A LETTER FROM THE CHAIR OF OUR BOARD

		Masco Corporation 17450 College Parkway Livonia, MI 48152 313-274-7400 www.masco.com

March 29, 2019

Dear Stockholder:

On behalf of our entire Board of Directors, I am pleased to invite you to attend Masco Corporation’s Annual Meeting of Stockholders. Our meeting will be held at 9:30 a.m. on Friday, May 10, 2019 at our corporate office in Livonia, Michigan. Following our formal meeting, management will provide a review of our operations and we will respond to your questions.

Board Oversight of Our Strategy

To optimize the effectiveness of our Board, we engage with management throughout the year to understand and oversee our Company’s strategic objectives, which focus on driving the full potential of our businesses, leveraging opportunities across our portfolio and actively managing our portfolio. Annually, we hold a strategy session with management to discuss the Company’s execution of those objectives and our Company’s long-term plans to drive stockholder value. At Board meetings throughout the year, management also provides updates on the progress toward achieving our strategy. The Board also sees our Company’s strategy and corporate culture in action when leaders of our businesses present their specific growth objectives to us at Board meetings and when we visit one business unit each year to engage with its broader leadership team.

Board Composition and Refreshment

Our Board is comprised of eleven directors who bring a diverse set of skills and experience that promote active and engaged discussions to ensure an effective and highly functioning Board. Our Corporate Governance and Nominating Committee regularly reviews our Board’s composition to ensure alignment with long-term strategy, and as a result, has recommended to our Board the appointment of seven new independent directors since 2012. We also have performed an annual self-evaluation for a number of years. This focus on board refreshment and self-evaluation has brought a valued balance of fresh perspectives and deep historical knowledge of our Company to our Board’s role as stewards of your investment in Masco Corporation. We will continue to focus on maintaining an appropriate balance of tenure, skills, experience and diversity, along with ensuring our Board continues to conduct itself effectively.

Commitment to Pay-for-Performance

We believe that our Organization and Compensation Committee has demonstrated a consistent commitment to developing and overseeing executive compensation programs that align our executive management team’s interests with delivering strong financial performance and driving long-term stockholder value. Our efforts to enhance our pay-for-performance practices resulted in 98% of the votes cast last year in favor of the compensation paid to our named executive officers. In 2018, approximately 87% of our CEO’s compensation consisted of performance-based pay. In addition, as discussed in the Compensation Discussion and Analysis, we have incorporated numerous best practices into our executive compensation programs.

We Value Your Support

On behalf of our entire Board, I thank you for your continued support of Masco Corporation and your confidence in us as Board members. Your vote is very important to us, and I urge you to carefully read this proxy statement. Voting instructions for the proposals to be presented at our Annual Meeting can be found on the enclosed proxy card. Please submit your vote today by internet, telephone or mail.

Sincerely,

J. Michael Losh

Chair of the Board

THIS PROXY STATEMENT AND THE ENCLOSED PROXY CARD ARE BEING MAILED OR OTHERWISE MADE AVAILABLE TO STOCKHOLDERS ON OR ABOUT MARCH 29, 2019.

		MASCO CORPORATION Notice of Annual Meeting of Stockholders

Stockholders of record at the close of business on March 15, 2019 are entitled to vote at the Annual Meeting or any adjournment or postponement of the meeting. Whether or not you plan to attend the Annual Meeting, you can ensure that your shares are represented at the meeting by promptly voting by internet or by telephone, or by completing, signing, dating and returning your proxy card in the enclosed postage prepaid envelope. Instructions for each of these methods and the control number that you will need are provided on the proxy card. You may withdraw your proxy before it is exercised by following the directions in the proxy statement. Alternatively, you may vote in person at the meeting.

By Order of the Board of Directors,

Kenneth G. Cole

Vice President, General Counsel and Secretary

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 10, 2019: THIS PROXY STATEMENT AND THE MASCO CORPORATION 2018 ANNUAL REPORT TO STOCKHOLDERS, WHICH INCLUDES THE COMPANY’S ANNUAL REPORT ON FORM 10-K, ARE AVAILABLE AT:

http://www.ezodproxy.com/masco/2019

THE COMPANY WILL PROVIDE A COPY OF ITS ANNUAL REPORT ON FORM 10-K, WITHOUT CHARGE, UPON A STOCKHOLDER’S WRITTEN REQUEST TO: INVESTOR RELATIONS, MASCO CORPORATION, 17450 COLLEGE PARKWAY, LIVONIA, MICHIGAN 48152.

