ITEMS OF BUSINESS:

BOARD RECOMMENDATIONS:

The Board of Directors recommends that you vote FOR the election of each of the nominees named in Proposal 1 and FOR Proposals 2 and 3.

Throughout this proxy statement, references to “MYR Group,” the “Company,” “we,” “us,” and “our” refer to MYR Group Inc. and its consolidated subsidiaries, except as otherwise indicated or as the context otherwise requires.

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PROXY SUMMARY

This section introduces and provides overview information and the recommendations of the board of directors of MYR Group (the “Board”) for each of the proposals to be voted on at the 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”), in addition to highlighting our corporate governance, business results and executive compensation. This overview of voting items does not contain all of the information that you should consider, and we encourage you to review the entire 2019 proxy statement (the “Proxy Statement”) prior to determining how you wish to vote your shares.

PROPOSAL 1. ELECTION OF DIRECTORS (full proposal begins on page 11)

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES.

The Board and the Nominating and Corporate Governance Committee believe that the four nominees possess the necessary qualifications, attributes, skills and experiences to provide quality advice and counsel to the Company’s management and effectively oversee the business and long-term interests of the Company’s stockholders. Further biographical and qualification information for each director nominee can be found in the full proposal.

Our Director Nominees

You are being asked to vote on the election of four Class III directors, each for a term ending in 2022 or until a successor has been chosen and qualified.

Directors will be elected by the affirmative vote of a majority of votes cast in this uncontested election.

 
 
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Corporate Governance Highlights

We are committed to sound corporate governance practices. We believe that good governance promotes the long-term interests of our stockholders and strengthens Board and management accountability.

The Board engaged an independent, third-party executive and corporate governance consultant to facilitate the 2018 annual self-evaluation exercises by the Board and its committees, which provided the Board with independent insight as to the effectiveness of its operation, the effectiveness of operations of its committees, its governance practices and its director succession planning.

The Board appointed Kenneth M. Hartwick as independent Chairman of the Board (“Chairman”) effective April 1, 2018.

Effective July 27, 2018, the Board appointed Jennifer E. Lowry as a director. Ms. Lowry was appointed as a Class I director with an initial term expiring at the 2020 annual meeting of stockholders. Ms. Lowry serves on the Board’s Audit Committee.

In 2018, the Board amended the guidelines that provide a framework for MYR Group’s corporate governance (the “Corporate Governance Principles”) to establish the general policy that directors will not be nominated for reelection or reappointment to the Board after reaching the age of 72. Additionally, directors are expected to tender their resignations immediately following the first annual stockholders’ meeting following their 72^nd birthday. The Board retains its discretion to waive this policy in individual cases.

All but one of our directors are independent and four independent directors have been appointed since 2015.

 
 
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PROPOSAL 2. ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (full proposal begins on page 59)

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ADVISORY RESOLUTION TO APPROVE OUR EXECUTIVE COMPENSATION.

The Board and the Compensation Committee seek a non-binding advisory vote to approve our named executive officer (“NEO”) compensation as described under the sections entitled “Compensation Discussion and Analysis” and “Executive Compensation Tables.” The Board values stockholders’ opinions, and the Compensation Committee will consider the outcome of the advisory vote when evaluating future executive compensation decisions.

2018 Performance

Our revenues for the year ended December 31, 2018 were $1.531 billion compared to $1.403 billion and $1.142 billion for the years ended December 31, 2017 and 2016, respectively. Our net income attributable to MYR Group Inc. for the year ended December 31, 2018 was $31.1 million compared to $21.2 million and $21.4 million for the years ended December 31, 2017 and 2016, respectively. For the year ended December 31, 2018, our backlog was $1.147 billion compared to $679.1 million and $688.8 million for the years ended December 31, 2017 and 2016, respectively.

On July 2, 2018, the Company completed the acquisition of substantially all of the assets of Huen Electric, Inc., an electrical contracting firm based in Illinois, Huen Electric New Jersey Inc., an electrical contracting firm based in New Jersey, and Huen New York, Inc., an electrical contracting firm based in New York (collectively, the “Huen Companies”). The Huen Companies provide a wide range of commercial and industrial electrical construction capabilities under the Company’s commercial and industrial (“C&I”) segment and expand our C&I footprint into Illinois, New Jersey and New York.

Executive Compensation Highlights

Compensation decisions are based on a number of factors, including peer company data and general market data, Company performance against pre-established goals, relative performance of the Company’s stock compared to a peer group, and the experience and contributions of individual executives. At our 2018 Annual Meeting, our stockholders voted on an advisory resolution regarding the compensation of our NEOs (the “Say-on-Pay” proposal), which was approved by more than 98% of the votes cast. Our executive compensation program seeks to attract and retain executive talent and emphasizes pay for performance. Our executive compensation program includes base salary, short-term incentive compensation under our Senior Management Incentive Plan (amended and restated as of May 1, 2014) (the “SMIP”), long-term equity compensation under our 2017 Long-Term Incentive Plan (the “LTIP”), a defined-contribution retirement plan, and very limited perquisites.

 
 
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We continue to strive to adhere to the following best practices in executive compensation:

PROPOSAL 3. RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (full proposal begins on page 64)

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF CROWE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

The Board and the Audit Committee believe that the appointment of Crowe LLP (“Crowe”) to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2019 is in the best interests of the Company and its stockholders.

OTHER MATTERS THAT MAY BE PRESENTED AT THE 2019 ANNUAL MEETING (found on page 65)

We will also act upon any other business as may properly come before the 2019 Annual Meeting and any adjournments or postponements of that meeting. The Board or proxy holders will use their discretion on other matters that may arise at the 2019 Annual Meeting.

 
 
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CORPORATE GOVERNANCE

CODE OF ETHICS AND CORPORATE GOVERNANCE PRINCIPLES

We have a Code of Business Conduct and Ethics (the “Code of Ethics”) applicable to all of our directors, officers and employees. The Code of Ethics promotes honest and ethical conduct, full and accurate public communication and compliance with applicable laws, rules and regulations. We disclose any waiver or amendments to the Code of Ethics as required by the applicable rules of the U.S. Securities and Exchange Commission (“SEC”).

Additionally, our Corporate Governance Principles provide a framework for MYR Group’s corporate governance and assist the Board in the exercise of its responsibilities to help ensure compliance with governing law and our policies.

Stockholders and others can access our corporate governance materials, including our Certificate of Incorporation, Amended and Restated By-Laws (the “By-Laws”), committee charters, Corporate Governance Principles, Code of Ethics and other corporate governance related materials on our website at www.myrgroup.com. Copies of these materials are also available free of charge to any stockholder who sends a written request to our Secretary at MYR Group Inc., 1701 Golf Road, Suite 3-1012, Rolling Meadows, Illinois 60008.

The information on our website is not, and shall not be deemed to be, a part of this Proxy Statement or incorporated into any other filings we make with the SEC.

DIRECTOR INDEPENDENCE

Our Corporate Governance Principles require that at least a majority of the Board qualify as independent directors under the listing standards of the NASDAQ Stock Market (“Nasdaq”) and any other requirements of the committees upon which he or she serves. Nasdaq listing standards have both objective tests and a subjective test for determining who is an independent director. The objective tests state, for example, that a director who is, or at any time during the past three years was, employed by the Company, is not considered independent. The subjective test requires the Board to affirmatively determine that the director does not have a relationship that would interfere with the director’s exercise of independent judgment in carrying out his or her responsibilities. Members of our Audit Committee and Compensation Committee, respectively, are subject to certain additional qualification requirements as described below under “Audit Committee Matters” and “Compensation Committee Matters.”

After considering the Nasdaq listing standards and information provided by each director, the Board determined that the following directors are independent: Larry F. Altenbaumer, Bradley T. Favreau, Henry W. Fayne, Kenneth M. Hartwick, Gary R. Johnson, Jennifer E. Lowry, Donald C.I. Lucky, Maurice E. Moore and William D. Patterson. William A. Koertner is not considered an independent director due to his prior employment with MYR Group, which ended on March 31, 2018, and he will not be considered independent until March 31, 2021 in accordance with the Nasdaq listing standards.

EXECUTIVE SESSIONS OF THE BOARD

In accordance with the Corporate Governance Principles, the independent directors meet at least twice per year in executive sessions. Executive sessions are typically held following Board meetings, without management present.

COMMUNICATIONS WITH THE BOARD AND REPORTING OF CONCERNS

The Board values and encourages constructive dialogue with stockholders and other interested parties on compensation and other important governance topics. Stockholders and other interested parties can communicate with the directors, individually or as a group, by writing to our Secretary at MYR Group Inc., 1701 Golf Road, Suite 3-1012, Rolling Meadows, Illinois 60008 or by completing and submitting the “Contact Us” form on our corporate website at www.myrgroup.com under the “Investors” section.

 
 
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The Secretary forwards communications relating to matters within the Board’s purview to the appropriate directors, communications relating to matters within a Board committee’s area of responsibility to the chair of the appropriate committee and communications relating to ordinary business matters to the appropriate Company officer. The Secretary generally does not forward complaints about service, new services suggestions, resumes and other forms of job inquiries, surveys, business solicitations, advertisements or inappropriate communications. Anyone who has a concern about the Company’s conduct, accounting, financial reporting, internal controls, or auditing matters may submit that concern anonymously or confidentially to the Company’s Anonymous Incident Reporting System, MySafeWorkplace, at 800-461-9330 or www.mysafeworkplace.com.

BOARD LEADERSHIP STRUCTURE

Our Corporate Governance Principles provide that the Board has the discretion to choose its board leadership structure as it deems best for MYR Group and our stockholders. When determining the leadership structure that allows the Board to effectively carry out its responsibilities and represent our stockholders’ interests, the Board considers various factors, including our specific business needs, our industry’s demands, our operating and financial performance, the economic and regulatory environment, the Board’s self-evaluations, alternative leadership structures and our corporate governance policies and practices.

Separate Chairman and CEO Positions; Independent Chairman of the Board

Effective April 1, 2018, William A. Koertner stepped down from his position as Executive Chairman of the Board and the Board appointed Kenneth M. Hartwick, one of the Company’s independent directors, as Chairman. The Board believes that separate Chairman and Chief Executive Officer (“CEO”) positions provides strong leadership for our Company. By separating these positions, our CEO is able to focus on managing the Company’s daily operations and our Chairman can devote his time and attention to matters of Board oversight and governance.

The Corporate Governance Principles require an independent director to serve as lead director if the Chairman is not an independent director. As the Chairman is currently an independent director, Gary R. Johnson stepped down as lead independent director and continues to serve as a member of the Board.

Except for Mr. Koertner, who due to his prior employment with the Company is not considered independent, the Board is composed entirely of independent directors. In addition, all of the committee members are independent and our Chairman is independent.

