DEF 14A 1 d703764ddef14a.htm DEF 14A DEF 14A

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant  x                            

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨

 

Preliminary Proxy Statement

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  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

¨

 

Definitive Additional Materials

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Soliciting Material pursuant to Rule 14a-12

Martin Marietta Materials, Inc.

(Name of Registrant as Specified In Its Charter)

         

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Notice of 2014

Annual Meeting of

Shareholders and

Proxy Statement

 

 

LOGO

 

 

 


LOGO

April 17, 2014

Dear Fellow Shareholder:

The Directors and Officers of Martin Marietta Materials, Inc. join us in inviting you to attend Martin Marietta’s Annual Meeting of Shareholders on May 22, 2014. The formal notice of this meeting and the proxy statement describing the matters to be acted upon at the meeting accompany this letter.

Your vote is important. Whether or not you plan to attend the Annual Meeting in person, we encourage you to vote so that your shares will be represented and voted at the meeting.

Thank you for your continued support of Martin Marietta Materials.

 

Sincerely,

   
LOGO     LOGO

Stephen P. Zelnak, Jr.

   

C. Howard Nye

Chairman of the Board

   

President and Chief Executive Officer


MARTIN MARIETTA MATERIALS, INC.

2710 Wycliff Road, Raleigh, North Carolina 27607

Notice of Annual Meeting of Shareholders

To Be Held May 22, 2014

To our Shareholders:

The Annual Meeting of Shareholders of Martin Marietta Materials, Inc. will be held on Thursday, May 22, 2014, at 11:30 a.m. at our principal office located at 2710 Wycliff Road, Raleigh, North Carolina. At the meeting, the holders of our outstanding common stock will act on the following matters:

 

  (1)

To elect as Directors the three (3) nominees named in the attached proxy statement, each to serve for a term of three (3) years until the Annual Meeting of Shareholders in 2017, and until their successors are duly elected and qualified;

 

  (2)

To ratify the appointment of Ernst & Young, LLP as independent auditors for 2014;

 

  (3)

To approve, by a non-binding advisory vote, the compensation of our named executive officers; and

 

  (4)

Any other business as may properly come before the meeting.

All holders of record of Martin Marietta Materials common stock (NYSE: MLM) at the close of business on March 14, 2014 are entitled to notice of and to vote at the annual meeting and any adjournments or postponements of the meeting.

Whether or not you expect to attend the meeting, we hope you will date and sign the enclosed proxy card and mail it promptly in the enclosed stamped envelope.

By Order of the Board of Directors,

 

LOGO

Roselyn R. Bar

Senior Vice President, General

Counsel and Secretary

Raleigh, North Carolina

April 17, 2014

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL SHAREHOLDER MEETING TO BE HELD ON MAY 22, 2014

Martin Marietta’s proxy statement, form of proxy card and 2013 Annual Report to Shareholders are also available for review on the Internet at ir.martinmarietta.com/annuals.cfm.

 


 

PROXY STATEMENT

 

 

GENERAL INFORMATION

This proxy statement contains information related to the annual meeting of shareholders of Martin Marietta Materials, Inc., a North Carolina corporation (referred to as the “Corporation” or “Martin Marietta”), to be held on Thursday, May 22, 2014, at 11:30 a.m. at Martin Marietta’s principal office, 2710 Wycliff Road, Raleigh, North Carolina. Martin Marietta’s audited financial statements and portions of the Annual Report on Form 10-K for the fiscal year ended December 31, 2013 are being mailed to shareholders with this proxy statement.

This proxy statement, the proxy card, and the notice of meeting are being sent commencing on approximately April 17, 2014 to shareholders of record on March 14, 2014.

What is the purpose of the annual meeting?

At our annual meeting, shareholders will act on the matters outlined in the accompanying notice of annual meeting of shareholders. This statement is furnished in connection with the solicitation by Martin Marietta’s Board of Directors of proxies to be used at the meeting and at any and all adjournments or postponements of the meeting.

Whether or not you plan to attend the meeting, we encourage you to date, sign, and return your proxy in the enclosed envelope.

Who is entitled to vote at the meeting?

Only shareholders of record at the close of business on March 14, 2014 are entitled to notice of and to participate in the annual meeting. If you were a shareholder of record on that date, you will be entitled to vote all the shares that you held on that date at the meeting, or any adjournments or postponements of the meeting.

What are the voting rights of the holders of Martin Marietta Materials common stock?

Each share of Martin Marietta Materials common stock is entitled to one vote on each matter considered at the meeting.

Who can attend the meeting?

All shareholders as of the record date, or their duly appointed proxies, beneficial owners presenting satisfactory evidence of ownership as of the record date, and invited guests of Martin Marietta may attend the meeting.

What constitutes a quorum?

The presence at the meeting, in person or by proxy, of the holders of a majority of the common stock outstanding on the record date constitutes a quorum, permitting shareholders to take action at the meeting. On March 14, 2014, there were 46,199,840 shares outstanding of Martin Marietta’s common stock, $.01 par value per share.

 

 

1


Who will oversee the voting results?

Votes cast by proxy or in person at the annual meeting will be tabulated by an independent inspector of election appointed by Martin Marietta’s Board of Directors for the annual meeting from American Stock Transfer & Trust Company, Martin Marietta’s transfer agent. The inspector of election will determine whether a quorum is present. For purposes of determining the presence of a quorum, abstentions and broker non-votes (which are described below) will be counted as shares that are present and entitled to vote.

How do I vote?

If you complete and properly sign the accompanying proxy card and return it to Martin Marietta, it will be voted as you direct. If you are a registered shareholder and attend the meeting, you may deliver your completed proxy card or vote in person. Shareholders whose shares are held by brokers, banks, or other nominees who wish to vote at the meeting will need to obtain a proxy form from the institution that holds its shares.

Can I change my vote after I return my proxy card?

Yes. Even after you have submitted your vote, you may revoke your proxy at any time prior to its exercise at the annual meeting (i) by filing with Martin Marietta’s Corporate Secretary an instrument revoking the proxy prior to the meeting, (ii) by the timely delivery to Martin Marietta’s Corporate Secretary, including at the meeting, of a subsequently dated and executed proxy, or (iii) if you attend the meeting, by voting your shares in person. Attendance at the meeting will not in and of itself constitute a revocation of a proxy.

How do I vote my 401(k) shares?

Each participant in Martin Marietta’s Performance Sharing Plan and the Savings and Investment Plan may direct the trustee as to the manner in which shares of common stock allocated to the plan participant’s account are to be voted. If the plan participant does not return a signed voting instruction card to the trustee in a timely manner or returns a card without indicating any voting instructions, the trustee will vote the shares in the same proportion as shares for which the trustee receives voting instructions for that plan.

How are brokers required to vote? What are “broker non-votes”?

Brokers holding shares for beneficial owners must vote those shares according to the specific instructions they receive from the beneficial owners. If specific instructions are not received, brokers may generally vote these shares at their discretion. However, the New York Stock Exchange rules preclude brokers from exercising their voting discretion on certain proposals, such as the election of Directors or executive compensation matters. In such cases, absent specific instructions from the beneficial owner, the broker may not vote on those proposals. This results in what is known as a “broker non-vote.” The approval of the ratification of the appointment of independent auditors is not a proposal subject to this rule. Accordingly, if you want your broker to vote your shares on the election of Directors or the approval on an advisory basis of the compensation of our named executive officers, you must provide specific voting instructions to your broker. Conversely, any broker holding shares for you may vote your shares at their discretion with respect to the ratification of the appointment of independent auditors unless you give them specific instructions on how you wish for them to vote.

 

 

2


Will my broker vote my shares for me on the election of Directors?

Under the New York Stock Exchange rules, the election of Directors and the advisory vote on executive compensation are not considered routine matters and your broker will not be able to vote your shares with respect to those matters if you have not provided directions to your broker. We strongly encourage you to submit your proxy card and exercise your right to vote as a shareholder.

What vote is required to approve each item?

Martin Marietta amended its articles of incorporation following the 2013 annual meeting of shareholders to provide for majority voting in the election of Directors. As a result, in an uncontested Director election (i.e., an election where the only nominees are those proposed by our Board of Directors, such as at the 2014 annual meeting), Directors are elected by a majority of the votes cast by holders of our common stock present in person or by proxy at the meeting. For purposes of uncontested Director elections, a majority of votes cast means that the number of votes cast “for” a nominee’s election exceeds the number of votes cast “against” that nominee’s election. Abstentions and broker non-votes will not be counted as votes cast in the election of Directors and will have no effect on the outcome of the election of Directors.

Under North Carolina law, if an incumbent director is not re-elected at an annual meeting of shareholders, then, even though his or her term has expired, the incumbent director continues to serve in office as a holdover director until his or her successor is elected or until there is a decrease in the number of directors. North Carolina law further provides that if the shareholders fail to elect the full authorized number of directors, a board of directors may fill the vacancy by electing a successor. Accordingly, Martin Marietta’s articles of incorporation provide that if a nominee is not elected by a vote of the majority of the votes cast with respect to that nominee’s election, the Board of Directors may decrease the number of Directors, fill any vacancy or take other appropriate action.

Approval of the ratification of the selection of independent auditors, the approval on an advisory basis of the compensation of our named executive officers, and any other proposal presented at the meeting, will be approved if more votes are cast by proxy or in person in favor of the proposal than are cast against it. Abstentions and broker non-votes, if any, will not be counted “for” or “against” any of these proposals.

Where can I find voting results for the Annual Meeting?

We will announce preliminary voting results at the conclusion of the meeting and publish final results in a Current Report on Form 8-K filed with the Securities and Exchange Commission within four business days after the annual meeting.

Where can I find out more information about Martin Marietta Materials?

Martin Marietta maintains a website at www.martinmarietta.com where you can find additional information about Martin Marietta. Visitors to the website can view and print copies of Martin Marietta’s SEC filings, including periodic and current reports on Forms 10-K, 10-Q and 8-K, as soon as reasonably practicable after those filings are made with the SEC. Copies of the charters for each of our Audit Committee, Management Development and Compensation Committee, and Nominating and Corporate Governance Committee, Corporate Governance Guidelines, as well as the our code of business ethics are all available through the website. Alternatively, our shareholders and other interested parties may obtain, without charge, copies of all of these documents by writing to the

 

 

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Corporate Secretary, Martin Marietta Materials, Inc., 2710 Wycliff Road, Raleigh, NC 27607. Please note that the information contained on Martin Marietta’s website is not incorporated by reference in, or considered to be a part of, this document.

Who is paying for this proxy statement?

The entire cost of preparing, assembling, printing, and mailing the Notice of Meeting, this proxy statement, and proxies, and the cost of soliciting proxies relating to the meeting, if any, has been or will be paid by Martin Marietta. In addition to use of the mails, proxies may be solicited by Directors, officers, and other regular employees of Martin Marietta by telephone, facsimile, or personal solicitation, and no additional compensation will be paid to such individuals. Martin Marietta will use the services of Morrow & Co., LLC, 470 West Avenue, Stamford, CT 06902, a professional soliciting organization, to assist in obtaining in person or by proxy shareholder votes. Martin Marietta estimates its expenses for solicitation services will not exceed $15,000. Martin Marietta will, if requested, reimburse banks, brokerage houses and other custodians, nominees and certain fiduciaries for their reasonable expenses incurred in mailing proxy materials to their principals.

Will any other matters be presented at the annual meeting?

At the time this proxy statement was filed with the Securities and Exchange Commission, the Board of Directors was not aware that any matters not referred to herein would be presented for action at the annual meeting. If any other matters properly come before the meeting, it is intended that the persons named in the enclosed proxy will vote the shares represented by proxies on such matters in accordance with the recommendation of the Board of Directors, or, if no recommendation is given, in their own discretion. It is also intended that discretionary authority will be exercised with respect to the vote on any matters incident to the conduct of the meeting.

What are the Board’s recommendations?

Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors. The Board’s recommendation, as well as a description of each proposal, is set forth in this proxy statement. The Board recommends a vote:

 

   

FOR the election of the nominated slate of Directors;

 

   

FOR the ratification of the selection of Ernst & Young LLP as independent auditors; and

 

   

FOR the approval, by a non-binding advisory vote, of the compensation of our named executive officers as described in this proxy statement.

With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 22, 2014

This proxy statement, form of proxy card and the accompanying annual report are also available at ir.martinmarietta.com/annuals.cfm.

 

 

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SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

Who are the largest owners of Martin Marietta’s stock?

The following table sets forth information with respect to the shares of common stock which are held by persons known to Martin Marietta to be the beneficial owners of more than 5% of such stock as of March 14, 2014. To the best of Martin Marietta’s knowledge, based on filings with the Securities and Exchange Commission as noted below, no person beneficially owned more than 5% of any class of Martin Marietta’s outstanding voting securities at the close of business on March 14, 2014, except for those shown below.

 

Name and Address of Beneficial Owner

   Amount and Nature  of
Beneficial Ownership
     Percent
of Class
 
   

T. Rowe Price Associates1

100 East Pratt St.

Baltimore, MD 21202-1009

 

     6,400,224         13.8

BlackRock, Inc.2

40 East 52nd Street

New York, NY 10022

     3,040,551         6.60
   

The Vanguard Group3

100 Vanguard Blvd. V26

Malvern, PA 19355-2331

 

     2,600,080         5.62

First Eagle Investment Management, LLC4

1345 Avenue of the Americas

New York, NY 10105-4399

     2,503,415         5.41

 

1

As reported in Schedule 13G dated December 31, 2013 filed with the Securities and Exchange Commission on February 12, 2014.

 

2

As reported in Schedule 13G/A dated December 31, 2013 filed with the Securities and Exchange Commission on January 30, 2014.

 

3

As reported in Schedule 13G dated December 31, 2013 filed with the Securities and Exchange Commission on February 11, 2014.

 

4

As reported in Schedule 13G/A dated December 31, 2013 filed with the Securities and Exchange Commission on March 5, 2014.

 

 

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How much stock do Martin Marietta’s Directors and executive officers own?

The following table sets forth information as of March 14, 2014 with respect to the shares of common stock that are beneficially owned by the Directors and nominees, the Chief Executive Officer, the Chief Financial Officer, and the three other executive officers who are listed in the Summary Compensation Table on page 54 of this proxy statement, individually, and by all Directors and executive officers of Martin Marietta as a group.

 

Name of Beneficial Owner

   Amount and Nature  of
Beneficial Ownership1
 

Roselyn R. Bar

     83,314 2 

Sue W. Cole

     41,228 3,4 

Dana F. Guzzo

     13,758 2 

Anne H. Lloyd

     102,056 2 

David G. Maffucci

     23,812 3 

Donald A. McCunniff

     11,165 2 

William E. McDonald

     36,572 3 

Frank H. Menaker, Jr.

     41,954 3 

C. Howard Nye

     170,381 2 

Laree E. Perez

     23,202 3 

Michael J. Quillen

     14,163 3 

Dennis L. Rediker

     21,691 3 

Richard A. Vinroot

     33,699 3 

Stephen P. Zelnak, Jr.

     92,341 3,6 

All Directors and executive officers as a group (15 individuals including those named above)

     709,336 3,4,6,7 

 

1

As to the shares reported, unless indicated otherwise, (i) beneficial ownership is direct, and (ii) the person indicated has sole voting and investment power. None of the Directors or named executive officers individually own in excess of one percent of the shares of common stock outstanding. All Directors and executive officers as a group own 1.54% of the shares of common stock outstanding as of March 14, 2014. None of the shares reported are pledged as security.

 

2

The number of shares owned for each of Mr. Nye, Ms. Lloyd, Ms. Bar, Mr. McCunniff and Ms. Guzzo assumes that options held by each of them covering shares of common stock in the amounts indicated, which are currently exercisable within 60 days of March 14, 2014, have been exercised: Mr. Nye, 76,339; Ms. Lloyd, 55,730; Ms. Bar, 47,366; Mr. McCunniff, 2,624; and Ms. Guzzo, 5,713. The amounts reported also include common stock units credited to each of the named executives in connection with (i) their deferral of a portion of their cash bonus under the Martin Marietta Materials, Inc. Incentive Stock Plan, and (ii) restricted stock awards granted under the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan that are subject to forfeiture in accordance with the terms of the plan, each in the following amounts: Mr. Nye, 9,342 and 27,302, respectively; Ms. Lloyd, 2,362 and 9,253, respectively; Ms. Bar, 2,036 and 7,552, respectively; Mr. McCunniff, 870 and 3,432, respectively; and Ms. Guzzo, 1,115 and 2,373, respectively. There are no voting rights associated with the stock units.

 

3

Amounts reported include (1) compensation paid on an annual basis that Directors have received in common stock units that is deferred pursuant to the Amended and Restated Martin Marietta Materials, Inc. Common Stock Purchase Plan for Directors and (2) 1,017 restricted stock units that each Director received in 2013 as part of their compensation. The Directors do not have voting or investment power for their respective common stock units and restricted stock units. The number of common stock units credited to each of the Directors as of March 14, 2014 is as follows: Ms. Cole, 19,602; Mr. Maffucci, 14,812; Mr. McDonald, 21,572; Mr. Menaker, 24,350; Ms. Perez, 11,202; Mr. Quillen, 11,163; Mr. Rediker, 15,691; Mr. Vinroot, 21,699; and Mr. Zelnak, 9,985. Amounts reported also include options for common stock for each Director, as follows: Ms. Cole, 15,000; Mr. Maffucci, 9,000; Mr. McDonald, 15,000; Mr. Menaker, 15,000; Ms. Perez, 12,000; Mr. Quillen, 3,000; Mr. Rediker, 6,000; Mr. Vinroot, 12,000; and Mr. Zelnak, 82,356.

 

4

Includes an approximation of the number of shares in IRA and 401(k) accounts.

 

 

6


5

Amounts reported include: (1) 342,280 options held by Directors and executive officers, which are currently exercisable within 60 days of March 14, 2014; (2) 15,725 common stock units credited to executive officers in connection with their deferral of a portion of their cash bonus under the Martin Marietta Materials, Inc. Incentive Stock Plan; (3) 42,360 common stock units credited to executive officers in connection with restricted stock awards granted under the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan that are subject to forfeiture in accordance with the terms of the plan; and (4) 93,774 common stock units credited to the Directors in connection with restricted stock awards granted under the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan. There are no voting rights associated with the stock units.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires directors and officers of Martin Marietta and persons who own more than 10% of the common stock to file with the Securities and Exchange Commission initial reports of ownership and reports in changes in ownership of the common stock. Directors, officers and more than 10% shareholders are required by Securities and Exchange Commission regulations to furnish to Martin Marietta copies of all Section 16(a) reports filed.

Based solely on its review of the copies of reports furnished to Martin Marietta and written representations of Directors and officers that no other reports were required for the year ended December 31, 2013, Martin Marietta believes that no Director, officer, or 10% shareholder failed to timely file in 2013 any report required by Section 16(a).

THE BOARD OF DIRECTORS

The Board of Directors currently consists of ten members, nine of whom are non-employee Directors. The Board is divided into three classes with three-year terms.

The Board of Directors has nominated three persons for election as Directors to serve three-year terms expiring in 2017. Unless otherwise directed, proxies will be voted in favor of these nominees. Each nominee has agreed to serve if elected. Each of the nominees is currently serving as a Director. Should any nominee become unable to serve as a Director, the persons named in the enclosed form of proxy will, unless otherwise directed, vote for the election of such other person for such position as the present Board of Directors may recommend in place of such nominee.

Under our Bylaws, nominations of persons for election to the Board of Directors may be made at an annual meeting of shareholders by the Board of Directors and by any shareholder who complies with the notice procedures set forth in the Bylaws. As described in the proxy statement for our 2013 annual meeting, for a nomination to be properly made by a shareholder at the 2014 annual meeting, the shareholder’s notice must have been sent to, and received by, our Secretary at our principal executive offices between January 16, 2014 and February 15, 2014. No such notice was received during this period. Should any of the following nominees be unavailable for election by reason of death or other unexpected occurrence, the proxy, to the extent permitted by applicable law, may be voted with discretionary authority in connection with the nomination by the Board of Directors and the election of any substitute nominee.

The following sets forth the age and certain other biographical information for each of the nominees for election and for each of the other members of the Board of Directors as of the date of this proxy statement.

 

 

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PROPOSAL 1

ELECTION OF DIRECTORS

(Item 1 on Proxy Card)

Nominees for Election to the Board of Directors for a Term Continuing Until 2017:

 

LOGO

 

Sue W. Cole (63)

Director (since 2002), Chair of the Management Development and Compensation Committee and member of the Nominating and Corporate Governance Committee.

 

Ms. Cole is the managing partner of SAGE Leadership & Strategy, LLC, an advisory firm for businesses and organizations and individuals relating to strategy, governance and leadership development. Ms. Cole was previously a principal of Granville Capital Inc., a registered investment advisor, from 2006 to 2011. Ms. Cole has more than 37 years’ experience in financial services and investment management. Before joining Granville Capital, she served as Regional Chief Executive Officer of the Mid-Atlantic Region of U.S. Trust Company, N.A., an integrated wealth management firm, from 2003 to 2006, and as Chief Executive Officer for U.S. Trust Company of North Carolina and North Carolina Trust Company. Previously she was Head of Corporate Lending for the Greensboro, North Carolina Region of NCNB. Ms. Cole also previously served as a Director of UNIFI, Inc., and has been active in the community and charitable organizations including serving on the Investment Committees of UNC-Greensboro, the Cone Health Foundation, and the Weaver Foundation Chair; Chair of the Management Development and Compensation Committee and member of the Executive Committee of the North Carolina Biotechnology Center; member of the Board of Directors of the North Carolina Economic Development Board; and trustee and Vice Chairman of the Board of Governors of the Center for Creative Leadership. Ms. Cole is also Chair of the Board of Directors of Biscuitville, Inc. and a member of the Board of Directors of High Point Bank.

 

Key attributes, experience and skills:

 

Ms. Cole brings to the Board valuable experience in executive compensation, corporate governance, human resources, finance and financial statements, and customer service in connection with her role as chief executive officer of several financial services and investment advisory businesses as well as several non-profit organizations. She also has strong leadership skills and familiarity with governmental affairs from her service on the boards of various business associations and non-profit organizations in North Carolina, an important state to Martin Marietta.