		2019 Proxy Statement Summary

This summary highlights information to assist you in reviewing the proposals you will be voting on at our 2019 Annual Meeting. This summary does not contain all of the information you should consider; you should read the entire proxy statement carefully before voting. The proposals for our Annual Meeting are the election of our Class I Directors, the approval of the compensation paid to our named executive officers (who we generally refer to as our “executive officers” in this proxy statement), and the ratification of the selection of PricewaterhouseCoopers LLP as our independent auditors for 2019.

CORPORATE GOVERNANCE AND OUR BOARD OF DIRECTORS

Our Board of Directors is committed to maintaining our high standards of ethical business conduct and corporate governance principles and practices. Our corporate governance practices include:

DIRECTOR NOMINEES

The Class I Director Nominees for our Board of Directors are:

Marie A. Ffolkes

DIRECTOR SINCE: 2017

POSITION: President, Industrial Gases, Americas of Air Products & Chemicals, Inc.

INDEPENDENT: Yes

COMMITTEES: Audit Committee; Organization and Compensation Committee

Donald R. Parfet

DIRECTOR SINCE: 2012

POSITION:   •  Managing Director, Apjohn Group, LLC, a business development company •  General Partner, Apjohn Ventures Fund, Limited Partnership, a venture capital fund

INDEPENDENT: Yes

COMMITTEES: Audit Committee; Organization and Compensation Committee (Chair)

Lisa A. Payne

DIRECTOR SINCE: 2006

POSITION: Former Vice Chairman and Chief Financial Officer of Taubman Centers, Inc., a real estate investment trust

INDEPENDENT: Yes

COMMITTEES: Audit Committee (Chair); Organization and Compensation Committee

Reginald M. Turner

DIRECTOR SINCE: 2015

POSITION: Attorney and Member, Clark Hill PLC, a Detroit, Michigan-based law firm; and currently serves on its Executive Committee

INDEPENDENT: Yes

COMMITTEES: Audit Committee; Corporate Governance and Nominating Committee

If elected, each would serve for a three-year term concluding at our 2022 Annual Meeting.    

BOARD REFRESHMENT

We have had significant Board refreshment over the past several years. Seven new independent directors have joined our Board since 2012, which, combined with our directors who have experience with us, provides a desirable balance of deep, historical understanding of our Company and new and diverse perspectives.

STOCKHOLDER OUTREACH

In determining our executive compensation and corporate governance practices, our Board believes it is important to consider feedback from our stockholders. In 2018, we continued our robust stockholder engagement program and requested the opportunity to engage with stockholders holding approximately 50% of our outstanding shares. We ultimately engaged with stockholders representing 20% of our outstanding shares, and discussed our Board’s oversight of our strategy and risk, board composition and refreshment, corporate sustainability and our annual and long-term performance-based compensation programs. We received positive feedback from the stockholders with whom we spoke regarding the structure of our compensation programs and practices, which was reflective of the strong support we received for our say-on-pay proposal over the past years. We provide reports on the feedback we receive to our Organization and Compensation Committee (“Compensation Committee”) and Corporate Governance and Nominating Committee (“Governance Committee”).

2018 FINANCIAL PERFORMANCE

We delivered solid financial results in 2018. Our reported sales for the full year increased 9% to $8.4 billion and we increased our operating profit for the full year 1% to $1.2 billion. Our sales growth was driven by our acquisitions of Kichler Lighting in March 2018 and Mercury Plastics in December 2017, strong consumer demand due to increased repair and remodel activity and new home construction in the U.S. and net selling price increases. Our operating profit grew despite the rising price of raw materials and logistics costs, Enterprise Resource Planning System costs and a purchase accounting adjustment related to our acquisition of Kichler Lighting, demonstrating our ability to manage our costs.

In addition to delivering sales and operating profit growth, we continued to execute on our capital allocation strategy. In 2018 we returned value to our stockholders by repurchasing $654 million in shares of our stock and increasing our annual dividend for the fifth year in a row. In addition, we deployed $549 million to complete the acquisition of Kichler Lighting.

2018 EXECUTIVE COMPENSATION

Based on our financial performance in 2018, we exceeded the target for our working capital as a percent of sales goal, but we did not achieve our target operating profit goal.

