MARTIN MARIETTA MATERIALS INC
For the period ended May 16, 2024. Filed Apr 15, 2024.
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May 16, 2024 · Filed Apr 15, 2024
Contents
Proxy Statement Highlights
Shareholders Benefit from Martin Marietta’s Record 2023 Performance
This summary provides highlights of selected information about Martin Marietta Materials, Inc. (the Company, Martin Marietta, we or us) from this Proxy Statement. The Board of Directors is providing the Notice of 2024 Annual Meeting of Shareholders, this Proxy Statement and Proxy Card (the Proxy Materials) in connection with the Company’s solicitation of proxies for the 2024 Annual Meeting (the Annual Meeting) to be held on May 16, 2024, and at any adjournment or postponement thereof.
This proxy summary highlights information contained elsewhere in our Proxy Statement. The summary does not contain all the information that you should consider, and we encourage you to read the entire Proxy Statement before voting.
2023 Safety & Financial Highlights from Continuing Operations
| • | Southwest and East Divisions outperformed world class with Total Injury Incident Rates (TIIRs) of 0.63 and 0.69, respectively |
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| • | Achieved word-class TIIR for the 3rd consecutive year with companywide TIIR of 0.78 |
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| • | 99.9% of employees experienced zero lost-time incidents |
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| • | Net Earnings from Continuing Operations Attributable to Martin Marietta increased by more than 40% |
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| • | Adjusted EBITDA increased 33%, surpassing $2.1 billion |
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| • | Achieved 41% growth of diluted EPS from continuing operations to $19.32 |
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| • | Grew aggregates gross profit per ton by 46% to $6.93 |
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| • | Delivered Total Shareholder Return of 49% vs. the S&P 500 of 26% |
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*Adjusted EBITDA, Adjusted EBITDA margin and Net Leverage are not measures under generally accepted accounting principles in the United States (GAAP). Please see Appendix B for a reconciliation ofnon-GAAP measures to GAAP measures and other disclosures related to the presentation of Non-GAAP measures.
+Dollar amounts and adjusted EBITDA margin metrics represent records and are based on continuing operations only.
1 Net Margin is defined as the ratio between Net Earnings from Continuing Operations Attributable to Martin Marietta and Total Revenues.
RECORD FINANCIALPERFORMANCE TOTAL REVENUES $6.78 B +10% NET EARNINGS FROM CONTINUINGOPERATIONS ATTRIBUTABLE TOMARTIN MARIETTA $1.20 B +40% ADJUSTED EBITDA*+ $2.13 B +33% NET MARGIN1 17.7% +380 bps ADJUSTED EBITDA MARGIN*+ 31.4% +540 bps
DILUTED EPS FROM CONTINUINGOPERATIONS $19.32 +41% CASH FROM OPERATIONS $1.53 B +54% NET LEVERAGE AT DEC. 31, 2023* 1.44x
| Proposal 1 | Election of 10 Directors The Board recommends a vote FOR each of the Directors | See pages 25 for more information |
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| Proposal 2 | Ratification of the Appointment of PricewaterhouseCoopers LLP as our Independent Auditors for 2024 The Board recommends a vote FOR ratification of PricewaterhouseCoopers for 2024 | See pages 39 for more information |
| Proposal 3 | Advisory Vote to Approve the Compensation of our Named Executive Officers The Board recommends a vote FOR our Say-On-Pay proposal | See page 89 for more information |
Measuring our Performance
World-Class Safety We are committed to our Guardian Angel safety culture where Zero is Possible, and achieved a world-class lost-time incident rate (LTIR) for the seventh-consecutive year (0.13 in 2023). With a company-wide Total Injury Incident Rate (TIIR) of 0.78, we exceeded the world-class rate of 0.90 for the third-consecutive year.
| 1 | Dollar amounts and adjusted EBITDA margin metrics represent records and are based on continuing operations only. |
| 2 | Net Leverage is as of December 31, 2023. |
- Adjusted EBITDA, Adjusted EBITDA Margin and Net Leverage arenon-GAAP measures. Please see Appendix B for a reconciliation ofnon-GAAP measures to GAAP measures.
2 2024 PROXY STATEMENT
Execution of Strategic Plan Our strategic plan, inclusive of targeted platform and bolt-on acquisitions, has resulted in best-in-class short- and long-term shareholder returns and has given us a meaningful presence in ten of the 11 U.S. megaregions, large networks of metropolitan population centers covering thousands of square miles.
Creation of Long-Term Value Our accomplishments in 2023 and execution of our strategic plan have helped position the Company for continued long-term success and are a testament to our team’s commitment to Martin Marietta’s vision and strategic priorities
Commitment to Sustainability Sustainability is part of our culture, including operating in an environmentally responsible manner
2050 Net Zero ambition with strong 2030 commitments Martin Marietta has an ambition to be Net Zero by 2050 across our entire value chain. We have made a commitment to reduce the intensity of our Scope 1 CO2e process emissions from our heritage cement operations as compared to 2010 levels by 2030. We have made a commitment to reduce the intensity of our Scope 1 CO2e process emissions from our magnesia specialties business as compared to 2010 levels by 2030. We have made a commitment to reduce or offset 30% of our Scope 2 CO2e emissions by 2030 with a baseline year of 2021 and a goal of Net Zero Scope 2 emissions by 2050.1 In 2023, we expanded our Net Zero goals to include a Net Zero by 2050 ambition for our Scope 1 emissions.
Strategy As outlined in our Sustainability Report, Martin Marietta has a roadmap for achieving its sustainability goals including our ambitions and commitments. We seek ways to create lower carbon products. We have a growing recycled aggregates business in Texas, Minnesota and California. We are invested in our Magnesia Specialties business which produces magnesia-based products that help our customers reduce their harmful air emissions and chemical usage, as well as help purify water and neutralize nuclear waste among other applications. Our Management Development and Compensation Committee reviews management’s performance with regard to its sustainability goals and considers those achievements in determining incentive pay.
Resilience We review physical and transition climate risks and the impact on the business of various climate scenarios and opportunities. We disclose those risks and the materiality of those potential impacts in our Annual Report. Our risk management process and sustainability oversight structure allow the Board and management to address and manage climate risks in the same manner as other material risks to the Company.
Collaboration We actively participate in a dialogue to reduce emissions and the related impact on climate change. We participate in working groups both at the Portland Cement Association (PCA) and National Ready Mixed Concrete Association to evaluate the feasibility and/or opportunity associated with PCA’s 2050 “Net Zero Roadmap,” along with other developments relevant to commercial-scale carbon capture and storage (CCS) technologies that we anticipate being considered by the industry in the coming years. We work with Fortera, a Silicon Valley-based materials technology company, that is permitting and constructing a pilot carbon capture plant and determining the feasibility of this technology at other locations.
| 1 | Facilities in most source categories subject to the United States Environmental Protection Agency’s (USEPA’s) Greenhouse Gas Reporting Program (codified at 40 CFR Part 98), including cement production, began reporting emissions in 2010. Thus, we believe 2010 is a year with reliable and comparable data across a wide range of facilities in the U.S. Our Scope 1 CO2e emissions intensity associated with our cement operations in 2010 was 0.836. Notably, when we announced our 2030 emissions reduction targets in 2019, as described above, we took into account that we have been investing heavily over the past decade to reduce our cement and magnesia emissions, which is reflected in our favorable CO2e intensity performance relative to the U.S. cement industry average. We also believe this has allowed us to achieve significant environmental benefits from reduced emissions well ahead of many other operators in the industry and will position us not only to achieve our targets but to be in a good position to evaluate additional actions in the future. |
4 2024 PROXY STATEMENT
Board Oversight of Risk Management
Our Board currently has nine independent members and only onenon-independent member, Mr. Nye. A number of our independent Board members are serving or have served as members of senior management of other public companies, have served as directors of other public companies, and otherwise have experience and/or educational backgrounds that we believe qualify them to effectively assess risk. Each of our Board Committees, including our Audit, Management Development and Compensation, and Nominating and Corporate Governance Committees, are comprised solely of independent Directors, each with a different independent Director serving as Chair of the Committee (other than the Executive Committee, which does not meet on a regular basis).
The Board has overall responsibility for oversight of risk management. The Board believes that an effective risk management system will accomplish the following goals:
The Board delegates certain responsibilities to the Committees to assist in fulfilling its risk oversight responsibilities. Each of the Committees reports regularly to the full Board of Directors as to actions taken and topics discussed. In addition, the Board regularly reviews with management the most significant risks facing Martin Marietta, the probabilities of those risks occurring, the steps taken to mitigate any impact of risks, and management’s general risk management strategy. This risk management approach includes consideration of risks and opportunities relating to climate change, sustainability and other ESG matters. In addition, the Board encourages management to promote a corporate culture that incorporates risk management into Martin Marietta’s day-to-day operations.
6 2024 PROXY STATEMENT
Our Sustainability Governance
Our Board plays an essential role in determining strategic priorities and considers sustainability issues an integral part of its business oversight. Our Corporate Governance Guidelines, set forth a flexible framework within which the Board, assisted by its Committees, directs the affairs of Martin Marietta.
Board of Directors
Provides oversight of sustainability issues for the Company. • Receives a report from each of the Committees on its work relating to sustainability matters. • Engages in strategic review and risk assessments which also includes management’s sustainability goals, our performance relating to sustainability and our engagement with investors with regard to sustainability matters.
Ethics, Environment, Safety and Health Committee
Established in 1994 and meets at least four times annually. • Comprised wholly of independent directors, whose members are diverse and have relevant expertise to provide appropriate oversight in helping us achieve sustainable growth and reduce our risks. • Reviews our Sustainability Report and our sustainability performance commitments and goals, including those relating to climate change, as well as capital investments and improved practices that reduce greenhouse gas (GHG) and other emissions. • Reviews the input we have received from, and our engagement with, investors on climate, sustainability and other ESG matters. • Monitors our safety performance, Ethics Office activity and compliance with environmental, health and safety laws and regulations, as well as our public reporting and disclosure with respect to climate change-related risks and opportunities and other environmental issues. • Has the authority to investigate any matter falling within its purview.
Management Development and Compensation Committee
Reviews matters relating to human capital management, diversity, equity and inclusion (DEI), talent acquisition and retention, and compensation matters related thereto. • Reviews management’s performance with regard to its sustainability goals and considers those achievements in determining incentive pay.
Audit Committee
Reviews our significant environmental matters and assesses the potential risks and liabilities they may pose to our business.
Finance Committee
Reviews large capital projects relating to sustainability and growth. • Oversees our policies and practices relating to political contributions and political activities, including lobbying and/or trade associations of which we are a member, and expenditures. • Reviews and approves charitable contributions and community support budgets.
Nominating and Corporate Governance Committee
Oversees the development and implementation of a set of corporate governance principles applicable to Martin Marietta • Oversees the review and implementation of best practices in corporate governance matters affecting the Board, its Committees and the Company.
Management
The Chair and CEO, as well as the executive leadership team, guides and governs corporate-wide sustainability objectives and initiatives. • Our dedicated employees help drive performance of our sustainability agenda, including: ○ Chief Ethics Officer ○ Head of Sustainability ○ Inclusion and Engagement Task Force ○ Head of Inclusion and Engagement ○ Safety teams ○ Environmental managers
8 2024 PROXY STATEMENT
Our Board Practices Promote Sustainable Long-Term Shareholder Value
Corporate Governance Highlights
| Our Board is accountable to our shareholders • Annual election of Directors • Majority voting for uncontested Director elections • Proxy access right for shareholders • No poison pill • Disclosure of governance processes implemented by the Board and its committees Our Board is responsive to our shareholders and is proactive to understand their perspectives • Proactive, year-round engagement with shareholders • Engagement topics include Board refreshment, environmental, social and governance (ESG) matters, management compensation, and Board and management diversity Our shareholders are entitled to voting rights in proportion to their economic interest • One class of voting stock • One share, one vote standard | Our Board adopted practices that enhance its effectiveness • 9 of 10 Directors are independent • 4 of our Director Nominees are women comprising 44% of our independent directors and nominees • 2 of our Directors are ethnically diverse • Significant Board refreshment with 8 new director nominees in the past 9 years • Directors reflect a diverse mix of skills and experience • Annual Board, committee and individual self-assessments • Board access to management and employees • Overboarding, anti-hedging and stock ownership policies | |
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| Our Board has strong, independent leadership • Independent Lead Director • Annual review of Board leadership structure • Independent chairs of Board committees • Only one Director is a Company employee Our Board has developed a management compensation structure that is aligned with the long-term strategy of the company • Compensation programs reviewed to include short-and long-term goals tied to the long-range plan and to attract, retain, incentivize and reward excellent performance |
Board Composition and Effectiveness
We seek to include a diverse group of Directors on our Board to provide different perspectives to the Board’s oversight responsibilities. Our Directors demonstrate diversity in the form of experience, geography, gender, ethnicity, age and tenure.
| 4 | Women represent 4 of our Nominees comprising 44% of our independent director nominees |
| 2 | Racially and ethnically diverse – 1 Board members is African American and 1 Board member is Hispanic |
| 50% | 50% of our Director nominees bring diversity in gender or ethnicity |
| 8.5 years | The average tenure of our Director Nominees is 8.5 years |
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Practices Contributing to Board Effectiveness
| • | Identification of diverse Board candidates |
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| • | Meaningful refreshment |
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| • | Rotation of Board committee assignments