 

 

8


LOGO

 

Michael J. Quillen (65)

Director (since 2008), Member of the Ethics, Environment, Safety and Health Committee, Finance Committee and the Management Development and Compensation Committee.

 

Mr. Quillen served as Chief Executive Officer and a member of the Board of Directors of Alpha Natural Resources, Inc., a leading Appalachian coal supplier, since its formation in 2004 until its merger with Foundation Coal Holdings, Inc. in July 2009. He continued to serve as Executive Chairman through December 2009 and served as non-Executive Chairman of the combined entity, also named Alpha Natural Resources, Inc., until May 2012. He was named Chairman of the Board of Alpha in 2006. Mr. Quillen served as President of Alpha until 2006. In 2002, Mr. Quillen joined the Alpha management team as President and the sole manager of Alpha’s operating subsidiary, Alpha Natural Resources, LLC, where he had served as Chief Executive Officer since 2003. From 2002 to 2005 he also served in senior executive capacities with other former affiliates of Alpha. From September 1998 to December 2002, Mr. Quillen was Executive Vice President—Operations of AMCI Metals and Coal International Inc., a mining and marketing company (“AMCI”). While at AMCI, he was also responsible for the development of AMCI’s Australian properties. He has held senior executive positions in the coal industry throughout his career, including Vice President-Operations of Pittston, President of Pittston Coal Sales Corp., Vice President of AMVEST Corporation, Vice President-Operations of NERCO Coal Corporation, President and Chief Executive Officer of Addington, Inc. and manager of Mid-Vol Leasing, Inc. Mr. Quillen has over 30 years of experience in the coal industry starting as an engineer. Mr. Quillen has served as Chairman of the Board of Visitors of Virginia Polytechnic Institute and State University since July 2012 and as Chairman of the Audit and Finance Committee of Virginia Polytechnic Institute and State University from July 2010 to June 2012. He also served on the Virginia Port Authority from 2003 to 2012 and as Chairman from July 2011 to December 2012.

 

Key attributes, experience and skills:

 

Mr. Quillen brings to the Board valuable business, leadership, management, financial, and mergers and acquisitions experience through his service of more than 30 years in senior positions, including chief executive officer and chairman, of publicly-traded companies. He also has extensive experience related to mining companies, governmental and regulatory issues, and safety, health and environmental matters. Mr. Quillen also brings tremendous insight and expertise with respect to strategic analysis, the natural resources industry, and energy. In addition, Mr. Quillen has a wealth of knowledge related to transportation, which is a key factor in our business.

 

 

9


LOGO

 

Stephen P. Zelnak, Jr. (69)

Director (since 1993), Chairman of the Board of Directors and Chairman of the Executive Committee.

 

Mr. Zelnak has served as non-Executive Chairman of Martin Marietta since May 27, 2010. He served as Executive Chairman from January 1, 2010 to May 27, 2010. He previously served as Chief Executive Officer of the Corporation since 1993 and as President of the Corporation from 1993 to 2006. Mr. Zelnak joined Martin Marietta Corporation in 1981 and he had been responsible for the Aggregates operations since 1982. Mr. Zelnak is also a Director of Beazer Homes USA, Inc. Mr. Zelnak is also Chairman and majority owner of ZP Enterprises, LLC, a private investment firm of which he is the majority owner, which owns and manages several precision machining and specialty coatings companies in the Southeast. Mr. Zelnak has served as Chairman of the North Carolina Chamber, North Carolina Community College Foundation, National Stone, Sand and Gravel Association, Peace College Board of Trustees, North Carolina Foundation for Research and Economic Education, North Carolina Aggregates Association and the North Carolina State University Physical and Mathematical Sciences Foundation. He currently serves on the Advisory Boards of North Carolina State University and the Georgia Tech Foundation Board.

 

Key attributes, experience and skills:

 

As the longstanding Chairman of the Board of Martin Marietta and previous Chief Executive Officer, Mr. Zelnak brings extensive leadership, business and operating experience to the Board, as well as knowledge of all aspects of Martin Marietta and the construction aggregates industry. He also brings his broad strategic and financial experience to the Board, knowledge of the home building industry and factors that impact construction from his service on the board of a large homebuilder, and corporate governance from serving on the boards and various committees of other companies.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR

ALL NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS

 

 

10


Directors Whose Terms Continue Until 2016:

 

LOGO

  

C. Howard Nye (51)

Director (since 2010)

 

Mr. Nye has served as President and Chief Executive Officer of Martin Marietta since January 1, 2010. He previously served as President and Chief Operating Officer of Martin Marietta from August 2006 to 2009. From 2003 to 2006, Mr. Nye served as Executive Vice President of Hanson Aggregates North America, a producer of aggregates for the construction industry, and in other managerial roles since 1993. Mr. Nye has also been active in a number of various business, civic, and education organizations, including serving as a member of the Board of Directors for the National Stone, Sand & Gravel Association (currently Chairman of the Board), the American Road & Transportation Builders Association (currently Vice Chairman), and Romeo Guest Associates, Inc. Mr. Nye has also been a member of the Duke University Alumni Board, as well as a former gubernatorial appointee to the North Carolina Mining Commission.

 

Key attributes, experience and skills:

 

Mr. Nye has extensive knowledge of the construction aggregates industry from his 29 years of experience in all facets of the construction materials business. He brings to the Board extensive leadership, business, operating, mergers and acquisitions, legal, customer-relations, and safety and environmental experience. He understands the competitive nature of the business and has strong management skills and broad executive experience. In addition, Mr. Nye brings to the Board his broad strategic vision for the future growth of Martin Marietta.

LOGO

  

Laree E. Perez (60)

Director (since 2004), Chair of the Finance Committee and member of the Audit Committee and the Ethics, Environment, Safety and Health Committee.

 

Ms. Perez serves as the Managing Partner in The Medallion Company, LLC, an investment management company, since 2003 and as an independent financial consultant with that company since 2002. Ms. Perez was previously a Director of GenOn Energy, Inc., one of the largest power producers in the United States, from 2002 to 2012, and served as the Chairman of the Audit Committee of GenOn Energy, Inc. from 2002 to 2007 and a member of its Audit and Risk and Finance Oversight Committees from 2008 to December 2012. From 1996 to 2002, she was Vice President of Loomis, Sayles & Company, L.P. Ms. Perez was co-founder of Medallion Investment Company, Inc. and served as President and Chief Executive Officer from 1991 until it was acquired by Loomis Sayles in 1996. Ms. Perez recently served as Vice Chairman of the Board of Regents at Baylor University and previously served on the Board of Trustees of New Mexico State University, where she was also

 

 

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Chairman of the Board. Ms. Perez has also served on the Leadership Council and as Chair of the Development Committee for the Mayo Clinic Arizona. Ms. Perez has over 30 years’ experience in finance and investments.

 

Key attributes, experience and skills:

 

Ms. Perez brings to the Board significant business, financial and private investment experience. She has significant expertise with respect to financial statements, corporate finance, accounting and capital markets, mergers and acquisitions, and strategic analysis. Ms. Perez also brings insight into auditing best practices from her experience serving as a Board member on the audit and finance committees of other publicly-traded companies. Her familiarity with the southwestern United States has been very valuable to the Board since Martin Marietta has important operations in that region and she gives the Board perspective on diversity.

LOGO

  

Dennis L. Rediker (70)

Director (since 2003), Member of the Audit Committee, the Finance Committee and the Ethics, Environment, Safety and Health Committee.

 

Mr. Rediker serves as the President and Chief Operating Officer of Utility Composite Solutions International (UCSI), a developer and maker of composite materials for utility and municipal lighting applications. From 2009 to 2011, Mr. Rediker served as the President and Chief Operating Officer of B4C, LLC, a developer and maker of ceramic materials for defense and aerospace applications. He continues to serve as a consultant for B4C, LLC. He previously served as President and Chief Executive Officer and Director of The Standard Register Company, a document services company, from 2000 until his retirement in 2008. Mr. Rediker was also previously the Chief Executive Officer and a Director of English China Clays, plc. During the past five years, Mr. Rediker served as Director of The Standard Register Company. Mr. Rediker is past volunteer Chairman of the Board of Trustees of the National Composites Center, and previously served on the Dayton Development Coalition and on the Board of Managers for the National Museum of the U.S. Air Force Foundation.

 

Key attributes, experience and skills:

 

Mr. Rediker brings to the Board significant operating, financial, leadership, strategic, audit, and marketing experience as a result of his tenure as chief executive officer of publicly-traded companies and service on their boards. He also has extensive experience in mergers and acquisitions, environmental and safety, and customer service that has been valuable to the Board. In addition, Mr. Rediker has considerable expertise in corporate strategy from his various roles, including his former association with McKinsey & Co.

 

 

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Directors Whose Terms Continue Until 2015:

 

LOGO

  

David G. Maffucci (63)

Director (since 2005), Chair of the Audit Committee and member of the Finance Committee.

 

Mr. Maffucci is a Director of Domtar Corporation, which designs, manufactures, markets and distributes a wide variety of fiber-based products, including communication papers, specialty and packaging papers, and adult incontinence products. He is currently a member of its Audit and Finance Committees. Mr. Maffucci served as Executive Vice President and Chief Financial Officer of Xerium Technologies, Inc., a manufacturer and supplier of consumable products used in paper production, from 2009 to 2010. He served on its Board of Directors from 2008 until 2010, serving on its Audit and Compensation Committees from 2008 to 2009. From 2005 to 2006, Mr. Maffucci served as Executive Vice President of Bowater Incorporated (the predecessor in interest to Resolute Forest Products) (NYSE: RFP)) and President of its Newsprint Division. He served as Chief Financial Officer of Bowater Incorporated from 1995 to 2005. Resolute Forest Products produces a wide range of newsprint and commercial printing papers, market pulp and wood products. On March 30, 2010, Xerium Technologies, Inc. filed a voluntary petition for relief under Chapter 11 of the Federal bankruptcy laws as part of a “pre-arranged” restructuring plan with the support of its lenders. On May 25, 2010, Xerium Technologies, Inc. emerged from Chapter 11 protection. Mr. Maffucci previously worked at KPMG and is a Certified Public Accountant.

 

Key attributes, experience and skills:

 

Mr. Maffucci brings to the Board extensive financial experience gained through his positions as chief financial officer, a member of the audit committees of publicly-traded companies, and formerly with a large public accounting firm. This experience enables him to provide insight into Martin Marietta’s financial statements, accounting principles and practices, auditing, internal control over financial reporting, and risk management processes.

LOGO

  

William E. McDonald (71)

Director (since 1996), Chair of the Nominating and Corporate Governance Committee, member of the Executive Committee and the Management Development and Compensation Committee.

 

Mr. McDonald served as President and Chief Executive Officer of Sprint Mid-Atlantic Telecom and Sprint Mid-Atlantic Operations from 1993 to 1998, and was President and Chief Executive Officer for the United Telephone-Eastern in Carlisle, Pennsylvania. Mr. McDonald began working with Sprint in 1968 when he joined Sprint United Telephone-Southeast. He progressed through various management positions until 1980, when he was

 

 

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named Vice President-Revenue Requirements. In 1981, he became Vice President-Operations for Sprint United Telephone-Midwest in Kansas City, Missouri. Mr. McDonald became President of Uninet in 1982 and in 1984 served as Senior Vice President-Network Development for what is now Sprint Long Distance. He was named President of Sprint United Telephone-Northwest in Hood River, Oregon, in 1986, before becoming President of Sprint United Telephone-Eastern. Mr. McDonald served as Senior Vice President, Customer Service Operations, Sprint Corporation, a telecommunications company, until his retirement in 2000.

 

Key attributes, experience and skills:

 

Mr. McDonald brings to the Board leadership, corporate governance, executive compensation, customer service, marketing, sales, and human resources experience from his service as chief executive officer of large business regions with significant operations. His 17-year tenure on the Board gives him a valuable perspective into our business, its strategy and industry leadership.

LOGO

  

Frank H. Menaker, Jr. (73)

Director (since 1993), Member of the Audit Committee, the Ethics, Environment, Safety and Health Committee, the Executive Committee and the Management Development and Compensation Committee.

 

Mr. Menaker previously served as Senior Vice President and General Counsel of Lockheed Martin Corporation, a defense, aeronautics, and aerospace company, from 1996 until 2005, and previously was General Counsel of Martin Marietta Corporation since 1981. During his tenure, Mr. Menaker helped guide Lockheed Martin Corporation and Martin Marietta Corporation through a period of consolidation in the defense industry, beginning with Martin Marietta Corporation’s successful “Pac Man” defense of Bendix Corporation’s attempted hostile takeover of Martin Marietta Corporation in 1982. He retired from Lockheed Martin Corporation in 2006. From 2006 to 2012, Mr. Menaker was a member, and subsequently counsel in the DLA Piper international law firm, based in Washington, D.C., and a member of the McCammon Group, a mediation, arbitration, facilitation, training and consulting group providing conflict resolution services throughout the mid-Atlantic region. Mr. Menaker’s professional activities include previously serving as past chair and fellow of the ABA Public Contract Law Section, and is currently a board member of the Atlantic Legal Foundation.

 

Key attributes, experience and skills:

 

Mr. Menaker brings to the Board his experience as general counsel of an S&P 100 corporation, with responsibility for legal, compliance, corporate governance, among other matters, as well as his experience in management, leadership, executive compensation, financial affairs, governmental and regulatory issues, safety, health and environmental

 

 

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matters, and mergers and acquisitions. As one of the original members of Martin Marietta’s Board, Mr. Menaker also brings an important perspective on Martin Marietta’s business, strategy, and culture. In addition, Mr. Menaker is a recognized leader in corporate ethics programs.

LOGO

  

Richard A. Vinroot (73)

Director (since 1996), Chair of the Ethics, Environment, Safety and Health Committee and member of the Nominating and Corporate Governance Committee.

 

Mr. Vinroot has been a member of the law firm of Robinson, Bradshaw & Hinson, P.A. in Charlotte, North Carolina since 1969, where he practices in the areas of civil litigation including construction, labor, employment discrimination, securities and commercial contract disputes and controversies. He has appeared and served as lead trial counsel in the successful prosecution, defense and resolution of numerous actions in the federal and state courts during the past several years. Mr. Vinroot has also been active in civic and community activities, including serving on the Board of Trustees of Sugar Creek Charter School and the Board of Trustees of the Charlotte-Mecklenburg County YMCA. From 1991 to 1995, Mr. Vinroot served as Mayor of Charlotte, North Carolina and from 1983 to 1991, he served on the Charlotte City Council.

 

Key attributes, experience and skills:

 

Mr. Vinroot brings tremendous experience to the Board from both private practice of law and his elected position as Mayor of Charlotte, North Carolina related to leadership, corporate governance, legal, mergers and acquisitions, governmental and regulatory issues, safety, health and environmental matters. His familiarity with North Carolina, which is one of Martin Marietta’s most important states, has been very valuable to the Board, as well as his involvement with non-profit organizations to give the Board perspective on diversity and corporate citizenship.

 

 

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DIRECTOR COMPENSATION

Martin Marietta uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Board of Directors. In setting director compensation, Martin Marietta considers the significant amount of time that Directors expend in fulfilling their duties to Martin Marietta as well as the skill-level required by Martin Marietta of members of the Board. The Board determines reasonable compensation for Directors upon recommendation of the Management Development and Compensation Committee of the Board, which retains independent compensation consultants to assist it.

Cash Compensation Paid to Board Members

For the fiscal year ended December 31, 2013, all of the individuals who were then Directors, except Mr. Nye, who was the Chief Executive Officer of Martin Marietta in 2013 and was not and is not compensated separately for his service as a Director, received an annual retainer of $32,500. Directors received $1,250 for each regular or special meeting of the Board and Board committees attended. Members of the Audit Committee received an additional $5,000 in view of their increased responsibilities. Each committee chair received an annual fee of $8,000, except the Chair of the Audit Committee, who received an additional annual fee of $15,000 in light of his increased responsibilities. Directors were also reimbursed for travel and other expenses related to attendance at Board and committee meetings. Martin Marietta’s plane was used to transport some Directors to and from Board and committee meetings, but no Directors received personal use of Martin Marietta’s plane or other perquisites and personal benefits in 2013. In his role as non-executive Chairman, Mr. Zelnak received $125,000 in addition to the annual retainer in lieu of receiving Committee meeting attendance fees.

Equity Compensation Paid to Board Members

All of the individuals who were Directors in 2013, except Mr. Nye, were granted 1,017 restricted stock units pursuant to the Amended and Restated Stock-Based Award Plan. The restricted stock units granted to the Directors in 2013 were fully vested upon award and will be distributed upon retirement from the Board of Directors. The Directors do not have voting or investment power for their respective restricted stock units.

Deferred Compensation Program for Board Members

Pursuant to the Common Stock Purchase Plan for Directors, non-employee Directors may elect to receive all or a portion of their fees earned in 2013 in the form of Martin Marietta’s common stock, which must be deferred until, at the Director’s election, the date the person ceases to be a Director or the date that is one year and one month following the date that the person ceases to be a Director. Directors may elect to receive payment of the deferred amount in a single lump sum or in equal annual installments for a period up to ten years. Directors may also elect to defer their fees paid in cash on the same basis. In 2013, a minimum of 50% of each Director’s fees was paid in common stock and deferred pursuant to the terms of the plan. Amounts deferred under the plan in cash are credited with interest at the prime rate. Amounts deferred under the plan in common stock are credited toward units of common stock at a 20% discount from the fair market value of the common stock (the closing price of the common stock as reported in the Wall Street Journal) on the date the Director fees would

 

 

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otherwise be paid. There are no matching contributions made by Martin Marietta. The units are converted into common stock of Martin Marietta pursuant to the terms of the plan. Dividend equivalents are paid on the units at the same rate as dividends are paid to all shareholders. The Directors do not have voting or investment power for their respective common stock units.

Director Compensation Table

The table below summarizes the compensation paid by Martin Marietta to each person who served as a non-employee Director during the fiscal year ended December 31, 2013.

 

Name1

(a)

  Fees Earned
or Paid in
Cash($)2

(b)
    Stock
Awards($)3

(c)
    Option
Awards($)4

(d)
  Non-Equity
Incentive Plan
Compensation($)

(e)
  Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings($)5

(f)
    All Other
Compensation($)6

(g)
    Total($)
(h)
 
                                               

Sue W. Cole

    61,750        110,080            5,308        46,085        223,223   

David G. Maffucci

    82,500        110,080            2,532        33,533        228,645   

William E. McDonald

    61,750        110,080            6,867        49,237        228,645   

Frank H. Menaker, Jr.

    73,750        110,080            8,163        56,619        248,612   

Laree E. Perez

    79,250        110,080            1,855        27,217        218,462   

Michael J. Quillen

    58,750        110,080            1,413        31,845        202,088   

Dennis L. Rediker

    71,250        110,080            3,978        42,178        227,486   

Richard A. Vinroot

    56,750        110,080            7,327        48,176        222,333   

Stephen P. Zelnak, Jr.

    175,500        110,080                883        37,244        323,707   

 

1

Mr. Nye, who is the Chief Executive Officer of Martin Marietta and a member of the Board of Directors, is not included in this table because he is not compensated separately for his service as a Director. The compensation received by Mr. Nye as an employee of Martin Marietta is shown in the Summary Compensation Table on page 54.

 

2

The amounts in column (b) reflect fees earned in 2013. Some of these fees were deferred pursuant to the Common Stock Purchase Plan for Directors in the form of common stock units. The number of units of common stock credited in 2013 to each of the Directors under the Common Stock Purchase Plan for Directors and the grant date fair value for these awards determined in accordance with FASB ASC Topic 718, which includes the 20% discount, are as follows: Ms. Cole, 1,010 units and $58.66 value, respectively; Mr. Maffucci, 1,303 units and $58.52 value, respectively; Mr. McDonald, 992 units and $58.47 value, respectively; Mr. Menaker, 1,102 units and $60.12 value, respectively; Ms. Perez, 615 units and $59.35 value, respectively; Mr. Quillen, 922 units and $59.65 value, respectively; Mr. Rediker, 1,067 units and $59.75 value, respectively; Mr. Vinroot, 936 units and $57.96 value, respectively; and Mr. Zelnak, 1,555 units and $55.63 value, respectively. The number of units credited to each of the Directors as of December 31, 2013, including units accumulated under the plan for all years of service as a Director, is as follows: Ms. Cole, 12,458; Mr. Maffucci, 7,910; Mr. McDonald, 14,428; Mr. Menaker, 17,052; Ms. Perez, 4,318; Mr. Quillen, 4,048; Mr. Rediker, 8,424; Mr. Vinroot, 14,618; and Mr. Zelnak, 3,935. The 20% discount from the market price of Martin Marietta’s common stock used in converting to common stock is reported in column (g).

 

3

Each Director received 1,017 restricted stock units in 2013. The amounts in column (c) reflect the grant date fair value for these awards determined in accordance with FASB ASC Topic 718. The restricted stock units fully vested upon award and will be distributed to the Director upon retirement.

 

4

As of December 31, 2013, each Director held options for common stock in the amounts as follows: Ms. Cole, 15,000; Mr. Maffucci, 9,000; Mr. McDonald, 15,000; Mr. Menaker, 15,000; Ms. Perez, 12,000; Mr. Quillen, 3,000; Mr. Rediker, 6,000; Mr. Vinroot, 12,000; and Mr. Zelnak, 82,356.

 

5

The amounts in column (f) reflect interest paid on fees deferred in cash under the plan.

 

6

The amounts in column (g) reflect for each Director: (i) an amount equal to the 20% discount from the market price of Martin Marietta’s common stock used in converting fees deferred in 2013 into common stock units pursuant to the Common Stock Purchase Plan for Directors, and (ii) the dollar value of dividend equivalents paid in 2013 on common stock units held under the plan. The Directors did not receive perquisites or other personal benefits in 2013.

 

 

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CORPORATE GOVERNANCE MATTERS

Corporate Governance Philosophy

The Board of Directors has long believed that good corporate governance is important to ensure Martin Marietta is managed for the long-term benefit of its shareholders. Martin Marietta’s business is managed under the direction of the Board of Directors. The Board delegates the conducting of business to Martin Marietta’s senior management team. The corporate governance standards established by the Board provide a structure within which Directors and management can effectively pursue Martin Marietta’s objectives for the benefit of its shareholders. Even before the adoption of the Sarbanes-Oxley Act of 2002, one of the most critical components that has governed the way the business affairs of Martin Marietta are conducted has been Martin Marietta’s Code of Ethics and Standards of Conduct, which has been in place for more than two decades.

With that backdrop, the Board has endeavored to choose Board and Committee members who are distinguished by a depth of knowledge and experience, to elect a qualified and dedicated management team, and to direct the business affairs of Martin Marietta to achieve long-term value for shareholders. The Board believes this purpose is particularly important in overseeing the management of a company such as Martin Marietta that is engaged in a cyclical business where the long-term value for shareholders may not be reflected in current stock prices and which may be temporarily depressed by short-term factors, such as recessionary economies and operating markets.

In furtherance of these goals, in 2002, the Board created a Nominating and Corporate Governance Committee, which consists of three independent Directors. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board of Directors has adopted a set of Corporate Governance Guidelines for Martin Marietta. The Nominating and Corporate Governance Committee is responsible for overseeing the guidelines and making recommendations to the Board relating to corporate governance matters.

The New York Stock Exchange has adopted rules that require listed companies like Martin Marietta to adopt governance guidelines and comply with certain standards regarding corporate governance. Martin Marietta voluntarily implemented these corporate governance rules even prior to their effective date in 2004. Martin Marietta’s Chief Executive Officer certifies annually to the NYSE that he is not aware of any violation by Martin Marietta of the NYSE corporate governance listing standards. This certification is in addition to the certification by Martin Marietta’s Chief Executive Officer and Chief Financial Officer included with Martin Marietta’s periodic reports filed with the Securities and Exchange Commission. Martin Marietta also submits written affirmations to the NYSE annually regarding details of Martin Marietta’s compliance with the corporate governance rules of the NYSE.

Martin Marietta’s Corporate Governance Guidelines are posted and available for public viewing on Martin Marietta’s website at www.martinmarietta.com. The guidelines address a wide array of governance issues. Among other matters, the corporate governance principles of Martin Marietta Materials include the following:

Ethics

 

   

A comprehensive Code of Ethics and Standards of Conduct applicable to all Directors, officers, and employees of Martin Marietta, including Martin Marietta’s executive officers, has been in place since the 1980’s.

 

 

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A confidential telephone hotline for anonymous reporting of complaints and concerns was established in 1994 when Martin Marietta’s common stock became publicly traded.

 

   

The Board has had, since 1994, an Ethics, Environment, Safety and Health Committee that is responsible for reviewing and monitoring Martin Marietta’s program on business ethics and conduct, compliance with environmental laws and regulations and matters concerning health and safety.

 

   

Martin Marietta will also disclose on its website any amendments to its Code of Ethics and Standards of Conduct and waivers, if any, of such code as applicable to Martin Marietta’s Directors and executive officers. Any waiver of the Code of Ethics and Standards of Conduct for Directors or executive officers will be made only by the full Board and promptly disclosed to shareholders within four business days.

Board Independence

 

   

Nine out of ten Board members are non-employee Directors.

 

   

Eight out of ten Board members are independent Directors, as defined in the rules of the NYSE, and are not affiliated with Martin Marietta.

 

   

Martin Marietta’s Corporate Governance Guidelines adopted by the Board reflect the Board’s belief that at least two-thirds of all Directors should consist of independent Directors.

 

   

The Board has adopted Guidelines for Director’s Independence for Martin Marietta and has determined that eight of the ten Board members are independent under these Guidelines.

 

   

The Board has adopted a policy of regularly scheduled executive sessions where the independent Directors meet without management.

Independent Board Committees

 

   

Martin Marietta has had, since it went public in 1994, an Audit Committee and a Compensation Committee. In 2004, the Compensation Committee was renamed the Management Development and Compensation Committee to more accurately reflect the Committee’s responsibilities. Both Committees consist entirely of independent Directors, as defined in the rules of the NYSE and the applicable requirements of the SEC.

 

   

The Nominating and Corporate Governance Committee also consists entirely of independent Directors. Included in the responsibilities of the Nominating and Corporate Governance Committee is oversight of Board nominations and Board committee assignments. The Committee recommends to the Board nominees and committee assignments based on the skills and expertise of the individual nominees and Directors, as well as the needs of Martin Marietta, among other things.

 

   

The Audit Committee meets privately with each of management, representatives of Martin Marietta’s independent auditors, and Martin Marietta’s internal audit department.

 

   

The members of the Audit Committee do not receive any consulting or advisory fees or other compensation from Martin Marietta, other than Directors fees.

 

   

The members of the Audit Committee have no affiliation with Martin Marietta other than as a Director of Martin Marietta.

 

 

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The Board of Directors has determined that the Audit Committee includes at least one member who is an audit committee financial expert as defined in SEC rules.

General

 

   

The Board and its members are subject to self-assessments of their performance and the Board’s performance.

 

   

Directors have access to members of Martin Marietta’s management team and, as necessary and appropriate, to independent advisors.

 

   

At least annually, the Board evaluates the performance of the Chief Executive Officer.

 

   

The Board has adopted charters for each of its Audit Committee, Management Development and Compensation Committee, and Nominating and Corporate Governance Committee, which meet the requirements of the rules of the NYSE and are available on Martin Marietta’s website at www.martinmarietta.com.

Who are Martin Marietta’s Independent Directors?

All of Martin Marietta’s Directors are non-employee Directors except Mr. Nye. Mr. Nye does not sit in the executive sessions of the independent Directors unless invited to attend for a specific discussion nor does he participate in any action of the Board relating to any executive compensation plan in which he may participate.

In assessing the independence of its members, the Board has adopted for Martin Marietta a set of Guidelines for Director’s Independence. The Guidelines are posted and available for public viewing on Martin Marietta’s website at www.martinmarietta.com. These Guidelines reflect the rules of the NYSE, applicable requirements of the SEC, and other standards determined by the Board to be important in assessing the independence of Board members. The Board has determined that all members of the Board, except Mr. Zelnak and Mr. Nye, are “independent” under these Guidelines. The Board of Directors has determined that no Director (except Mr. Zelnak and Mr. Nye), or any person or organization with which the Director has any affiliation, has a relationship with Martin Marietta that may interfere with the Director’s independence from Martin Marietta and its management.

In making this “independence” determination, the Board considered other entities with which the Directors were affiliated and any business Martin Marietta had done with such entities. In that regard, Mr. Vinroot is a member of the law firm of Robinson, Bradshaw & Hinson, P.A. located in Charlotte, North Carolina, which provided certain legal services to Martin Marietta in 2013. Mr. Vinroot did not work on any of the legal matters for Martin Marietta. The amount of fees paid to Robinson, Bradshaw & Hinson, P.A. for such services in 2013 was approximately $87,000, representing less than 0.2% of the firm’s total revenues for the last fiscal year. Accordingly, the Board determined that Mr. Vinroot’s relationship with Martin Marietta, directly and as a partner of Robinson, Bradshaw & Hinson, P.A., was not material for purposes of the independence determination.

Do the independent Directors ever meet without management?

Martin Marietta’s Corporate Governance Guidelines adopted by the Board provide that at least two Board meetings each year will include an executive session of the non-employee Directors to discuss such topics as they may choose, including a discussion of the performance of Martin Marietta’s

 

 

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Chairman and its Chief Executive Officer. In 2013, Martin Marietta’s non-employee Directors met four times in executive session without management, in addition to executive sessions held by committees of the Board. In addition, at least once a year the independent Directors meet in executive session. The Chair of the Nominating and Corporate Governance Committee, currently Mr. McDonald, a non-employee Director, presides at these executive sessions of non-employee Directors. In the absence of such Chair, the non-employee Directors would elect from among themselves a chair for such an executive session.

What is the Board’s leadership structure?

The Board of Directors elected Mr. Nye as Chairman of the Board effective after the 2014 Annual Meeting of Shareholders. This change to add the responsibility of Chairman to Mr. Nye’s position completes the orderly succession process overseen by the Board of Directors. Our Corporate Governance Guidelines provide that the Board’s policy as to whether the Chairman and Chief Executive Officer positions should be separate is to adopt the practice that best serves the Corporation’s needs at any particular time. The Nominating and Governance Committee and the Board discussed board leadership alternatives on a number of occasions during 2013 and 2014 before deciding to recombine the Chairman and Chief Executive Officer roles. As a result of Mr. Nye’s long tenure at Martin Marietta, including four years as President and Chief Operating Officer and four years as President and Chief Executive Officer, the Board believes he is uniquely qualified through his experience, education and expertise to be the person who promotes strong and visionary leadership for our Board as well as important recognition as the leader of Martin Marietta by our customers, employees and other constituencies. The Board also believes that Mr. Nye’s serving as both Chairman and Chief Executive Officer is appropriate taking into consideration the size and nature of our business, Mr. Nye’s effective and careful formulation and execution of our strategic plan, Mr. Nye’s established working relationship and open communication with our independent directors, the significant board-level experience of our independent directors as a whole, the strong independent leadership and accountability to shareholders provided by 80% of our directors being independent, the independent leadership provided by our Committee chairs, and our Board culture in which Mr. Nye and the other directors are able to thoughtfully debate different points of view and reach consensus in an efficient manner.

Our Corporate Governance Guidelines also provide that the Chairman of the Nominating and Corporate Governance Committee presides at executive sessions of the Board, at which Mr. Nye does not attend unless specifically invited, to facilitate communication among the non-employee Directors. These executive sessions are routinely held each time the Board meets in person at a regularly scheduled meeting of the Board. The Corporate Governance Guidelines also provide that a discussion of the performance of the Chairman and the Chief Executive Officer be held at executive sessions of the Board. The Board believes that the strong working relationships between Mr. Nye and the other Directors fosters open communication among the members, both during meetings and in the intervals between meetings, and promotes an understanding of the issues and appropriate oversight.

What is the Board’s role in risk oversight?

Our Board currently has eight independent members and only two non-independent members, the non-executive Chairman and the Chief Executive Officer. A number of our independent Board members are serving or have served as members of senior management of other public companies,

 

 

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have served as directors of other public companies, and otherwise have experience and/or educational backgrounds that we believe qualify them to effectively assess risk. Each of our Board Committees, including our Audit, Management Development and Compensation, and Nominating and Corporate Governance Committees, are comprised solely of independent Directors, each with a different independent Director serving as Chair of the Committee (other than the Executive Committee, which does not meet on a regular basis).

The Board has overall responsibility for oversight of risk management. The Board believes that an effective risk management system will (1) timely identify the material risks that Martin Marietta faces, (2) communicate necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant Board Committee, (3) determine whether the risk is excessive or appropriate under the circumstances and designed to achieve a legitimate corporate goal, (4) implement risk management responses consistent with Martin Marietta’s risk profile, and (5) integrate risk management into Martin Marietta’s decision-making.

The Board delegates certain responsibilities to Board Committees to assist in fulfilling its risk oversight responsibilities. Each of the Committees reports regularly to the full Board of Directors as to actions taken and topics discussed. In addition, the Board reviews with management regularly the most significant risks facing Martin Marietta, the probabilities of those risks occurring, the steps taken to mitigate any impact of risks, and management’s general risk management strategy. In addition, the Board encourages management to promote a corporate culture that incorporates risk management into Martin Marietta’s day-to-day operations.

The Board has designated the Audit Committee to take the lead in overseeing risks related to financial reporting, financial statements, internal control environment, internal audit, independent audit, and accounting processes. The Finance Committee evaluates risks associated with Martin Marietta’s capital structure, including credit and liquidity risks. The Management Development and Compensation Committee oversees aspects of risk related to the annual performance evaluation of our Chief Executive Officer, succession planning and ensuring that executive compensation is appropriate to meet Martin Marietta’s objectives. The Nominating and Corporate Governance Committee oversees aspects of risk related to the composition of the Board and its Committees, Board performance and best practices in corporate governance. The Ethics, Environment, Safety and Health Committee monitors risks in the areas of Martin Marietta’s ethics program, health, safety, and the environment.

While the Board oversees Martin Marietta’s risk management, the executive officers are responsible for the day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our Corporation and is appropriate whether the positions of Chairman and Chief Executive Officer are separate or held by the same individual.

How would interested parties make their concerns known to the independent Directors?

The Board of Directors provides a process for shareholders and other interested parties to send communications to the Board. Shareholders and other interested parties may communicate anonymously and confidentially with the Board through Martin Marietta’s Ethics Hotline at 1-800-209-4508. The Board has also designated the Corporate Secretary to facilitate communications to the Board. Shareholders and other interested parties may communicate directly with the Board of

 

 

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Directors, or directly with non-management Directors, or an individual Director, including the Chair of the Nominating and Corporate Governance Committee, by writing to Martin Marietta Materials, Inc., Attn: Corporate Secretary, 2710 Wycliff Road, Raleigh, North Carolina 27607-3033.

All communications by shareholders or other interested parties addressed to the Board will be sent directly to Board members. While Martin Marietta’s Ethics Office and the Corporate Secretary may review, sort, and summarize these communications, all direct communications will be presented to the non-management Directors unless there is instruction from them to filter such communications (and in such event, any communication that has been filtered out will be made available to any non-management Director who wishes to review it).

Martin Marietta and its Board of Directors will continue to review and evaluate the process by which shareholders or other interested persons communicate with Martin Marietta and the Board and may adopt other or further processes and procedures in this regard. If so, Martin Marietta will identify those policies and procedures on its website at www.martinmarietta.com.

How often did the Board meet during 2013?

Martin Marietta’s Board of Directors held nine meetings during 2013, five of which were regularly scheduled meetings and four of which were special meetings. There were also a total of 26 committee meetings in 2013. In addition, management confers frequently with its Directors on an informal basis to discuss Corporation affairs.

How many times did Directors attend meetings of the Board and its Committees?

In 2013, all Directors attended at least 75% of the meetings of the Board of Directors. All directors attended at least 75% of the meetings of the committees of the Board on which they served (during the periods that they served).

Will the Directors attend the Annual Meeting?

Martin Marietta’s Directors are expected to attend Martin Marietta’s Annual Meeting of Shareholders. All Directors attended the 2013 Annual Meeting of Shareholders.

How are Directors compensated?

A table showing the compensation paid by Martin Marietta to the individuals serving as Directors in 2013, other than Mr. Nye, is included in the section of this proxy statement entitled “DIRECTOR COMPENSATION—Director Compensation Table.” Mr. Nye’s compensation as an executive officer of Martin Marietta is shown in the section entitled “EXECUTIVE COMPENSATION” and he received no additional compensation for service as a Director.

What Committees has the Board established?

Martin Marietta’s Board of Directors has six standing committees: the Audit Committee, the Ethics, Environment, Safety and Health Committee, the Executive Committee, the Finance Committee, the Management Development and Compensation Committee, and the Nominating and Corporate Governance Committee.

 

 

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The Audit Committee, which is composed entirely of non-employee, independent Directors, held 11 meetings during 2013. The Audit Committee meets periodically and separately in executive sessions with management, the independent auditors, and Martin Marietta’s internal auditors to review the activities of each. The Audit Committee possesses and may exercise the powers of the Board of Directors relating to accounting, auditing, and financial reporting matters of Martin Marietta, except when such powers are by statute or the Articles of Incorporation or Bylaws reserved to the full Board or delegated to another committee of the Board. The Audit Committee reports regularly to the full Board on these matters. The Audit Committee is directly responsible for the appointment, compensation, and oversight of Martin Marietta’s independent auditors. Among other duties, the Audit Committee:

 

   

selects the independent auditors

 

   

pre-approves all audit and non-audit services provided to Martin Marietta by the independent auditors

 

   

monitors the independence of the independent auditors

 

   

reviews and approves:

 

  ¯  

the scope and timing of work to be performed by the independent auditors

 

  ¯  

compensation to be paid to the independent auditors

 

  ¯  

financial accounting and reporting principles used by Martin Marietta

 

  ¯  

policies and procedures concerning audits, accounting, and financial controls

 

  ¯  

recommendations to improve existing practices

 

  ¯  

results of the audit and the reports of the independent auditors

 

   

reviews and discusses Martin Marietta’s annual audited consolidated financial statements and quarterly consolidated financial statements with management and the independent auditors

 

   

reviews and discusses management’s assessment of the effectiveness of Martin Marietta’s system of internal control over financial reporting

 

   

discusses Martin Marietta’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies

 

   

discusses matters related to risk assessment and risk management and how the process is handled by management

 

   

considers allegations, if ever made, of possible financial fraud or other financial improprieties

 

   

sets clear hiring policies for employees or former employees of the independent auditors

 

   

reviews the qualifications and the plan and scope of work of the corporate internal audit function

 

   

prepares an audit committee report as required by the SEC to be in this proxy statement

The Committee’s current members are Directors Maffucci (Chair), Menaker, Perez, and Rediker. The Board of Directors has determined that the Chair of the Audit Committee, Mr. Maffucci,

 

 

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qualifies as an “audit committee financial expert” as defined in rules adopted by the SEC. The Board has also determined that Mr. Maffucci, and the other members of the Audit Committee, are independent of management, as required by the rules of the NYSE, SEC, and the Board’s Guidelines for Director’s Independence.

The Ethics, Environment, Safety and Health Committee held two meetings during 2013. It monitors compliance with Martin Marietta’s Code of Ethics and Standards of Conduct and reviews all matters presented to it by the Corporate Ethics Officer concerning the ethical practices of Martin Marietta and its Directors, officers, and employees, including conflicts or potential conflicts of interest between Martin Marietta and any of its Directors, officers, and employees. The Committee also reviews and monitors the adequacy of Martin Marietta’s policies and procedures and organizational structure for ensuring compliance with environmental laws and regulations, and matters relating to health and safety. The Committee’s current members are Directors Vinroot (Chair), Menaker, Perez, Quillen, and Rediker.

The Executive Committee held no meetings during 2013. It has the authority to act during the intervals between the meetings of the Board of Directors and may exercise the powers of the Board in the management of the business and affairs of Martin Marietta as may be authorized by the Board of Directors, except to the extent such powers are by statute, the Articles of Incorporation or Bylaws reserved to the full Board. The Committee’s current members are Directors Zelnak (Chair), McDonald, and Menaker.

The Finance Committee held five meetings during 2013. It has been delegated general oversight powers related to the management of the financial affairs of Martin Marietta, including but not limited to, establishing lines of credit or other short-term borrowing arrangements and investing excess working capital funds on a short-term basis. The Committee reviews and makes recommendations to the Board of Directors concerning changes to capital structure, including the incurrence of long-term debt, issuance of equity securities, share repurchases, and the payment of dividends, as well as capital expenditures and the contributions budget. The Committee’s current members are Directors Perez (Chair), Maffucci, Quillen, and Rediker.

The Management Development and Compensation Committee held six meetings during 2013. It is composed entirely of non-employee, independent Directors, as required by the rules of the NYSE, who are also “non-employee” and “outside” Directors as those terms are defined by Rule 16b-3 promulgated under the Securities and Exchange Act of 1934 and Section 162(m) of the Internal Revenue Code of 1986. The Committee possesses and may exercise the powers of the Board of Directors relating to management development and compensation matters of Martin Marietta, except when such powers are by statute, the Articles of Incorporation or Bylaws reserved to the full Board or delegated to another committee of the Board. The Committee reports regularly to the full Board on these matters. The purposes of the Committee are to:

 

   

establish an overall strategy with respect to compensation for officers and management to enable Martin Marietta to attract and retain qualified employees

 

   

oversee executive succession and management development plans

 

   

discharge the Board’s responsibilities relating to compensation of Martin Marietta’s directors and elected officers

 

 

25


   

administer Martin Marietta’s equity and other compensation plans, as amended from time to time

 

   

review and discuss the Compensation Discussion and Analysis and produce a compensation committee report as required by the SEC to be included in this proxy statement

 

   

provide oversight of Martin Marietta’s Benefit Plan Committee, which administers Martin Marietta’s defined benefit and contribution plans

The Committee has the power, in its sole discretion, to determine the compensation and benefits to be paid for all elected officers and employees. The Committee also approves and administers the grants of stock options and any other equity-based awards that may be granted by Martin Marietta.

The Committee reviews and approves Martin Marietta’s goals and objectives for Chief Executive Officer’s compensation, evaluates the Chief Executive Officer’s performance in light of those goals and objectives, and determines and approves the Chief Executive Officer’s compensation level based on the Committee’s evaluation, which includes executive sessions with the independent directors of the Board of Directors. The Committee also reviews management’s assessment of the performance of other elected officers, and reviews and approves the salary, bonus, and other compensation of such elected officers. The Committee has the authority, in its sole discretion, to retain, pay, and terminate any consulting firm, if any, used to assist in evaluating director, chief executive officer, or senior executive compensation. The Committee has authority to delegate any of its duties under its charter, including to the Chair of the Committee, as it deems appropriate. The Committee also reviews with management at least annually plans for the orderly development and succession of executive management of Martin Marietta. The Committee’s current members are Directors Cole (Chair), McDonald, Menaker and Quillen.

The Nominating and Corporate Governance Committee held two meetings in 2013. The Committee is composed entirely of non-employee, independent Directors, as required by the rules of the NYSE. The Committee possesses and may exercise the powers of the Board of Directors relating to the process of governance of Martin Marietta, except when such powers are by statute, the Articles of Incorporation or Bylaws reserved to the full Board or delegated to another committee of the Board. The Committee reports regularly to the full Board on these matters. The purposes of the Committee are to:

 

   

oversee the identification and selection of qualified Board and Committee members

 

   

recommend to the Board director nominees for the next annual meeting of shareholders

 

   

oversee the development and implementation of a set of corporate governance principles applicable to Martin Marietta

The Committee also oversees the evaluation of the Board and its committees. The Committee has the sole authority to retain, pay, and terminate search firms, if any, used to identify Director candidates. The Committee’s current members are Directors McDonald (Chair), Cole, and Vinroot.

Upon the recommendation of this Committee, the Board of Directors has adopted a set of Corporate Governance Guidelines for Martin Marietta. The Guidelines are posted and available for

 

 

26


public viewing on Martin Marietta’s website at www.martinmarietta.com. A copy may also be obtained upon request from Martin Marietta’s Corporate Secretary. Additional information concerning the corporate governance process of Martin Marietta is contained in the section entitled “CORPORATE GOVERNANCE MATTERS” above.

Will the Nominating and Corporate Governance Committee consider any Director candidates recommended by shareholders?

The Nominating and Corporate Governance Committee will consider nominees recommended by shareholders for election as a Director at an annual meeting of shareholders of Martin Marietta, if the shareholder making such recommendation complies with the advance notice provisions of the Bylaws of Martin Marietta. The Bylaws of Martin Marietta require advance notice for any proposal for the nomination for election as a Director at an annual meeting of shareholders that is not included in Martin Marietta’s notice of meeting or made by or at the direction of the Board of Directors. In general, nominations must be delivered to the Secretary of Martin Marietta at its principal executive offices, 2710 Wycliff Road, Raleigh, North Carolina 27607, not less than 60 days nor more than 90 days prior to the first anniversary of the mailing of the proxy statement in connection with the preceding year’s annual meeting of shareholders and must contain specified information concerning the nominee and the shareholder proposing the nomination. Any shareholder desiring a copy of the Bylaws of Martin Marietta will be furnished a copy without charge upon written request to the Secretary of Martin Marietta. Since the 2013 annual meeting, Martin Marietta has not made any material changes to the procedures by which shareholders may recommend nominees to Martin Marietta’s Board of Directors. Additional information is contained in the section entitled “SHAREHOLDERS’ PROPOSALS FOR 2015 ANNUAL MEETING” below.

How does the Board select nominees for the Board?

The Nominating and Corporate Governance Committee will consider candidates for Board membership suggested by its members and other Board members, as well as management and shareholders. The Committee has also retained a third-party executive search firm to identify potential candidates for its consideration from time to time. The Committee makes an initial determination as to whether to conduct a full evaluation of the candidate, and reviews all information provided to the Committee, including the recommendations for the prospective candidate and the Committee’s own knowledge of the prospective candidate. If the Committee determines that additional consideration is warranted, interviews are conducted by the members of the Committee, as well as the Chief Executive Officer of Martin Marietta; appropriate inquiries are conducted into the background and qualifications of potential candidates; the Committee meets to discuss its evaluation and feedback from the Chief Executive Officer; and, if the Committee determines to do so, it makes a recommendation to the full Board as to the persons who should be nominated by the Board. The Board of Directors determines the nominees after considering the recommendation and report of the Committee.

In evaluating any potential candidate, the Nominating and Corporate Governance Committee considers the extent to which the candidate has the personal characteristics and core competencies outlined in the Guidelines for Potential New Board Members adopted by the Committee, and takes into account all other factors it considers appropriate. A copy of these Guidelines is attached to this proxy statement as Appendix A.

 

 

27


The Board of Directors, acting through the Committee, is responsible for presenting for shareholder consideration a group of Board candidates that, taken together, have the experience, qualifications, attributes and skills appropriate for functioning effectively as a Board and providing oversight to Martin Marietta. The Committee looks for certain characteristics common to all Board members, including integrity, strong professional reputation, mature business judgment, record of achievement, constructive and collegial personal attributes, and the ability and commitment to devote sufficient time and energy to Board service. In addition, the Committee seeks to include on the Board a complementary mix of individuals with diverse backgrounds and skills reflecting the broad set of challenges that the Board confronts. These individual qualities include matters such as experience in the mining or manufacturing industry, technical experience in financial or accounting matters, experience gained in situations comparable to Martin Marietta’s which has grown through acquisitions, leadership experience, public company Board membership or executive officer experience, and relevant geographical experience.

Although the Committee does not have a formal policy regarding Board diversity, matters of diversity (including diversity in professional experience, geographic background reflecting Martin Marietta’s geographic base, education, ethnic background and gender) are included in the many characteristics considered by the Committee in evaluating nominees for election as directors as reflected in Martin Marietta’s Guidelines for Potential New Board Members. The Committee considers all candidates in the context of the qualifications enumerated above, as well as their complementary experiences, backgrounds and skills, in an effort to maintain a strong and effective Board of Directors. The Nominating and Corporate Governance Committee also assesses, through discussions at Committee and Board of Directors meetings, the effectiveness of its efforts with respect to diversity and consideration of its Guidelines for Potential New Board Members when it periodically reviews the overall composition of the Board and as part of its self-evaluation process. In addition to these qualities, the Committee has considered the special characteristics outlined in the Directors’ biographies on pages 8 to 14 of this proxy statement, which has led the Committee to conclude that the current Board members, including the nominees for election, have the appropriate characteristics to serve as members of the Board of Directors.

Each nominee approved by the Nominating and Corporate Governance Committee and recommended for election at the 2014 Annual Meeting is a current Director standing for re-election. The Committee received no additional recommendations for Director nominees for consideration at the annual meeting.

Do the Board Committees have charters? How can shareholders obtain them?

Martin Marietta’s Board of Directors has adopted written charters meeting the requirements of the NYSE for the Audit Committee, Management Development and Compensation Committee, and Nominating and Corporate Governance Committee. These charters address the purposes and responsibilities of each committee, as described above, and provide for an annual performance evaluation of each committee. Copies of these charters are posted on Martin Marietta’s website at www.martinmarietta.com, along with copies of Martin Marietta’s Corporate Governance Guidelines, Code of Ethics and Standards of Conduct, and Guidelines for Director’s Independence.

 

 

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How are transactions with persons related to Martin Marietta reviewed?

The SEC requires Martin Marietta to disclose in this proxy statement certain transactions in which Martin Marietta participates and in which certain persons considered “related persons” of Martin Marietta have a direct or indirect material interest. These “related persons” would include the directors and executive officers of Martin Marietta, nominees for Director, certain control persons, and their immediate family members.

Each Director, executive officer, and nominee for Director of Martin Marietta receives and agrees to abide by Martin Marietta’s Code of Ethics and Standards of Conduct. Martin Marietta considers that any transaction in which Martin Marietta participates and in which any related person of Martin Marietta has a direct or indirect material interest will be subject to Martin Marietta’s Code of Ethics and Standards of Conduct and subject to review, approval or ratification, as appropriate under the circumstances, by Martin Marietta under the standards enumerated in Martin Marietta’s Code of Ethics and Standards of Conduct. If a proposed transaction is one in which a Director of Martin Marietta has an actual or potential conflict of interest, it will be subject to review by the Chairman of the Board of Directors and the Chairman of the Nominating and Corporate Governance Committee.

Any waivers of the Code of Ethics and Standards of Conduct for Directors and executive officers may be made only by Martin Marietta’s Board of Directors or any committee to which it delegates that authority. Any waivers for Directors and executive officers and any amendments to the Code of Ethics and Standards of Conduct will be promptly disclosed to Martin Marietta’s shareholders.

In assessing the independence of its members, the Board considers any interests a director may have in any transactions in which Martin Marietta participates. The Board also considers other entities with which the Directors are affiliated and any business Martin Marietta has done with such entities.

PROPOSAL 2

INDEPENDENT AUDITORS

(Item 2 on Proxy Card)

The Board of Directors recommends that the shareholders ratify the appointment of Ernst & Young LLP, an independent registered public accounting firm, to audit the consolidated financial statements of Martin Marietta and the effectiveness of Martin Marietta’s internal control over financial reporting for the 2014 fiscal year. The ratification of the appointment of Ernst & Young LLP is being submitted to the shareholders because management believes this to be good corporate practice. Should the shareholders fail to ratify this appointment, the Board of Directors and its Audit Committee will review the matter.

Ernst & Young LLP served as Martin Marietta’s independent auditors for 2013 and audited the consolidated financial statements of Martin Marietta for the year ended December 31, 2013 and the effectiveness of Martin Marietta’s internal control over financial reporting as of December 31, 2013. In connection with the audit of Martin Marietta’s 2013 consolidated financial statements, Martin Marietta entered into an engagement letter with Ernst & Young LLP that sets forth the terms by which Ernst & Young LLP would perform audit services for Martin Marietta. Ernst & Young LLP required that the audit engagement agreement be subject to alternative dispute resolution procedures.

 

 

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The Audit Committee is solely responsible for retaining or terminating Martin Marietta’s independent auditors in 2014. Representatives of Ernst & Young LLP are expected to attend the annual meeting, will have the opportunity to make a statement if they so desire, and will be available to respond to questions from shareholders.

THE BOARD UNANIMOUSLY RECOMMENDS

A VOTE “FOR” RATIFCATION OF THE SELECTION

OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS

Summary of Fees

The following table summarizes the aggregate fees billed for professional services rendered to Martin Marietta by Ernst & Young LLP in 2013 and 2012. A description of these various fees and services follows the table.

 

      2013      2012  
                   

Audit Fees

     $1,689,000         $1,498,000   

Audit-Related Fees

     414,000         102,000   

Tax Fees

     135,000         259,000   

All Other Fees

     0         0   
    

 

 

    

 

 

 

TOTAL

     $2,238,000         $1,859,000   

Percentage of Audit & Audit-Related Fees to Total Fees

     94.0%         86.1%   

Audit Fees

The aggregate fees billed for professional services rendered by Ernst & Young LLP to Martin Marietta for each of 2013 and 2012 in connection with the annual consolidated financial statement audit, the annual internal controls audit, and reviews of Martin Marietta’s consolidated financial consolidated statements included in the quarterly reports on Form 10-Q were $1,689,000 and $1,264,000, respectively. During 2013, Ernst & Young LLP also billed Martin Marietta $234,000 related to the filing of the S-4 registration statement related to a proposed significant business combination that was not consummated.

Audit-Related Fees

The aggregate fees billed for professional services rendered by Ernst & Young LLP to Martin Marietta for each of 2013 and 2012 and in connection with audit-related services, including transaction due diligence, subsidiary audits and continuing education, was $414,000 and $102,000, respectively.

Tax Fees

The aggregate fees billed for professional services rendered by Ernst & Young LLP to Martin Marietta for each of 2013 and 2012 in connection with tax advice, including consultation on transfer pricing issues and pending tangible property regulations, and other tax-related activities were $135,000 and $259,000, respectively.

 

 

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All Other Fees

There were no other fees billed for other professional services rendered or products provided by Ernst & Young LLP to Martin Marietta for 2013 and 2012.

Pre-Approval Policies and Procedures

The Audit Committee has adopted a policy that requires advance approval of all audit, audit-related, tax services, and other services performed by Ernst & Young LLP. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved with respect to that year, the Audit Committee must approve the permitted service before Ernst & Young LLP is engaged to perform it. The Audit Committee has delegated to the Chair of the Audit Committee authority to approve permitted services, provided that the Chair reports any decision to the Committee at its next scheduled meeting.

Audit Committee Review

In connection with the Audit Committee’s review of services rendered and fees billed by Ernst & Young LLP, the Audit Committee has considered whether the provision of the non-audit related services described above is compatible with maintaining the independent auditors’ independence and has concluded that the provision of these services does not compromise such independence.

AUDIT COMMITTEE REPORT

The Audit Committee operates under a written charter adopted by the Board of Directors, which is reassessed at least annually for adequacy by the Audit Committee. The Directors who serve on the Audit Committee have no financial or personal ties to Martin Marietta (other than Director compensation and equity ownership as described in this proxy statement) and are all “independent” for purposes of the Securities and Exchange Commission’s regulations, the New York Stock Exchange listing standards, and the Guidelines for Director’s Independence adopted by the Board of Directors. The Board of Directors has determined that none of the Audit Committee members has a relationship with Martin Marietta that may interfere with the Director’s independence from Martin Marietta and its management. Copies of the Audit Committee’s charter and Martin Marietta’s Guidelines for Director’s Independence can be viewed on Martin Marietta’s website at www.martinmarietta.com.

The Board of Directors has charged the Audit Committee with a number of responsibilities, including review of the adequacy of Martin Marietta’s financial reporting, accounting systems, and internal controls. Martin Marietta’s independent auditors and the vice president of the internal audit function report directly and are ultimately accountable to the Audit Committee.

In the discharge of its responsibilities, the Audit Committee has reviewed and discussed with management and the independent auditors Martin Marietta’s audited consolidated financial statements for fiscal year 2013. In addition, the Committee has discussed with the independent auditors matters such as the quality (in addition to acceptability), clarity, consistency, and completeness of Martin Marietta’s financial reporting, as required by Statement on Auditing Standard No. 16, Communication with Audit Committees, as adopted by the Public Company Accounting Oversight Board.

 

 

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The Audit Committee has received from the independent auditors written disclosures and a letter concerning the independent auditors’ independence from Martin Marietta, as required by the Public Company Accounting Oversight Board in Rule 3526, Communications with Audit Committees Concerning Independence, and has discussed with the independent auditors the independent auditors’ independence. The Audit Committee also received from the independent auditors a letter indicating there were no material issues raised by the independent auditors’ most recent internal quality control review, or by any inquiry or investigation by governmental or professional authorities within the preceding five years. These disclosures have been reviewed by the Committee and discussed with the independent auditors.

Based on these reviews and discussions, the Audit Committee has recommended to the Board that the audited financial statements be included in Martin Marietta’s 2013 Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

February 19, 2014

AUDIT COMMITTEE

David G. Maffucci, Chair

Frank H. Menaker, Jr.

Laree E. Perez

Dennis L. Rediker

MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT

The Management Development and Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis beginning on page 33 of this proxy statement. Based on this review and discussion, the Management Development and Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Martin Marietta’s Annual Report on Form 10-K and this Proxy Statement.

February 20, 2014

MANAGEMENT DEVELOPMENT AND

COMPENSATION COMMITTEE

Sue W. Cole, Chair

William E. McDonald

Frank H. Menaker, Jr.

Michael J. Quillen

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER

PARTICIPATION IN COMPENSATION DECISIONS

The members of Martin Marietta’s Management Development and Compensation Committee are Directors Cole, McDonald, Menaker and Quillen, none of whom has ever been an officer or employee of Martin Marietta or any of its subsidiaries. There are no executive officer-Director interlocks where an executive of Martin Marietta serves on the compensation committee of another corporation that has an executive officer serving on Martin Marietta’s Board of Directors.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

This Executive Summary provides an overview of our performance in 2013, the factors influencing it, and how executive compensation in 2013 was tied to our performance. Our compensation philosophy and programs are described in more detail below in this Compensation Discussion and Analysis.

Our shareholders expressed their continued support of our executive compensation programs by approving our non-binding advisory vote on executive compensation at our 2013 annual meeting of shareholders. More than 97% of votes cast supported our executive compensation policies and practices. During 2013, we reviewed our programs and we continue to believe that our executive compensation programs are designed to support our company and our business strategies in concert with our compensation philosophy.

The overall United States economy moved at a tepid pace during 2013, following the economic recession that began in 2009 for the construction materials industry generally. Economic and political uncertainty, including the prolonged Congressional impasse over the federal budget and national debt ceiling that resulted in the government shutdown and the pending impact of The Patient Protection and Affordable Care Act, eroded consumer confidence, impeding significant growth during 2013. Construction unemployment remains 1.9 million jobs below peak. Further, despite the momentum of the residential recovery and the Federal Reserve keeping the federal funds rate near zero percent, housing permits remain significantly below normalized annual levels.

Against this background, Martin Marietta continued to execute on its strategic plan while delivering strong performance in 2013:

 

   

Earnings per diluted share of $2.61 compared with $1.83 in 2012 (2012 included business development costs of $0.46 per diluted share)

 

   

Net sales of $1.943 billion, a 6.0% increase

 

   

Aggregates product line pricing increase of 3.0% and volume growth of 0.1%

 

   

Record financial results by the Specialty Products segment

 

   

Consolidated gross margin (excluding freight and delivery revenues) of 18.7%, up 90 basis points

 

   

Consolidated earnings from operations of $218.0 million compared with $156.2 million (2012 included business development costs of $35.1 million)

 

   

Continued payment of an annual cash dividend of $1.60 per share to shareholders, which has not been reduced from previous levels

Management was able to achieve these performance results in 2013 by continuing its improvement on our cost structure without jeopardizing the long-term value of the business, allowing us to become more profitable as volumes recover. Selling, general and administrative (“SG&A”) expenses were 7.7% of net sales, an increase of only 10 basis points compared with 2012. On an

 

 

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absolute basis, SG&A expenses increased $11.7 million, as expected, due to incremental costs for the Corporation’s information systems upgrade that was successfully completed in October 2013, as well as other costs related to productivity improvement initiatives. These results have enabled us to achieve the following:

 

   

Return on shareholders’ equity of 8.2% in 2013, an increase of approximately 220 basis points.

 

   

Earnings per share of $2.61, an increase of over 43%.

 

   

Net earnings attributable to Martin Marietta of $121 million, an increase of over 44%.

 

   

Consolidated earnings from operations were $218.0 million, an improvement of 40%.

 

   

Cash provided by operating activities for 2013 was $309.0 million compared with $222.7 million in 2012, an increase of almost 39%.

 

   

The ratio of consolidated debt-to-consolidated EBITDA, as provided for in our $600 million credit agreement, was 2.67 times for the trailing twelve months ended December 31, 2013, down from 3.21 times in 2012 and well below the credit agreement’s limit of 3.50 times.

The strong financial results for 2013 are accompanied by other achievements that reflect the discipline of our executive management team. Mr. Nye and the other executive officers executed on our business plan and promoted our strategic objectives focused on long-term growth:

 

   

We continued our focus on employee safety performance, environmental and other regulatory compliance and a robust ethics program. Our Chico Quarry in the Dallas/Fort Worth Metroplex was recognized in the Large Quarry Category by the National Mining Association with its Sentinels of Safety Award, the industry’s oldest and most prestigious safety honor, and six additional Martin Marietta sites were named runners-up in their respective categories.

 

   

We successfully completed the acquisition and integration of three quarries in North Georgia, adding over 800 million tons of reserves. We also continued the effective integration of our Colorado business acquired in December 2011.

Management was able to consider these growth and value-added opportunities because of its discipline in managing costs and maintaining a healthy balance sheet, and its experience in successfully concluding acquisitions.

The Management Development and Compensation Committee (the “Committee”) reviewed executive compensation in 2013 in light of our financial results, individual performance, competitive data, and the other performance achievements noted above. In light of these considerations, the Committee made the following compensation decisions for 2013:

 

   

Awarded merit pay increases in base salary in the amount of 2.9% to select named executive officers, which increases were lower than historical levels in light of the recessionary economy, despite strong satisfaction of individual performance goals. Mr. Nye was awarded a merit pay increase of 2.94%, although his base salary was at or below median for executives in comparable positions.

 

 

34


   

Approved cash bonus payouts pursuant to the Executive Incentive Plan in the range of 79.8% to 82.5% of target to the named executive officers, consistent with the achievement of the performance metrics at or above that level. Mr. Nye’s cash bonus in 2013 was approximately 80% of base salary. Mr. Nye has no target bonus under the Executive Incentive Plan, but the Committee generally considers an appropriate target for Mr. Nye to be 100% of base salary.

 

   

Granted performance-based long-term equity incentives to our continuing named executive officers in 2013 at 67.5% of target for the performance-based LTIP Awards (discussed on pages 47 to 49).

 

LOGO

Performance-Related Compensation

The pay-for-performance orientation of compensation in 2013 for the named executive officers is illustrated below with respect to (1) Mr. Nye and (2) all the named executive officers other than Mr. Nye.

 

LOGO   LOGO

 

 

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All of the opportunities to achieve long-term equity incentives granted to the executive officers in 2013 were performance-related. These consisted of three types of awards, which are discussed more fully below (see Performance-Based Stock Purchase Awards): options; restricted stock units pursuant to our long-term incentive program (LTIP Awards); and restricted stock units that replaced a previous equity plan, the Shareholder Value Achievement Plan (SVAP Awards). Each of these awards have a target amount based on enumerated performance measures, with performance required to achieve a threshold award and the opportunity to earn a multiple of the target. Our entire long-term incentive program is subject to performance adjustment, whereby the grant date value of these incentive awards may be reduced based on prior year performance. Based on data from Aon Hewitt, we believe this contrasts with our peer group and broader United States market practice, where such adjustments to target awards are not typically observed or, when observed, impact a minority portion of the overall award.

 

LOGO

All of the equity-based awards granted in 2013 were adjusted, despite the excellent performance during the downturn in terms of financial metrics, maintenance of an unreduced dividend, health of the balance sheet, compliance with debt covenants, and safety and regulatory performance. The performance adjustments applicable to the compensation earned by the executive officers in 2013 have resulted in awards that were below target, or no awards were granted.

 

 

 

36


Equity Plan

 

2013 Award

Granted

  2013 Performance
Measurements
 

2012 Award

Granted

 

2012 Performance

Measurements

                      
   

SVAP

  No award granted   TSR as compared to
S&P 400 Midcap and
S&P 1500 Basic
Materials
  No award granted  

TSR as compared to S&P 400 Midcap and

S&P 1500 Basic Materials

   

Options

  67.5% of Target   Return, Growth, Cash
Flow and EBIDTA as
compared to
Performance Peer
Group
  50% of Target   Profitability, Financial Position, Growth, Regulatory and Compliance Matters, Existence of No Material Weaknesses as compared to Performance Peer Group
   

LTIP RSUs

  67.5% of Target   Return, Growth, Cash
Flow and EBIDTA as
compared to
Performance Peer
Group
  50% of Target   Profitability, Financial Position, Growth, Regulatory and Compliance Matters, Existence of No Material Weaknesses as compared to Performance Peer Group

In summary, we believe that our executive compensation program continues to be reasonable, competitive, and strongly focused on pay-for-performance. The majority of the target compensation opportunities for our named executive officers in 2013 were performance-based. Through equity incentives and mandatory investment of a portion of the annual bonus award in common stock units through the Incentive Stock Plan (discussed on pages 46 to 47), we align the interests of our executives with those of our shareholders and Martin Marietta’s long-term interests, and also help retain executives over time. We believe that the compensation of our named executive officers in 2013 was consistent with Martin Marietta’s performance in 2013 and appropriate to align it with Martin Marietta’s growth in future years.

Compensation Philosophy and Objectives

We believe that our employees are Martin Marietta’s most important resource. In developing our executive compensation policies, the Board of Directors, through the Management Development and Compensation Committee, focuses on two primary objectives: compensating our executive officers in a manner that is fair, reasonable and competitive and structuring executive compensation programs to provide incentives consistent with our strategic goals. The executive compensation program is designed to reward high performance in achieving both annual and long-term goals that have the ultimate objective of improving shareholder value. We measure the achievement of goals not only in terms of financial performance, but also by evaluating ethical conduct, safety performance, effectiveness of our internal controls and other factors as determined by the Committee. In 2013, as in prior years, the Committee evaluated financial performance by reference to our operating performance rather than short-term changes in stock price based on its view that our long-term operating performance will be reflected by stock price performance over the long-term. The Board believes this purpose is particularly important in overseeing the management of a company such as Martin Marietta that is engaged in a cyclical business where the long-term value for shareholders may not be reflected

 

 

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in current stock prices and which may be temporarily depressed by short-term factors, such as recessionary economies and operating markets. The types of compensation and benefits provided to the named executive officers are similar to those provided to other executive officers.

Executive Compensation Policies

The Committee considers the following objectives in setting executive compensation:

 

   

Attract and retain knowledgeable and experienced senior executives.

 

   

Motivate our executives to achieve superior results on both annual and long-term bases to build long-term value for shareholders.

 

   

Reward performance that exceeds established performance goals consistent with our strategic goals and upholding integrity.

 

   

Align individual objectives with company objectives without encouraging excessive risk-taking.

 

   

Encourage ownership mentality and align the long-term financial interest of our executives with those of our shareholders.

 

   

Be competitive with our peers.

 

   

Provide reward systems that are measurable and easily understood by our managers and shareholders.

The Role of the Management Development and Compensation Committee

The Committee is responsible for carrying out the philosophy and objectives of the Board of Directors related to executive compensation in addition to its responsibilities of overseeing the development and succession of executive management of Martin Marietta. The Committee has the authority to determine compensation and benefits for Martin Marietta’s executive officers. The Committee members are each non-employee, independent Board members pursuant to the New York Stock Exchange rules, and the Committee operates pursuant to a written charter, a copy of which can be viewed on Martin Marietta’s website at www.martinmarietta.com.

The performance of the Chief Executive Officer and each other executive officer is reviewed regularly by the Committee. Based on this review, the Committee sets compensation for all executive officers. Compensation decisions with respect to the executive officers other than the Chief Executive Officer are based in part on recommendations by the Chief Executive Officer, with input from the Senior Vice President—Human Resources, with respect to salary adjustments and annual cash and equity awards. The Committee can accept, reject or modify any recommended adjustments or awards to executive officers. For the Chief Executive Officer, the Committee sets the levels of annual adjustments and awards based on the criteria it deems to be appropriate under the circumstances. There are no employment agreements between Martin Marietta and any executive officer of Martin Marietta, including the Chief Executive Officer.

 

 

38


The Committee uses a mix of annual and long-term compensation to provide a total compensation structure that is designed to motivate executives to achieve the business goals set by Martin Marietta and reward Martin Marietta’s executives when they achieve those goals. Although the Committee has no specific pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term compensation, the pay mix is largely dictated by competitive market practice combined with a philosophy of calibrating incentive levels to performance results. The Committee determines the percentage mix of compensation that it believes is appropriate for each of the executive officers based on their judgment and experience, compensation information compiled by management, recommendations of the Chief Executive Officer (except for his own compensation) and information provided by independent compensation consultants. In 2013, in light of Martin Marietta’s positive performance despite the lengthy economic recession, the Committee continued to evaluate whether its compensation appropriately compensated its executive officers based on Martin Marietta’s performance, and allowed us to attract and retain excellent leaders. In the Committee’s view, this was especially important given the decreased bonus and long-term equity grants being made due to Martin Marietta’s lower operating performance despite significant efforts being made by executive officers that will better position the Company for growth when the economy improves. In this regard, the Committee reaffirmed its philosophy of looking at total compensation, with long-term equity targets at or about median, although actual pay would be below median.

The Committee in April 2013 retained Aon Hewitt as a compensation consultant to assist the Committee in reviewing our executive compensation program to ensure that the program is consistent with the Committee’s philosophy and to provide valuable information and insight as to market pay practices. Aon Hewitt was selected by the Committee and works under the direction of the Committee Chair. The Committee has assessed the independence of Aon Hewitt and did not identify any conflict of interest that would prevent Aon Hewitt from independently representing the Committee.

Aon Hewitt’s primary role is to provide an independent analysis of competitive market data and to assist the Committee in evaluating compensation proposals made by management. Aon Hewitt provides comments on management’s annual competitive analysis of each component of compensation and total compensation for the Chief Executive Officer and executive officers of Martin Marietta. Aon Hewitt also provides the Committee with relevant market data and alternatives to consider when making compensation decisions for the Chief Executive Officer. Aon Hewitt also provides feedback to management on proxy information and published compensation surveys, which are then used by the Chief Executive Officer in making recommendations to the Committee with respect to compensation for executive officers other than the Chief Executive Officer. The Committee and/or the Committee Chairman from time to time in 2013 met with Aon Hewitt in private sessions without management present. At the direction of the Committee Chair, Aon Hewitt meets with management to review management’s proposals prior to the Committee’s review. A representative of Aon Hewitt generally attends the Committee’s meetings. Aon Hewitt’s fees for its services provided to the Committee in 2013 were $156,077.

The Committee retained Towers Watson in 2012 and through April 2013 as its independent compensation consultant. Towers Watson advised the Committee on the Chief Executive Officer’s 2013 merit increase, which was determined in November 2012, and the 2012 incentive bonus award, which was determined in January 2013. Towers Watson provided the Committee with relevant market data and alternatives to consider when making compensation decisions for the Chief Executive Officer.

 

 

39


The Committee assessed and discussed the performance and independence of its executive compensation consultant and whether the work performed by the executive compensation consultants at Towers Watson raised a conflict of interest that would prevent Towers Watson from independently advising the Committee. As part of this assessment, the Committee considered the extent of other business that Towers Watson performed for Martin Marietta and reviewed the safeguards that were in place to ensure the independence of the advice they received. The Committee also considered that Towers Watson provides other services to Martin Marietta, the amount of fees received by Towers Watson from Martin Marietta as a percentage of its total revenue, Towers Watson’s policies and procedures that are designed to prevent conflicts of interest, no personal or business relationship of the compensation consultant with a member of the Committee, no Martin Marietta stock owned by the compensation consultant, and no business or personal relationship between our executive officers and Towers Watson or the compensation consultant. The Committee considered that Towers Watson performed actuarial, retirement plan, welfare plan and benefits consulting services for Martin Marietta from a different office and individuals than those who provided compensation advice to the Committee. Martin Marietta paid $676,779 to Towers Watson for such other business in 2012 and $512,080 in 2013. Towers Watson’s fees to Martin Marietta for executive compensation services in 2012 were $160,454 and in 2013 were $24,442. The total fees Towers Watson received from Martin Marietta were less than 0.05% of its total revenue. The Committee also reviewed Towers Watson’s protocols and policies with regard to ensuring the objectivity of its consulting on compensation, including rigorous peer reviews by qualified reviewers who do not regularly perform work for Martin Marietta, a comprehensive Code of Conduct and Ethics that addresses issues relating to conflicts of interest, periodic compliance reviews, the compensation consultants who advise Martin Marietta on the compensation of executive officers and directors may not serve in broader relationship-management roles for us, individuals who are not part of the executive compensation consulting team (other than designated quality reviewers) are precluded from involvement in the development of recommendations regarding the compensation of Martin Marietta’s executive officers and directors, and the compensation paid to Towers Watson executive compensation consultants is not directly tied to the fees paid, or to the expansion of the fees paid, by that client. Based on these considerations, the Committee determined that adequate safeguards were in place to assure that the engagement of Towers Watson to provide actuarial, retirement plan, welfare plan and benefits consulting services would not cause Towers Watson to be unduly influenced by management and that Towers Watson provided objective and independent executive compensation advice to the Committee.

Compensation and Risk-Taking

We believe our executive pay is reasonable and provides appropriate incentives to our executives to achieve our financial and strategic goals without encouraging them to take excessive risks in their business decisions. Compensation program features that mitigate against risks include the following:

 

   

Our annual bonus plan does not provide payment for poor individual or corporate performance, regardless of whether the failure to achieve target was outside management’s control.

 

   

There is a cap on the annual bonus, even for spectacular performance.

 

   

There are caps on the long-term equity awards, even if the required performance-related criteria are exceeded.

 

 

40


   

A majority of the named executive officers’ compensation is long-term, with equity grants vesting over three to five years, depending on the plan.

 

   

Our compensation is not based on highly-leveraged short-term incentives that encourage high risk investments at the expense of long-term value.

 

   

Long-term compensation to executive officers is based on specific performance measures that balance long-term growth and returns.

 

   

The Committee uses benchmarking data and the advice of its independent compensation consultant to keep compensation in line with typical market practices and appropriate to Martin Marietta’s needs.

The Use of Benchmarking Information

The Committee in 2013 reviewed compensation information drawn from various sources, including proxy statements of a peer group of the following companies that we selected primarily from the Standard and Poor’s 1500 Basic Materials Index with other companies added to the group, that are in the aggregates, cement, natural resources and specialty chemical industries, based on similarities in revenue and business characteristics: Albermarle Corporation, Amcol International Corporation, Arch Coal, Inc., Armstrong World Industries, Compass Minerals International, FMC Corporation, Granite Construction Inc., Kaiser Aluminum Corp., Kansas City Southern, Louisiana- Pacific Corporation, Packaging Corporation of America, Suncoke Energy Inc., Universal Forest Products Inc., USG Corp., The Valspar Corporation and Vulcan Materials Company (the “Compensation Peer Group”). The Committee reviews these peer companies annually to ensure that the companies included in the group are comparable to Martin Marietta as to size and mix, and other factors (such as removing companies that have undergone bankruptcy or other significant financial issues). The Compensation Peer Group was used by the Committee for data related to base, bonus and long-term incentive compensation because of the Committee’s view that it competes for executive officers and employees from companies that are represented by this group. In 2013, the Committee used a different peer group for comparisons related to performance based on its view that investors consider the performance of these public companies when deciding to make an investment in the construction materials sector. This peer group consists of Cemex, S.A.B. de C.V., CRH PLC, Heidelberger Druckmaschinen AG/Heidelberg USA, Holcim Ltd., Lafarge S.A. and Vulcan Materials Company (the “Performance Peer Group”).

Because the information in the proxy statements or other reports of these companies generally does not provide precise comparisons by position to our executive officers, the Committee also takes into consideration published independent compensation surveys of companies with revenue in the range of $1.5 billion to $2.0 billion as to median levels for each executive officer. As to the Chief Executive Officer’s compensation, the Committee reviews compensation information derived from both the Compensation Peer Group described above and the published surveys described in the preceding sentence, as well as the advice of the independent compensation consultant, which in 2012 was Towers Watson. The Committee considered this benchmarking information in November 2012 in setting Mr. Nye’s base salary and for the other components of his 2013 compensation.

In general, the Committee compares annual base salaries to the median compensation levels or the 50th percentile and 75th percentile of executive officers performing similar job functions at the companies in both the peer group survey and the published surveys described above that were reviewed. The same peer group survey was used to consider compensation for the Chief Executive

 

 

41


Officer, the Chief Financial Officer and the executive officers responsible for operations. The published surveys described above are used to consider compensation for the Chief Executive Officer and all the named executive officers. The Committee also reviews a range of market pay for similarly-situated executive officers. It also compares targets for all variable pay, which is compensation other than base salaries, to the median level. The variable pay is based on specific performance measurements as discussed below for each component of compensation and is therefore commensurate with actual performance. In structuring variable pay, the Committee seeks to give each executive officer the opportunity to earn more than the median of the total compensation paid to executive officers performing similar job functions at the peer companies for outstanding performance, which can be difficult to achieve. The Committee uses the median level for benchmarking purposes because it believes that is the appropriate level to attract and retain executive officers. Coupled with the opportunity to earn higher amounts commensurate with performance, the Committee believes high performing executives are given appropriate incentives and rewards for performance that results in improved shareholder value.

Although the Committee uses the benchmark standards as its starting point in setting compensation levels, the compensation packages for executive officers may vary materially from the peer group benchmarks based on several factors. Market data, position, tenure, individual and organization performance, retention needs and internal pay equity have been the primary factors considered in decisions to increase or decrease compensation opportunities. Specifically, the Committee sets compensation levels below the benchmark levels for executive officers with relatively less relevant experience, less responsibility, less tenure with Martin Marietta and/or lower performance ratings. Conversely, if an officer consistently receives favorable performance ratings, accumulates years of service and expertise in relevant areas, has more responsibility and/or has significant other achievements, his or her compensation will typically be above the peer group median. Long-term compensation to executive officers is based on specific performance measurements as discussed below for each component of compensation.

Compensation Structure and Awards for 2013

The Committee periodically reviews the components of Martin Marietta’s executive compensation program to ensure that pay levels are competitive and that incentive opportunities are effective in attracting and retaining talented employees. Consistent with the Committee’s approach in prior years, the 2013 executive compensation program was based on the following principles:

 

   

Base salaries that provide a base level of compensation targeted to the median level of salaries paid to officers in comparable companies with perceived comparable responsibilities, adjusted for each individual to reflect the factors discussed above.

 

   

Annual cash bonuses that reward recipients if they achieve or exceed performance results against established targeted corporate and personal goals.

 

   

Stock purchase awards that encourage stock ownership and reward future stock price appreciation by permitting the recipients to purchase stock at a discount with cash from bonus awards.

 

   

Long-term equity compensation that links officers’ rewards directly to the return realized by Martin Marietta’s shareholders. This component includes both stock options and restricted stock awards, both of which are based on Martin Marietta’s performance.

 

 

42


   

Retirement and other benefits that are designed to attract and retain employees. The level of retirement payments reward employees who remain with Martin Marietta for longer periods of employment.

When setting total compensation for each of the named executive officers, the Committee reviewed in 2013 tally sheets that showed the executive’s total current compensation, including equity and non-equity based compensation. In establishing specific award levels in 2013, the Committee reviewed award amounts granted in past years but it did not adjust amounts or otherwise take into account other award amounts or prior awards that vested because all of the components are targeted at median levels with the opportunity to exceed such levels for superior performance. When the performance is achieved, we believe that the executive officers should be rewarded and that this approach is consistent with achieving sustained value for the shareholders.

Base Salary

Martin Marietta provides the named executive officers with base salaries to provide minimum compensation for services rendered during the fiscal year. Salary levels for executive officers are typically considered by the Committee annually as part of each executive officer’s performance review as well as upon a promotion or other change in job responsibility, and may be increased or decreased at that time based on: (1) the Committee’s agreement on the individual’s contribution to Martin Marietta, and (2) changes in median competitive pay levels. The competitive market rate based on the benchmarking standards referred to above and proposed individual salary for each executive are presented by the Chief Executive Officer to the Committee, along with data supporting the recommendations, other than for himself. In August 2013, the Committee determined that it would award merit increases for all executive officers at its regularly scheduled January meeting each year rather than on the anniversary date of each executive’s employment commencement date, which was the previous process. Accordingly, in 2013, an increase in the amount of 2.9% from 2012 base salaries was awarded to Ms. Lloyd and Mr. McCunniff and 0% was awarded to Ms. Bar and Ms. Guzzo as a result of the change in timing of the annual review. The increases in base salaries for each executive officer in 2014 was pro-rated based on the last merit increase. Base salary in 2013 for Ms. Lloyd and Mr. McCunniff was at approximately the median range or slightly above that of the compensation peer group in 2013.

In assessing the Chief Executive Officer’s base salary for 2013, the Committee approved a base salary of $875,000 for Mr. Nye in November 2012. This 2.94% increase was awarded based on his excellent achievements as Chief Executive Officer since 2010 in a challenging economic environment. The Committee also considered the increase in the number of managers reporting directly to Mr. Nye as a result of management reorganizations. In addition, the Committee considered whether this increase would further its objective in aligning Mr. Nye’s compensation with the interests of the Company’s shareholders. The Committee reviewed base salary data and total compensation data for chief executive officers in the compensation studies described above. It also considered the advice of Towers Watson, the independent compensation consultant in 2012. Mr. Nye’s base salary and annual incentive bonus compensation for 2013 were below the median range of peers in the Compensation Peer Group.

Annual Bonus Compensation

We award annual cash bonuses based on corporate performance objectives and the achievement of individualized targeted goals. This furthers Martin Marietta’s compensation philosophy in that it

 

 

43


encourages superior performance and rewards the achievement of Martin Marietta’s annual goals. In 2013, under Martin Marietta’s Executive Incentive Plan, the amount of bonus that an executive could receive was based upon a percentage of that executive’s base salary. In 2013, all of the executive officers participated in the plan, except for Mr. Nye, for whom bonus compensation was awarded outside of the plan.

In determining awards granted under the plan, the Committee first reviews the achievements of Martin Marietta for the past year as compared to its targeted goals set at the end of the previous year. The Committee then conducts a comparative review of the individual contributions of each of the executive officers towards achieving these goals. The Committee also considers qualitative measures of performance for the executive officers such as adherence to and implementation of Martin Marietta’s Code of Ethics and Standards of Conduct, safety, customer satisfaction, and product quality.

The amount awarded to each executive officer is based upon the Committee’s general review of each individual’s achievement of individualized targeted goals, including standard objective measures of financial performance such as earnings, cash flow, and other key sales and production metrics for Martin Marietta as a whole and for individual business units, and subjective measures, such as the individual’s overall contribution to Martin Marietta, personal or organizational development and overall effectiveness of the executive. The target for these goals, which is a percentage of base salary depending upon the executive’s position, is set at or about the median level of the executives with comparable responsibilities at the comparable company group. For 2013, the target bonus level set for each of the named executive officers was a percentage of such officer’s base salary: 80% for Ms. Lloyd, 70% for Ms. Bar and Mr. McCunniff, and 60% for Ms. Guzzo. The maximum is 150% of target commensurate with performance at that “stretch” level. There is no threshold since there is no guaranteed bonus if the performance goals are not met.

The objective goals vary by the position of the executive officer. They are established at the beginning of each plan year and are based upon Martin Marietta’s Long Range Operating Plan, which is set at the end of the previous year. For executives in corporate staff positions, 50% of the determination is made with respect to Martin Marietta’s performance and 50% is based on the individual’s performance against established objectives.

The individualized target goals are tailored for each executive, his or her specific areas of responsibility and the then-current and longer term goals of Martin Marietta. In addition, achievement of the goals typically is in part dependent on conditions outside the control of each of the named executive officer. For example, we have a strong focus on safety in our business. Regardless of the achievement of other targets, incentive awards are reduced for all employees in the event of any workplace fatality in Martin Marietta. Similarly, our business may be adversely affected by hurricanes or other weather-related conditions, which could have the result of impeding the achievement of certain performance-based goals.

Although there is substantial uncertainty with respect to achieving the target levels at the time the goals are set and communicated, our named executive officers have a reasonable expectation of receiving a cash incentive award at a level that is near their target level. However, the “stretch” levels remain extremely difficult to obtain and the maximum cash award level has not been achieved in prior periods.

 

 

44


The bonus level for 2013 for the named executive officers was in the range of 79.8% to 82.5% of target as a result of Martin Marietta’s lower financial performance in 2013 than pre-recession levels even though the named executive officers achieved near their target levels on the individualized personal goals. The factors that the Committee took into account in determining Martin Marietta’s performance in 2013 included a detailed assessment of Martin Marietta’s overall financial performance and each segment’s financial performance, Martin Marietta’s continuing successful cost management and automation initiatives in a challenging economic environment, a safety performance improvement in total case incident rate over the prior year’s record low rate, outstanding environmental and regulatory compliance results, continuing achievement of excellent management of working capital, and the successful organic and inorganic growth of Martin Marietta.

The Chief Executive Officer does not participate in Martin Marietta’s Executive Incentive Plan and his bonus, if any, is determined at the discretion of the Committee. Generally, his bonus level is approximately 100% of his base salary although there is no specific target for the Chief Executive Officer’s bonus. The Committee did not attempt to set Mr. Nye’s 2013 bonus in any particular relationship to peer compensation survey data. The Committee awarded him an annual incentive bonus of $700,000 for 2013, which was 80% of his base salary, after considering many diverse factors, including the advice of Aon Hewitt. Consistent with its compensation philosophy that focuses on long-term performance, the Committee considers whether there are factors in addition to quantitative ones that should be taken into account in establishing the overall level of Mr. Nye’s compensation. In this regard, the Committee considered accomplishments that benefit shareholders in the longer term. In subjectively determining the amount of Mr. Nye’s bonus for 2013, the Committee took into account the same type of objective performance measures and qualitative measures, such as the effectiveness and quality of Mr. Nye’s leadership of Martin Marietta, as it would typically consider for executive officers who receive awards under the plan.

The following achievements were considered by the Committee in determining Mr. Nye’s 2013 bonus:

 

   

Total shareholder returns in 2013 of 7.7%, following a TSR in 2012 of 27.6%.

 

   

Financial performance in 2013 that exceeded market expectations, reporting:

 

  ¯  

Earnings per diluted share of $2.61 per diluted share in 2013, compared with $1.83 in 2012.

 

  ¯  

Earnings from operations of $218 million, up nearly 40% over 2012.

 

  ¯  

Effective management of controllable production costs, as evidenced by a 90-basis-point expansion of consolidated gross margin (excluding freight and delivery cost).

 

   

Specialty Products record earnings from operations of $73.5 million, compared with $68.5 million in 2012.

 

   

Reinvestment in the business with capital expenditures of $155.2 million focused on preserving capital while maintaining safe, environmentally-sound operations.

 

   

The stringent focus on controlling costs and improving efficiencies, which differentiated us from others in the industry, as reflected by selling, general and administrative expenses of 7.7% of net sales in 2013, approximately flat with 2012 performance, which was down 60 basis points from 2011

 

 

45


   

Achievement of excellent regulatory performance, including further safety performance improvement in total injury incidence rates.

 

   

The generation of sufficient cash flow to continue paying dividends to shareholders at the unreduced annual rate of $1.60 per share, reflecting more than $74 million.

 

   

Excellent balance sheet management that allowed Martin Marietta to consider marketplace opportunities, pay its debt obligations as they matured, maintain the annual cash dividend of $1.60 per share to shareholders, and reduce outstanding debt by $17 million, thereby achieving a year-end debt-to-EBITDA ratio of 2.7 times, in compliance with the 3.50 times limit provided for in our senior credit agreement.

 

   

Invested cash of $42 million and significant capacity to invest in our business with $367 million of undrawn revolver and trade receivables capacity.

 

   

The innovative use of Martin Marietta’s information systems to achieve new and improved applications to enhance customer service and further management’s ability to analyze and manage the business. Martin Marietta was the only company in its industry to be selected (now for the 12th straight year) to the Information Week 500.

 

   

No significant deficiencies or material weaknesses in the design or operation of Martin Marietta’s internal control over financial reporting.

The Committee also considered the performance of Martin Marietta as compared to its peers and bonuses awarded to executives in comparable positions in the compensation studies discussed above, as well as the bonuses awarded to the other named executives in 2013.

Because a subjective analysis of performance criteria was used in determining the bonus compensation paid under the Executive Incentive Plan and the bonus compensation paid to Mr. Nye, the bonus compensation does not qualify for the performance-based exception to the $1,000,000 limit on deductibility of executive officer compensation under Section 162(m) of the Internal Revenue Code of 1986.

Performance-Based Stock Purchase Awards

The Incentive Stock Plan is intended to give the named executive officers who participate in the Executive Incentive Plan the opportunity to invest up to 50% of their annual cash bonus to purchase units that are subsequently converted into shares of common stock pursuant to the terms of the plan at a 20% discount from the market price of Martin Marietta’s common stock on the date the amount of the bonus is determined. Participation in the plan is elective, except that all senior officers of Martin Marietta are required to invest a minimum of 20% of their cash bonus towards the crediting of units under the plan, except for the Chief Executive Officer who is required to invest a minimum of 35% of his cash bonus towards the crediting of such units. The units generally vest in three years from the date of the award and are distributed in shares of common stock. If an executive officer voluntarily terminates employment before the units vest in three years, the stock units are forfeited and the executive officer receives a cash payment equal to the lesser of the cash that was invested or the fair value of the share units on the day of termination.

The mandatory contribution requirement directly links a portion of executive officer compensation to shareholder returns. The vesting aspect combined with the yearly stock purchase

 

 

46


requirement creates continuous overlapping three-year cycles, which encourage executive officer retention and provide a continuous link of a significant portion of executive officer compensation with shareholder return over the long-term to reward these executive officers in line with our shareholders when our stock price increases.

Long-Term Incentive Compensation

Martin Marietta’s long-term compensation in 2013 consisted of equity awards granted in the form of stock options and restricted stock units. When the Committee grants each component of long-term compensation, it first determines the intended cash value of the award based on specific performance metrics described below. It then converts the cash value into an equity award using the closing price of the common stock on the date of award. The equity award is subject to vesting and forfeiture as described below. The target for the awards is the median of comparable companies in the Performance Peer Group and the Committee has designed the awards to give the participants an opportunity to exceed the median level with high performance. Accordingly, these components of the executive compensation program encourage participants to focus on the long-term performance of Martin Marietta and provide an opportunity for executive officers to increase their stake in Martin Marietta. The long-term incentive compensation program delivers more value to executive officers if the value of Martin Marietta’s stock increases.

LTIP Awards.    Martin Marietta’s long-term incentive program (LTIP Awards) consists of (1) granting a mix of options and restricted stock units and (2) basing the amount of the award on the performance of Martin Marietta. The Committee believes that the mix provides better incentives to executive officers than either options or restricted stock units alone. Stock options link the compensation provided to the named executive officers with gains realized by the shareholders and therefore serve to confer on recipients an ownership interest in Martin Marietta. These awards also assist Martin Marietta in maintaining competitive levels of total compensation. The vesting periods associated with stock options encourage the continued retention of these individuals. The granting of restricted stock unit awards to executive officers continues to provide a motivating form of equity compensation and provides certain advantages over the use of only stock options because restricted stock units have an intrinsic value when granted and executives holding these awards share an immediate downside risk with our shareholders. In addition, restricted stock units permit us to issue fewer shares to deliver the same value, thereby reducing potential dilution.

For each named executive officer, other than the Chief Executive Officer, the Committee derived a target dollar value for this component of compensation based on a review of equity award data in the compensation studies described above and input from Aon Hewitt. The target is increased each year by an amount equal to the average percentage increase in base pay for salaried employees and relevant subjective considerations, such as a promotion or expanded responsibilities. The maximum award (200%) is a stretch goal based on the Committee’s subjective determination that such level of shareholder value created by Martin Marietta is outstanding, and would be achieved when Martin Marietta’s return on invested capital is at least 6% higher than the weighted average cost of capital. This threshold was not achieved in 2013.

Over the course of several meetings in 2012 and 2013, the Committee considered Martin Marietta’s performance in light of the severe nature and duration of the economic recession. The

 

 

47


Committee discussed with its independent compensation consultants the appropriateness of the continued use of the performance measures to determine LTIP awards, namely comparing the weighted average cost of capital with the return on invested capital, noting that this formulation would not have resulted in any award in 2010 through 2013. The Committee determined that this measurement did not fairly reflect Martin Marietta’s superior performance and creation of value for its shareholders in light of the recessionary economy that has impacted the construction materials industry since 2008. In particular, the Committee considered the share price performance, operating performance, margin performance, continued unreduced payment of dividends to shareholders, outstanding cost management, strong capital structure, excellent cash flow, achievement of a world class safety record, and other factors that it viewed as reflective of excellent performance. The Committee also determined that the LTIP program is an important element of its compensation program as a long-term performance-based component to incentivize executive officers, retain talented managers, and recognize superior job performance. The Committee also considered the significantly lower level of annual bonuses paid starting in 2009 and the non-attainment of threshold performance levels under another component of the long-term performance-based compensation program (see SVAP Awards below).

Accordingly, the Committee developed a formula that it would use to determine whether an LTIP award was appropriate when the Corporation’s return on invested capital is 1% or more lower than its weighted average cost of capital. Under this alternative method of considering the grant of an LTIP award, Martin Marietta’s performance was measured against that of the Performance Peer Group in making this determination. The four performance measures that the Committee in 2013 took into account under this alternative formula are: (1) Return, measured by operating profit expressed as a percentage margin to net sales, (2) Growth, measured by the increase in 2012 revenue/net sales expressed as a percentage change compared to 2011, (3) Cash Flow, measured by operating cash flow calculated as a percentage change over prior year, and (4) Earnings Before Interest, Taxes and Depletion, Depreciation and Amortization (“EBITDA”), measured as a percentage of EBITDA margin to net sales. These metrics were determined by the Committee to be appropriate measures of performance based on its knowledge of the performance factors that the Corporation’s shareholders consider, the advice of Aon Hewitt that these factors are appropriate, the differences in size, diversity and markets of the businesses conducted by the international companies in the Performance Peer Group, and the limited availability of full performance metrics from the international companies in the Performance Peer Group that do not make financial statement filings in accordance with generally accepted accounting principles with the SEC.

 

Martin Marietta

Ranking Position

  

Award

Payout %

   Performance Metric
      Return    Growth    Cash Flow    EBITDA
                                

1

   75%       X        

2

   75%          X     

3

   60%    X          X

4

   50%              

5

   40%              

6

     0%              

7

     0%              
Award Achievement Per Measure    60%    75%    75%    60%
Total 2013 Award (sum of 4 Performance Metrics) = 67.5%

 

 

48


In accordance with this formula, awards were granted in 2013 at 67.5% of each officer’s target. One-third of the dollar value was then converted to stock options and two-thirds of the dollar value was converted to restricted stock units using the closing price on the date of grant. The one-third stock options to two-thirds restricted stock units bases was determined on a variety of factors, including lattice modeling values for options, median levels of compensation, and a subjective view regarding the appropriate mix of restricted stock units and stock options in light of compensation, incentive and accounting considerations.

In 2013, the Committee awarded Mr. Nye 14,475 options and 7,238 shares of restricted stock units that are subject to vesting, which the Committee believes will align this portion of Mr. Nye’s compensation directly with Martin Marietta’s performance over the long term. In exercising its discretion for Mr. Nye, the Committee generally follows the same procedures as are followed in determining the amount of annual bonus compensation discussed above. The Committee determined the dollar value for this component of Mr. Nye’s compensation by starting with the median level of long-term compensation identified in the compensation studies reviewed. The Committee then adjusted the amount as it deemed appropriate based on its subjective determination of the Chief Executive Officer’s performance. The dollar value was converted to a mix of one-third stock options and two-thirds restricted stock units, as are the long-term stock option and restricted stock unit awards for the other named executive officers. The award granted was 67.5% of the target for Mr. Nye.

The stock options granted in 2013 vest ratably over 4 years and the restricted stock units vest on the third anniversary of the grant date, in each case in general if the executive is continuously employed from the date of grant through the vesting date. Prior to the exercise of a stock option, the holder has no rights as a shareholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents. Executives who receive awards of restricted stock units (including restricted stock units discussed below) receive dividend equivalents paid on the shares awarded at the same rate and at the same time as the other shareholders of Martin Marietta. The value of the receipt of these dividend equivalents is included in the value of the restricted stock unit awards shown in the Summary Compensation Table. We pay these dividend equivalents to remain competitive on compensation because the majority of other comparable companies in compensation surveys pay dividends or equivalents.

SVAP Awards.    We also sponsor a long-term program pursuant to which the Committee may grant restricted stock unit awards to the named executive officers under the Amended and Restated Stock-Based Award Plan. These awards would be in addition to the LTIP awards described in the preceding paragraphs. This program was designed to incentivize performance relative to other public companies with which the Committee believes we compete for investors. The SVAP Awards generally vest three years from the date of grant and require the executives to remain employed for the three-year period for vesting to occur. This program offers the opportunity for the amount of the awards to increase if the value of the Corporation’s common stock increases as compared to a peer group over a rolling three-year period. No awards were granted in 2013, and have not been granted since 2010 under this program as a result of the impact of the economic recession on the Corporation’s business.

The amounts of awards under this program are based on the Corporation’s performance as measured by its total return on shareholders’ investment that is equally weighted and determined by a total return to shareholders ranking that has a target level of at least the 60th percentile as compared to

 

 

49


the Standard and Poor’s index of 400 MidCap companies and to the Standard and Poor’s 1500 Basic Materials Index over the three year period ending on December 31, 2013. The target award is based on 40% of each executive officer’s base salary. The executives would have earned 50% of their targeted award if the Corporation achieved the threshold 30th percentile as compared to each of the comparison groups, 100% of their targeted award if the Corporation had achieved the 60th percentile level, and 200% of the targeted award if the Corporation had achieved the 75th percentile level. These percentages were selected because, at the target level, it rewards executives based on the performance criteria indicated when it surpasses that of the comparison groups of companies. The threshold and stretch goals were determined based on the Committee’s subjective determination that these were appropriate. No award was granted since we did not meet the threshold performance objective for this period.

Stock-Based Awards Generally.    The stock purchase awards under our Incentive Stock Plan and SVAP restricted stock unit awards described above are granted at the Committee’s regularly scheduled meetings in January following the availability of financial results for the prior year, and all LTIP awards are granted in May to enable us to consider current proxy information and compensation surveys for comparable companies. Newly hired executive officers may, subject to the discretion of the Committee, receive an award of restricted stock units as of the date of their hire. The per-share exercise price for all stock options is equal to, and the number of restricted stock units is based on, the New York Stock Exchange closing price of Martin Marietta’s common stock on the date of the grant. The Committee’s schedule is determined several months in advance and the proximity of any awards to earnings announcements or other market events is coincidental.

All of Martin Marietta’s equity-based award plans have been approved by shareholders.

Ownership Guidelines

Martin Marietta generally requires that executive officers, other than the Chief Executive Officer, invest a minimum of 20%, and that the Chief Executive Officer invest a minimum of 35%, of each year’s cash bonus award in common stock units of Martin Marietta that are purchased at a 20% discount to the price on the date of grant through the Incentive Stock Plan, which awards vest generally after three years of additional employment with Martin Marietta. Mr. Nye in 2013 deferred the maximum of 50% of his cash bonus in common stock units under the Incentive Stock Plan. In addition, a significant portion of the executive compensation program is in the form of equity awards that vest over various periods. There is no required holding period beyond the vesting period. Martin Marietta does not have formal ownership guidelines for the named executive officers. The Committee reviewed stock ownership levels of the named executive officers in 2013 and believes the levels are appropriate and that the equity components of the compensation program appropriately align the interests of executive officers with the interests of our shareholders, as more fully described above.

Perquisites

Martin Marietta provides named executive officers with perquisites that the Committee believes are appropriate, reasonable and consistent with its overall compensation program to better enable Martin Marietta to attract and retain superior employees for key positions. The Committee periodically reviews the types and levels of perquisites provided to the named executive officers. The value of each of the named executive officer’s perquisites is included in the annual compensation set forth in the Summary Compensation Table.

 

 

50


The perquisites provided in 2013 to the named executive officers included personal use of leased automobiles and, for some executive officers, personal use of Martin Marietta’s plane. Martin Marietta also provides to executive officers and other employees certain other fringe benefits such as tuition reimbursement, airline club dues, professional society dues, and food and recreational fees incidental to official company functions.

Retirement and Other Benefits

In order to maintain market competitive levels of compensation, we provide retirement and other benefits to the named executive officers and other employees. The benefits under the defined benefit pension plan are more valuable for employees who remain with Martin Marietta for longer periods, thereby furthering Martin Marietta’s objectives of retaining individuals with more expertise in relevant areas and who can participate in management development for purposes of executive succession planning. All of Martin Marietta’s salaried employees in the United States are eligible to participate in the following retirement and other plans. The named executive officers participate in the plans on the same terms as Martin Marietta’s other salaried employees. Additional information regarding these benefits is under the heading Pension Benefits Table on page 60 and the accompanying narrative.

Pension Plan.    We have a defined benefit pension plan under which eligible full-time salaried employees of Martin Marietta who have completed five continuous years of employment with Martin Marietta, including the named executive officers, earn the right to receive certain benefits upon retirement on a reduced basis at or after age 55 and on an unreduced basis at or after age 62. Retirement benefits are monthly payments for life based on a multiple of the years of service and the final average eligible pay for the five highest consecutive years in the last ten years before retirement, less an offset for social security. The amount is equal to the sum of (A) plus (B) plus (C) below:

 

  (A)

1.165% of the participant’s final average eligible pay up to social security covered compensation, multiplied by the participant’s credited years of service up to 35 years;

 

  (B)

1.50% of the participant’s final average eligible pay in excess of social security covered compensation, multiplied by the participant’s credited years of service up to 35 years;

 

  (C)

1.50% of the participant’s final average eligible pay multiplied by the participant’s credited years of service in excess of 35 years.

Supplemental Excess Retirement Plan.    We also have a nonqualified restoration plan that covers any employee in the defined benefit pension plan, including the named executive officers, who are highly compensated and whose qualified plan benefit is reduced by Internal Revenue Code benefit or pay limits in Sections 415(b) and 401(a)(17). The plan is based on the same formula as the qualified Pension Plan described above. Benefits under our nonqualified plan are paid from our general assets.

Performance Sharing Plan.    The Performance Sharing Plan is a tax-qualified defined contribution retirement savings plan pursuant to which all salaried employees in the United States, including the named executive officers, are eligible to contribute up to 25% or the limit prescribed by the Internal Revenue Service on a ROTH individual retirement account on a before-tax basis and up to an additional 17% on an after-tax basis not to exceed a total of 25%. We match 50% of the first 7% of pay that is contributed by employees to the Performance Sharing Plan up to Internal Revenue Service limitations. All contributions as well as any matching contributions are fully vested upon contribution.

 

 

51


Retiree Medical.    Eligible salaried employees who commenced employment with Martin Marietta prior to December 1, 1999 and who retire with at least 5 years of service are currently eligible for retiree medical benefits for life. Eligible salaried employees who commenced employment with Martin Marietta between December 1, 1999 and December 31, 2001 and who retire with at least 15 years of service are currently eligible for retiree medical benefits until age 65. Eligible employees share the cost of retiree medical based on their years of service and a predetermined cap on total payments by Martin Marietta. Employees who commenced employment with Martin Marietta on or after January 1, 2002 are not eligible for retiree medical benefits. Mr. Nye, Mr. McCunniff and Ms. Guzzo are not eligible for retiree medical benefits as each commenced employment with Martin Marietta after 2002.

Medical Insurance.    Martin Marietta provides an opportunity to all of its salaried employees in the United States and the employees’ immediate family to select health, dental and vision insurance coverage. Martin Marietta pays a portion of the premiums for this insurance for all employees. All employees in the United States, including the named executive officers, pay a portion of the premiums depending on the coverage they choose.

Life and Disability Insurance.    Martin Marietta provides to all of its salaried employees in the United States, including the named executive officers, long-term disability and life insurance that provides up to 1.5 times base salary at no cost to the employee. All employees in the United States, including the named executive officers, can choose additional coverage and pay a portion of the premiums depending on the coverage they choose. In addition, Martin Marietta pays an amount equal to one year of base salary in the event of death of any active salaried employee.

Housing Allowance and Relocation Costs.    Martin Marietta provides relocation benefits, including a housing allowance, to certain employees upon their employment with Martin Marietta or in conjunction with a job relocation or promotion.

Potential Payments Upon Termination or Change of Control

Martin Marietta has entered into an Employment Protection Agreement with each of the named executive officers that provides for certain payments and benefits upon a qualifying termination of employment following a change of control. Martin Marietta’s equity-based award plans and retirement plans also provide for certain post-termination payments and benefits. The Committee believes these payments and benefits are important to align the interests of the executive officers with the interests of the shareholders because the agreements will reduce or eliminate the reluctance to pursue potential change of control transactions that may ultimately lead to termination of their employment but otherwise be in the best interests of our shareholders. There are no employment agreements with any employees of Martin Marietta, including the named executive officers. The Employment Protection Agreement is described on pages 62 to 63 of this Proxy Statement.

In addition, Martin Marietta’s Amended and Restated Stock-Based Award Plan, pursuant to which equity-based awards are made to the executive officers, provides that upon the occurrence of a change of control of Martin Marietta as provided in the Employment Protection Agreements, all time periods for purposes of vesting in, or realizing gain from, any outstanding award under the plan will automatically accelerate.

 

 

52


Tax and Accounting Implications

Section 162(m) of the Internal Revenue Code of 1986 makes certain compensation to the named executives in excess of $1 million non-deductible to Martin Marietta unless it is based on objectively determined performance criteria pursuant to a plan approved by shareholders. One of the named executive officers received annual compensation exceeding $1 million in 2013 that is not deductible pursuant to Section 162(m).

As part of its role, the Committee reviews and considers the deductibility of executive compensation under Section 162(m). Although the Committee has structured the current compensation program based on various performance criteria as described above, certain aspects of the program do not comply with the other requirements of Section 162(m). The Committee has determined that it is essential in achieving the compensation objectives discussed above to retain the flexibility to exercise subjective judgment in assessing an executive’s performance. The Committee believes that the achievement of Martin Marietta’s general compensation policies and objectives that are currently in place best serves shareholder interests.

EXECUTIVE COMPENSATION

Executive Officer Compensation

The following tables show annual and long-term compensation, for services in all capacities to Martin Marietta, earned by the Chief Executive Officer, the Chief Financial Officer, and three other executive officers serving as such on December 31, 2013, which we refer to collectively as the “named executive officers.” These tables and the accompanying narratives should be read in conjunction with the Compensation Discussion and Analysis section of this proxy statement, which provides a detailed overview of the methods used by Martin Marietta to compensate its officers, including the named executive officers.

 

 

53


Summary Compensation Table

The table below summarizes the total compensation paid or earned by each of the named executive officers for the fiscal years set forth below. Martin Marietta has not entered into any employment agreements with any of the named executive officers.

SUMMARY COMPENSATION TABLE

 

Name and Principal Position

(a)

  Year
(b)
    Salary
($)
(c)
    Bonus
($)1
(d)
    Stock
Awards

($)2
(e)
    Option
Awards

($)3
(f)
    Non-Equity
Incentive Plan
Compensation
($)

(g)
  Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings

($)4
(h)
    All Other
Compensation
($)5

(i)
    Total
($)
(j)
 

C. Howard Nye

President and CEO

    2013        875,000        455,000        1,028,441        528,048          48,860        166,959        3,102,308   
    2012        850,000        390,000        773,950        363,543          520,648        128,368        3,026,509   
    2011        825,000        325,000        723,078        379,279          269,055        139,188        2,660,600   

Anne H. Lloyd

    2013        495,400        261,600        330,913        178,934            61,901        1,328,748   

Executive Vice President and CFO

    2012        481,067        232,451        249,230        123,208          445,594        59,331        1,590,881   
    2011        467,767        180,221        230,760        128,562          332,881        66,087        1,406,278   

Roselyn R. Bar

    2013        412,255        189,600        264,096        146,066            57,408        1,069,425   

Senior Vice President, General Counsel and Corporate Secretary

    2012        402,619        148,808        193,206        100,550          422,274        55,621        1,323,078   
    2011        392,300        132,252        184,704        104,829          317,101        62,973        1,194,159   

Donald A. McCunniff6

    2013        338,900        156,000        213,591        117,684          73,372        36,622        936,169   

Senior Vice President, Human Resources

    2012        328,533        134,305        159,305        81,032          81,311        31,310        815,796   

Dana F. Guzzo6

    2013        298,700        114,400        122,661        63,402            32,119        631,282   

Senior Vice President,

Controller, Chief Accounting Officer and Chief Information Officer

    2012        292,970        98,438        92,347        43,647            122,625        21,658        671,685   

 

1

The amounts in column (d) for 2013 reflect the cash bonuses to the named individuals earned in 2013 and paid in 2014 under the Executive Incentive Plan, which is discussed in further detail on pages 43 to 46 under the heading “Annual Bonus Compensation.” The amounts in this column also include the amounts of bonus irrevocably deferred in common stock units at the election of each named executive officer pursuant to Martin Marietta’s Incentive Stock Plan, which is discussed in further detail on page 46 under the heading “Performance-Based Stock Purchase Awards.” The number of stock units and the related grant date fair value attributable to the amounts of bonus so deferred by the named executive officers appear in columns (i) and (l), respectively, of the Grants of Plan-Based Awards Table on page 56. The amounts mandatorily deferred in 2013 are included in column (e). The amounts deferred in 2013 for each of the named executive officers at his or her election, which are included in column (d), are as follows: Mr. Nye, $105,000; Ms. Lloyd, $16,350; Ms. Bar, $23,700; Mr. McCunniff, $0; and Ms. Guzzo, $14,300.

 

2

The amounts in column (e) reflect the aggregate grant date fair value of awards made in the year reported, determined in accordance with FASB ASC Topic 718 (without any assumption for early forfeiture), of awards of restricted stock units (including performance-based restricted stock unit awards granted in 2013) and awards related to the amount of cash bonus irrevocably and mandatorily deferred in common stock units by each named executive officer pursuant to Martin Marietta’s Incentive Stock Plan, which is discussed in further detail on page 46 under the heading “Performance-Based Stock Purchase Awards.” The amount included in the table for performance-based restricted stock unit awards granted in 2013 reflects the value of the units granted, which is subject to forfeiture if the executive does not remain in the employment of Martin Marietta for the requisite time period (generally three or four years). The amounts in column (e) do not include the 20% discount on the Incentive Stock Plan units, which is reported in column (i). Assumptions used in the calculation of these amounts are included in Note A to Martin Marietta’s audited financial statements for the fiscal year ended December 31, 2013, included in Martin Marietta’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2014. The amounts of cash bonus deferred in 2013 at the election of each named executive officer are included in column (d). The amounts of cash bonus mandatorily deferred in 2013 for each of the named executive officers are as follows: Mr. Nye, $245,000; Ms. Lloyd, $65,400; Ms. Bar, $47,400; Mr. McCunniff, $39,000; and Ms. Guzzo, $28,600.

 

 

54


3

The amounts in column (f) reflect the grant date fair value, determined in accordance with FASB ASC Topic 718 (without any assumption for early forfeiture), of option awards made in the year reported. Assumptions used in the calculation of these amounts for the fiscal year ended December 31, 2013 are included in Note A to Martin Marietta’s audited financial statements for the fiscal year ended December 31, 2013, included in Martin Marietta’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2014.

 

4

The amounts in column (h) reflect the aggregate increase in the actuarial present value of the named executive officer’s accumulated benefits during 2013, 2012 and 2011, respectively, under all defined benefit retirement plans established by Martin Marietta determined using interest rate and mortality rate assumptions consistent with those used in Martin Marietta’s financial statements and include amounts which the named executive officer may not currently be entitled to receive because such amounts are not vested. The change in pension value and non-qualified deferred compensation earnings decreased for Ms. Lloyd, Ms. Bar and Ms. Guzzo from 2012 to 2013: $(97,432), $(106,571), and $(6,406), respectively, due to the effect of the increase in interest rates used for accounting measurement purposes.

 

5

The amount shown in column (i) for 2013 reflects for each named executive officer: matching contributions allocated by Martin Marietta to each of the named executive officers pursuant to the Performance Sharing Plan, which is more fully described on page 51 under the heading “Retirement and Other Benefits,” the value attributable to life insurance benefits provided to the named executive officers, which is more fully described on page 51 under the heading “Retirement and Other Benefits”; and the value attributable to personal use of leased automobiles provided by Martin Marietta, and, for some executive officers, Martin Marietta’s plane. The personal use of the plane in 2013 was related to spouses accompanying executive officers on business trips. These values are included as compensation on the W-2 of named executive officers who receive such benefits. Each such named executive officer is responsible for paying income tax on such amount. None of the All Other Compensation elements included in column (i) that are not perquisites or personal benefits exceed $10,000. None of the elements that are perquisites or personal benefits exceed the greater of $25,000 or 10% of the total perquisites for each named executive officer. The amounts in column (i) also reflect the 20% discount from the market price of Martin Marietta’s common stock pursuant to the elective deferrals under the Incentive Stock Plan in each of 2013, 2012 and 2011, and the dollar value of dividend equivalents on units credited under the Incentive Stock Plan and on restricted stock units as computed for financial statement reporting purposes for each fiscal year ended December 31, 2013, 2012 and 2011 in accordance with FASB ASC Topic 718.

 

6

Mr. McCunniff and Ms. Guzzo were not named executive officers for purposes of the Summary Compensation Table in 2011.

Grants of Plan-Based Awards

The table below shows each grant of an award made to a named executive officer in the fiscal year ended December 31, 2013. This includes equity awards made to the named executive officers under Martin Marietta’s Stock-Based Award Plan and the Incentive Stock Plan.

 

 

55


GRANTS OF PLAN-BASED AWARDS TABLE

 

           

 

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards1

   

 

Estimated Future Payouts
Under Equity Incentive
Plan Awards

  All  Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#)

(i)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options

(#)
(j)
    Exercise
or Base
Price of
Option
Awards
($/Sh)

(k)
    Grant Date
Fair Value
of Stock
and
Option
Awards5

(l)
 

Name

(a)

  Grant  Date
(b)
    Threshold
($)

(c)
  Target
($)

(d)
    Maximum
($)

(e)
    Threshold
(#)

(f)
  Target
(#)

(g)
  Maximum
(#)

(h)
       
                                                            

C. Howard Nye

    1/23/14 2                                      4,008                        437,553   
      5/23/13 3                  7,238            783,441   
      5/23/13 4                    14,475        108.24        528,048   

Anne H. Lloyd

    1/23/14 2        396,320        594,480                   
      1/23/14 2                  937            102,292   
    5/23/13 3                  2,453            265,513   
    5/24/13 4                    4,905        108.24        178,934   

Roselyn R. Bar

    1/23/14 2        288,578        432,868                   
      1/23/14 2                  815            88,974   
      5/23/13 3                  2,002            216,696   
      5/23/13 4                    4,004        108.24        146,066   

Donald A. McCunniff

    1/23/14 2        237,230        355,845                   
      1/23/14 2                  447            48,799   
    5/23/13 3                  1,613            174,591   
    5/23/13 4                    3,226        108.24        117,684   

Dana F. Guzzo

    1/23/14 2        179,220        268,830                   
      1/23/14 2                  492            53,712   
      5/23/13 3                  869            94,061   
      5/23/13 4                                              1,738        108.24        63,402   

 

1

The amounts shown in column (d) reflect the target level of annual bonus that could have been earned in 2013 that was paid in 2014 pursuant to the Executive Incentive Plan. The amounts shown in column (e) reflect the maximum level of annual bonus that could have been earned in 2013. There is no threshold amount since the program does not provide for an amount to be paid if performance falls below the performance goals. These amounts shown in columns (d) and (e) have not been reduced by the amounts that were mandatorily and voluntarily invested pursuant to the Incentive Stock Plan, which are also reported in column (i) of this table corresponding to footnote 2. The amount earned in cash and voluntarily deferred is also included in column (c) of the Summary Compensation Table. Mandatory deferrals of payments under the Incentive Stock Plan into common stock units are included in column (e) of the Summary Compensation Table on page 54. Mr. Nye does not participate in the Executive Incentive Plan.

 

2

The amounts shown in column (i) include the amount of cash bonus earned in 2013 but paid in 2014 that was deferred in units of common stock under the Incentive Stock Plan. Participants in this program for 2013 were approved on May 23, 2013. These awards are discussed under the heading “Performance-Based Stock Purchase Awards” on page 46. These awards are also included in columns (d) and (e) of this table and the Summary Compensation Table on page 54.

 

3

The amounts shown in column (i) reflect the number of shares of restricted stock units granted in 2013 to each of the named executive officers pursuant to the Stock-Based Award Plan. These awards are discussed under the heading “LTIP Awards” on page 47. These awards are also included in column (e) of the Summary Compensation Table on page 54.

 

4

The amounts shown in column (j) reflect the number of options to purchase shares of Martin Marietta’s common stock granted in 2013 to each of the named executive officers pursuant to the Stock-Based Award Plan. These awards are discussed under the heading “LTIP Awards” on page 47. These awards are also included in column (f) of the Summary Compensation Table on page 54.

 

5

The amounts shown in column (l) reflect the grant date fair value of each equity award computed in accordance with FASB ASC Topic 718. The components of these amounts are included in columns (e), (f) and (i) of the Summary Compensation Table on page 54.

 

 

56


Stock-based incentive awards have been a significant component of Martin Marietta’s management compensation. In 1998, the Board of Directors adopted and Martin Marietta’s shareholders approved the Stock-Based Award Plan. In 2006, the shareholders approved amendments to the plan increasing the number of shares of Martin Marietta’s common stock available for restricted stock awards. They also approved amendments to the plan designed to more directly tie long-term compensation incentives to Martin Marietta’s performance and enhance flexibility in structuring long-term incentive compensation packages by providing a mix of different types of long-term stock-based incentives.

As amended, the plan authorizes the Management Development and Compensation Committee to award stock options, restricted stock and other stock-based incentive awards to employees of Martin Marietta for the purpose of attracting, motivating, retaining and rewarding talented and experienced employees. The plan also provides for the automatic grant of non-qualified stock options to non-employee Directors of Martin Marietta on an annual basis, or as otherwise determined by the Board of Directors. Since 2005, Martin Marietta’s long-term compensation program consists of a mix of options and restricted stock units for senior level employees and restricted stock for other select employees.

The awards granted in 2013 were based on the achievement by Martin Marietta of performance measures described under “LTIP Awards” on page 47.

A maximum of 5,000,000 shares of Martin Marietta’s common stock are authorized under the plan for grants to key employees. Of that amount, 1,500,000 shares are available under the Plan for restricted stock awards. Each award under the plan is evidenced by an award agreement setting forth the number and type of stock-based incentives subject to the award and such other terms and conditions applicable to the award as determined by the Committee. No individual may receive annual grants for more than 10% of the shares available under the plan.

Stock option awards to the named executive officers are made by the Committee, upon the recommendation of management of Martin Marietta, except for Mr. Nye, for whom the Committee formulates its own decision, and may be awarded based on past performance or as incentive for future efforts. Under the applicable award agreements, the 2013 options will vest and become exercisable in four equal increments on May 23, 2014, 2015, 2016, and 2017, and expire 10 years from the date of grant. Options awarded in 2013 expire 90 days following termination of employment, except in instances following death, disability or retirement. In the event of death, all outstanding options vest immediately and will expire one year following the date of death. For options awarded in 2013, the award agreement states that the terms of all outstanding options will be unaffected by normal retirement or disability and in the event of early retirement, options that are not vested will terminate on the second business day after such retirement and options that are vested will terminate 90 days thereafter unless the Chief Executive Officer or, in the case of Martin Marietta’s executive officers, the Committee, determines that all outstanding options will be unaffected by such retirement. In the event of a change of control (as defined in the plan), the vesting date of all outstanding options is accelerated so as to cause all outstanding options to become exercisable. The exercise price of the shares of common stock subject to options is set by the Committee and must be at least 100% of the fair market value of the shares on the date the option is granted.

 

 

57


Outstanding Equity Awards at Fiscal Year-End

The table below shows for each of the named executive officers information with respect to the unexercised stock options (columns (b), (c), (e), and (f)), stock unit awards (columns (g) and (h)) that have not vested, and equity incentive plan awards (columns (d), (i), and (j)) outstanding on December 31, 2013.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

 

     OPTION AWARDS     STOCK AWARDS
Name  

Number of
Securities
Underlying
Unexercised
Options

(#)
Exercisable

   

Number of
Securities
Underlying
Unexercised
Options

(#)
Unexercisable

   

Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options

(#)

 

Option
Exercise
Price

($)

    Option
Expiration
Date
    Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
   

Market
Value of
Shares or
Units of
Stock That
Have Not
Vested1

($)

   

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
other
Rights That
Have Not
Vested

(#)

  Equity
Incentive
Plan Awards:
Market
or Payout
Value or
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
($)

(a)

  (b)     (c)     (d)   (e)     (f)     (g)     (h)     (i)   (j)

C. Howard Nye

 

   

 

 

 

 

 

 

13,165

15,707

15,039

8,397

6,304

4,079

0

  

  

  

  

  

  

  

   

 

 

 

 

 

 

0

0

0

2,799

6,305

12,238

14,475

  

  

  

2 

3 

4 

5 

     

 

 

 

 

 

 

151.92

117.77

79.79

95.27

86.90

69.12

108.24

  

  

  

  

  

  

  

   

 

 

 

 

 

 

5/22/2015

5/28/2016

5/27/2017

5/27/2018

5/12/2019

5/24/2020

5/23/2021

  

  

  

  

  

  

  

   

 

 

 

 

 

5,598

6,307

8,159

7,238

2,688

2,646

6 

7 

8 

9 

10 

11 

   

 

 

 

 

 

559,464

630,322

815,410

723,366

268,639

264,411

  

  

  

  

  

  

     

Anne H. Lloyd

 

   

 

 

 

 

 

 

 

 

6,815

10,000

8,602

10,263

9,060

2,845

2,137

1,382

0

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

0

0

0

0

0

949

2,137

4,148

4,905

  

  

  

  

  

2 

3 

4 

5 

     

 

 

 

 

 

 

 

 

89.02

42.38

151.92

117.77

79.79

95.27

86.90

69.12

108.24

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

5/22/2014

8/17/2014

5/22/2015

5/28/2016

5/27/2017

5/27/2018

5/12/2019

5/24/2020

5/23/2021

  

  

  

  

  

  

  

  

  

 

 

 

 

 

 

 

1,897

2,137

2,765

2,453

692

733

6 

7 

8 

9 

10 

11 

 

 

 

 

 

 

 

189,586

213,572

276,334

245,153

69,158

73,256

  

  

  

  

  

  

     

 

Roselyn R. Bar

   

 

 

 

 

 

 

 

 

5,608

10,000

7,021

8,377

7,394

2,322

1,742

1,128

0

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

0

0

0

0

0

774

1,743

3,385

4,004

  

  

  

  

  

2 

3 

4 

5 

     

 

 

 

 

 

 

 

 

89.02

42.38

151.92

117.77

79.79

95.27

86.90

69.12

108.24

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

 

5/22/2014

8/17/2014

5/22/2015

5/28/2016

5/27/2017

5/27/2018

5/12/2019

5/24/2020

5/23/2021

  

  

  

  

  

  

  

  

  

   

 

 

 

 

 

1,548

1,745

2,257

2,002

635

586

6 

7 

8 

9 

10 

11 

   

 

 

 

154,707

174,395

225,565

200,080

  

  

  

  

     
   

Donald A. McCunniff

 

 

 

909

0

  

  

 

 

 

2,728

3,226

4 

5 

   

 

 

69.12

108.24

  

  

 

 

 

5/24/2020

5/23/2021

  

  

   

 

 

1,819

1,613

423

8 

9 

11 

   

 

 

181,791

161,203

42,275

  

  

  

     

 

Dana F. Guzzo

   

 

 

 

 

 

 

 

1,020

1,055

1,244

1,103

346

291

489

0

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

0

0

0

0

116

291

1,470

1,738

  

  

  

  

2 

3 

4 

5 

       

 

 

 

 

 

 

 

89.02

151.92

117.77

79.79

95.27

86.90

69.12

108.24

  

  

  

  

  

  

  

  

   

 

 

 

 

 

 

 

5/22/2014

5/22/2015

5/28/2016

5/27/2017

5/27/2018

5/12/2019

5/24/2020

5/23/2021

  

  

  

  

  

  

  

  

   

 

 

 

 

 

231

293

980

869

235

388

6 

7 

8 

9 

10 

11 

   

 

 

 

 

 

23,086

29,282

97,941

86,848

23,486

38,777

  

  

  

  

  

  

       

 

  1

Based on the closing price of our common stock as of December 31, 2013 ($99.94).

 

  2

Options exercisable ratably in installments on May 27, 2014.

 

 

58


  3

Options exercisable ratably in installments on May 12, 2014 and 2015.

 

  4

Options exercisable ratably in installments on May 24, 2014, 2015 and 2016.

 

  5

Options exercisable ratably in installments on May 23, 2014, 2015, 2016 and 2017.

 

  6

Restricted stock units restrictions lapse on May 27, 2014.

 

  7

Restricted stock units restrictions lapse on May 12, 2015.

 

  8

Restricted stock units restrictions lapse on May 24, 2016.

 

  9

Restricted stock units restrictions lapse on May 23, 2016.

 

10

Incentive Stock Plan units restrictions lapse on December 1, 2014.

 

11

Incentive Stock Plan units restrictions lapse on December 1, 2015.

Option Exercises and Stock Vested

The table below shows on an aggregated basis for each of the named executive officers information on (1) the exercise of options for the purchase of Martin Marietta’s common stock and (2) the vesting of stock, including restricted stock units and Incentive Stock Plan units, during the last completed fiscal year. There are no awards of stock appreciation rights for Martin Marietta’s common stock or other similar instruments.

OPTION EXERCISES AND STOCK VESTED TABLE

 

      OPTION AWARDS      STOCK AWARDS  
Name   

Number of
Shares Acquired
on Exercise

(#)

    

Value
Realized on
Exercise

($)

    

Number of
Shares Acquired
on Vesting

(#)

    

Value
Realized on
Vesting1

($)

 

(a)

   (b)      (c)      (d)      (e)  

C. Howard Nye

           10,619         920,136   

Anne H. Lloyd

     2,812         105,084         5,335         522,348   

Roselyn R. Bar

     4,686         189,455         4,583         433,217   

Donald A. McCunniff

             

Dana F. Guzzo

     2,297         154,899         889         70,788   

 

1

The amounts in column (e) include the value of restricted stock unit awards at the time of vesting and the appreciation of both mandatory and voluntary contributions under the Incentive Stock Plan.

 

 

59


Pension Benefits

The table below shows the present value of accumulated benefits payable to each of the named executive officers, including the number of years of service credited to each such named executive officer, under our Pension Plan and Supplemental Excess Retirement Plan, determined using interest rate and mortality rate assumptions consistent with those used in Martin Marietta’s financial statements.

PENSION BENEFITS TABLE

 

Name

(a)

   Plan Name
(b)
   Numbers of
Years  Credited
Service
(#)

(c)
     Present Value
of  Accumulated
Benefit ($)1

(d)
     Payments
During Last
Fiscal Year
($)

(e)

C. Howard Nye

   Pension Plan

SERP

    

 

7.417

7.417

  

  

    

 

186,349

1,084,369

  

  

    

Anne H. Lloyd

   Pension Plan

SERP

    

 

15.583

15.583

  

  

    

 

435,694

1,090,941

  

  

    

Roselyn R. Bar

   Pension Plan

SERP

    

 

19.500

19.500

  

  

    

 

640,055

1,093,126

  

  

    

Donald A. McCunniff

   Pension Plan

SERP

    

 

2.417

2.417

  

  

    

 

82,725

86,008

  

  

    

Dana F. Guzzo

   Pension Plan

SERP

    

 

9.750

9.750

  

  

    

 

218,769

128,446

  

  

    

 

1

Amounts in column (d) reflect the valuation method and use the assumptions that are included in Notes A and J to Martin Marietta’s audited financial statements for the fiscal year ended December 31, 2013, included in Martin Marietta’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2014.

The Pension Plan is a defined benefit plan sponsored by Martin Marietta and covers all of Martin Marietta’s executive officers, including the named executive officers, and substantially all of the salaried employees of Martin Marietta on a non-contributing basis. Compensation covered by the Pension Plan generally includes, but is not limited to, base salary, executive incentive compensation awards, lump sum payments in lieu of a salary increase, and overtime. The normal retirement age under the Pension Plan is 65, but unreduced early retirement benefits are available at age 62 and reduced benefits are available as early as age 55. The calculation of benefits under the Pension Plan is generally based on an annual accrual rate, average compensation for the highest consecutive five years of the ten years preceding retirement, and the participant’s number of years of credited service (1.165% of average compensation up to social security covered compensation for service up to 35 years and 1.50% of average compensation over social security covered compensation for service up to 35 years and 1.50% of average compensation for service over 35 years.) Benefits payable under the Pension Plan are subject to current Internal Revenue Code limitation, including a limitation on the amount of annual compensation for purposes of calculating eligible remuneration for a participant under a qualified retirement plan ($255,000 in 2013). Martin Marietta’s Supplemental Excess Retirement Plan (“SERP”) is a restoration plan that generally provides for the payment of benefits in excess of the Internal Revenue Code limits, which benefits vest in the same manner that benefits vest under the Pension Plan. The SERP provides for a lump sum payment of the vested benefits provided by the SERP subject to the provisions of Section 409A of the Internal Revenue Code of 1986. Of the named executive officers, only Ms. Bar is eligible for early retirement, which allows for payment to

 

 

60


employees who are age 55 with at least five years of service at a reduced benefit based on the number of years of service and the number of years prior to age 62 at which the benefits began. Mr. Nye, Ms. Lloyd, Mr. McCunniff, and Ms. Guzzo are not yet eligible for early retirement, but would still be eligible for payments at age 55 (age 59.417 for Mr. McCunniff) at a reduced benefit based on the number of years of service and the number of years prior to age 65 at which the benefits began. The present value of the Pension Plan and SERP benefit, respectively, for Mr. Nye, Ms. Lloyd, Ms. Bar, Mr. McCunniff, and Ms. Guzzo, if they had terminated on December 31, 2013 and began collecting benefits at age 55 (age 59.417 for Mr. McCunniff) would be as follows: Mr. Nye, $157,715 and $958,034, respectively; Ms. Lloyd, $419,576 and $1,112,171, respectively; Ms. Bar, $653,182 and $1,174,784, respectively; Mr. McCunniff, $0 and $0, respectively, since he is not vested in the plan; and Ms. Guzzo, $189,613 and $117,847, respectively. The amounts listed in the foregoing table are not subject to any deduction for Social Security benefits or other offset amounts.

Potential Payments Upon Termination or Change of Control

The discussion and tables below reflect the amount of potential payments and benefits to each of the named executive officers at, following, or in connection with any termination of such executive’s employment, including voluntary termination, involuntary not-for-cause termination, for-cause termination, normal retirement, early retirement, in the event of disability or death of the executive, and termination following a change of control. The amounts assume that such termination was effective as of December 31, 2013 and thus includes amounts earned through such time and are estimates of the amounts that would have been paid out to the executives upon their termination at such time. The actual amounts to be paid out can only be determined at the time of such executive’s actual separation from Martin Marietta.

Payments Upon Any Termination.    Regardless of the manner in which the employment of a named executive officer terminates, he or she is entitled to receive the amounts earned during the term of employment, including cash compensation earned during the fiscal year, amounts contributed by the employee and Martin Marietta’s matching contributions to the Performance Sharing Plan, unused earned vacation pay and amounts accrued and vested through Martin Marietta’s Pension Plan and SERP.

Payments Upon Voluntary Termination.    In addition to the amounts described under the heading Payments Upon Any Termination, upon a voluntary termination of employment, the named executive officer would be entitled to receive the lower of the amount of cash contributed to the Incentive Stock Plan or the current market value of the common stock units credited to the employee measured by the NYSE closing price of Martin Marietta’s common stock on the date of termination.

Payments Upon Involuntary Not-For-Cause Termination.    In addition to the amounts described under the heading Payments Upon Any Termination, upon an involuntary termination of employment not for cause, the named executive officer would be entitled to receive a prorated share of the common stock units credited to him or her under the Incentive Stock Plan paid out as shares of common stock and the remaining cash contribution invested by the employee in the plan.

Payments Upon Involuntary For-Cause Termination.    In the event of involuntary termination for cause, which is defined in the Employment Protection Agreement and the Stock-Based Award Plan, the named executive officer would be entitled to receive the payments and benefits described under the heading Payments Upon Voluntary Termination.

 

 

61


Payments Upon Retirement.    In the event of the retirement at age 62 or above of a named executive officer, in addition to the items described under the heading Payments Upon Any Termination, the executive will continue to hold all outstanding options unaffected by the retirement and retain such options for the remainder of the outstanding term; will continue to hold all awards of performance-based restricted stock unit awards for the remainder of the outstanding term unaffected by the retirement; will vest in all outstanding awards of common stock units under the Incentive Stock Plan; will be eligible to receive health and welfare benefits as described under the heading Retiree Medical on page 52 (except Mr. Nye, Mr. McCunniff and Ms. Guzzo, who are not eligible for Retiree Medical); and will continue to receive life insurance coverage until his or her death.

Payments Made Upon Early Retirement.    In the event of the retirement prior to reaching age 62 but on or after reaching age 55, the named executive officer will receive benefits as described under the heading Payments Upon Voluntary Termination. In addition, the named executive officer will receive reduced benefits of the type described under Pension Benefits on page 60 and may be eligible for benefits described under the heading Retiree Medical on page 52 at a higher cost.

Payments Upon Death or Disability.    In the event of the death or disability of a named executive officer, in addition to the payments and benefits under the headings Payments Upon Any Termination, the named executive officer or their estate will receive benefits under Martin Marietta’s long-term disability plan or life insurance plan, as appropriate, and a death benefit payment equal to the then-current base salary of such employee paid under the Pension Plan plus one month base salary. In addition, in the event of death, all awards of restricted stock units and options will vest and the executive or their estate will have one year to exercise the options. In the event of disability, the executive will continue to hold all outstanding options unaffected by the disability and retain such options for the remainder of the outstanding term; will continue to hold all awards of performance-based restricted stock unit awards for the remainder of the outstanding term unaffected by the disability; and will vest in all outstanding awards of common stock units under the Incentive Stock Plan.

Payments Upon a Change of Control.    Martin Marietta has entered into Employment Protection Agreements, as amended from time to time, with each of the named executive officers. The purpose of these agreements is to provide Martin Marietta’s key executives with payments and benefits upon certain types of terminations within two years and 30 days following a “Change of Control.” For purposes of the agreements, a Change of Control is generally defined as (i) the acquisition by any person, or related group of persons, of 40% or more of either the outstanding common stock of Martin Marietta or the combined voting power of Martin Marietta’s outstanding securities, (ii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of Martin Marietta’s assets following which Martin Marietta’s shareholders before such event fail to own more than 50% of the resulting entity, (iii) a change in the majority membership of the Board, or (iv) a liquidation or dissolution of Martin Marietta.

The agreements provide that if, within the two-year period following a Change of Control, an executive is terminated without “Cause” (as defined in the agreements) or terminates his employment with “Good Reason” (as defined in the agreements), or if the executive voluntarily terminates his employment for any reason during the thirty-day period following the second anniversary of the Change of Control (except as described below), Martin Marietta is obligated to pay the executive, in a lump sum, an amount equal to three times the sum of the executive’s base salary, annual bonus,

 

 

62


perquisites and Martin Marietta’s match to the defined contribution plan; the payment of a pro-rata annual target bonus in the year of termination as determined under the Executive Incentive Plan (for Mr. Nye such target bonus is 100% for purposes of the Employment Protection Agreement); and a continuation of health, medical and other insurance benefits for a period of three years following termination. The rationale for selecting these triggers is to encourage the named executive officers to remain focused on Martin Marietta, its performance and matters that are in the best interests of its shareholders rather than be distracted by the personal impact to their employment that the Change of Control may have. The rationale for selecting the latter trigger is to provide an incentive for the executive to remain with Martin Marietta for at least two years following a Change of Control and provide a limited period during which the executive could terminate his or her employment for no reason and obtain payment under his or her Employment Protection Agreement. For purposes of the agreements, “base salary” means the highest annual rate of base salary that the executive received within the twelve-month period ending on the date of the Change of Control, and “annual bonus” means the executive’s highest annual bonus paid during the period beginning five years prior to the Change of Control and ending on the date of the executive’s termination of employment. In addition, for three years following termination of employment, Martin Marietta must provide the executive with welfare benefits that are generally as favorable as those the executive enjoyed prior to the Change of Control. Executives also are credited with an additional three years of service under the defined benefit plan, are eligible to retire after age 55 without reduction in benefits and with a lump sum payment based on a 0% discount rate. Martin Marietta must also continue to provide the executive all benefits provided under Martin Marietta’s defined benefit and defined contribution retirement plans and provide the executive with the same retiree medical benefits that were in effect for retirees immediately prior to the Change of Control. Furthermore, the agreements provide for “gross up” payments to compensate the executives for any golden parachute excise taxes imposed under the Internal Revenue Code on account of the severance amounts. Gross-up payments are provided to ensure that executives retain the full value of these awards in these termination scenarios. The agreements also have confidentiality requirements to ensure that the executives do not disclose any confidential information relating to Martin Marietta.

The term of the agreements is one year following their effective dates. On each anniversary date of the effective date, the agreements are renewed for one additional year, unless either party gives notice of its intent to cancel the automatic extension. If, prior to termination, a Change of Control occurs or the Board becomes aware of circumstances which in the ordinary course result in a Change of Control, then under no circumstances will the agreements terminate prior to 31 days after the second anniversary of the Change of Control.

 

 

63


Value of Payments Upon Termination.    The following tables show the potential incremental value of payments to each of our named executive officers upon termination, including in the event of a Change of Control of Martin Marietta, assuming a December 31, 2013 termination date and, where applicable, using the NYSE closing price of our common stock of $99.94 on December 31, 2013.

POTENTIAL INCREMENTAL VALUE OF PAYMENTS UPON TERMINATION

OR CHANGE OF CONTROL AT DECEMBER 31, 2013

 

Name

 

Benefit or Payment1

  Retirement9
($)
    Involuntary
Not-for-Cause
Termination
($)
  Disability
($)
    Death
($)
    Change-
of-Control

($)
 

C. Howard Nye

  Cash Severance2             4,457,855   
  Unvested Restricted Stock Units3           2,728,562        2,728,562   
  Unexercisable Options4           472,464        472,464   
  Unvested Incentive Stock Plan Units5     51,687          51,687        51,687        51,687   
  Retirement Plans6         1,483,074        600,257        4,646,784   
  Health and Welfare Benefits7             74,659   
  Retiree Medical Benefits8            
  Excise Tax & Gross-up             4,873,333   

Anne H. Lloyd

  Cash Severance2             2,425,628   
  Unvested Restricted Stock Units3           924,645        924,645   
  Unexercisable Options4           160,140        160,140   
  Unvested Incentive Stock Plan Units5     13,343          13,343        13,343        13,343   
  Retirement Plans6         428,056        91,376        3,315,798   
  Health and Welfare Benefits7             9,585   
  Retiree Medical Benefits8            
  Excise Tax & Gross-up             3,033,851   

Roselyn R. Bar

  Cash Severance2             1,877,039   
  Unvested Restricted Stock Units3           754,747        754,747   
  Unexercisable Options4           130,669        130,669   
  Unvested Incentive Stock Plan Units5     12,183          12,183        12,183        12,183   
  Retirement Plans6         95,212          2,322,267   
  Health and Welfare Benefits7             53,467   
  Retiree Medical Benefits8             46,257   
  Excise Tax & Gross-up             2,146,661   

Donald A. McCunniff

  Cash Severance2             1,580,448   
  Unvested Restricted Stock Units3           342,994        342,994   
  Unexercisable Options4           84,077        84,077   
  Unvested Incentive Stock Plan Units5     300          300        300        300   
  Retirement Plans6         298,237          750,331   
  Health and Welfare Benefits7             31,903   
  Retiree Medical Benefits8            
  Excise Tax & Gross-up             1,249,649   

Dana F. Guzzo

  Cash Severance2             1,295,148   
  Unvested Restricted Stock Units3           237,158        237,158   
  Unexercisable Options4           49,642        49,642   
  Unvested Incentive Stock Plan Units5     4,630          4,630        4,630        4,630   
  Retirement Plans6         155,604        9,616        1,067,824   
  Health and Welfare Benefits7             41,339   
  Retiree Medical Benefits8            
  Excise Tax & Gross-up                                 1,281,058   

 

1

The table does not include information with respect to plans or arrangements that are available generally to all salaried employees and that do not discriminate in favor of executive officers. The table reflects the incremental value over the amounts to which the named executive officer would have been entitled on a voluntary resignation on December 31, 2013.

 

 

64


2

Assumes all earned base salary has been paid.

 

3

Reflects the estimated lump-sum intrinsic value of all unvested restricted stock units.

 

4

Reflects the estimated lump-sum intrinsic value of unvested stock options.

 

5

Reflects the difference between the value of the unvested Incentive Stock Plan share units at year-end and the amount of cash invested by the executive officer in the share units.

 

6

The table does not include information related to the form and amount of payments or benefits that are not enhanced or accelerated in connection with any termination that would be provided by Martin Marietta’s retirement plans, which is disclosed in the Pension Benefits Table and the accompanying narrative on page 60. Change of Control values include the incremental value of the benefit (including three times Martin Marietta’s match to the defined contribution plan) payable upon a qualifying termination of employment following a Change of Control.

 

7

Reflects the estimated incremental lump-sum present value of all future premiums that would be paid on behalf of the named executive officer under Martin Marietta’s health and welfare plans, including long-term disability and life insurance.

 

8

Reflects the estimated incremental value of the benefit to which the named executive officer would be entitled payable on a Change of Control. Assumes postretirement medical coverage begins after 3 years of active welfare coverage but no earlier than age 55.

 

9

Mr. Nye, Ms. Lloyd, Mr. McCunniff, and Ms. Guzzo were not eligible to retire on December 31, 2013. Reflects the value as if Mr. Nye, Ms. Lloyd, Mr. McCunniff, and Ms. Guzzo were retirement eligible on December 31, 2013.

PROPOSAL 3

ADVISORY VOTE ON THE COMPENSATION OF OUR

NAMED EXECUTIVE OFFICERS

(Item 3 on Proxy Card)

Public companies are required to provide their shareholders with a periodic opportunity to endorse or not endorse our executive officer pay program and policies. The Board of Directors has elected to do so annually and intends to present through the following non-binding resolution for approval by shareholders at the annual meeting:

“RESOLVED, that the shareholders approve, on an advisory basis, the overall compensation paid to Martin Marietta’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K in this Proxy Statement in the Compensation Discussion and Analysis and in the narrative and tabular disclosure under the heading “Executive Compensation.”

Shareholders are urged to read the Compensation Discussion and Analysis and consider the various factors regarding compensation that are discussed. We believe that our executive compensation program is reasonable, competitive and strongly focused on pay-for-performance principles. Our executive compensation policies have enabled us to implement our compensation philosophy and achieve its goals. We believe that compensation awarded to our named executive officers in 2013 was appropriate and aligned with 2013 performance and position for growth in future years. The results of the vote on this resolution are advisory and will not be binding upon the Board of Directors. However, the Board values our shareholders’ opinions, and consistent with our record of shareholder engagement, will consider the outcome of the vote in making future executive compensation decisions.

THE BOARD UNANIMOUSLY RECOMMENDS

A VOTE “FOR” THIS PROPOSAL

 

 

65


Securities Authorized for Issuance Under Equity Compensation Plans

The following table shows information as of December 31, 2013 regarding Martin Marietta’s compensation plans that allow Martin Marietta to issue its equity securities. Martin Marietta’s equity compensation plans consist of the Amended and Restated Martin Marietta Materials, Inc. Common Stock Purchase Plan for Directors (the “Directors’ Plan”), the Martin Marietta Materials, Inc. Amended and Restated Stock-Based Award Plan (the “Stock-Based Award Plan”), under which the Martin Marietta Materials, Inc. Incentive Stock Plan (the “Incentive Stock Plan”) was adopted, the Martin Marietta Materials, Inc. Amended Omnibus Securities Award Plan (the “Omnibus Securities Award Plan”), and the Martin Marietta Materials, Inc. Shareholder Value Achievement Plan (the “Achievement Plan”). Martin Marietta’s shareholders have approved all of these plans. Martin Marietta has not entered into any individual compensation arrangements that would allow it to issue its equity securities to employees or non-employees in exchange for goods or services.

EQUITY COMPENSATION PLAN INFORMATION

 

Plan Category

  Number of securities to be
issued upon exercise of
outstanding

options, warrants, and rights
    Weighted-average exercise
price of outstanding options,
warrants, and rights
    Number of securities
remaining available

for future issuance
under equity
compensation plans
(excluding securities

reflected in column (a))
 

  

  (a)1     (b)2     (c)3  

Equity compensation plans approved by shareholders

    1,104,596      $ 102.74        871,915   

Equity compensation plans not approved by shareholders

    None        None        None   

TOTAL

    1,104,596      $ 102.74        871,915   

 

1

Includes 882,416 stock options that have a weighted-average exercise price of $102.74; 197,049 restricted stock units that have a $0 exercise price; and 25,131stock units granted in accordance with Martin Marietta’s Incentive Stock Plan that are credited to participants at an average weighted cost of $70.81. The restricted stock units and stock units granted in accordance with Martin Marietta’s Incentive Stock Plan represent Martin Marietta’s obligation to issue shares in the future subject to certain conditions in accordance with Martin Marietta’s Stock-Based Award Plan.

 

2

The weighted-average exercise price does not take into account the restricted stock units and stock units for which there is no exercise price.

 

3

Includes shares of Martin Marietta’s common stock available for issuance (other than those reported in column (a)) under Martin Marietta’s equity compensation plans as of December 31, 2013 in the following amounts: Directors’ Plan (207,407 shares), Stock-Based Award Plan (456,533 shares), and Achievement Plan (207,975 shares). The Directors’ Plan provides that nonemployee directors may elect to receive all or a portion of their fees in the form of common stock. Under the Achievement Plan, awards can be granted to key senior employees based on certain common stock performance over a long-term period. No awards have been granted under this plan since 2000.

 

 

66


INCORPORATION BY REFERENCE

The Audit Committee Report beginning on page 31 and the Management Development and Compensation Committee Report beginning on page 32 do not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing by Martin Marietta under the Securities Act of 1933 or the Securities Exchange Act of 1934, or subject to Regulation 14A or to the liabilities of Section 18 of the Exchange Act, except to the extent that Martin Marietta specifically requests that the information be treated as soliciting material or specifically incorporates such information by reference.

SHAREHOLDERS’ PROPOSALS FOR 2015 ANNUAL MEETING

Proposals by shareholders intended to be presented at the 2015 Annual Meeting of Shareholders of Martin Marietta must be received by the Secretary of Martin Marietta no later than December 20, 2014 in order to be included in the proxy statement and on the proxy card that will be solicited by the Board of Directors in connection with that meeting. The inclusion of any proposal will be subject to applicable rules of the Securities and Exchange Commission. In addition, the Bylaws of Martin Marietta establish an advance notice requirement for any proposal of business to be considered at an annual meeting of shareholders, including the nomination of any person for election as Director. In general, written notice must be received by the Secretary of Martin Marietta at its principal executive office, 2710 Wycliff Road, Raleigh, North Carolina 27607, not less than 60 days nor more than 90 days prior to the first anniversary of the mailing of the preceding year’s proxy statement in connection with the annual meeting and must contain specified information concerning the matter to be brought before such meeting and concerning the shareholder proposing such a matter. Accordingly, to be considered at the 2015 Annual Meeting of Shareholders, proposals must be received by the Secretary of Martin Marietta no earlier than January 17, 2015 and no later than February 16, 2015. Any waiver by Martin Marietta of these requirements with respect to the submission of a particular shareholder proposal shall not constitute a waiver with respect to the submission of any other shareholder proposal nor shall it obligate Martin Marietta to waive these requirements with respect to future submissions of the shareholder proposal or any other shareholder proposal. Any shareholder desiring a copy of the Bylaws of Martin Marietta will be furnished one without charge upon written request to the Secretary of Martin Marietta at its principal executive office, 2710 Wycliff Road, Raleigh, North Carolina 27607.

MARTIN MARIETTA MATERIALS, INC.

April 17, 2014

 

 

67


APPENDIX A

MARTIN MARIETTA MATERIALS, INC.

GUIDELINES FOR POTENTIAL NEW BOARD MEMBERS

Preamble:    The following considerations are one of the tools used to assist the Nominating and Corporate Governance Committee in the exercise of its responsibility to evaluate the suitability of new potential candidates for the Board of Directors, consistent with any criteria set out in Martin Marietta’s Corporate Governance Guidelines. In evaluating a new potential candidate who is not an employee or former employee of Martin Marietta, the Nominating and Corporate Governance Committee would take into consideration the extent to which the candidate has the personal characteristics and core competencies outlined in one or more of the guidelines set out below, and would take into account all other factors it considers appropriate, including the overall composition of the Board. These guidelines are in addition to and are not intended to change or interpret any law or regulation, or Martin Marietta’s Articles of Incorporation or Bylaws. The guidelines are subject to modification from time to time by the Nominating and Corporate Governance Committee.

 

1.

Candidates should have a long-term history of the highest integrity and should ascribe fully to the ethics program of Martin Marietta.

 

2.

Candidates should be experienced, seasoned and have mature business judgment. It would be desirable if they are still active in their careers.

 

3.

Consideration should be given to matching the geographic base of the candidate with the geographic coverage of Martin Marietta.

 

4.

Consideration should be given to diversity on the Board. Such diversity may include type of experience, education, skill sets, ethnic origin, gender and other items that will enable the Board to have a broad knowledge base and diverse viewpoints.

 

5.

Generally, candidates should not come from firms or companies that are significant sellers or buyers of goods and services to or from Martin Marietta.

 

6.

Candidates who would serve on Martin Marietta’s Audit Committee, Nominating and Corporate Governance Committee, or Management Development and Compensation Committee should be “independent” as defined by the Securities and Exchange Commission, the New York Stock Exchange and Martin Marietta’s Corporate Governance Guidelines.

 

7.

Given the nature of Board governance, the background and expertise of candidates should reflect the skill needs of the Board and Martin Marietta. With the Securities and Exchange Commission requirements with respect to audit committees and the financial nature of much of what the Board is responsible for, a significant number of Board members need to have strong financial knowledge.

 

8.

Candidates should have significant professional experience to make a significant contribution to the Board such that the overall composition of the Board includes expertise in the following areas: audit committee financial experts, legal, human resources, business strategy, marketing, the primary businesses in which Martin Marietta operates, and other areas of importance to Martin Marietta.

 

9.

Public company experience is highly desirable.

 

10.

Candidates from education or nonprofit organizations will be considered where there is a specific priority need identified by the Board and where such a candidate can add value.

 

11.

Board candidates ideally would serve on no more than three for-profit boards inclusive of Martin Marietta Materials to assure adequate time to discharge the duties of a Board member.

 

 

A-1


 

 

 

 

LOGO

Martin Marietta Materials, Inc.

2710 Wycliff Road

Raleigh, NC 27607

919-781-4550

www.martinmarietta.com

NYSE Stock Symbol: MLM

 

 


 

 

q FOLD AND DETACH HERE q

 

 

MARTIN MARIETTA MATERIALS, INC.

Proxy solicited by the Board of Directors for the

Annual Meeting to be held May 22, 2014

The undersigned hereby appoints C. Howard Nye and Anne H. Lloyd, and each or either of them, proxies, with full power of substitution, with the powers the undersigned would possess if personally present, to vote, as designated below, all shares of the common stock of the undersigned in Martin Marietta Materials, Inc. at the Annual Meeting of Shareholders to be held on May 22, 2014, and at any adjournment thereof.

YOU DO NOT NEED TO MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. PLEASE DATE AND SIGN THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.

THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR ITEMS 1, 2, and 3.

Please mark votes as in this example:  x

 

1. Election of Directors:

 

        Sue W. Cole

   ¨  For    ¨  Against    ¨  Abstain

        Michael J. Quillen

   ¨  For    ¨  Against    ¨  Abstain

        Stephen P. Zelnak, Jr.

   ¨  For    ¨  Against    ¨  Abstain

 

2. Ratification of selection of Ernst & Young LLP as independent auditors.

 

¨  For

  ¨  Against   ¨  Abstain

 

3. Approval, by a non-binding advisory vote, of the compensation of Martin Marietta Materials, Inc.’s named executive officers.

 

¨  For

 

¨  Against

 

¨  Abstain

 

4. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting, or any adjournments thereof.


MARTIN MARIETTA MATERIALS, INC.

 

q FOLD AND DETACH HERE q

 

 

This proxy is solicited by the Board of Directors of Martin Marietta Materials, Inc. and when properly executed will be voted as specified herein and, unless otherwise directed, will be voted FOR the election of all nominees as Directors, FOR the ratification of selection of Ernst & Young LLP as independent auditors, and FOR the approval, by a non-binding advisory vote, of the compensation of our named executive officers. The Board of Directors recommends voting FOR each item.

Receipt of Notice of Annual Meeting of Shareholders and accompanying Proxy Statement is hereby acknowledged.

 

Please date and sign exactly as printed below and return promptly in the enclosed postage paid envelope
Dated:                                                             , 2014

 

        Signature and Title

 

 

        Signature if held jointly

 
(When signing as attorney, executor, administrator, trustee, guardian, etc., give title as such. If joint account, each joint owner should sign. If a corporation or a partnership, sign full corporate name or partnership name, as the case may be, by an authorized person.)