The Nominating and Corporate Governance Committee and the Board periodically review and consider this leadership structure to ensure it remains appropriate for MYR Group.

BOARD AUTHORITY TO RETAIN OUTSIDE CONSULTANTS

The Board has the necessary power and authority to request and obtain information directly from management, to retain outside consultants and to consult directly with management and employees where it deems appropriate. The Audit Committee has the sole authority to appoint, compensate, retain and oversee the Company’s independent registered public accountants. The Compensation Committee has the sole authority to engage, retain, oversee and terminate compensation advisers for our senior management compensation review and for our directors’ compensation review. The Nominating and Corporate Governance Committee has the sole authority to retain and terminate search firms used to identify director candidates.

RISK OVERSIGHT

We do not view risk in isolation but consider risk as part of our regular consideration of business strategy and business decisions. Assessing and managing risk is the responsibility of management, which establishes and maintains risk management processes, including action plans and controls, to balance risk mitigation and opportunities to create stockholder value. It is management’s responsibility to anticipate, identify and communicate risks to the Board and/or its committees.

 
 
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The Board has the responsibility to oversee and review certain aspects of our risk management efforts, either directly or through its committees, based upon management’s identification, assessment and mitigation of risk. We approach risk management by integrating strategic planning and operational decision-making with risk oversight by management and the Board. The Board commits extensive time and effort discussing and establishing the Company’s strategic plan, and it reconsiders key elements of the strategic plan as significant events and opportunities arise during the year. As part of the strategic plan review, the Board and management focus on the primary value drivers for the Company and risks facing the Company, as well as the Company’s sustainability and social responsibilities.

The Board’s committees are each chaired by an independent director and support the Board’s oversight functions by regularly addressing various risks in their respective areas of oversight. Specifically, the Audit Committee assists the Board in fulfilling its risk management oversight responsibilities in the areas of financial reporting, internal controls (including internal controls over information technology systems and security), compliance with public reporting requirements and cyber security. The Compensation Committee assists the Board in fulfilling its risk management oversight responsibilities associated with risks arising from compensation policies and programs, including the review of incentive compensation to ensure our programs contribute to our success, increase stockholder value and discourage unnecessary and excessive risk taking. The Nominating and Corporate Governance Committee assists the Board in fulfilling its risk management oversight responsibilities associated with risks primarily related to corporate governance, director succession and the composition of the Board. Each of the committee chairs reports to the full Board at regular meetings concerning the activities of the committee, the significant issues it has discussed, and the actions taken by the committee.

We believe that our leadership structure supports the risk oversight function of the Board.

BOARD AND COMMITTEE SELF-EVALUATIONS

Each year, the Board and each of the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee conduct a self-evaluation addressing matters that the Board and committees consider relevant to their performance. These evaluations include an assessment by each director of the performance of the Board and the committee or committees on which the director sits. The Nominating and Corporate Governance Committee oversees the evaluation process.

In 2018, the Board engaged an independent, third-party executive and corporate governance consultant to facilitate the annual self-evaluation exercises by the Board and its committees. These self-evaluation exercises provided the Board with independent insight as to the effectiveness of its operation, the effectiveness of operations of its committees, its governance practices and its director succession planning.

The Board has in the past, and may in the future, retain an independent, third-party executive and corporate governance consultant to facilitate Board and committee self-evaluations and individual director performance evaluations.

COMMITTEE MEMBERSHIP AND MEETING ATTENDANCE

Our Board designates the members and chairs of committees based on the Nominating and Corporate Governance Committee’s recommendations. The Board has three standing committees — Audit, Compensation, and Nominating and Corporate Governance — each composed entirely of independent directors. Mr. Koertner does not serve on any of the committees because, due to his prior employment with the Company, he is not considered an independent director under the Nasdaq listing standards.

Each of the three standing committees has a written charter adopted by the Board. The charters define each committee’s roles and responsibilities. The charters are available on our website at www.myrgroup.com under the “Investors” section. MYR Group will provide copies of these charters free of charge to any stockholder who sends a written request to our Secretary at MYR Group Inc., 1701 Golf Road, Suite 3-1012, Rolling Meadows, Illinois 60008.

 
 
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We expect directors to regularly attend Board meetings and meetings of the committees on which they serve. In 2018, the Board held 11 meetings, the Audit Committee held 4 meetings, the Compensation Committee held 5 meetings, and the Nominating and Corporate Governance Committee held 4 meetings. Each of our directors serving during the year ended December 31, 2018 attended at least 75% of the aggregate number of meetings of the Board and committees on which they served. The overall aggregate director attendance for all Board and committee meetings was over 98%. All directors serving at the time of the 2018 Annual Meeting of Stockholders (the “2018 Annual Meeting”), including the director nominees, attended that meeting and all directors are expected to attend the 2019 Annual Meeting.

Current membership of the standing committees is as follows:

BOARD REFRESHMENT

In 2018, the Board amended its Corporate Governance Principles in order to establish the general policy that directors will not be nominated for reelection or reappointment to the Board after reaching the age of 72. Directors are expected to tender their resignations immediately following the first annual meeting of stockholders following their 72^nd birthday. The Board retains its discretion to waive this policy in individual cases. Accordingly, directors Henry W. Fayne and Gary R. Johnson are expected to tender their resignations following the 2019 Annual Meeting and the Board will consider accepting their resignations at that time. Should the Board accept one or both of their resignations, it is expected that the Board will act, in accordance with our By-Laws, to reduce the size of the Board to nine members or to eight members, respectively.

 
 
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NOMINATING AND CORPORATE GOVERNANCE COMMITTEE MATTERS

COMMITTEE INDEPENDENCE AND RESPONSIBILITIES

The Board has determined that all of the Nominating and Corporate Governance Committee members are independent under the Nasdaq listing standards. The primary responsibilities of the Nominating and Corporate Governance Committee include, among others:

CRITERIA FOR NOMINATION TO THE BOARD OF DIRECTORS

The Nominating and Corporate Governance Committee is responsible for identifying, screening, and recommending candidates to the Board for Board membership in accordance with the committee’s charter, our Certificate of Incorporation, our By-Laws, our Corporate Governance Principles and additional criteria that may be considered regarding director candidate qualifications. The Nominating and Corporate Governance Committee also evaluates the qualifications of all candidates properly nominated by stockholders using the same criteria.

Since the identification and selection of qualified directors is a complex and subjective process that requires consideration of many intangible factors, and is significantly influenced by the particular needs of the Board from time to time, there is not a specific set of qualifications, qualities or skills that are necessary for a nominee to possess, other than those that are necessary to meet legal requirements, the Nasdaq listing standards and the provisions of our Certificate of Incorporation, By-Laws, Corporate Governance Principles and charters of the Board’s committees. When considering nominees, the Nominating and Corporate Governance Committee may take into consideration many factors including, but not limited to, a candidate’s:

 
 
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When considering nominees, the Nominating and Corporate Governance Committee may also consider whether the candidate possesses the qualifications, experience, attributes and skills, taken as a whole, it considers appropriate in the context of the Board’s overall composition and needs.

The Board is responsible for nominating directors for election to the Board. When considering whether our directors, including the nominees, have the experience, qualifications, attributes and skills to serve on the Board, the Board considers the Nominating and Corporate Governance Committee’s recommendations and the individual’s breadth of knowledge of our industry and customers, integrity, particular experiences, talents, business judgment, vision, leadership skills and what each individual would bring to the Board as a whole, including the information discussed in each of the director’s individual biographies. Additionally, the Board considers and values a director’s or director nominee’s extensive experience as a business leader and strong understanding of business operations in general.

Under the heading “Proposal 1. Election of Directors,” we provide an overview of each nominee’s principal occupation, business experience and other directorships of publicly traded companies, together with the qualifications, experience, key attributes and skills that the Nominating and Corporate Governance Committee and the Board believe will best serve the interests of the Board, the Company and our stockholders.

DIVERSITY

Our Corporate Governance Principles specify that the Nominating and Corporate Governance Committee should consider the value of diversity on the Board in the director nominee identification and nomination process. While the Company does not have a specific policy regarding diversity, the Nominating and Corporate Governance Committee is responsible for recommending measures to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity. The Nominating and Corporate Governance Committee’s evaluation of director nominees and the Board as a whole includes the diversity of personal and professional experiences, opinions, perspectives, backgrounds, genders, ages and ethnicities. The Nominating and Corporate Governance Committee believes that a diverse board strengthens Board performance and better positions the Board to make thoughtful decisions. Accordingly, the Nominating and Corporate Governance Committee strives to select nominees with complementary and diverse skills, backgrounds and experiences. The Nominating and Corporate Governance Committee will assess the effectiveness of this approach as part of its review of the Board’s composition as well as in the course of the Board’s and the Nominating and Corporate Governance Committee’s self-evaluation process.

In 2018, the Nominating and Corporate Governance Committee recommended, and the Board appointed, Jennifer E. Lowry as a director, continuing the diversification and strengthening of our Board.

DIRECTOR SUCCESSION PLANNING

The Nominating and Corporate Governance Committee regularly reviews the size and composition of the Board, which includes identifying measures to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity, and recommends opportunities for adding diversity to the Board. While the Nominating and Corporate Governance Committee performs the initial review of the succession plans and makes recommendations to the Board as necessary, the entire Board has the primary responsibility for Board and committee succession planning and has developed both long-term and contingency plans.

 
 
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PROPOSAL 1. ELECTION OF DIRECTORS

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES.

The Board currently consists of ten directors. The directors are divided into three classes, designated as Class I, Class II and Class III. The term for each class expires at the conclusion of a three-year period. At the 2019 Annual Meeting, the Class III directors are standing for election.

The Nominating and Corporate Governance Committee recommended to the Board, and the Board approved, the nominations of Larry F. Altenbaumer, Bradley T. Favreau, William A. Koertner and William D. Patterson, each for a term ending at the 2022 Annual Meeting of Stockholders or until his successor has been chosen and qualified.

Each of the nominees was chosen by the Board to be a director because the Board and the Nominating and Corporate Governance Committee believe that his qualifications, experience, background and skills, taken together, demonstrate his capacity to make a continuing meaningful contribution to the Board’s oversight of the business and affairs of the Company. Accordingly, the Board believes that the continued service of each of the nominees on the Board will serve the best interests of the Company and all of its stockholders.

If any nominee should be unavailable to serve due to an unanticipated event, the Board may designate another person as a substitute nominee or, in accordance with our By-Laws, act to reduce the number of directors. If the Board substitutes another nominee, the shares represented by your proxy card will be voted for the substitute nominee. None of the nominees are related to one another or to any other director or executive officer of MYR Group or its subsidiaries by blood, marriage or adoption.

VOTE REQUIRED

Our By-Laws provide that a director nominee in an uncontested election will be elected if the number of shares voted FOR the director’s election exceeds 50% of the number of votes cast on the issue of that director’s election (including votes FOR, votes AGAINST and votes to withhold authority with respect to that director’s election, but excluding any votes to ABSTAIN or broker non-votes). If a director in an uncontested election fails to receive the required number of votes for re-election in an uncontested election, the director is expected to tender his or her resignation for prompt consideration by the Board. A director whose resignation is under consideration is expected to abstain from participating in any decision regarding that resignation. The Nominating and Corporate Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept or reject a director’s resignation.

In a contested election, where the number of director nominees exceeds the number of directors to be elected, a plurality vote standard will apply, and the director nominees who receive the most FOR votes will be elected.

In this election, because the number of director nominees does not exceed the number of directors to be elected, the election of directors at the 2019 Annual Meeting will not be a contested election. As a result, each of the nominees will be elected if the number of shares voted for such nominee’s election exceeds 50% of the number of votes cast on the issue of such nominee’s election (including votes FOR, votes AGAINST and votes to withhold authority with respect to that director’s election, but excluding any votes to ABSTAIN or broker non-votes).

If you return a proxy card without giving specific voting instructions, then your shares will be voted FOR the election of the nominees.

 
 
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2019 DIRECTOR NOMINEES

The following is information as of February 28, 2019, regarding each director who is up for election at the 2019 Annual Meeting.

Larry F. Altenbaumer   Age: 70 Director Since: 2006 Independent: Yes Nominated for Class: III Committee Membership: Audit o Compensation x (Chair) NCG o Meeting Attendance: 93% Other Public Directorships: 0    Mr. Altenbaumer has over 45 years of experience in the energy industry, including nearly 34 years at Illinois Power Company (“Illinois Power”), an electric and natural gas utility, where he served as President from 1999 until his retirement in 2004. At Illinois Power, he also held various financial leadership positions, including Treasurer, Controller and Chief Financial Officer. During his tenure with Illinois Power, Mr. Altenbaumer also served as Executive Vice President for Regulated Delivery for Dynegy, Inc. (“Dynegy”), a wholesale power, capacity and ancillary service provider. Illinois Power became a subsidiary of Dynegy in 2000 in a transaction led by Mr. Altenbaumer for Illinois Power. Since 2004, he has served as an independent consultant providing services to several organizations both inside and outside the energy industry. Since 2005, he has served as an independent director and currently serves as Board Chair and Chair of the Strategic Planning Committee for the Southwest Power Pool, a Federal Energy Regulation Commission (“FERC”) approved regional transmission organization covering portions of fourteen states. He also currently serves as the Board Chair of Decatur Memorial Hospital (“DMH”) and its parent Illinois Health and Science Corporation. DMH is a fully accredited 300-bed not-for-profit hospital offering a wide range of general and specialized health care services. He is also a director and Audit Committee Chair of Blackwater Midstream Corporation (“Blackwater”), an independent developer and operator of agricultural, petroleum and chemical liquid terminal storage facilities. Blackwater is an investment of the JP Morgan Asset Management Infrastructure Investments Group (“JPMIIF”). From 2005 to 2014, he served as an advisor to ArcLight Capital Partners, LLC (“ArcLight”), a private equity firm that has invested approximately $21 billion in energy infrastructure assets since its inception in 2001. He has also recently served as a director for Summit Utilities, another JPMIIF investment, that owns and operates natural gas distribution companies in Colorado, Missouri, Maine, Arkansas and Oklahoma and as President of the Economic Development Corporation of Decatur and Macon County. Mr. Altenbaumer received a Bachelor’s Degree in electrical engineering and computer science from the University of Illinois in 1970.

 
 
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		Bradley T. Favreau    Age: 35 Director Since: 2016 Independent: Yes Nominated for Class: III Committee Membership: Audit o Compensation x NCG x Meeting Attendance: 100% Other Public Directorships: 0    Mr. Favreau currently serves as Partner at Engine Capital Management, LLC (“Engine Capital Management”), which serves as the investment manager to value-oriented special situations funds that invest both actively and passively in companies undergoing change. Mr. Favreau has been at Engine Capital Management since 2013. His responsibilities include sourcing and evaluating investment opportunities as well as monitoring portfolio risk and position sizing. From 2015 to 2017, Mr. Favreau served as a director and a member of the Audit Committee of RDM Corporation, a provider of solutions for the electronic commerce and payment processing industries. Prior to Engine Capital Management, in 2011, Mr. Favreau served as a consultant at HUSCO International, a global leader in the development and manufacture of hydraulic and electro-hydraulic controls for off-highway applications. At HUSCO International, his duties included identifying and initiating supply chain improvement initiatives. Mr. Favreau has also worked as an investment professional at Apax Partners, an international private equity investment group, and in the mergers and acquisition group at UBS AG. Mr. Favreau received a Master of Business Administration from Columbia Business School and a Bachelor of Science degree from the Kelley School of Business at Indiana University.
		Qualifications, Experience, Key Attributes and Skills:
		Mr. Favreau’s experience at an investment firm with investments in a broad range of industries provides the Board with additional financial and operational expertise. Such knowledge helps our Company to position itself for future growth and allocate capital effectively. Mr. Favreau’s experiences as a director and member of the Audit Committee of RDM Corporation and as a consultant at HUSCO International offer the Board additional awareness and perspectives for the Company’s oversight and risk management functions. Mr. Favreau, with his financial background and experience serving on another board of directors, has proven to be a valuable asset to the Board and the Compensation Committee and the Nominating and Corporate Governance Committee.

 
 
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		William A. Koertner    Age: 69 Director Since: 2007 Independent: No (Former MYR Group President, CEO and Executive Chairman of the Board) Nominated for Class: III Committee Membership: Audit o Compensation o NCG o Meeting Attendance: 90% Other Public Directorships: 0    Mr. Koertner served as President and CEO of MYR Group from December 2003 until January 1, 2017 and served as Executive Chairman of the Board from December 2007 until March 31, 2018. Mr. Koertner joined MYR Group in 1998 as Senior Vice President, Treasurer and Chief Financial Officer, and was responsible for all financial functions including accounting, treasury, risk management and management information systems. Prior to joining MYR Group, Mr. Koertner served as Chief Financial Officer for Central Illinois Public Service Company from 1995 to 1998 and President and Chief Executive Officer of CIPSCO Investment Company (“CIPSCO”) from 1995 to 1998 as well. CIPSCO manages nonutility investments and provides investment management services for affiliates. Mr. Koertner holds a Bachelor of Science degree in finance from Northern Illinois University and a Master of Business Administration degree from the University of Illinois.
		Qualifications, Experience, Key Attributes and Skills:
		During Mr. Koertner’s tenure as an executive officer and Executive Chairman of the Company, he gained an in-depth understanding of the day-to-day operations that enhances the Board’s understanding of our Company and the industries in which we operate. His leadership of the Board was instrumental in setting our business goals and creating a culture of good corporate governance that has contributed greatly to the growth and success of the Company. Mr. Koertner is a leader in our industry in the area of safety and he was instrumental in the creation of the OSHA Electrical Transmission and Distribution Strategic Partnership in 2004 and served as the first chairman of its executive committee. Mr. Koertner possesses an expert understanding of financial, accounting and treasury practices, which allows him to provide sound guidance to the Board regarding growth strategies and management of the Company.

 
 
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		William D. Patterson    Age: 64 Director Since: 2007 Independent: Yes Nominated for Class: III Committee Membership: Audit o Compensation x NCG o Meeting Attendance: 93% Other Public Directorships: 0    Mr. Patterson is a retired water utility executive that is currently engaged in not-for-profit and philanthropic activities. From 2010 through 2016, Mr. Patterson provided advisory and consulting services to utilities through EnSTAR Management Corporation, a company that he founded. In 2010, Mr. Patterson retired from American Water Works Company Inc. (“American Water Works”), the largest investor-owned U.S. water and wastewater utility company. From 2009 until his retirement in 2010, Mr. Patterson served as Senior Vice President of Corporate and Business Development for American Water Works. From 2005 to 2008, Mr. Patterson served as Senior Vice President and Chief Financial Officer of Pennichuck Corporation, an investor-owned water utility holding company. From 2003 to 2005, he served as an executive advisor to Concentric Energy Advisors, a private firm located in Marlborough, Massachusetts, providing financial advisory and consulting services for utilities. His experience also includes nearly 20 years of work within the investment banking industry, serving in senior positions at E.F. Hutton, Shearson Lehman and Smith Barney, where he was managing director and co-head of the corporate finance department’s regulated utilities practice. Mr. Patterson earned his Bachelor of Science degree in civil engineering from Princeton University, graduating summa cum laude. He earned his Master of Business Administration degree in finance and accounting from the University of Chicago Booth School of Business.
		Qualifications, Experience, Key Attributes and Skills:
		Mr. Patterson is a financial executive and expert with 30 years of experience primarily serving the regulated utility and energy/utility infrastructure markets. Mr. Patterson brings a broad-based track record of success as a banker, investor and advisor and has held senior management and independent director positions for both public and private companies. His service as a senior executive for various companies in the utility industry provides him with an unparalleled understanding and awareness of our markets and a valuable perspective that make Mr. Patterson highly qualified to serve on the Compensation Committee.

 
 
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CLASS I AND CLASS II DIRECTORS

The following is information as of February 28, 2019 regarding Class I and Class II directors.

CLASS I DIRECTORS

		Henry W. Fayne    Age: 72 Director Since: 2007 Independent: Yes Class: I Committee Membership: Audit x Compensation o NCG o Meeting Attendance: 93% Other Public Directorships: 0    Mr. Fayne has more than 30 years of experience with American Electric Power (“AEP”), an electric utility company servicing five million customers in 11 states. During his tenure with AEP from 1974 to 2004, he held senior positions in both finance and operations. Mr. Fayne last served as Executive Vice President of Energy Services and was responsible for transmission, distribution and customer relations operations for the AEP system, which employed approximately 15,000 line workers. He also served as Chief Financial Officer and Executive Vice President — Financial Services and was responsible for financial planning and budgeting, risk management, internal audits, accounting and treasury functions. After retiring from AEP in 2004, Mr. Fayne began providing advisory and consulting services to various companies, including Century Aluminum Company, and served as chairman of the board of directors for Southwest Generation, LLC, a privately held gas-fired generating company, from July 2008 through September 2018. In addition to serving on our Board, Mr. Fayne currently serves as director and chairman of the Audit Committee of the board of directors for Murray Energy Corporation, a privately held coal mining company; as a director and chairman of the Audit Committee of Summit Utilities Inc., a privately held gas distribution company; as co-chairman of the board of directors of Almod Diamonds Ltd., a privately held retail jewelry company; and as a director of the JP Morgan Infrastructure Investments Fund, a private equity investment fund that owns infrastructure companies in the United States and abroad. Mr. Fayne holds a Bachelor of Arts degree in economics from Columbia College of Columbia University and a Master of Business Administration degree from Columbia Business School.
		Qualifications, Experience, Key Attributes and Skills:
		With over 35 years of total industry experience, Mr. Fayne’s extensive background in financial planning, budgeting, risk management and operational experience with AEP combine to provide relevant insight and guidance related to our primary operations. His substantial executive leadership expertise and consulting experience are directly relevant to our operations and activities and help aid the Board’s strategic and high-level planning as well as the Board’s understanding of our customers and competitors. Mr. Fayne’s participation on a variety of private company boards provides him with a well-rounded perspective to further enhance the Board’s understanding of the industry. Mr. Fayne’s background, leadership expertise and experience make him a valuable resource and highly qualified to serve on our Board and Audit Committee.

 
 
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		Kenneth M. Hartwick    Age: 56 Director Since: 2015 Independent: Yes Class: I Committee Membership: Audit x Compensation o NCG o Meeting Attendance: 100% Other Public Directorships: 1    Since 2016, Mr. Hartwick has served as Senior Vice President of Finance, Strategy, Risk and Chief Financial Officer for Ontario Power Generation, a provincial owner of power generation in Ontario, Canada. From February 2015 to March 2016, Mr. Hartwick served as the Chief Financial Officer of Wellspring Financial Corporation, a Canadian sales financing company. Prior to joining Wellspring Financial Corporation, Mr. Hartwick served for ten years as Director, President and Chief Executive Officer of Just Energy Group Inc., an integrated retailer of commodity products. At Just Energy Group, Inc., his role included putting in place a broad set of financing arrangements for growth in North America and the United Kingdom and the expansion of the sales organization across these locations. Prior to that, Mr. Hartwick held a variety of senior executive roles, gaining an extensive financial background in the energy, consumer products and capital markets areas, including the positions of Chief Executive Officer and Chief Financial Officer at Just Energy Group, Inc., Chief Financial Officer at Hydro One, Inc. and a Partner at Ernst & Young LLP. In each of these roles, Mr. Hartwick participated in the expansion and growth of the businesses and the establishment of financial platforms to support that growth. Mr. Hartwick currently serves on the Board of Directors of Spark Energy, Inc., a publicly-traded retail energy services company. From October 2004 to March of 2016, Mr. Hartwick served on the Board of Directors of Atlantic Power Corporation, a publicly-traded power generation company in the United States and Canada. From 2014 through 2016, Mr. Hartwick served on the Board of Governors for Trent University, his alma mater. Mr. Hartwick earned his Honors of Business Administration Degree from Trent University, Peterborough, Ontario and is a Chartered Professional Accountant.
		Qualifications, Experience, Key Attributes and Skills:
		Mr. Hartwick’s experience in senior executive positions, including the roles of chief executive officer and chief financial officer, brings leadership, risk management, and strategic planning experience to the Board and Audit Committee. Mr. Hartwick’s in-depth knowledge of financing initiatives as a senior executive in North American markets provides the Board with proficiencies to support business development, growth strategies and expenditure plans. Mr. Hartwick’s experience as a director of other publicly-traded companies enables him to provide insights into a variety of strategic planning, risk management, compensation, finance and governance practices. The culmination of Mr. Hartwick’s leadership in the energy industry and financial sector make him a valued advisor and highly qualified to serve as Chairman and as a member of our Audit Committee.

 
 
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		Gary R. Johnson    Age: 72 Director Since: 2007 Independent: Yes Class: I Committee Membership: Audit o Compensation x NCG x Meeting Attendance: 100% Other Public Directorships: 0    Most recently, Mr. Johnson was Vice President and General Counsel of Xcel Energy and its wholly-owned subsidiary, Northern States Power Company. Xcel Energy, through its subsidiaries, is a leading electric and natural gas utility company offering a comprehensive portfolio of energy-related products and services to customers throughout the western and midwestern United States. Mr. Johnson occupied this position from 2000 until his retirement in 2007. From 1989 to 2000, Mr. Johnson was Vice President and General Counsel of Northern States Power Company, the predecessor to Xcel Energy. He holds a bachelor’s degree in history from the University of Minnesota and a Master of Public Administration degree from the Ohio State University. Mr. Johnson is a graduate of the University of Minnesota Law School.
		Qualifications, Experience, Key Attributes and Skills:
		Through his distinguished career as an executive officer and general counsel at Xcel Energy and Northern States Power Company, Mr. Johnson gained a broad understanding of the business, industry, legal issues and regulatory landscape of the electrical utility industry. Mr. Johnson uses his extensive knowledge to provide a valuable perspective that assists in the understanding of current legal and regulatory issues facing our Company and the industry. Mr. Johnson’s distinguished career, understanding of the energy markets and experience make him a valuable resource and highly qualified to serve on our Board and as a member on the Compensation Committee and the Nominating and Corporate Governance Committee.

 
 
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		Jennifer E. Lowry   Age: 50 Director Since: 2018 Independent: Yes Class: I Committee Membership: Audit x Compensation o NCG o Meeting Attendance: 83% Other Public Directorships: 0    Since November 2016, Ms. Lowry has served as Vice President of Corporate Finance for McCormick & Company, Inc. From 2012 to 2016, Ms. Lowry held senior management roles with Exelon Corporation (“Exelon”) and Constellation Energy, Inc. (“Constellation”), which merged with Exelon, including Treasurer and Vice President of Constellation and Senior Vice President and head of strategy for Exelon’s Generation Company. Prior to that, she held executive positions at companies within the electric power industry including AES Corporation and Cogentrix Energy Group, Inc. Ms. Lowry has served on numerous governing committees within Constellation and Exelon and is currently Vice Chair of the Maryland Zoo Board of Trustees. She attended Dartmouth College, where she obtained a Bachelor of Arts degree and Bachelor of Engineering degree with a focus on electrical engineering, and she holds a Masters in Management from the Northwestern University Kellogg School of Management.
		Qualifications, Experience, Key Attributes and Skills:
		Ms. Lowry, through her variety of experience, brings industry knowledge and expertise, strong leadership qualities and a diverse set of governance skills to our Board. Her financial and strategic transactional experience with both national and global organizations offer unique perspectives to our Board. Ms. Lowry’s collective leadership, experience and skillset makes her a valuable asset and highly qualified to serve on our Board and as a member of our Audit Committee.

 
 
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CLASS II DIRECTORS

		Donald C.I. Lucky    Age: 56 Director Since: 2015 Independent: Yes Class: II Committee Membership: Audit o Compensation x NCG x (Chair) Meeting Attendance: 100% Other Public Directorships: 0    Mr. Lucky is a construction attorney and Managing Partner at the century-old Alberta-based law firm of Reynolds Mirth Richards & Farmer LLP, where he has practiced since 1988. He has advised contractors and owners in major power projects, including oil and gas, solar, wind and carbon capture, engineer procurement and construction mega projects and more than 100 public-private finance infrastructure projects (hospitals, penitentiaries, water treatment and transportation) throughout Canada, the United States and Australia. Mr. Lucky has appeared as counsel at all levels of the Courts of Alberta and the Northwest Territories and in mediations and arbitrations as counsel and adjudicator. In addition to his practice of law, he taught Construction Law at the University of Alberta from 2002 to 2015 and has received numerous industry awards and recognitions in the area of construction law and otherwise, including being inducted into the Canadian College of Construction Lawyers in 2009. Mr. Lucky obtained his Bachelor of Commerce and Bachelor of Law degrees from the University of Alberta, and his Master of Law degree from the University of Cambridge.
		Qualifications, Experience, Key Attributes and Skills:
		Throughout his career as an attorney in the construction industry, Mr. Lucky has demonstrated a detailed understanding of the legal issues and risks of our current and expanding markets. Mr. Lucky’s perspective as an academic and his involvement in various energy projects in multiple countries provides the Board with valuable new ideas and perspectives. Mr. Lucky’s experience in the construction industry, along with the wealth of knowledge he has gained through advocating for contractors, gives the Board significant insight for our strategic planning as well as an understanding and awareness of the Company’s opportunities and challenges, all of which makes him highly qualified to serve as Chairman of the Nominating and Corporate Governance Committee and as a member on the Compensation Committee.

 
 
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		Maurice E. Moore    Age: 68 Director Since: 2010 Independent: Yes Class: II Committee Membership: Audit x (Chair) Compensation o NCG x Meeting Attendance: 100% Other Public Directorships: 0    Mr. Moore has over 30 years of experience in banking, leasing and project financing, and in providing financial advisory services to the electric utility and renewable energy industries. Since 2009, Mr. Moore has served as Managing Director of Primus Financial Group, LLC, a company that he founded, which provides asset and lease financial advisory services to major U.S. commercial banks and companies engaged in the renewable energy business. Since 2018, Mr. Moore has served as a Director (Owner Lessor Assigned Director) on the Board of Managers of GenOn Mid-Atlantic, LLC, a wholly-owned subsidiary of GenOn Holdings, Inc., an independent wholesale power producer operating in the Northeast and Mid-Atlantic states. From 2006 to 2009, Mr. Moore served in senior leadership roles with Chase Equipment Leasing, Inc., a division of JP Morgan Chase, offering a variety of financing and lease solutions to help businesses acquire the equipment needed for daily operations. From 1986 to 2005, Mr. Moore served in various roles, including senior leadership roles, with JP Morgan Capital Corporation and its predecessor companies. Prior to serving on the Board, Mr. Moore served on the boards for West Suburban Medical Center and Community Chest of Oak Park & River Forest, Illinois, and was formerly Finance Advisory Committee Chairman for Oak Park & River Forest High School in Illinois. Mr. Moore earned a Bachelor of Science degree in civil engineering from Brown University and a Master of Business Administration degree from Harvard Business School.
		Qualifications, Experience, Key Attributes and Skills:
		Mr. Moore has substantial leadership, financial services and capital expenditures experience, and has advised a variety of clients engaged in energy and renewable energy markets. His skills in originating, negotiating and financing large capital projects serve as a guiding force concerning our capital investment and expenditure plans. In addition, his financial advisory involvement in the renewable energy space provides a diverse range of insight that contributes to the Board’s understanding of the markets in which we operate. Mr. Moore’s business acumen and experience in both financial services and capital expenditure experience broadens our Board’s experience and understanding of successful financial practices and growth strategies and makes Mr. Moore highly qualified to serve as the Chairman of our Audit Committee and as a member of our Nominating and Corporate Governance Committee.

 
 
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DIRECTOR COMPENSATION

We use a combination of cash and equity-based compensation to attract and retain directors and to compensate directors for their service on the Board in amounts that are commensurate with their Board and committee responsibilities. The Compensation Committee reviews director compensation periodically and recommends changes to the Board when it deems them appropriate. The Compensation Committee and the Board consider analyses prepared by the Compensation Committee’s independent executive and director compensation consultant, Mercer, of reported director compensation practices at our peer companies. The Compensation Committee generally seeks to target our directors’ total compensation (defined as total cash compensation and total equity compensation) at or near the median total compensation of the directors of our peers.

In October of 2016, at the request of our Compensation Committee, Mercer performed and presented to the Compensation Committee a study of reported non-employee director compensation practices (the “2016 Mercer Non-Employee Director Compensation Study”). The 2016 Mercer Non-Employee Director Compensation Study included comparisons of our non-employee director compensation to a peer group of companies, which assisted the Compensation Committee with designing our non-employee director compensation program to be competitive with the peer group and other companies in our markets.

According to the 2016 Mercer Non-Employee Director Compensation Study, total cash compensation compared to a group of our peers was below the 50^th percentile and annual equity compensation was near the 50^th percentile, which resulted in total direct compensation below the 50^th percentile. The 2016 Mercer Non-Employee Director Compensation Study made the following recommendations for our non-employee directors:

The Compensation Committee considered the 2016 Mercer Non-Employee Director Compensation Study and changes in the Board’s structure in 2018 and recommended to the Board, and the Board approved, the following non-employee director compensation for 2018:

 
 
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2018 Director Compensation Table

The following table sets forth the compensation received by each of our directors for the year ended December 31, 2018. Beginning with the Board meeting in April 2018, our directors received one-quarter of the annual cash retainer and one-quarter of the additional cash compensation for serving as the chair of a board committee or as Chairman at each quarterly board meeting:

 
 
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Director Stock Ownership

The Board has established stock ownership guidelines for our directors to reinforce the importance of aligning the interests of our directors and stockholders. The guidelines generally require directors to meet an equity ownership level with a value equal to or greater than four times the annual cash retainer within five years from the date the director was appointed to the Board. A director has three years to meet an incremental increase in the minimum stock ownership level caused by an increase in the annual retainer. We have adopted retention requirements with respect to these stock ownership guidelines whereby directors are expected to retain shares after withholding any shares to satisfy taxes at the time of vest (“Net Shares”) received through an exercise of stock options or the vesting of restricted stock, Restricted Stock Units or phantom stock units with tandem dividend equivalents (“Phantom Stock Units”) if they have not satisfied the required equity ownership level.

The following table sets forth each director’s ownership as of March 1, 2019 for stock ownership guidelines purposes:

Insider Trading Policy

Our insider trading policy, among other things, prohibits our directors from hedging the economic risk of their stock ownership, holding shares of the Company’s common stock in a margin account, pledging shares as collateral for a loan or short-selling the Company’s securities. The policy also prohibits trading in our securities outside of specified window periods and without pre-clearance.

 
 
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers, directors and persons who own more than 10% of our common stock to report their ownership of our common stock and changes in that ownership.

We reviewed copies of reports filed pursuant to Section 16(a) of the Exchange Act and any written representations from reporting persons that all reportable transactions were reported. Based solely on that review, we believe that during the fiscal year ended December 31, 2018, all filings required of our executive officers and directors were timely made in accordance with the Exchange Act, except for one Form 4, which was inadvertently filed late by the Company on April 5, 2018 on behalf of William A. Koertner.

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

We have a written policy and procedures for the review, approval and ratification of transactions with related persons, which have been adopted by the Board. Under our policy, the definition of related persons includes, among others, any person who is or was, during the last fiscal year, an executive officer, director or nominee for director of the Company, any stockholder owning more than 5% of any class of our voting securities, or an immediate family member of any such person.

It is the policy of the Company to prohibit related person transactions unless the Company’s Audit Committee has determined in advance of the Company or a subsidiary entering into the transaction that it will be conducted on terms that are fair to the Company or the subsidiary and the transaction is in the best interests of the Company or the subsidiary.

Pursuant to our policy and the SEC and Nasdaq reporting rules, there were no reported transactions in 2018 that qualified as a related person transaction. As a result, no reported transaction was referred to the Audit Committee or any other committee of the Board for review and no related person transaction was required to be disclosed in the Company’s filings.

 
 
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COMPENSATION COMMITTEE MATTERS

COMMITTEE INDEPENDENCE AND RESPONSIBILITIES

The Board established the standing Compensation Committee in accordance with our By-Laws. The Board has determined that each member of the Compensation Committee qualifies as an “independent” director as defined under the Nasdaq rules, as a “non-employee director” as defined in Rule 16b-3(b)(3) under the Exchange Act and as an “outside director” within the historical meaning of such term for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), as in effect prior to changes made in connection with the December 2017 tax reform.

The Compensation Committee firmly believes that the compensation of our executive officers should emphasize paying for performance that contributes to our success while encouraging behavior that is in our stockholders’ long-term best interests. The Compensation Committee is responsible for assisting the Board in overseeing the Company’s compensation and employee benefit plans and practices, including its executive compensation plans and its incentive-compensation and equity-based plans. To represent and assist the Board in its oversight of the Company’s compensation practices and under its charter, the Compensation Committee performs, among others, the following tasks:

The “Compensation Discussion and Analysis” included in this Proxy Statement goes into further detail about the Compensation Committee’s processes for determining the appropriate levels of compensation for NEOs and directors.

COMPENSATION CONSULTANTS

In order to fulfill its duties, the Compensation Committee has the authority to retain, at the Company’s expense, its own advisors and compensation consultants and to approve their compensation. These external compensation consultants provide the Compensation Committee with guidance on compensation trends, program designs and market research and advice and recommendations on both executive and director compensation. They also help evaluate the competitive position of executive officers’ and directors’ compensation and provide advice on incentive award programs. Their findings are discussed in more detail in “Compensation Discussion and Analysis.”

Compensation consultants are engaged by and report directly to the Compensation Committee on executive compensation matters and meet separately with the Compensation Committee outside the

 
 
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presence of management. Interaction between the compensation consultants and management is generally limited to providing necessary information and data.

As it has in prior years, the Compensation Committee retained Mercer, a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“MMC”), to serve as its executive and director compensation consultant. The Compensation Committee reviewed the independence of Mercer’s advisory role relative to the six consultant independence factors adopted by the SEC to guide listed companies in determining the independence of their compensation consultants, legal counsel and other advisers. Following its review, the Compensation Committee concluded that Mercer had no conflicts of interest and could provide the Compensation Committee with objective and independent executive and director compensation advice.

MANAGEMENT SUCCESSION PLANNING AND DIVERSITY

The Compensation Committee regularly reviews and provides input on management’s succession planning and talent management. This review includes an ongoing evaluation of management’s talent and leadership at both the workforce and senior management levels as well as an endorsement of extensive training and professional development programs for all employees. The Compensation Committee believes that a diverse workforce strengthens the Company and, accordingly, considers the importance of diversity in its review of management’s succession planning and talent management.

COMPENSATION RISK ASSESSMENT

In reviewing and approving compensation programs, the Compensation Committee considers whether the programs are likely to promote risk-taking behavior that could adversely affect the Company. The Compensation Committee has designed the Company’s compensation programs, including the Company’s incentive compensation plans, with specific features to address potential risks while rewarding employees for achieving long-term financial and strategic objectives through prudent business judgment and appropriate risk taking. The following elements have been incorporated into our programs available for our executive officers:

 
 
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The Compensation Committee annually performs an assessment of compensation-related risks for all of our compensation policies and programs. These assessments include a review of multiple factors including, but not limited to, the design of compensation policies and programs, controls and approval processes and the discretion provided in the oversight of these programs. Periodically, the Compensation Committee retains outside consultants to assist in these assessments. After its review in 2018, the Compensation Committee concluded that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on the Company. In the event that the Company’s risk profile was to change, the Compensation Committee would consider appropriate adjustments in policies and practices.

COMPENSATION COMMITTEE REPORT FOR THE YEAR ENDED DECEMBER 31, 2018

The Compensation Committee oversees our compensation program on behalf of the Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the “Compensation Discussion and Analysis” included in this Proxy Statement.

In reliance on the review and discussion referred to above, the Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in our Proxy Statement to be filed with the SEC in connection with our 2019 Annual Meeting and incorporated by reference in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”).

The information contained in the above Compensation Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, as amended, except to the extent that MYR Group specifically incorporates it by reference in such filing.

 
 
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LETTER FROM OUR COMPENSATION COMMITTEE

 

Dear Fellow Stockholder,

Good progress was realized in 2018 in the advancement of the Company’s strategy to grow through a balanced combination of organic growth and strategic acquisitions that built on our foundation that emphasizes safety and quality relationships.

The Compensation Committee believes that the design of its compensation programs is an important driver of stockholder value creation at MYR Group by helping us attract, retain and incentivize quality talent. Our programs reward success when the management team’s efforts build stockholder value and limit compensation when our performance expectations are not met. We have designed our compensation programs to incentivize employees at all levels within the organization and to specifically reward our key leaders for their contributions to both our short-term and long-term performance.

We believe that the pay of our executive officers should be linked to our long-term performance; thus, our compensation programs are designed to reward strong financial performance and safe operations. We also recognize the importance of acquiring and retaining the very best employees, and we regularly review our compensation programs to ensure we are competitive with the market for quality talent. In addition, we offer extensive training and professional development programs for all employees to provide them with opportunities for meaningful career paths.

The Compensation Committee annually reviews the performance metrics and the equity compensation vehicles used in our long-term equity compensation program to ensure they are aligned with the goals we believe will drive stockholder value. Following our analysis for 2018, we continued to use the financial performance metric of return on invested capital and the market-based metric of relative total stockholder return. We believe these metrics align the long-term equity compensation opportunities of our executive officers with stockholder value creation. In addition to this focus on long-term value, we also provide short-term incentives to employees for both financial and safety performance.

In addition to our annual “say-on-pay” proposal, we invite our stockholders to provide feedback on our executive compensation programs, as we believe these conversations have improved and will continue to improve our programs. With the positive responses to our “say-on-pay” votes over recent years and based on our annual review of best practices with our independent compensation consultant, we have maintained our fundamental compensation programs and structures. Through these review processes and stockholder feedback, we continue to endeavor to improve these programs with the objective of improving stockholder value.

On behalf of the Compensation Committee,

Larry F. Altenbaumer
Chair of the Compensation Committee

 
 
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COMPENSATION DISCUSSION AND ANALYSIS

INTRODUCTION

This Compensation Discussion and Analysis (the “CD&A”) describes the objectives, principles and material components of our executive officer compensation program for our NEOs.

Named Executive Officers

Our NEOs for 2018 were as follows:

2018 Company Performance

MYR Group is a holding company of specialty electrical construction service providers that was established through the merger of long-standing specialty contractors. Through our subsidiaries, we serve the electrical utility infrastructure, commercial and industrial construction markets throughout the United States and western Canada and have the experience and expertise to complete electrical installations of any type and size. Our Transmission and Distribution (“T&D”) segment provides comprehensive services on electric transmission and distribution networks and substation facilities including design, engineering, procurement, construction, upgrade, maintenance and repair services. Our T&D customers include investor-owned utilities, cooperatives, private developers, government-funded utilities, independent power producers, independent transmission companies, industrial facility owners and other contractors. Our C&I segment provides electrical contracting services including the design, installation, maintenance and repair of commercial and industrial wiring, installation of traffic networks and the installation of bridge, roadway and tunnel lighting for general contractors, facility owners, local governments and developers throughout the United States and western Canada.

Our noteworthy 2018 highlights included the following:

Pay For Performance

We have designed our compensation programs to reward our key executive officers for their contributions to our short- and long-term performance and to be competitive with programs offered by companies with which we compete for executive officer talent. We believe that the pay of our NEOs should be directly linked to performance; thus, our compensation programs are designed to reward strong financial performance and safe operations.

In 2018, we did not meet our target pretax financial performance goal resulting in below target annual cash incentive payouts for financial performance under the SMIP, but we exceeded our target safety

 
 
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performance goals resulting in above target annual cash incentive payouts under the SMIP for safety performance. The three-year average 2016 ROIC was below threshold performance, consequently no ROIC performance shares were earned for grants made in 2016, and, for the 2016 TSR performance shares, TSR performance ranked at the 49^th percentile and 97% of the target number of TSR performance shares were earned.

OBJECTIVES OF OUR COMPENSATION PROGRAM

We seek to maintain the competitiveness of our executive compensation program with those of our peers and competitors. Adjustments to both overall compensation and the individual components of compensation are based on various factors, including results of compensation benchmarking studies, general economic conditions, the effects of inflation or other economic forces, changes in our business operations and the related financial results, results of our stockholder vote on our Say-on-Pay proposal and changes in the compensation practices of our competitors. We also take into account each executive officer’s individual performance when making compensation adjustments.

The primary objectives of our executive compensation program are to:

 
 
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KEY FEATURES OF OUR COMPENSATION

We adhere to executive compensation best practices

 
 
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COMPONENTS OF OUR COMPENSATION

 
 
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STOCKHOLDER ENGAGEMENT AND “SAY-ON-PAY”

At our 2018 Annual Meeting, more than 98% of the votes cast on the Say-on-Pay proposal voted in support of an advisory resolution regarding the compensation of our NEOs. These results demonstrated strong stockholder support for our overall executive compensation program. The Compensation Committee considered this favorable vote and determined that our current practices and processes did not require any significant modifications to address stockholder concerns. The Compensation Committee will continue to consider the outcome of these annual advisory votes when considering future executive compensation arrangements.

In addition to our annual Say-on-Pay proposal, stockholders are encouraged to provide feedback on our corporate governance policies and our executive compensation programs, including their various components. Management reports to the Compensation Committee on issues or concerns our stockholders provide with respect to our executive compensation programs. We encourage stockholders to reach out to the Board or the Compensation Committee with any feedback on our executive compensation programs. For more information on providing feedback and the related procedures, please see “Corporate Governance — Communications with the Board and Reporting of Concerns” in this Proxy Statement.

2018 TARGET COMPENSATION

We endeavor to maintain strong compensation practices, which requires effective governance standards with respect to the oversight of our executive compensation policies and practices. Although we do not use a specific formula to determine the mix of at-risk pay that is performance-based and fixed compensation paid to our NEOs, our emphasis on pay-for-performance resulted in at-risk performance-based compensation (which we define as performance share awards and cash awards tied to performance) representing a significant part of our NEOs’ target compensation in 2018. In 2018, at-risk performance-based compensation represented approximately 54% of the target total direct compensation for our CEO and an average of approximately 45% of the target total direct compensation for our other NEOs, as shown in the charts below:

 
 
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As shown below for 2018, the target total direct compensation for our CEO and other NEOs was generally below the Peer Group median (as discussed below under “Peer Groups, Pay Mix and Use of Compensation Consultants”):

MANAGEMENT’S ROLE IN DETERMINING COMPENSATION

The Compensation Committee oversees the executive compensation program for our NEOs, as discussed under “Compensation Committee Matters.” Our management also plays an important role in setting the compensation of our NEOs by initially recommending various aspects of incentive compensation, including financial performance goals, safety performance goals and strategic goals relating to each NEO. Management also makes recommendations regarding the salary, short-term cash incentive awards and equity awards for our NEOs (other than with respect to our CEO). While our management makes recommendations as to the goals and awards for NEOs’ incentive compensation (other than with respect to our CEO), the Compensation Committee has final authority and complete discretion to ultimately set the compensation of our NEOs.

At the request of the Compensation Committee, our CEO presents to the Compensation Committee his evaluation of the performance of our other NEOs and his recommendations regarding their compensation. The Compensation Committee considers these evaluations and recommendations in determining our NEOs’ salaries and the amounts that may be paid under our incentive plans. To assist the Compensation Committee, management also prepares information “tally sheets.” The purpose of the tally sheets is to provide the Compensation Committee the information on key elements of actual realized compensation and potential realizable compensation for our NEOs so that the Compensation Committee may fully evaluate our total compensation packages. Further, the Compensation Committee discusses compensation decisions with Mercer, its independent compensation consultant, and deliberates on such decisions without management present.

PEER GROUPS, PAY MIX AND USE OF COMPENSATION CONSULTANTS

The Compensation Committee believes that it is appropriate to utilize compensation benchmarking studies of our peer and competitor companies to establish initial compensation targets because the competitiveness of our compensation practices greatly influences our ability to attract, motivate and retain top executive officer talent, which is an important determinant of our business success. However, the Compensation Committee believes compensation benchmarking studies should be considered only as a point of reference for measurement and not as the determinative factor for our NEOs’ compensation. The results of the studies do not supplant the significance of the individual performance of our NEOs that the Compensation Committee considers when making compensation decisions. Because the information provided by compensation benchmark studies is just one of the pieces of information that is used in setting executive compensation, the Compensation Committee has discretion in determining the nature and extent of their use. Further, the Compensation Committee has discretion to determine the frequency of performing benchmarking and other studies.

We annually compare our compensation program with those companies in a peer group that the Compensation Committee evaluates together with Mercer (the “Peer Group”). The companies selected for inclusion in the Peer Group, which are listed below, were selected on the basis of a number of

 
 
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factors, including similar industry characteristics, organization size and financial characteristics such as revenues, total assets and market capitalization, as well as companies we compete with for talent. At the time of selection, all of the companies were publicly traded U.S. companies in the construction, engineering and commercial services industries with annual revenue between approximately one-half and two times our annual revenue.

During our 2017 review of the makeup of our Peer Group, we added Argan, Inc. and Superior Energy Services, Inc., given their similar industry characteristics and revenues. The companies included in the Peer Group for the evaluation of 2018 executive compensation were:

EXECUTIVE COMPENSATION PEER GROUP FOR 2018

In October 2017, Mercer performed and presented to the Compensation Committee an executive compensation study (the “Mercer Executive Compensation Review”). The Mercer Executive Compensation Review included comparisons of our executive compensation programs to the Peer Group, which assisted the Compensation Committee with designing our executive compensation program for 2018 to be competitive with the Peer Group and our markets. According to the Mercer Executive Compensation Review, MYR Group was positioned near the Peer Group median of annual revenue and below the Peer Group median of total assets and market capitalization, respectively, as indicated in the chart below:

 
 
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The Compensation Committee generally considers the median total compensation of the Peer Group in determining total executive compensation and allows business and individual performance to determine whether actual pay is above or below the median. The Compensation Committee believes that this review of Peer Group programs provides valuable information during the Compensation Committee’s review and design of both the NEOs’ overall compensation levels and individual components of compensation, including the allocation of compensation between long-term and short-term compensation and cash and non-cash compensation.

ANALYSIS OF 2018 COMPENSATION DECISIONS AND ACTIONS

2018 Base Salary

Salary is a critical element of our NEOs’ compensation because it provides them with a base level of guaranteed monthly income as compensation for services provided to the Company. The Compensation Committee generally reviews the salaries of the NEOs annually. To assist with that review, the Compensation Committee often will refer to the salaries in effect for comparable officers at companies in the Peer Group. The Compensation Committee also considers internal comparables, individual performance and level of responsibility, economic conditions and the Company’s financial performance in reviewing salary levels. When market or merit increases are warranted, changes in salary are generally made effective during our second quarter.

When setting salaries for our NEOs for 2018, the Compensation Committee considered the Mercer Executive Compensation Review, as well as certain other factors, including those specified above. As a result, the Compensation Committee made the following decisions related to base salaries for our NEOs in 2018:

2018 Short-Term Incentive Compensation

Awards granted under the SMIP are designed to provide our NEOs with annual cash performance awards to reward the achievement of certain performance goals established annually by the Compensation Committee that we believe are strongly linked to stockholder value creation. An important factor in our decision to pay our SMIP awards in cash rather than in equity has been to help ensure that our compensation program remains competitive with the compensation programs of our direct competitors. The Compensation Committee established performance targets based on financial performance and safety performance goals that encouraged our NEOs to increase stockholder value by focusing on growth in revenue and earnings, and to maintain and improve safety performance in operations. These performance goals were the basis for awards under the SMIP for 2018.

The amount of the payout of awards for each NEO under the SMIP for 2018 depended on the percentage of each NEO’s salary that the Compensation Committee determined to be subject to the award, our performance measured against financial and safety performance goals established by the Compensation Committee and an assessment of the NEO’s individual performance.

 
 
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The basic formula for calculating the 2018 SMIP payout is as follows:

The Compensation Committee determined the percentage of each NEO’s salary to be subject to an award under the plan based on position, market pay levels and our overall compensation philosophy, which emphasizes performance-based compensation. No payouts under the 2018 SMIP awards would be made unless the threshold levels for performance goals were achieved. Achievement of the performance goals above the maximum level would not result in any additional payments above the maximum payout level. Any payouts under the 2018 SMIP awards would be calculated by the straight-line mathematical interpolation between (i) threshold and target performance for performance lower than target but greater than threshold or (ii) target and maximum for performance greater than or equal to target but less than or equal to maximum.

In 2018, each NEO’s award opportunity was based on pre-tax income as the financial performance goal and total case incident rate and lost time incident rate as the safety performance goals. We chose these particular metrics because we believe they are strongly correlated with our success and are consistent with our compensation philosophy of linking NEOs’ compensation with performance. The financial and safety performance goals are intended to be challenging and ambitious but also realistic enough to be attainable given a concerted effort by our NEOs in consideration of current market and competitive conditions and trends.

In connection with its review of the percentage of each NEO’s salary that should be subject to an award under the SMIP in 2018 and considering the Mercer Executive Compensation Review, the Compensation Committee set the following threshold, target and maximum award opportunities based on the achievement of financial and safety performance goals, subject to the weighting percentages set forth below:

 
 
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For 2018, the levels of threshold, target and maximum performance, and the Company’s actual performance are shown in the following table:

The Compensation Committee has discretion to reduce payouts by up to 20% or increase them by up to 15% based on an assessment of each NEO’s individual performance throughout the year, including consideration of talent development and successor preparation, contributions toward strategic initiatives, internal controls, business development, acquisition integration and information technology initiatives. At the beginning of 2019, the Compensation Committee conducted a review of the NEOs’ performance, with input from the human resources department and other applicable departments, and, based on its qualitative assessment of each NEOs’ performance, determined not to decrease or increase the SMIP payout awards to any of the NEOs.

See “Executive Compensation Tables — 2018 Summary Compensation Table” for the 2018 SMIP payouts to the NEOs.

2018 Long-Term Incentive Compensation

We believe that long-term performance is achieved through an ownership culture that rewards and encourages our NEOs to foster our long-term success. We believe that an effective method to reward and encourage such success is through the use of equity compensation awards. The purposes of our long-term incentive plan are to attract, motivate and retain our key employees and non-employee directors upon whose judgment, initiative and efforts the financial success and growth of our business largely depends, to provide additional incentives to our employees and directors through stock ownership and other rights that promote and recognize our financial success and growth, and to align management’s interests with those of our stockholders.

All long-term equity awards granted to NEOs in 2018 were made under the LTIP. The LTIP succeeded the 2007 Long-Term Incentive Plan (Amended and Restated as of May 1, 2014) (the “2007 LTIP”) in its entirety. Equity grants before March 31, 2017 were made under the 2007 LTIP; all subsequent grants were made under the LTIP.

The Compensation Committee has the authority to determine who will receive long-term equity awards and the nature, amounts and limitations on those awards. The Compensation Committee also has the authority to cancel outstanding grants and substitute new grants of the same or different number of shares of stock and having exercise prices that may be the same or different than the exercise price of the cancelled grants or amend the terms of outstanding grants, provided that such amendment does not impair the rights of the grantee without the grantee’s consent. Our long-term incentive plans prohibit the repricing of outstanding stock options or stock appreciation rights without stockholder approval.

For 2018, the Compensation Committee considered the market data with respect to each NEO in the Mercer Executive Compensation Review, compensation levels of executive officers of our Peer Group, and compensation objectives of retention, stockholder value creation and individual and corporate performance. As a result of this review, in February 2018, the Compensation Committee approved the following mix of equity compensation awards for our NEOs, except for Mr. Engen¹:

 
 
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The Compensation Committee elected this mix of equity awards because it represented an appropriate balance of the types of incentives provided by the different types of equity instruments. For example, Restricted Stock Units help to retain key employees and performance shares are designed to vary the level of rewards a NEO receives dependent upon actual corporate performance and market results that are critical to stockholders.

Time-Based Restricted Stock Units

The 40% of the equity compensation award granted to Messrs. Swartz, Cooper and Waneka and Ms. Johnson as Restricted Stock Units will vest evenly over a three-year period beginning on the first anniversary of the grant. The number of Restricted Stock Units was determined by dividing the amount of the equity compensation award allocated to Restricted Stock Units by the closing price of our common stock on the date of the grant. In light of Mr. Engen’s indication of his intention to retire prior to the end of the standard vesting period, 100% of his equity compensation award in 2018 was granted as Restricted Stock Units that will vest at the end of a one-year period.

ROIC Performance Shares

The 30% of the equity compensation award granted to Messrs. Swartz, Cooper and Waneka and Ms. Johnson as ROIC-based performance shares can be earned based on the achievement of an average ROIC that is measured over the three-year performance period that starts on January 1, 2018 and ends on December 31, 2020 compared to a target level of average ROIC. For purposes of the ROIC-based performance shares granted in 2018, we define ROIC as net income plus net interest net of taxes, less dividends divided by invested capital (funded debt less cash and marketable securities plus total stockholders’ equity) at the beginning of each fiscal year in the performance period computed as follows:

ROIC =  

Net Income + (Net Interest x (1 – Tax Rate)) – Dividends

Funded Debt – Cash and Marketable Securities + Total Stockholders’ Equity

The target number of ROIC-based performance shares was determined by dividing the amount of the equity compensation award allocated to ROIC performance by the closing price of the Company’s common stock on the date of grant.

 
 
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The number of ROIC-based performance shares earned can vary from zero to 200% of the target number of performance shares granted. The potential award levels are as follows (straight-line mathematical interpolation between threshold and target and between target and maximum levels):

TSR Performance Shares

The 30% of the equity compensation award granted to Messrs. Swartz, Cooper and Waneka and Ms. Johnson as TSR-based performance shares can be earned based on the TSR of the Company’s stock compared to the TSR of a peer group over the performance period of the equity award grant date, March 23, 2018, to December 31, 2020. We define TSR as the change in the fair market value, adjusted for dividends, of a company’s common stock. The measurement of change in fair market value over the performance period is based on the average closing price of common stock for the 20 days preceding the grant date, March 23, 2018, and the 20 days preceding December 31, 2020. The target number of TSR-based performance shares was determined by dividing the amount of the equity compensation award allocated to TSR performance by the fair value of the grant, which was based on a market metric and, therefore, is calculated utilizing a Monte Carlo simulation. The number of TSR-based performance shares earned can vary from zero to 200% of the target number of performance shares granted. The potential award levels are as follows (straight-line mathematical interpolation between 25^th percentile and 50^th percentile or between 50^th percentile and 75^th percentile):

The Compensation Committee selected the TSR peer group based on each company’s industry and operational comparability. The 2018 TSR peer group was comprised of companies that are in either the peer group used in the stock performance graph in our Annual Report on Form 10-K for the year ended December 31, 2017, the Peer Group used to set 2018 executive compensation or certain industry peers recommended by Mercer. Consequently, Argan, Inc., McDermott International, Inc. and Superior Energy Systems, Inc. were added to the TSR peer group from the prior year. In order to be counted in the final TSR calculations, a company must remain publicly traded during the entire performance period.

 
 
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The peer group of companies used for evaluating the Company’s relative TSR performance for the 2018 grant of TSR-based performance shares is as follows:

TSR PEER GROUP FOR 2018

2018 Grants of Equity Awards

With respect to each NEO, the Compensation Committee considered the Mercer Executive Compensation Review, compensation levels of executive officers of our Peer Group, compensation objectives of retention and stockholder value creation and individual and corporate performance, and approved equity award grants to our NEOs in the following amounts based on grant-date fair value, consistent with the presentation in the 2018 Summary Compensation Table:

2016 Performance Shares Vesting in 2018

The Compensation Committee granted performance share awards in 2016 under the 2007 LTIP which could be earned based on achievement compared to a target level of ROIC, defined as net income plus net interest net of taxes (net income plus net interest, less net interest times the effective tax rate), less

 
 
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dividends divided by invested capital (total debt less cash and marketable securities plus total stockholders’ equity) (the “2016 ROIC”) measured over a period that started on January 1, 2016 and ended on December 31, 2018 and the TSR of the Company’s stock compared to the TSR of a peer group over a performance period that started on March 24, 2016 and ended on December 31, 2018 and otherwise contained terms consistent with the performance shares granted in 2018 under the LTIP described above.

The 2016 ROIC threshold, target and maximum goals were 7.5%, 11.5% and 14.5%, respectively. The Compensation Committee exercised negative discretion to exclude the positive impacts of the Tax Act and the adoption of ASU No. 2016-09, Compensation — Stock Compensation (Topic 718) (see footnote 1, Recently Adopted Accounting Pronouncements to our audited consolidated financial statements for the fiscal year ended December 31, 2017 included in our 2017 Annual Report on Form 10-K) in its calculation of the three-year average of 2016 ROIC. After this exercise of negative discretion, the three-year average 2016 ROIC was 7.0%, which was below threshold performance, and, consequently, no ROIC performance shares were earned. For the 2016 performance share awards based on TSR, the TSR of the Company’s stock ranked at the 49^th percentile of the TSR peer group and, consequently, 97.0% of the target TSR performance shares were earned.

The chart below shows the performance share payouts in 2018 for each of our NEOs that were awarded performance shares in 2016:

2017 Performance Shares Vesting in 2019

The Compensation Committee also awarded performance shares in 2017 under the 2007 LTIP that can be earned based on achievement compared to a target level of ROIC measured over a period that started on January 1, 2017 and will end on December 31, 2019 and TSR of the Company’s stock compared to the TSR of a peer group over a performance period that started on March 23, 2017 and will end on December 31, 2019 and otherwise contain terms consistent with the performance shares granted in 2018 under the LTIP described above.

Forward-Looking Target ROIC Levels

We do not publicly disclose specific, forward-looking target levels of ROIC for outstanding performance share awards because these target levels relate to executive compensation to be earned and/or paid in future years, do not reflect a fair understanding of the NEOs’ compensation for 2018 and constitute

 
 
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confidential commercial or financial information, the disclosure of which could cause us competitive harm with regard to short-term strategies and goals. We intend to disclose this information after the conclusion of the applicable performance period. When establishing the applicable target levels for the ROIC performance measure, we specifically considered how likely it will be for us to achieve the target levels. We believe that the threshold level will be appropriately difficult to attain, and that the target level will require considerable and increasing collective effort on the part of our employees, including our NEOs, to achieve. Achievement of the maximum level is considered to be a stretch goal given current market conditions.

Pro-Rata Earning of Shares and Acceleration of Vesting

Under the terms of the grant agreements, a NEO may earn a pro-rata share of performance shares in the event of his or her death, disability, retirement after reaching normal retirement age (as such is defined in the Social Security Act of 1935, as amended) or termination without “cause” or for “good reason.” The vesting of performance shares may be accelerated in the event of a NEO’s termination without “cause” or for “good reason” following a “change in control.” Additional information regarding these awards may be found in the 2018 Summary Compensation Table, the 2018 Grants of Plan-Based Awards Table and under “Potential Payments Upon Termination or Change in Control.”

Change in Control

As part of our long-term incentive plan, we include a “change in control” provision that more closely aligns our interests with those of the NEOs in the event of a change in control by allowing the Compensation Committee to adjust long-term incentive equity awards to maintain and protect the rights of the participants in the event of a change in control.

Other Compensation

At its discretion, the Compensation Committee may authorize profit sharing contributions to the Diversified Holdings Savings Plan (our 401(k) plan) accounts of our employees, including our NEOs, subject to applicable limitations. For 2018, we paid 1% of salary in profit sharing contributions.

Additionally, our employees, including our NEOs, receive matching contributions under our 401(k) plan. We match 100% of an employee’s contributions up to the first 6% of such employee’s salary, up to the maximum allowed by the plan.

Each NEO is eligible to utilize the financial planning service offered by the Company as a perquisite. In 2018, Ms. Johnson and Mr. Engen elected to use this service.

Each NEO is also eligible to participate in all other benefit plans and programs that are or in the future may be available to our other executive employees, including any health insurance or health care plan, life insurance, disability insurance, retirement plan, vacation and sick leave plan and other similar plans. In addition, each NEO is eligible for certain other benefits that are generally available to our employees, including reimbursement of business and entertainment expenses, reimbursement of relocation expenses and perquisites, including the choice of a car allowance or the use of a company car with a gas card. The Board may revise, amend or add to the executive officer’s benefits and perquisites as it deems advisable.

The benefits described in this section are paid to remain competitive in the marketplace. Amounts relating to certain of these benefits may be found in the “All Other Compensation” column of the “Executive Compensation Tables — 2018 Summary Compensation Table.”

Employment Agreements, Severance Benefits and Change in Control Provisions

In connection with our private placement in 2007, we entered into employment agreements with each of the individuals serving as NEOs at the time. These employment agreements remain in place with Messrs. Swartz and Engen. Mr. Swartz’s employment agreement was amended and restated in April 2017 to replace the excise tax gross-up provisions in favor of a modified cut-back approach, which is consistent with the provisions that the Company has included in new employment agreements since

 
 
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2011. Ms. Johnson entered into an employment agreement in connection with her appointment as Senior Vice President, Chief Financial Officer and Treasurer in October 2015. Mr. Cooper entered into an employment agreement in April 2015 in connection with his appointment as a Senior Vice President. Mr. Waneka entered into an employment agreement in connection with his appointment as Senior Vice President and Chief Operating Officer C&I in December 2017. The employment agreements for Messrs. Swartz, Cooper, Engen and Waneka and Ms. Johnson (each an “Employment Agreement” and collectively, the “Employment Agreements”) provide for severance payments and benefits upon a termination of a NEO’s employment without “cause” or resignation for “good reason,” as further described below under “Executive Compensation Tables — Employment Agreements.” We compete for executive talent in a highly competitive market in which companies routinely offer similar benefits to NEOs. We view the cash severance and continuation of health and welfare benefits provided by these agreements as appropriate for the NEOs who may not be in a position to readily obtain comparable employment within a reasonable period of time due to the restrictive covenants, including a one-year non-compete covenant, in the Employment Agreements.

In addition, the Employment Agreements provide for additional severance payments and benefits upon a termination of a NEO’s employment without “cause” or resignation for “good reason” within one year following a change in control (in other words, only on a so-called “double trigger” basis). We believe that providing change in control benefits reduces the potential reluctance of our NEOs to pursue potential change in control transactions that may be in our best interest while simultaneously preserving neutrality in negotiating and executing transactions that are favorable to us. Since 2011, the Compensation Committee has maintained a policy that it will not include gross-up payments for excise taxes as a result of a change in control pursuant to any new employment agreement. Accordingly, the employment agreements for Messrs. Swartz, Cooper and Waneka and Ms. Johnson do not include any provisions to provide gross-up payments for excise taxes as a result of a change in control. Details regarding severance payments and benefits payable upon a termination of a NEO’s employment following a change in control are described under “Executive Compensation Tables — Employment Agreements” and “— Potential Payments Upon Termination or Change in Control.”

Deductibility of Executive Compensation

In developing the compensation packages for the NEOs, the Compensation Committee generally considered the deductibility of executive compensation under Section 162(m) of the Code. Section 162(m) generally disallows a tax deduction for compensation paid to certain executive officers (and, beginning in 2018, to certain former executive officers) to the extent that the compensation for any such individual exceeds $1,000,000 in any taxable year. Historically, compensation that qualified as “performance-based” could be excluded from this $1,000,000 limit. This exception has been repealed, effective for taxable years beginning after December 31, 2017, except for certain compensation arrangements in place as of November 2, 2017 for which transition relief is available. In order to maintain flexibility in making compensation decisions, the Compensation Committee has not adopted a policy requiring all compensation to be deductible under Section 162(m) of the Code. Portions of the compensation we paid to NEOs in 2018 may not be deductible due to the application of Section 162(m) of the Code and, with the general elimination of the “performance-based” exception and the expansion of the definition of “covered employees” brought about by 2017 tax reform, the Compensation Committee is likely to approve compensation that is not deductible under Section 162(m). In addition, because of the uncertainties associated with the application and interpretation of Section 162(m) and the regulations issued thereunder, there can be no assurance that compensation intended to satisfy requirements for deductibility under Section 162(m), as in effect prior to 2018, will in fact be deductible.

 
 
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Stock Ownership Guidelines and Retention

In order to align the interests of our executives with those of our stockholders, our NEOs are expected to attain levels of beneficial stock ownership measured based on a multiple of his or her annual base salary, as set forth below:

Under our stock ownership guidelines, our NEOs are expected to attain levels of beneficial stock ownership within five years from the later of the date of the NEO’s appointment to a position subject to the guidelines and three years from the effective date of an increase in compensation. We have adopted retention requirements with respect to these stock ownership guidelines whereby NEOs are expected to retain the Net Shares received through an exercise of stock options and the vesting of restricted stock, Restricted Stock Units and performance shares if they have not reached the applicable stock ownership guidelines.

The following table sets forth each NEO’s ownership value as of March 1, 2019:

Trading Restrictions

We also have an insider trading policy which, among other things, prohibits NEOs from hedging the economic risk of their stock ownership, holding shares of the Company’s common stock in a margin account, pledging shares as collateral for a loan or short-selling the Company’s securities. Among other restrictions, the policy also prohibits trading in our securities outside of specific window periods and without pre-clearance.

 
 
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Clawback Arrangements

Each of the agreements underlying equity awards granted to our NEOs under the LTIP and its predecessor, the 2007 LTIP, as applicable, permits the Compensation Committee to cause us to recover shares of common stock or cash paid to the NEO with respect to the applicable award if:

For grants of restricted stock and Restricted Stock Units, we may recover any shares that vested within the period of 18 months prior to the restatement or the net proceeds of any sales of such shares. With respect to performance shares, the amount of any cash or shares recoverable is limited to the amount by which the payments exceeded the amount that would have been paid to the NEO had our financial statements for the applicable restated fiscal year or years been initially filed as restated, as reasonably determined by the Compensation Committee. In the case of stock options, to the extent an applicable NEO exercises a stock option within a period of 18 months prior to the restatement, we may recover from the NEO any equity acquired by the NEO or any net proceeds of any exercises and sales.

CONCLUSION OF THE CD&A

We have designed and administer our compensation programs in a manner that emphasizes the retention of our NEOs and rewards them appropriately for positive results. We monitor the programs in recognition of the dynamic marketplace in which we compete for talent and will continue to emphasize pay-for-performance and equity-based incentive plans that reward our NEOs for results aligned with the interests of our stockholders.

 
 
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EXECUTIVE COMPENSATION TABLES

2018 SUMMARY COMPENSATION TABLE

The following table shows the compensation earned by our NEOs for the fiscal years ended December 31, 2018, 2017 and 2016:

 
 
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2018 GRANTS OF PLAN-BASED AWARDS

The following table sets forth the estimated future payouts for grants of awards made to each of the NEOs under the SMIP and LTIP for 2018:

 
 
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EMPLOYMENT AGREEMENTS

Under each Employment Agreement, the NEO is eligible to receive salary, an annual cash incentive award, as defined under the SMIP, severance pay under certain conditions, use of a company car and gas card or a car allowance in accordance with the Company’s policy, and is eligible to participate in all incentive, 401(k), profit sharing, health and welfare benefit plans, policies and arrangements applicable generally to our other similarly-situated executive officers. Subject to prior notice, each Employment Agreement automatically renews annually for an additional one-year term.

Each Employment Agreement contains non-competition covenants restricting the ability of the NEO to compete with us, to solicit our clients or to recruit our employees during the term of his or her employment and for a period of one year thereafter and prohibiting him or her from disclosing confidential information and trade secrets at any time during or after his or her employment.

Each Employment Agreement generally terminates upon the NEO’s:

 
 
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If termination results from any of the foregoing, each NEO is entitled to all compensation earned and all benefits and reimbursements due through the date of termination. Additionally, if termination results from any of the reasons below, the NEO would be entitled to the following additional payments and/or benefits:

Each Employment Agreement generally defines “cause” as a NEO’s:

“Good reason” for a NEO’s resignation exists under each Employment Agreement if, among other things, the NEO’s base salary and/or annual target incentive opportunity is reduced, his or her duties are materially reduced, he or she is required to relocate to a work site more than 50 miles from his or her current work site or if the Company materially breaches a material provision of the NEO’s Employment Agreement and fails to cure such breach within 30 days of the receipt of written notice of the breach.

Each Employment Agreement generally defines a “change in control” as the occurrence of a “change in the ownership of the Company,” a “change in the effective control of the Company” or a “change in the ownership of a substantial portion of the Company’s assets” as defined in Treasury Regulation §§1.409A-3(i)(5)(v), (vi) and (vii), respectively. As described above, if a NEO is terminated without cause or resigns for good reason within 12 months following a “change in control,” the NEO would be entitled to all compensation earned and all benefits and reimbursements due through the date of termination, as well as a lump-sum payment equal to three times the NEO’s base salary, three times target annual

 
 
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incentive and company-funded benefit continuation coverage for the NEO and eligible dependents for a period of two years, subject to forfeiture in the event the NEO becomes reemployed in the two-year period following his or her termination and, under Mr. Engen’s employment agreement only, gross-up payments for any excise taxes incurred under Sections 280G of the Code.

The foregoing descriptions of the terms of the Employment Agreements are qualified in their entirety by reference to the terms and conditions of such agreements that the Company has filed with the SEC.

“Change in control” is similarly defined in the LTIP and its predecessor, the 2007 LTIP. Under the terms of the long-term incentive plans, award agreements may provide for one or more of the following effects in connection with a change in control:

 
 
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OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR END

The following table sets forth for each NEO outstanding equity awards as of the end of the 2018 fiscal year: