UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.)

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

Kirby Corporation

(Name of Registrant as Specified in its Charter)

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

Payment of Filing Fee (Check the appropriate box):

March 5, 2019

DEAR FELLOW STOCKHOLDERS,

On behalf of the Board of Directors (the “Board”), we cordially invite you to attend Kirby Corporation’s (“Kirby” or the “Company”) 2019 Annual Meeting of Stockholders. Information concerning the matters to be voted upon at the meeting is contained in this Notice of the 2019 Annual Meeting and our new enhanced Proxy Statement.

Looking back on 2018, we are pleased with our financial performance. During the year, we delivered record revenues of $2.97 billion, GAAP earnings per share of $1.31, and strong cash flow from operations of nearly $350 million. Excluding one-time items¹, earnings per share was $2.86, an increase of more than 40% year-on-year.

In the marine transportation segment, we continued to execute on our strategy of investing counter-cyclically, closing several meaningful acquisitions as our businesses started to emerge from the recent industry downturn. The acquisition of Higman Marine Inc. (“Higman”), Targa Resources Corp’s pressure barge business, CGBM 100, LLC’s inland tank barges, and a new 155,000-barrel coastal articulated tug barge unit were well-timed and lucrative transactions that strengthen Kirby’s fleet in our core markets and will enhance future profitability and stockholder returns in 2019 and beyond.

In distribution and services, we made significant progress on the integration of Stewart & Stevenson, LLC (“Stewart & Stevenson”) which we acquired in September 2017. This major acquisition changed the landscape of the segment and diversified our portfolio. We’re pleased with the efforts the leadership team and our employees have made to combine businesses, enhance the customer experience, and realize synergies and value. Within the first year, we fully realized the $25 million of synergies promised on the acquisition date, and more have been identified for 2019 and beyond.

During the year, we also enhanced our stockholder engagement and improved our communications with investors. In the spring, we hosted our first Analyst Day in more than 10 years, providing investors with an in-depth view into our key business segments and how we create value. In the summer, we released our first report of Corporate Sustainability, with emphasis on environmental and social topics. Late in the year, we embarked on a redesign and enhancement of this 2019 Proxy Statement. We hope that you find this document more informative and helpful in making your voting decisions this year.

Your vote is important to us, regardless of the number of shares you hold or whether you plan to personally attend the meeting. Once you have reviewed the proxy materials and have made your decision, please vote your shares using one of the methods outlined in the Proxy Statement.

Thank you for your continued support and for investing in Kirby Corporation.

		Sincerely,   DAVID W. GRZEBINSKI President & Chief Executive Officer

NOTICE OF ANNUAL MEETING

OF STOCKHOLDERS

Dear Fellow Stockholders:   On behalf of the Board of Directors, we cordially invite you to attend the 2019 Annual Meeting of Stockholders of Kirby Corporation to be held on Tuesday, April 30, 2019, at 10:00 a.m. (CDT). The meeting will be held at the Four Seasons Hotel, 1300 Lamar, Houston, Texas 77010. We look forward to personally greeting those stockholders who will be able to attend the meeting.   Proposals to be voted on at the Kirby Corporation 2019 Annual Meeting of Stockholders are as follows:   1.  Election of three Class III directors;   2.  Ratification of the Audit Committee’s selection of KPMG LLP as Kirby’s independent registered public accounting firm for 2019; and   3.  Advisory vote on the approval of the compensation of Kirby’s named executive officers.

You have the right to receive this notice and vote at the Annual Meeting if you were a stockholder of record at the close of business on March 1, 2019. Please remember that your shares cannot be voted unless you sign and return the enclosed proxy card, vote in person at the Annual Meeting, or vote your shares via the phone or internet.

We have enclosed a copy of Kirby Corporation’s 2018 Annual Report to stockholders with this notice and Proxy Statement.

Your Vote is Important

Your vote is important. Whether you intend to attend the meeting or not, please ensure that your shares will be represented by completing, signing and returning your proxy card in the envelope provided, or by voting via the phone or internet.

In Person		Telephone		Internet		Mail
		(800) 690-6903		www.proxyvote.com		Fill out your proxy
						card and submit
						by mail.

Sincerely,

THOMAS G. ADLER

Secretary

PROXY MATERIALS

This booklet contains the notice of the Annual Meeting and the Proxy Statement, which contains information about the proposals to be voted on at the meeting, Kirby’s Board of Directors and its committees and certain executive officers. This year you are being asked to elect three Class III directors, ratify the Audit Committee’s selection of KPMG LLP as Kirby’s independent registered public accounting firm for 2019 and cast an advisory vote on executive compensation.

General Information

This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors of Kirby Corporation to be voted at the Annual Meeting of Stockholders to be held at the Four Seasons Hotel, 1300 Lamar, Houston, Texas 77010, on April 30, 2019, at 10:00 a.m. (CDT).

Whenever we refer in this Proxy Statement to the Annual Meeting, we are also referring to any meeting that results from an adjournment or postponement of the Annual Meeting. The Notice of Annual Meeting, this Proxy Statement, the proxy card and the Company’s Annual Report, which includes the Annual Report on Form 10-K for 2018, are being mailed to stockholders on or about March 20, 2019.

BOARD COMPOSITION & EXPERIENCE

2018 BUSINESS HIGHLIGHTS

Consolidated revenues increased 34% in 2018 to a record $2.97 billion. Both Kirby segments experienced sizeable revenue growth as compared to 2017, with marine transportation increasing 12%, and distribution and services increasing 67%. Growth in marine transportation was primarily related to the acquisition of Higman in February 2018, improved market conditions for the inland barge industry, and higher utilization of the inland barge fleet. In the distribution and services segment, revenue growth was driven by a full year of Stewart & Stevenson, which was acquired in September 2017, higher demand for oil and gas products and services, and improved market conditions for marine diesel engine sales and service. Overall, operating income was $155.3 million. Excluding one-time items¹, operating income was $268.4 million, which represents a 35% increase compared to 2017. Earnings per share was $1.31, or $2.86 excluding one-time items¹, an increase of 44% compared to 2017.

In 2018, Kirby invested approximately $600 million in acquisitions of businesses and marine equipment, including 209 inland barges representing 5.4 million barrels capacity, 76 inland towboats, and one new 155,000 barrel coastal articulated tank barge unit. The inland acquisitions lowered the average age of the barge fleet by one year to 13.4 years at the end of 2018, and will reduce future capital outlays for new tank barge and towboat construction.

CORPORATE GOVERNANCE

Business Ethics Guidelines

The Board has adopted Business Ethics Guidelines that apply to all directors, officers and employees of the Company. A copy of the Business Ethics Guidelines is available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Documents. The Company is required to make prompt disclosure of any amendment to or waiver of any provision of its Business Ethics Guidelines that applies to any director or executive officer including its chief executive officer, chief financial officer, chief accounting officer or controller, or persons performing similar functions. The Company will make any such disclosure that may be necessary by posting the disclosure on its website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Documents.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines. A copy of the guidelines is available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Documents.

Communication with Directors

Interested parties may communicate with the full Board or any individual directors, including the Chairmen of the Audit,

Compensation and Governance Committees, the presiding director or the non-management or independent directors as a group, by writing to them c/o Kirby Corporation, 55 Waugh Drive, Suite 1000, Houston, Texas 77007. Complaints about accounting, internal accounting controls or auditing matters should be directed to the Chairman of the Audit Committee at the same address. All communications will be forwarded to the person(s) to whom they are addressed.

Website Disclosures

The following documents and information are available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Documents:

GOVERNANCE HIGHLIGHTS

Our Board prides itself on its commitment to high ethical standards and effective governance practices.

COMPENSATION HIGHLIGHTS

Our executive compensation philosophy has been consistent and focused on the creation of value for our stockholders. A significant portion of our named executive officers’ compensation is tied to “At Risk” or pay for performance components. The charts below depict how each element of compensation was weighted for our named executive officers in 2018.

Our executive compensation program is designed to attract and retain talented executive officers, motivate consistent performance over time, and encourage performance that results in increased profitability and stockholder returns. Our executive compensation program has historically received high levels of stockholder support, with an approval rating of 97% of the votes cast in 2018. For fiscal year 2018, there were no material changes to our executive compensation program. Listed below are some of the highlights of our compensation policies and practices:

EXECUTIVE CHAIRMAN		PRESIDENT AND CEO		OTHER NEO
TOTAL COMPENSATION1		TOTAL COMPENSATION		TOTAL COMPENSATION

NOTE: Reference Summary Compensation Table on pages 38-39 for additional information.

STOCKHOLDER ENGAGEMENT

Throughout 2018, we remained committed to and expanded our stockholder engagement activities. The highlight of the year was in May when we hosted our first Analyst Day in 12 years in Houston, Texas to better educate investors about our key businesses, how we create value, and opportunities for long-term growth. Our Analyst Day included an opening dinner, webcast presentations for our two business segments, and tours and demonstrations at two key operational facilities. Late in 2018, we were awarded a Top Analyst Day designation within the transportation sector from Institutional Investor.

In addition to our Analyst Day, senior management and investor relations engaged with our stockholders and potential stockholders on a regular basis to share information on the Company, listen to their perspectives, and solicit feedback. In 2018, we conducted more than 150 phone calls and in-house one-on-one meetings which connected us to more than 300 investors and analysts, attended eight industry investor conferences, and participated in seven non-deal roadshows in Boston, Los Angeles, San Francisco, Atlanta, Houston, and Fort Worth.

CORPORATE SUSTAINABILITY

Kirby has a long history of promoting sustainability into our corporate culture, and our “NO HARM” philosophy – NO HARM to People, to the Environment, and to Equipment – is its foundation. This motto is embedded in our culture and defines how we operate our businesses every day. Key to this are extensive training and development programs for our employees, promotion of sound public policy in our industries, and support of our employees, our industry, and the communities in which we operate.

In 2018, we released our first report on Corporate Sustainability, with emphasis on environmental and social matters. In this report, we highlight the environmental benefits of barge transportation relative to railroad and trucking, as well as many Kirby specific initiatives and programs that further benefit the environment. We also provide information on the industry and community organizations that we support financially, including The Seamen’s Church Institute and U.S. Coast Guard Foundation, as well as our extensive Employee Disaster Relief program and employee charitable matching programs.

To learn more about these programs and initiatives, please visit the Investor Relations section of our website at www.kirbycorp.com and click on Corporate Sustainability.

TABLE OF CONTENTS

VOTING ITEM 1:

ELECTION OF DIRECTORS

The Bylaws of the Company provide that the Board shall consist of not fewer than three nor more than fifteen members and that, within those limits, the number of directors shall be determined by the Board. The Bylaws further provide that the Board shall be divided into three classes, with the classes being as nearly equal in number as possible and with one class being elected each year for a three-year term. The size of the Board is currently set at nine. Three Class III directors are to be elected at the 2019 Annual Meeting to serve until the Annual Meeting of Stockholders in 2022.

Each nominee named below is currently serving as a director and each has consented to serve for the new term, if elected. If any nominee becomes unable to serve as a director, an event currently not anticipated, the persons named as proxies in the enclosed proxy card intend to vote for a nominee selected by the present Board to fill the vacancy.

In addition to satisfying, individually and collectively, the Company’s Criteria for the Selection of Directors discussed under the “THE BOARD OF DIRECTORS — Governance Committee” below, each of the directors has extensive experience with the Company or in a business similar to one or more of the Company’s principal businesses or the principal businesses of significant customers of the Company. The brief biographies of each of the nominees and continuing directors below include a summary of the particular experience and qualifications that led the Board to conclude that he or she should serve as a director.

NOMINEES FOR ELECTION (PROPOSAL 1)

The Board of Directors of the Company unanimously recommends that you vote “FOR” the election of each of the following nominees as a director.

Nominees for Election as Class III directors, serving until the Annual Meeting of Stockholders in 2022

Directors Continuing in Office

The following persons are directors of the Company who will continue in office.

Continuing Class I directors, serving until the Annual Meeting of Stockholders in 2020

Continuing Class II directors, serving until the Annual Meeting of Stockholders in 2021

THE BOARD OF DIRECTORS

The Company’s business is managed under the direction of the Board, which is responsible for broad corporate policy and for monitoring the effectiveness of Company management. Members of the Board are kept informed about the Company’s businesses by participating in meetings of the Board and its committees, through operating and financial reports made at Board and committee meetings by Company management, through various reports and documents sent to the directors for their review and by visiting Company facilities.

Director Independence

The NYSE listing standards require listed companies to have at least a majority of independent directors. For a director to be considered independent, the Board must determine that the director does not have any direct or indirect material relationship with the Company.

The Board has determined that the following incumbent directors have no relationship with the Company except as directors and stockholders and are independent within the meaning of the NYSE corporate governance rules:    

Risk Oversight

The Board carries out its risk oversight function through the Audit Committee and the full Board. Management prepares and reviews with the Audit Committee and the Board semiannually a comprehensive assessment of the identified internal and external risks of the Company that includes evaluations of the potential impact of each identified risk, its probability of occurrence and the effectiveness of the controls that are in place to mitigate the risk. The Audit Committee and the Board also receive regular reports of any events or circumstances involving risks outside the normal course of business of the Company. At times, a particular risk will be monitored and evaluated by another Board committee with primary responsibility in the area involved. For example, the Compensation Committee reviews the risks related to the Company’s compensation policies and practices and the Audit Committee receives regular reports and updates on cybersecurity issues. The Board’s administration of its risk oversight function has not affected the Board’s leadership structure.

Board Leadership Structure

The Board has no set policy concerning the separation of the offices of Chairman of the Board and Chief Executive Officer, but retains the flexibility to decide how the two positions should be filled based on the circumstances existing at any given time. Following Mr. Grzebinski’s succession to the position of President and Chief Executive Officer in 2014, the Board considered it important for Mr. Pyne, with his comprehensive understanding of the Company’s businesses and strategic direction, to continue in the role of an executive Chairman of the Board. During the same time period, the Board was focused on management succession planning, primarily for the role of Chief Executive Officer but also for other senior management positions. The Board determined that having Mr. Pyne continue to serve as an executive Chairman of the Board after relinquishing the role of Chief Executive Officer would facilitate the succession process and provide valuable support to the senior management team. When Mr. Pyne retired as Executive Chairman of the Board in April 2018, the Board considered it important to the Company for Mr. Pyne to continue as Chairman of the Board in a non-executive capacity to continue to take advantage of his knowledge of the Company and its businesses as well as his leadership experience.

The Board does not have a “lead director,” but has chosen Mr. Alario to be the “presiding director” to preside at the regular executive sessions of the non-management directors that are held at least quarterly. Mr. Alario also serves as a liaison between the independent directors and management on certain matters that are not within the area of responsibility of a particular committee of the Board.

Board Committees

The Board has established three standing committees, including the Audit Committee, the Compensation Committee and the Governance Committee, each of which is briefly described below.

Audit Committee

All of the members of the Audit Committee are independent, as that term is defined in applicable Securities and Exchange Commission (“SEC”) and NYSE rules. In addition, the Board has determined that all of the members of the Audit Committee are “audit committee financial experts,” as that term is defined in SEC rules. The Audit Committee operates under a written charter adopted by the Board. A copy of the charter is available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Documents.

Compensation Committee

All of the members of the Compensation Committee are independent, as that term is defined in applicable SEC and NYSE rules. In addition, all of the members of the Compensation Committee are “Non-Employee Directors” and “outside directors” as defined in relevant federal securities and tax regulations. The Compensation Committee operates under a written charter adopted by the Board. A copy of the charter is available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Documents.

Governance Committee

All of the members of the Governance Committee are independent, as that term is defined in NYSE rules. The Governance Committee operates under a written charter adopted by the Board. A copy of the charter is available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Documents.

The Governance Committee will consider director candidates recommended by stockholders or proposed by stockholders in accordance with the Company’s Bylaws. Recommendations may be sent to the Chairman of the Governance Committee, Kirby Corporation, 55 Waugh Drive, Suite 1000, Houston, Texas 77007, accompanied by biographical information for evaluation. The Board of the Company has approved Criteria for the Selection of Directors which the Governance Committee will consider in evaluating director candidates. The criteria address compliance with SEC and NYSE requirements relating to the composition of the Board and its committees, as well as character, integrity, experience, understanding of the Company’s business and willingness to commit sufficient time to the Company’s business. The criteria are available on the Company’s website at www.kirbycorp.com in the Investor Relations section under Governance/Governance Documents.

In addition to the criteria, the Governance Committee and the Board will consider diversity in business experience, professional expertise, gender and ethnic background in evaluating potential nominees for director. The Company’s Corporate Governance Guidelines and Governance Committee Charter include provisions concerning the consideration of diversity in business experience, professional skills, gender and ethnic background in selecting nominees for director.

When there is a vacancy on the Board (i.e., in cases other than the nomination of an existing director for reelection), the Board and the Governance Committee have considered candidates identified by executive search firms, candidates recommended by stockholders and candidates recommended by other directors. The Governance Committee will continue to consider candidates from any of those sources when future vacancies occur. The Governance Committee does not evaluate a candidate differently based on whether or not the candidate is recommended by a stockholder.

Attendance at Meetings

It is the Company’s policy that directors are expected to attend Board meetings and meetings of committees on which they serve and are expected to attend the Annual Meeting of Stockholders of the Company. During 2018, the Board met six times, the Audit Committee met eight times, the Compensation Committee met five times and the Governance Committee met four times. Each director attended more than 95% of the aggregate number of meetings of the Board and all of the committees on which he or she served. All directors attended the 2018 Annual Meeting of Stockholders of the Company.

Director Compensation

Directors who are employees of the Company receive no additional compensation for their service on the Board. Compensation of nonemployee directors is determined by the full Board, which may consider recommendations of the Compensation Committee. Past practice has been to review director compensation when the Board believes that an adjustment may be necessary in order to remain competitive with director compensation of comparable companies. Management of the Company periodically collects published survey information on director compensation for purposes of comparison.

Each nonemployee director receives an annual fee of $75,000. A director may elect to receive the annual fee in cash, stock options or restricted stock. The Chairman of the Board receives an additional annual fee of $150,000, the Chairman of the Audit Committee receives an additional annual fee of $20,000, the Chairman of the Compensation Committee receives an additional annual fee of $15,000 and the Chairman of the Governance Committee receives an additional annual fee of $10,000. The presiding director at executive sessions of the non-management directors receives an additional annual fee of $20,000. In addition, each director receives an annual fee of $7,500 for each committee of the Board on which he or she serves. All fees are payable in four equal quarterly payments made at the end of each calendar quarter. The annual director fee is prorated for any director elected between annual stockholder meetings and the Chairman of the Board, committee chairman, presiding director and committee member fees are prorated for any director who is elected to such position between annual meetings of the Board. Directors are reimbursed for reasonable expenses incurred in attending meetings.

Each nonemployee director will receive a fee of $3,000 for each board meeting attended, in person or by telephone, in excess of six meetings in any one calendar year. Each member of a committee of the board will receive a fee of $3,000 for each committee meeting attended, in person or by telephone, in excess of ten meetings in any one calendar year in the case of the Audit Committee, in excess of eight meetings in any one calendar year in the case of the Compensation Committee and in excess of eight meetings in any one calendar year in the case of the Governance Committee.

In addition to the fees described above provided to the directors, the Company has a stock award plan for nonemployee directors of the Company which provides for the issuance of stock options and restricted stock. The director plan provides for automatic grants of restricted stock to nonemployee directors after each annual meeting of stockholders. Each director receives restricted shares of the Company’s common stock after each annual meeting of stockholders. The number of shares of restricted stock issued is equal to (a) $167,500 divided by (b) the fair market value of a share of stock on the date of grant multiplied by (c) 1.2. The director plan also provides for discretionary grants of an aggregate of 10,000 shares in the form of stock options or restricted stock. In addition, the director plan allows for the issuance of stock options or restricted stock in lieu of cash for all or part of the annual director fee at the option of the director. A director who elects to receive options in lieu of the annual cash fee will be granted an option for a number of shares equal to (a) the amount of the fee for which the election is made divided by (b) the fair market value per share of the common stock on the date of grant multiplied by (c) 3. A director who elects to receive restricted stock in lieu of the annual cash fee will be issued a number of shares of restricted stock equal to (a) the amount of the fee for which the election is made divided by (b) the fair market value per share of the common stock on the date of grant multiplied by (c) 1.2. The exercise price for all options granted under the director plan is the fair market value per share of the Company’s common stock on the date of grant. The restricted stock issued after each annual meeting of stockholders vests six months after the date of issuance. Options granted and restricted stock issued in lieu of cash director fees vest in equal quarterly increments during the year to which they relate. The options generally remain exercisable for ten years after the date of grant.

The Board has established stock ownership guidelines for officers and directors of the Company. Nonemployee directors must be in compliance within five years after first election as a director, but are expected to accumulate the required number of shares ratably over the applicable five-year period. Under the guidelines, nonemployee directors are required to own common stock of the Company having a value equal to four times the annual cash director fee. As of December 31, 2018, all directors were in compliance with the stock ownership guidelines. The Governance Committee of the Board will monitor compliance with the guidelines and may recommend modifications or exceptions to the Board.

The following table summarizes the cash and equity compensation for nonemployee directors for the year ended December 31, 2018:

Director Compensation for 2018

Director Outstanding Equity at December 31, 2018 and Grant Date Fair Value of Equity Awarded During 2018

The following table shows the aggregate number of shares of unvested restricted stock and stock options outstanding for each director as of December 31, 2018, as well as the grant date fair value of restricted stock awards and stock option grants made during 2018:

TRANSACTIONS WITH

RELATED PERSONS

The Board has adopted a written policy on transactions with related persons that provides that certain transactions involving the Company and any of its directors, executive officers or major stockholders or members of their immediate families, including all transactions that would be required to be disclosed as transactions with related persons in the Company’s Proxy Statement, are subject to approval in advance by the Governance Committee, except that a member of the Committee will not participate in the review of a transaction in which that member has an interest. The Committee has the discretion to approve any transaction which it determines is in, or not inconsistent with, the best interests of the Company and its stockholders. If for any reason a transaction with a related person has not previously been approved, the Committee will review the transaction within a reasonable period of time and either ratify the transaction or recommend other actions, including modification, rescission or termination, taking into consideration the Company’s contractual obligations. If a transaction is ongoing or consists of a series of similar transactions, the Committee will review the transaction at least annually and either ratify the continuation of the transaction or recommend other actions, including modification, rescission or termination, taking into consideration the Company’s contractual obligations. The policy provides certain exceptions, including compensation approved by the Board or its Compensation Committee.

The only material related person transaction the Company is aware of and approved relates to Clifford B. Husted, the husband of Amy D. Husted, Vice President and General Counsel of the Company, who is a partner in the law firm of Clark Hill Strasburger. The Company paid the law firm $2,019,000 in 2018 for legal services. However, Mr. Husted is not involved in any legal matters related to the Company. Further, Mr. Grzebinski approves each engagement of the firm by the Company and the payment of fees billed by the firm.

VOTING ITEM 2:

AUDIT COMMITTEE MATTERS

RATIFICATION OF THE AUDIT COMMITTEE’S SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL 2)

The Audit Committee has selected KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019. KPMG served as the Company’s independent accounting firm for 2018. Although the Audit Committee has the sole authority and responsibility to select and evaluate the performance of the independent accounting firm for the Company, the Board is requesting, as a matter of good corporate governance, that the Company’s stockholders ratify the selection of KPMG for 2019.

The Board of Directors of the Company unanimously recommends that you vote “FOR” the ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm for 2019.

Ratification of the selection of KPMG requires the affirmative vote of a majority of the shares represented at the meeting in person or by proxy. If the stockholders do not ratify the selection of KPMG, the Audit Committee will reconsider the selection. However, because of the difficulty and expense of changing independent auditors at this point in the year, the selection of KPMG will probably be continued for 2019 in the absence of extraordinary reasons for making an immediate change. If the stockholders do ratify the selection of KPMG, the Audit Committee will retain the authority to make a change if warranted in its judgment.

Representatives of KPMG are expected to be present at the 2019 Annual Meeting of Stockholders, with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

Fees Paid to the Independent Registered Public Accounting Firm

The following table sets forth the fees billed by KPMG, the Company’s independent registered public accounting firm, during the last two fiscal years:

Audit Fees are fees for professional services rendered by KPMG for the audit of the Company’s annual financial statements, audit of internal control over financial reporting, review of the Company’s quarterly financial statements or services normally provided in connection with statutory or regulatory filings. This category also includes fees for issuance of comfort letters, consents and review of documents filed with the SEC.

Tax Fees are fees for professional services rendered by KPMG for tax compliance, tax advice and tax planning. Services performed by KPMG in this category for 2018 included the review of the Company’s 2017 federal income tax return.

Each engagement of the independent registered public accounting firm to perform audit or non-audit services must be approved in advance by the Company’s Audit Committee or by its Chairman pursuant to delegated authority.

AUDIT COMMITTEE REPORT

The Audit Committee of the Board of Directors of the Company is responsible for monitoring the integrity of the Company’s financial reporting, accounting procedures and internal controls. The Audit Committee is composed of four directors, all of whom are independent within the meaning of SEC and NYSE rules. The Audit Committee operates under a written charter adopted by the Board.

Management is primarily responsible for the Company’s financial reporting process and internal controls. The Company’s independent auditors are responsible for performing an audit of the Company’s financial statements and issuing a report on the conformity of the financial statements with generally accepted accounting principles. The Company’s independent auditors are also responsible for performing an audit of the Company’s internal control over financial reporting. The Audit Committee is responsible for overseeing those processes.

The Audit Committee has reviewed and discussed the audited financial statements of the Company for the year ended December 31, 2018 with management and the independent auditors. The Audit Committee also (a) discussed with the independent auditors the matters required to be discussed by Auditing Standard No. 1301, as adopted by the Public Company Accounting Oversight Board (the “PCAOB”), (b) received the written disclosures and letter from the independent auditors required by the PCAOB regarding the independent auditors’ communications with the Audit Committee concerning independence and (c) discussed with the independent auditors their independence.

Based on the Audit Committee’s review of the audited financial statements for the year ended December 31, 2018 and the Audit Committee’s discussions with management and the independent auditors, the Audit Committee recommended to the Board of Directors of the Company that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, which has been filed with the SEC.

Audit Committee

Richard R. Stewart, Chairman

Anne-Marie N. Ainsworth

Richard J. Alario

Barry E. Davis

VOTING ITEM 3:

EXECUTIVE COMPENSATION

ADVISORY VOTE ON EXECUTIVE COMPENSATION (PROPOSAL 3)

The Company is requesting your approval, on a non-binding advisory basis, of the compensation of the Company’s named executive officers as disclosed and discussed under “EXECUTIVE COMPENSATION” on pages 28-48 of this Proxy Statement. We believe that our executive compensation:

For those reasons, we are asking you to approve the following resolution:

RESOLVED that the compensation of the Company’s named executive officers as described under “EXECUTIVE COMPENSATION” in the Company’s Proxy Statement for its 2019 Annual Meeting of Stockholders is approved.

Although the vote on approval of executive compensation is not binding, the Compensation Committee and the Board will consider the result of the vote in making future compensation decisions.

The Board of Directors of the Company unanimously recommends that you vote “FOR” Proposal 3 approving the compensation of the named executive officers as disclosed in this Proxy Statement.

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Named Executive Officers

The Company’s “named executive officers” for 2018 and their positions with the Company at the end of the year were David W. Grzebinski, President and Chief Executive Officer, William G. Harvey, Executive Vice President and Chief Financial Officer, Joseph H. Reniers, President of the Company’s principal distribution and services subsidiary, Christian G. O’Neil, President of the Company’s principal marine transportation subsidiaries, Amy D. Husted, Vice President and General Counsel, and Joseph H. Pyne, Chairman of the Board.

Compensation for the named executive officers is provided primarily by three compensation elements: (1) base salary, (2) annual incentive compensation and (3) long-term incentives, including stock options, restricted stock, restricted stock units and performance awards. The overall goal of the Company’s compensation program is to pay compensation competitive with similar corporations and to align annual incentives and long-term incentives with corporate performance and a return to the Company’s stockholders.

Compensation Objectives

The objectives of the compensation program are:

The Company’s executive compensation program is designed to reward:

Company Performance

The Company’s performance improved in 2018 and was favorably impacted by 34% revenue growth compared to 2017. In the marine transportation segment, revenues increased 12% primarily due to the acquisition of Higman in February 2018, as well as improved market conditions in the inland barge market following a prolonged three-year industry downturn. In the distribution and services segment, revenue grew 67% year-on-year, driven by a full year of Stewart & Stevenson, which was acquired in September 2017, high demand for oil and gas products and services, and improved market conditions for marine diesel engine sales and service. In 2018, the Company continued to generate strong cash flow with EBITDA of $471 million and took advantage of opportunities, investing more than $600 million in marine transportation acquisitions. At the end of 2018, the Company had a

debt to capital ratio of 30.5%. The following table summarizes a number of key financial measures for the last three years (dollars are in millions except for per share amounts):

The Company’s total stockholder return was 28% over the last three years.

Incentive Plan Payouts

The named executive officers received annual incentive compensation payouts above target amounts because the Company’s results for 2018 on the key performance measures were above target amounts. Two of the named executive officers (Mr. Grzebinski and Mr. Pyne) received long-term incentive compensation payouts below target amounts because results for the 2016-2018 performance period were below target amounts on a cumulative basis. Four of the named executive officers (Mr. Harvey, Mr. Reniers, Mr. O’Neil and Ms. Husted) did not receive performance awards for the 2016-2018 performance period.

Chief Executive Officer Compensation

Mr. Grzebinski’s salary increased from an annual rate of $801,850 at the end of 2017 to an annual rate of $880,000 in April 2018, a 9.7% increase intended to align his base salary with the median for comparable companies. He earned cash incentive compensation payments of $2,311,330 (an increase of 21% from 2017) and received equity compensation awards with a grant date fair value of $1,848,156 (an increase of 12% from 2017). A total of 58% of his direct compensation (annual bonus, three-year performance award and stock options) was performance-based.

Compensation Committee

The Compensation Committee (the “Committee”) of the Board has the authority and responsibility to (1) determine the compensation of executive officers of the Company, (2) administer the Company’s annual incentive compensation program, (3) administer all of the Company’s stock option and incentive compensation plans and grant stock options, restricted stock, restricted stock units and other awards under the plans and (4) review and make recommendations to the Board with respect to incentive and equity-based compensation plans and any other forms of compensation for executive officers of the Company. During 2018, the Committee was composed of three members, all of whom are “independent directors,” “Non-Employee Directors” and “outside directors” as those terms are defined in relevant SEC and NYSE standards and federal securities and tax regulations.

The Committee does not delegate any of its authority to determine executive compensation. Except in the case of the special one-time retirement payment to Mr. Pyne which is discussed under “Special Retirement Payment” below, the Committee

considers recommendations from the Chief Executive Officer in making its compensation decisions for executive officers other than the Chief Executive Officer. The Committee will usually follow those recommendations when setting compensation for other executive officers since the Chief Executive Officer is in the best position to evaluate the contributions of the other executive officers to the success of the Company. The Board undertakes an independent evaluation of the individual performance of the Chief Executive Officer before the Committee sets his compensation. The Committee also engaged a compensation consultant in connection with its compensation decisions for 2018.

Except in the case of the special one-time retirement payment to Mr. Pyne which is discussed under “Special Retirement Payment” below, in determining the compensation of the named executive officers, the Committee considered all elements of total compensation, including salary, annual incentive compensation, equity-based and other long-term incentive compensation and projected payouts under the Company’s retirement plans. The Committee also relied in part on the marketplace analysis prepared by Longnecker & Associates (the “Consultant”), a compensation consulting firm retained by the Committee, in determining that its compensation decisions, both as to specific elements of compensation and as to aggregate compensation, were in a reasonable range for comparable companies and for the positions held by the named executive officers. The Committee also considered the Consultant’s analysis in evaluating internal pay equity among the named executive officers. From that foundation, the Committee refined the individual compensation decisions based on a number of factors, including the prior year’s compensation, the performance of the Company or its business groups, individual performance of the named executive officer, any increased responsibilities assigned to a particular executive officer, the recommendations of the Chief Executive Officer (except as to his own compensation and the special retirement payment to Mr. Pyne) and considerations of internal pay equity. However, the final decisions of the Committee are to some extent subjective and do not result from a formulaic application of any of those factors.

Say on Pay

At the Company’s 2018 Annual Meeting, stockholders approved the compensation of the Company’s named executive officers by 97% of the votes cast. The Company interpreted the vote as an endorsement of its executive compensation policies and practices, but the Committee continues to reevaluate the principal elements of the Company’s executive compensation on an ongoing basis, although no material changes were made for 2018.

Compensation Consultant

For 2018, the Committee engaged the Consultant to provide information for the Committee to consider in making compensation decisions. The Consultant was engaged directly by the Committee to:

At the Committee’s request, the Consultant addressed the six independence factors for compensation committee advisers that are identified in SEC regulations. The Committee concluded that there were no conflicts of interest that would affect the work of the Consultant for the Committee. The Consultant was not retained by the Company or any of its affiliates (other than the Committee) to perform any services during 2018.

Elements of Compensation

General

The Committee and management believe that the Company is a leader in the industries in which it operates and that its employees are frequently targeted by its competitors. Therefore, the Committee generally attempts to set compensation at levels to keep pace with inflation and the competitive market to avoid losing valuable employees.

Compensation information for a peer group of comparable companies used by the Committee in making compensation decisions was provided by the Consultant. See “Benchmarking” below for more detail and a listing of the companies in the peer group.

Based on information available in January 2018 when compensation for the year was set, the Consultant determined that, in the aggregate, four of the six named executive officers (excluding Mr. Pyne and Ms. Husted) were positioned below the median for comparable companies in total cash compensation (base salary plus annual incentive bonus) and target and actual total direct compensation, which also includes long-term incentive compensation. Since few meaningful comparisons to the group were available for Mr. Pyne in the role of an executive Chairman of the Board, the Committee based its decision on his compensation for the portion of 2018 during which he served as an executive officer on its assessment of his continuing value as an active executive Chairman of the Board of the Company, following his successful 19-year tenure as the Company’s Chief Executive Officer. The Executive Compensation Report prepared for the Committee by the Consultant at the beginning of 2018 did not include comparative compensation information for Ms. Husted.

Salary

The Committee targets base salaries for the named executive officers at approximately the median for comparable companies. Based on information provided by the Consultant, at the beginning of 2018, salaries of Mr. Grzebinski, Mr. Harvey, Mr. Reniers and Mr. O’Neil were within the range of 90% to 110% of the median for comparable positions with comparable companies. The salaries of all named executive officers were increased by amounts intended to keep them within, or bring them up to, the median range for comparable companies.

Annual Incentive Compensation

With regard to the annual cash incentives for executive officers, the Committee attempts to set annual incentive compensation targets at a level such that, with target performance by an executive officer and the Company, the total cash compensation (base salary plus annual incentive bonus) for the executive officer will be at approximately the median for comparable companies and positions, but with a superior performance by an executive officer and the Company, the total cash compensation for the executive officer will be above the median. The Committee believes that providing total annual cash compensation above the median for similar corporations and positions is appropriate since a significant portion of each executive officer’s total annual cash compensation is at risk due to both individual performance factors and the Company’s success in achieving the targeted performance measures described below. Annual incentive compensation constitutes a significant portion of direct cash compensation and can vary significantly from year to year depending on the Company’s achievement of the performance measures.

Based on the market analysis provided to the Committee by the Consultant, the Committee determined that the target total cash compensation for 2018 for Mr. Grzebinski, Mr. Harvey, Mr. Reniers, and Mr. O’Neil would be within the range of 90% to 110% of the median. Based on the Company’s performance in 2018 and information available at the end of the year, actual total cash compensation for the five named executive officers other than Mr. Pyne was at or above the median when compared to peer group and survey information for the positions with the Company they held at the end of the year.

The Company’s annual incentive plan for 2018 was based on the achievement of three equally weighted performance measures for the year, based on the budget for the year that was prepared by management and approved by the Board, which were the basis for determining the total amount to be paid out pursuant to the annual incentive plan. Target annual incentive compensation expressed as a percentage of a participant’s base salary was established for each participant in the plan and a preliminary incentive payment amount was determined for each participant based on the extent to which the three performance measures were achieved by each of the Company’s business units and by the Company as a whole. The aggregate amount of the bonus pool for the year was equal to the sum of the preliminary incentive payment amounts so determined for all participants. The preliminary incentive payment amount for each participant served as a guideline for the individual awards, but each individual bonus could be above or below that level. However, in no event would a bonus paid to any participant exceed 200% of the target bonus for that participant.

The three performance measures were EBITDA, return on total capital and earnings per share. EBITDA for the year is calculated by adding the following amounts shown in the Company’s audited financial statements: (1) net earnings attributable to Kirby, (2) depreciation and amortization, (3) interest expense, (4) provision for taxes on income, (5) impairment of long-lived assets, and (6) impairment of goodwill. Return on total capital for the year is calculated by dividing (i) net earnings attributable to Kirby plus provision for taxes on income plus interest expense by (ii) the average of total equity plus long-term debt for the year. Earnings per share is diluted net earnings per share attributable to the Company’s common stockholders as shown in the Company’s Consolidated Statements of Earnings.

In addition to the target bonus established for each participant in the annual incentive plan, the Committee also established a range of possible incentive compensation payments, with no payment unless a minimum percentage of the target performance is achieved, which ranged from 60% to 80% depending on the business unit, and a maximum possible award of 200% of the target amount if a maximum percentage of the target performance is achieved, which ranged from 120% to 140% depending on the business unit. Annual incentive compensation payments for most employees of the Company itself (a holding company which conducts operations through its subsidiaries) are based entirely on the performance of the Company as a whole. Payments for the heads of the Company’s business units and for certain management level employees with responsibilities for more than one business unit are generally based partly on the performance of the business units and partly on overall Company performance.

For 2018, the target and actual amounts for the three additional performance measures for the Company were:

For 2018, the Committee set the target annual incentive compensation for the named executive officers at the following percentages of base salary: Mr. Grzebinski (100%), Mr. Harvey (70%), Mr. Reniers (70%), Mr. O’Neil (70%), Ms. Husted (70%) and Mr. Pyne (90%). The target percentages were set at levels which the Committee determined, based in part on analysis by the

Consultant, are commensurate with their responsibilities, consistent with the Company’s executive compensation philosophy, internally equitable and competitive for executives with their qualifications and experience. Payouts under the annual incentive plan for 2018 were 145.1% of the target amount for Mr. Grzebinski, Mr. Harvey, Ms. Husted and Mr. Pyne (employees of the parent Company), prorated in Mr. Pyne’s case for the four months of 2018 during which he served as an executive officer of the Company, 153.9% of the target for Mr. Reniers, whose payout is based on a blend of Company performance and the performance of the Company’s distribution and services business and 137.4% of the target for Mr. O’Neil, whose payout is based on a blend of Company performance and the performance of the Company’s marine transportation business.

The Committee awarded an amount equal to the preliminary incentive payment calculated under the plan, without adjustment, to each named executive officer for 2018 after determining that the performance of each of the officers met expectations for the year. Those determinations for the Chairman of the Board and the Chief Executive Officer were based on the performance evaluation of the Chief Executive Officer conducted by the Board under the guidance of the Governance Committee, on the extent of the Company’s achievement of its financial, operational and strategic goals for 2018 and on the Board’s interaction on a regular basis with both officers. The determination for the other named executive officers was based primarily on evaluations and recommendations made by the Chief Executive Officer, as well as on the Board’s interaction with the other named executive officers during the previous year in relation to matters in their areas of responsibility.

Long-Term Incentive Compensation

The Committee’s objective for long-term incentive compensation for executive officers is generally to fall between the 50th and 75th percentiles (depending on performance) in long-term incentive compensation of similar corporations and positions. The primary long-term incentives for executive officers are stock options, restricted stock, restricted stock units and cash performance awards. The Committee views stock option, restricted stock and restricted stock unit awards as a regular component of compensation for executive officers, as well as for managerial level employees generally, because the Committee believes that such awards provide an incentive for key employees to remain with the Company and focus on the Company’s long-term performance. The long-term incentive compensation supplies the incentive of tying a meaningful portion of total compensation to Company performance, as well as business group and individual performance. In addition, the ultimate value of the options and restricted stock or restricted stock units granted depends on the Company’s stock price, aligning the interests of recipients of the awards with the interests of the Company’s stockholders.

In 2018, the Committee granted nonqualified stock options covering 81,702 shares of common stock and 50,590 restricted stock units to the named executive officers. Those numbers include options and restricted stock units granted under the long-term incentive compensation program discussed below. The options were granted at a price equal to the fair market value of the Company’s common stock on the date of grant, vest in equal increments over three years and have a term of seven years. The restricted stock units vest in equal increments over five years.

The Company maintains a long-term incentive compensation program for selected senior executives that is administered by the Committee. The program allows the grant of incentive stock options, nonincentive stock options, restricted stock, restricted stock units, performance shares and performance units (or any combination thereof). The objective of the program is to provide long-term incentive compensation to the specified executives in an amount that falls between the 50th and 75th percentiles (depending on performance) when compared to companies or business units of similar size. The actual value realized will be based on the Company’s performance over a period of approximately three to seven years.

Under the program, the elements of long-term compensation to be awarded, as well as the executives selected to participate, are determined each year by the Committee. For 2018, the Committee determined that the executives who would receive awards under the long-term incentive compensation program would include the three executive officers named below and that 20% of the target value of the awards would be in the form of stock options, 40% in the form of restricted stock units and 40% in the form of cash performance awards. The target values of the awards, broken down by the three components, were as follows:

The options vest over a three-year period and the restricted stock units vest over a five-year period. The performance awards are based on a three-year performance period beginning January 1, 2018. The percentage of the target award paid at the end of the performance period will be based on the Company’s achievement on a cumulative basis for the three-year period of the objective levels of EBITDA, return on total capital and earnings per share established under its annual incentive plan, with the three factors equally weighted. The officers will be paid the target amount if 100% of the objective performance measures is achieved over the three-year period. The payment can range from zero if less than 80% of the objective performance measures is achieved to a maximum of 200% of the target award for the achievement of 130% or more of the objective performance measures.

The amount and form of the long-term incentive compensation awards, including the specific mix of long-term incentive compensation elements, were based in part on an analysis of market data on the amounts of awards and recommendations on the form of awards provided by the Consultant to the Committee.

Chief Executive Officer

The base salary of the Company’s President and Chief Executive Officer, David W. Grzebinski, was generally based on the same factors and criteria outlined above, which include compensation paid to chief executives of similar corporations, individual as well as corporate performance and a general correlation with the compensation of other executive officers of the Company. The Committee set the base salary for Mr. Grzebinski at an annual rate of $880,000 effective April 1, 2018, an increase of 9.7% over his salary at the end of 2017. In setting Mr. Grzebinski’s compensation, the Committee also considered the Company’s success in achieving the financial, operational and strategic corporate goals established for the previous year, as well as the annual evaluation of the Chief Executive Officer’s performance conducted by the Board under the guidance of its Governance Committee. However, neither the achievement of corporate goals, the performance evaluation nor any other particular aspect of Company or individual performance is given any specific weighting or tied by any type of formula to decisions on the Chief Executive Officer’s base salary or long-term incentive compensation awards. The $2,311,330 in non-equity incentive plan compensation shown for Mr. Grzebinski in the Summary Compensation Table consisted of (1) $1,267,430 determined under the annual incentive plan described above and (2) a $1,043,900 payment earned by Mr. Grzebinski for the 2016-2018 performance period under a cash performance award granted as part of the Company’s long-term incentive compensation program that was based on the formula for the performance award that was established by the Committee when the award was made at the beginning of 2016. Based on information available at the end of the year, actual 2018 total cash compensation for Mr. Grzebinski was above the median, and actual total direct compensation was at the median, compared to peer group and survey data.

Special Retirement Payment

On April 30, 2018, Mr. Pyne retired as an executive officer of the Company after serving in various executive capacities for over 30 years, including 19 years as Chief Executive Officer. He continues to serve as Chairman of the Board in a nonexecutive role. In connection with Mr. Pyne’s retirement, the independent directors of the Company approved the payment of a special one-time cash bonus of $15,000,000 to Mr. Pyne and the acceleration of the vesting of unvested stock options covering 26,819 shares of Kirby common stock and 30,643 unvested shares of restricted stock. The special compensation was conditioned on Mr. Pyne’s execution of a noncompetition agreement that extends for two years after he ceases to serve as a director of the Company.

In determining the form and amount of the special compensation, the independent directors considered a number of factors, including:

In addition to the special retirement compensation, Mr. Pyne will receive prorated payments of previously awarded incentive compensation in amounts and at times to be determined according to the terms of the plans under which the awards were made and stock options for 21,396 shares and 13,245 restricted stock units previously granted to Mr. Pyne will continue to vest in accordance with the terms of the Company’s 2005 Stock and Incentive Plan.

Retirement Plans

The Company maintains two primary retirement plans in which the named executive officers are eligible to participate on the same basis as broad categories of employees — a Profit Sharing Plan and a 401(k) Plan. Most of the Company’s shore-based employees are eligible to participate in the Profit Sharing Plan. The aggregate contributions made to the plan by the Company are allocated among the participants according to base salary. All employees of the Company are eligible to participate in the 401(k) Plan, under which the Company will match employee contributions in an amount up to 3% of an employee’s base salary.

The Company maintains an unfunded, nonqualified Deferred Compensation Plan for Key Employees, which is designed primarily to provide additional benefits to eligible employees to restore benefits to which they would be entitled under the Company’s Profit Sharing Plan and 401(k) Plan were it not for certain limits imposed by the Internal Revenue Code. The plan is designed to restore benefits for employees being compensated in excess of certain limits (base salary of $275,000 per annum for 2018). In 2018, the Committee approved contributions for each participant at the maximum amounts allowed by the Plan.

Perquisites and Personal Benefits

The only perquisites or other personal benefits that the Company provides to the named executive officers are an automobile allowance that is given to approximately 220 executive and management employees, payment of the cost of club memberships that are used for both business and personal purposes, air travel on the Company plane that is considered personal income under Internal Revenue Service regulations for family members to attend customer events, and payment of office rent (up to a maximum of $2,000 per month) for Mr. Pyne. The Committee believes the personal benefits are reasonable in amount and help the Company attract and retain key employees.

Employment/Severance Agreements

Except for accelerated vesting of outstanding stock options, restricted stock and restricted stock units upon a qualifying termination of employment following a change in control of the Company, and a right to receive a proportionate part of outstanding performance awards upon a change in control of the Company, there are no special compensation arrangements related to severance or change in control events. The Company has no employment agreements with any of its executive officers.

Benchmarking

The Committee used information provided by the Consultant to benchmark executive compensation and assist in the design of its incentive plans. Marketplace analysis developed by the Consultant was based in part on a peer group of companies. The companies in the peer group were selected because they were of a similar size to the Company in revenue and market capitalization, generated comparable returns on assets, equity and capital and had primary operations in at least one of the same business segments as the Company. In determining competitive market levels for the elements of executive compensation, the Consultant used a combination of peer group proxy data and data from published compensation surveys.

The peer group companies used by the Consultant at the beginning of 2018 were:

Based on information available at the end of the year, total cash compensation was at or above the median and total direct compensation was at or below the median for the five named executive officers other than Mr. Pyne in the aggregate for comparable companies based on peer group and survey data.

Other Compensation Matters

Compensation Related Risk

With the assistance of the Consultant, the Committee undertook a review of the Company’s compensation policies and practices and concluded that the Company’s compensation programs do not encourage excessive risk taking and do not present risks that are reasonably likely to have a material adverse effect on the Company.

Tax Considerations

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1 million paid to the Chief Executive Officer and certain other highly compensated executive officers. Prior to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), certain performance-based compensation was exempt from the deduction limit. The Tax Act eliminated the exemption for performance-based compensation effective for tax years beginning after December 31, 2017.

Timing of Compensation Decisions

The Committee generally makes executive compensation decisions in January of each year. Options have always been granted at an exercise price equal to the fair market value of the Company’s stock on the date of grant. Options granted at the regular January meeting of the Committee, which takes place several days before the Company’s public release of earnings information for the previous year, are granted at an exercise price equal to the fair market value of the Company’s stock on a specified date shortly after the earnings release, in which case the later date is considered the date of grant.

Stock Ownership Guidelines

The Board has established stock ownership guidelines for executive officers and directors of the Company and its subsidiaries. Executive officers must be in compliance within five years after becoming an executive officer, but are expected to accumulate the required number of shares ratably over the applicable five-year period. Under the guidelines, the Chief Executive Officer is required to own common stock of the Company having a value equal to four times base salary. For executive vice presidents of the Company and presidents of the Company’s business units, the requirement is three times base salary. For vice presidents of the Company, the requirement is two times base salary. For Mr. Pyne, Chairman of the Board, the requirement is four times the annual cash director fee. As of December 31, 2018, all named executive officers were in compliance with the stock ownership guidelines.

Hedging

The Company has adopted a policy prohibiting hedging the economic risk of ownership of Company stock. The policy, which applies to all transactions that establish protection against a decline in the market price of Company stock, provides that Company employees may not (a) engage in short sales of Company stock, (b) pledge Company stock as collateral for a loan or hold Company stock in a margin account or (c) engage in transactions involving other financial instruments that are designed to, or have the effect of, hedging or protecting against any decline in the market value of any Company stock held, directly or indirectly, by such person. Hedging transactions include, but are not limited to, prepaid variable forward contracts, equity swaps, exchange funds, short sales and puts, calls, collars or similar options to buy or sell Company stock, but do not include the exercise of stock options granted by the Company.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors of the Company has reviewed and discussed with management the Compensation Discussion and Analysis in this Proxy Statement. Based on that review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

Compensation Committee

C. Sean Day, Chairman

Barry E. Davis

Monte J. Miller

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The current members of the Compensation Committee are Mr. Davis, Mr. Day, and Mr. Miller. None of such persons is or has been an officer or employee of the Company or any of its subsidiaries. In 2018, no executive officer of the Company served on the board of directors or compensation committee of another entity, any of whose executive officers served on the Board or Compensation Committee of the Company.

COMPENSATION TABLES

Summary Compensation Table

Grants of Plan Based Awards During 2018

Outstanding Equity Awards at December 31, 2018