2018 Annual Performance Program

Under our annual performance program, we pay cash bonuses and grant restricted stock to our executive officers if we meet our performance goals for operating profit and working capital as a percent of sales. The following tables reflect our 2018 target goals, our performance relative to our target goals and the compensation we paid to our executive officers under our 2018 annual performance program:

2016-2018 Long-Term Performance Program

Under our 2016-2018 Long Term Cash Incentive Program (“LTCIP”), our executive officers had the opportunity to earn a performance award in cash based on our achievement of a performance goal over the three-year period. The following tables reflect our target return on invested capital (“ROIC”) goal for the 2016-2018 LTCIP performance period, our performance relative to our target goal and the compensation we paid to our executive officers:

OUR COMPENSATION PRACTICES

During 2018, our Compensation Committee reviewed our compensation programs and practices to ensure our interests and the objectives for our compensation programs are aligned. At our 2018 Annual Meeting, 98% of the votes cast on our say-on-pay proposal approved the compensation we paid to our executive officers. Although the say-on-pay vote is advisory and non-binding, our Compensation Committee believes this approval percentage indicates strong support for our continued efforts to enhance our pay-for-performance practices, and our Compensation Committee concluded that our stockholders endorse our current executive compensation programs and practices.

Our compensation practices include:

Our compensation practices do not include:

Table of Contents

		Corporate Governance

This section of our proxy statement provides information on the qualifications and experience of our director nominees and incumbent directors, the composition of our Board and structure of our Board committees, and other important corporate governance matters.

DIRECTORS AND DIRECTOR NOMINEES

Our Board is divided into three classes. Following the election of the Class I directors nominated at this Annual Meeting, the terms of office of our Class I, Class II and Class III directors will expire at the Annual Meeting of Stockholders in 2022, 2020 and 2021, respectively, or when their respective successors are elected and qualified.

In addition to meeting the criteria that are described below under “Board Membership and Composition,” each of our director nominees and each continuing director brings a strong and unique background and set of skills to our Board. As a result, our Board as a whole possesses competence and experience in a wide variety of areas.

DIRECTOR NOMINEES FOR CLASS I

(Term Expiring at the Annual Meeting in 2022)

CLASS II DIRECTORS

(Term Expiring at the Annual Meeting in 2020)

CLASS III DIRECTORS

(Term Expiring at the Annual Meeting in 2021)

Mark R. Alexander
AGE: 54
DIRECTOR SINCE: 2014
POSITION:
• Chief Executive Officer, Icelandic Provisions, Inc., since February 2019
RELEVANT SKILLS AND EXPERIENCE:
Through his experience as a current CEO and as the former President of Campbell Soup Company’s largest division, Mr. Alexander brings to our Board strong leadership skills and experience in developing and executing business growth strategies. His past business responsibilities include investing in brand-building, innovation and expanded distribution, which correspond to areas of focus at our business operations. His extensive international experience with consumer branded products and his background in marketing and customer relations also provide our Board with expertise and insight as we leverage our consumer brands in the global market.
BUSINESS EXPERIENCE:
•  Campbell Soup Company: •  Senior Vice President (2009-2018) •  President of Americas Simple Meals and Beverages (2015-2018) •  President of Campbell North America (2012-2015), Campbell International (2010-2012) and Asia Pacific (2006-2009) •  Chief Customer Officer and President – North America Baking & Snacking (2009-2010) •  Served in various marketing, sales and management roles in the United States, Canada, Europe and Asia since 1989

Richard A. Manoogian

AGE: 82

DIRECTOR SINCE: 1964

POSITION:

•  Our Chairman Emeritus, since 2012

RELEVANT SKILLS AND EXPERIENCE:

Mr. Manoogian was instrumental in the dramatic growth of Masco to become a global leader in the design, manufacture and distribution of branded home improvement and building products. His experience in navigating our Company through various phases of its transformation and diversification provides our Board with unique and extensive knowledge of our Company’s history and strategies. As a long-term leader at Masco, Mr. Manoogian possesses firsthand knowledge of our operations as well as a deep understanding of the residential repair and remodeling and new home construction industries.

BUSINESS EXPERIENCE:

•  Our Chairman of the Board (1985-2012) •  Masco Corporation: •  Executive Chairman (2007-2009) •  Chief Executive Officer (1985-2007) •  Elected President in 1968 and Vice President in 1964 •  Director of Ford Motor Company (2001-2014)

BOARD OF DIRECTORS

Our Board of Directors is committed to maintaining our high standards of ethical business conduct and corporate governance principles and practices.

Leadership Structure of our Board of Directors

Mr. J. Michael Losh was appointed as Chair of our Board on May 4, 2015. At that time, Mr. Losh also became the Chair of our Corporate Governance and Nominating Committee. Mr. Losh has served on our Board since 2003, including as the Chair of our Audit Committee from 2008-2015.

Effective Oversight of our Company

As an independent Chair of our Board, Mr. Losh has a strong working relationship with the other directors and with our management. His responsibilities include:

Separation of our Chair of the Board and CEO Roles

Our Board believes that its leadership structure is in the best interests of the Company and our stockholders at this time; however, our Board has no policy with respect to the separation of the roles of CEO and Chair and believes that this matter should be discussed and determined by the Board from time to time, based on all of the then-current facts and circumstances. If the roles of Chair and CEO are combined in the future, the role of Lead Director could become part of our Board leadership structure.

Communications with our Chair of the Board

If you are interested in contacting the Chair of our Board, you may send your communication in care of our Secretary to the address specified in “Communications with Our Board of Directors” below.

Director Independence

Our Corporate Governance Guidelines require that a majority of our directors qualify as “independent” under the requirements of applicable law and the New York Stock Exchange’s listing standards.

Director Independence Standards

For a director to be considered independent, our Board must determine that the director does not have any direct or indirect material relationship with us. Our Board has adopted standards to assist it in making a determination of independence for directors. These standards are posted on our website at www.masco.com.

Assessment of our Directors’ Independence

Our Board has determined that nine of our eleven directors, including all of our non-employee directors other than Mr. Manoogian, are independent. As an employee, Mr. Allman, our President and Chief Executive Officer, is not an independent director. Our independent directors are Messrs. Alexander, Losh, O’Herlihy, Parfet, Plant, Stevens and Turner, Ms. Ffolkes and Ms. Payne.

In making its independence determinations, our Board reviewed all transactions, relationships and arrangements for the last three fiscal years involving each non-employee director and the Company.

Our Board also determined that we did not make any discretionary charitable contributions exceeding the greater of $1 million or 2% of the revenues of any charitable organization in which any of our directors was actively involved in the day-to-day operations.

Committee Member Independence Assessment

Our Board has determined that each member of our Audit Committee, Compensation Committee and Governance Committee qualifies as independent.

Board Refreshment

Our Governance Committee reviews current director tenure, including whether any vacancies are expected on our Board due to retirement or otherwise, and periodically assesses the composition of our Board by reviewing our directors’ skills and expertise. Our Board completes a director skills exercise periodically to provide our Governance Committee insight into our Board composition. The Committee uses this information to evaluate the skills and experience represented on our Board and to identify anticipated skills and experience that would be valuable in the future to best support the Company’s strategic objectives. In 2017, our Governance Committee and Board focused on director candidate recruitment, which resulted in the appointment of two new independent directors, Ms. Marie Ffolkes and Mr. Charles Stevens.

Director Refreshment

Seven new independent directors have joined our Board since 2012, bringing fresh and diverse perspectives. These directors have particular strength in the areas of executive management, finance and accounting, global operations, business and growth strategy, brand management, consumer products, risk management, talent management, corporate governance and government relations. We believe the addition of these new directors, combined with our directors who have experience with us, provides a desirable balance of deep, historical understanding of our Company and new perspectives, resulting in strong guidance and oversight to our executive management team.

Board Membership and Composition

Board Membership

Our Governance Committee believes that directors should possess exemplary personal and professional reputations, reflecting high ethical standards and values. The expertise and experience of directors should provide a source of strategic oversight, advice and guidance to our management. A director’s judgment should demonstrate an inquisitive and independent perspective with intelligence and practical wisdom. Directors should be free of any significant business relationships which would result in a potential conflict in judgment between our interests and the interests of those with whom we do business. Each director should be committed to serving on our Board for an extended period of time and to devoting sufficient time to carry out the director’s duties and responsibilities in an effective manner for the benefit of our stockholders. Our Governance Committee also considers additional criteria adopted by our Board for director nominees and the independence, financial literacy and financial expertise standards required by applicable law and by the New York Stock Exchange.

Board Composition

Neither our Board nor our Governance Committee has adopted a formal Board diversity policy. However, as part of its assessment of Board composition and evaluation of potential director candidates, our Governance Committee considers whether our directors hold diverse viewpoints, professional experiences, education and other skills and attributes that are necessary to enhance our Board’s effectiveness. In addition, our Governance Committee believes that it is desirable for directors to possess diverse characteristics of gender, race, national origin, ethnicity and age, and considers such factors in its evaluation of candidates for Board membership.

Director Candidate Recommendations

The Governance Committee uses a number of sources to identify and evaluate director nominees. It is the Governance Committee’s policy to consider director candidates recommended by stockholders. All Board candidates, including those recommended by stockholders, are evaluated against the criteria described above. Stockholders wishing to have the Governance Committee consider a candidate should

submit the candidate’s name and pertinent background information to our Secretary at the address stated below in “Communications with our Board of Directors.” Stockholders who wish to nominate director candidates for election to our Board should follow the procedures set forth in our Certificate of Incorporation and Bylaws. For a summary of these procedures, see “2020 Annual Meeting of Stockholders” below.

Risk Oversight

Our Board oversees our risk management practices, both directly and through its committees. Our Board exercises its risk oversight through review and discussion of comprehensive analyses prepared by management on material risks facing us and related mitigating activities; updates regarding these risks are presented at Board meetings throughout the year, as necessary.

Key risk oversight activities of our Board include:

Our Board has delegated certain responsibilities for risk oversight to our Audit and Compensation Committees, as follows:

For a detailed description of the risk oversight activities of our Audit and Compensation Committees, see the “Committees of the Board of Directors” section.

Board Meetings and Attendance

Board Meetings

Our Board held six meetings in 2018, one of which focused primarily on reviewing our long-term strategic plan with management. In addition to the Board meetings at our corporate headquarters, in 2018 our directors visited Behr Paint’s headquarters and manufacturing and distribution facilities to observe operations and meet with Behr’s management team.

Meeting Attendance

Each director attended at least 75% of our Board meetings and applicable committee meetings that were held in 2018 while such person served as a director. It is our policy to encourage directors to attend our Annual Meeting of Stockholders, and all of our directors attended our 2018 Annual Meeting.

Executive Sessions

Our non-employee directors frequently meet in executive session without management, and the independent directors meet separately at least once per year. Mr.  Losh, as our Chair of the Board, presides over these executive sessions.

Communications with our Board of Directors

If you are interested in contacting our Chair of our Board, an individual director, our Board as a group, our independent directors as a group, or a specific Board committee, you may send a communication, specifying the individual or group you wish to contact, in care of: Kenneth G. Cole, Secretary, Masco Corporation, 17450 College Parkway, Livonia, Michigan 48152.

COMMITTEES OF OUR BOARD OF DIRECTORS

The standing committees of our Board are the Audit Committee, the Compensation Committee and the Governance Committee. These committees function pursuant to written charters adopted by our Board. The committee charters, as well as our Corporate Governance Guidelines and our Code of Ethics, are posted on our website at www.masco.com and are available to you in print from our website or upon request.

Lisa A. Payne Chair Mark R. Alexander Marie A. Ffolkes Christipher A. O Herlihy Donald R. Parfet John C. Plant Charles K. Stevens Reginald M. Turner

Donald R. Parfet Chair Marie A. Ftolkes J. Michael Losh Christopher A. O' Herlihy Lisa A. Payne

6 meetings in 2018

J. Michael Losh Chair Mark R. Alexander John C. Plant Charles K. Stevens Reginald M. Turner

DIRECTOR COMPENSATION PROGRAM

Our non-employee directors receive the following compensation for service on our Board:

Annual Equity Retainer (row a): The restricted stock is granted under our Non-Employee Directors Equity Program.

Annual Governance Committee Chair Cash Retainer (row b): The Governance Committee Chair retainer is not paid if the director who chairs that committee also serves as the Chair of our Board. Currently Mr. Losh serves as both our Chair of the Board and Governance Committee Chair so he does not receive the Governance Committee Chair retainer.

Meeting Fee (row c): Our Board may approve the payment of meeting fees to directors serving on three or more standing committees or serving as members of a special committee constituted by our Board. No such fees were paid for 2018.

Other Compensation

Our non-employee directors may also receive the following benefits, which are available to all of our employees:

In addition, if space is available, a director’s spouse is permitted to accompany a director who travels on Company aircraft to attend Board or committee meetings.

Annual Review of our Director Compensation Program

Our Governance Committee reviews our director compensation program annually, including reviewing an analysis of the competitiveness of the program, and recommends any changes to our Board. During 2018, upon the recommendation of our Governance Committee, our Board made the following changes to our director compensation program:

In 2016, upon the recommendation of our Governance Committee, our Board amended our Non- Employee Director Equity Program to impose a limit on the amount of equity a director may receive during a year. The Board adopted an annual limit of the greater of 25,000 shares or restricted shares with a grant date value of $500,000 as the limit for each director.

DIRECTOR COMPENSATION TABLE

The following table reflects 2018 compensation paid to our directors, other than Mr. Allman, who is also a Company employee and receives no additional compensation for his service as a director.

Restricted Stock Awards (column a): In May 2018, we granted 3,680 shares of restricted stock to each non-employee director, except for Ms. Van Lokeren, whose service as a director concluded in May 2018. In addition, we granted Mr. Stevens 770 shares in February 2018, when his service as a director began, as pro-rated equity compensation for the months of February through April 2018. The amounts reported in this column reflect the aggregate grant date fair value of the shares, calculated in accordance with accounting guidance. Directors realize the value of restricted stock awards over time because the vesting of awards occurs pro rata over three years, and one-half of these shares must be retained until completion of their service on our Board.

All Other Compensation (column b): The amounts reported in this column reflect our contributions in 2018 to eligible tax-exempt organizations under our matching gifts program, as described above, for which directors receive no direct financial benefit.

Unvested Restricted Stock and Stock Options Outstanding: The following table reports the aggregate number of shares of unvested restricted stock, and the aggregate number of stock options outstanding, held on December 31, 2018 by each director who was serving on that date. Our Board ceased granting stock options to non-employee directors in 2010; however, a portion of the stock options granted before then remained outstanding at December 31, 2018.

RELATED PERSON TRANSACTIONS

Our Board of Directors has adopted a Related Person Transaction Policy that requires our Board or a committee of independent directors to approve or ratify any transaction involving us in which any director, director nominee, executive officer, 5% beneficial owner or any of his or her immediate family members has a direct or indirect material interest.

Related Persons Transaction Policy

Our policy covers:

Our policy excludes transactions determined by our Board not to involve a material interest of the related person, such as:

Assessing Related Person Transactions

Our policy requires directors, director nominees and executive officers to provide prompt written notice to our Secretary of any related transaction so it can be reviewed by our Governance Committee. If the Governance Committee determines that the related person has a direct or indirect material interest in the transaction, it will consider all relevant information to assess whether the transaction is in, or not inconsistent with, our best interests and the best interests of our stockholders. The Governance Committee annually reviews previously-approved ongoing related transactions to determine whether the transactions should continue.

Related Persons Transactions for 2018

There have been no transactions since January 1, 2018 required to be described in this proxy statement that were not subject to review, approval or ratification in accordance with this policy.

On-Going Related Person Transactions

Our Governance Committee previously approved the on-going related transaction described below.

Transactions with Mr. Richard A. Manoogian

In accordance with the terms of our 2009 agreement with Mr. Manoogian, who transitioned to Chairman Emeritus in 2012, we provide him with an administrative assistant and reasonable equipment and supplies for his personal use, which together aggregated approximately $158,000 for 2018. We also charged Mr. Manoogian the incremental cost for his use of our aircraft (with prior approval from our CEO), which was approximately $23,000 for 2018.

The term of office of our Class I Directors, who are Marie A. Ffolkes, Donald R. Parfet, Lisa A. Payne and Reginald M. Turner, expires at this meeting.

Our Board proposes the re-election of Ms. Ffolkes, Ms. Payne and Messrs. Parfet and Turner to serve as Class I Directors. The term of the Class I Directors elected at this Annual Meeting will expire at the Annual Meeting of Stockholders in 2022, or when their respective successors are elected and qualified.

Our Board expects that the persons named as proxy holders on the proxy card will vote the shares represented by each proxy for the election of each director nominee unless a contrary direction is given. If, prior to the meeting, a nominee is unable or unwilling to serve as a director, which our Board does not expect, the proxy holders may vote for an alternate nominee recommended by our Board, or our Board may reduce its size.

Information regarding each of our director nominees can be found above in “Director Nominees for Class I.”

Our Board recommends a vote FOR the election to our Board of Directors of each of the following Class I Director nominees:

The affirmative vote of a majority of the votes cast by shares entitled to vote is required for the election of directors. Abstentions and broker non-votes are not counted as votes cast, and therefore do not affect the outcome of the election.

Our executive compensation programs are designed to promote the long-term interests of our stockholders by attracting and retaining talented executives and motivating them to achieve our strategic business objectives and to drive stockholder value. We believe that our financial performance and the creation of long-term stockholder value should impact a significant portion of our executive officers’ compensation. Our Compensation Committee oversees our compensation programs and the compensation paid to our executive officers.

HOW OUR 2018 FINANCIAL PERFORMANCE IMPACTED OUR EXECUTIVE OFFICERS’ COMPENSATION

We delivered solid sales and operating profit growth in 2018. Our reported annual sales increased 9% to $8.4 billion and our annual operating profit increased 1% to $1.2 billion. Our operating profit margin decreased to 14.5% from 15.6% due to significant headwinds from increased commodity and logistics costs, Enterprise Resource Planning System costs, and a purchase accounting adjustment related to our acquisition of Kichler Lighting. Based on our financial performance in 2018, our executive officers earned incentive compensation under our performance-based compensation programs, which include:

The following tables reflect our target goals for our 2018 annual performance program and our 2016-2018 LTCIP and our performance relative to those goals. For our annual performance program, we exceeded the target for our working capital as a percent of sales goal, but we did not achieve our target operating profit goal, which reduced the payout to our executive officers.

Based on this performance, we paid the following compensation to our executive officers under our 2018 annual performance program and 2016-2018 LTCIP:

OTHER PERFORMANCE COMPENSATION WE PAID IN 2018

We grant stock options annually to our executive officers to align their long-term interests with those of our stockholders by reinforcing the goal of long-term share price appreciation. These stock options will provide value to our executive officers only if the price of our common stock increases above the option exercise price. In 2018, our Compensation Committee awarded to our executive officers the following stock options that vest ratably over five years:

OUR EXECUTIVE OFFICERS’ PERFOMANCE-BASED TARGET COMPENSATION

Our target compensation mix for our CEO and our other executive officers reflects our emphasis on long-term, performance-based compensation that incentivizes our executive officers to make strategic decisions that will strengthen our business and create long-term value for our stockholders. In 2018, 87% of our CEO’s target compensation and 74% of our other executive officers’ target compensation was performance-based, as shown in the graphs below.

OUR COMPENSATION PROGRAM HIGHLIGHTS

Our compensation practices include:

Our compensation practices do not include:

STOCKHOLDER ENGAGEMENT

At our 2018 Annual Meeting, 98% of the votes cast on our say-on-pay proposal approved the compensation we paid to our executive officers. Although the say-on-pay vote is advisory and non-binding, our Compensation Committee believes this approval percentage indicates strong support for our continued efforts to enhance our pay-for-performance practices, and our Compensation Committee concluded that our stockholders endorse our current executive compensation programs and policies.

In 2018, we continued our robust stockholder engagement program and requested the opportunity to engage with stockholders holding approximately 50% of our outstanding shares. We ultimately engaged with stockholders representing 20% of our outstanding shares. We received positive feedback from the stockholders with whom we spoke regarding the structure of our compensation programs and practices, which was reflective of the strong support we received for our say-on-pay proposal over the past years. We provide reports on the stockholder feedback we receive to our Compensation Committee and Governance Committee.

COMPENSATION DECISIONS IN 2018

Our 2018 Financial Performance

We delivered solid financial results in 2018. Our reported sales for the full year increased 9% to $8.4 billion and we increased our operating profit for the full year 1% to $1.2 billion. Our sales growth was driven by our recent acquisitions of Kichler Lighting in March 2018 and Mercury Plastics in December 2017, strong consumer demand due to increased repair and remodel activity and new home construction in the U.S. and net selling price increases. Our operating profit grew despite the rising price of raw materials and logistics costs, Enterprise Resource Planning System costs and a purchase accounting adjustment related to our acquisition of Kichler Lighting, demonstrating our ability to manage our costs.

In addition to delivering sales and operating profit growth, we continued to execute on our capital allocation strategy. In 2018 we returned value to our stockholders by repurchasing $654 million in shares of our stock and increasing our annual dividend for the fifth year in a row. In addition, we deployed $549 million to complete the acquisition of Kichler Lighting.

How We Performed Against our Performance Compensation Goals

Our 2018 annual performance program was based on operating profit and working capital as a percent of sales metrics. We exceeded the working capital as a percent of sales goal for this program, but we did not achieve the operating profit target, which resulted in an overall performance percentage of 89%. As a result, consistent with our commitment to pay-for-performance, our executive officers earned cash bonuses and restricted stock awards based on this achievement (see “Our 2018 Annual Performance Program” below).

Our LTCIP for the three-year performance period of 2016 to 2018 was based on a return on invested capital (“ROIC”) metric, and we improved our ROIC over the three-year period. Our adjusted ROIC in 2016, 2017 and 2018 was 14.0%, 15.3% and 15.8% respectively, for an average adjusted ROIC of 15.0% over the three-year performance period. This level of performance exceeded the target ROIC goal for this program, and we achieved a performance percentage of 160% (see “Our Long-Term Incentive Program” below).

Our 2018 Annual Performance Program

Program Opportunities

We provide annual performance-based cash bonus and restricted stock opportunities to our executive officers to emphasize achievement of rigorous annual performance goals, provide incentive to achieve our strategic business objectives, and align our executive officers’ interests with those of our stockholders.

Our Compensation Committee establishes the cash bonus and restricted stock opportunities available to each executive officer as a percent of the officer’s annual base salary. Under our annual performance program, if the threshold goal is not achieved, our executive officers do not earn a payout. If the maximum goal is exceeded, the payout percentage is capped at 200% of the target opportunity.

Our executive officers had the following target opportunities in 2018 under our annual performance program:

In 2018, our Compensation Committee increased Mr. Allman’s restricted stock award target opportunity from 150% to 167% of his annual base salary. In making this decision, our Compensation Committee took into consideration a number of factors, including our strong earnings growth, ROIC and total shareholder return relative to our peers as well as Mr. Allman’s overall pay positioning. Our Compensation Committee determined to increase Mr. Allman’s target equity compensation opportunity to ensure his long-term interests with those of our shareholders. Neither Mr. Allman’s annual base salary or cash bonus opportunity increased in 2018.

Performance Metrics

Our Compensation Committee selected operating profit and working capital as a percent of sales metrics for our annual 2018 performance program because it believed that improvement in these metrics would continue to reinforce our executive officers’ focus on long-term growth and capital efficiency and drive stockholder value. These metrics are easily derived from our audited financial statements, which our Compensation Committee believes provides transparency both for our stockholders (as requested from stockholders when we sought feedback) and our executive officers. Our Compensation Committee gave a 75% weighting to the operating profit metric and a 25% weighting to the working capital as a percent of sales metric.

Program Targets and Achievement

In setting our performance targets, our Compensation Committee reviews our operating profit forecast for the year, taking into account general economic and industry conditions. In establishing the 2018 performance targets, it was expected there would be continued improvement in the overall economy, that consumer spending for both large and small home improvement projects and housing starts would increase in 2018 and that there would be improved performance from all of our businesses. Our Compensation Committee also expected that we would incur increasing expenses related to commodity inflation, freight and logistics.

In 2018, we achieved 72% of our operating profit target and 140% of our working capital as a percent of sales target. After weighting the operating profit metric at 75% and the working capital as a percent of sales metric at 25%, our performance percentage for the 2018 annual performance program was 89% of target.

To calculate achievement of our operating profit performance target, we adjusted our 2018 reported operating profit from continuing operations of $1,211 million to exclude the effects of expense recognized due a purchase accounting adjustment related to our acquisition of Kichler Lighting ($40 million), rationalization charges ($14 million) and other unusual non-recurring net gains and losses ($7 million). Our operating profit for purposes of the annual performance program was $1,272 million.

To determine achievement of our working capital as a percent of sales performance target, we define working capital as a percent of sales as a twelve-month average of our reported accounts receivable and inventories, less accounts payable, divided by our reported sales for the year. For 2018, our working capital as a percent of sales was 15.1%.

Compensation Paid Under the 2018 Program

We calculated the actual cash bonuses to be paid and restricted stock award values to be granted to our executive officers under the 2018 annual performance program by multiplying the target opportunities for each executive officer, by the 89% performance percentage (except for Mr. Shah; see note below) and multiplying that result by each executive officer’s base salary as of December 31, 2018, as follows: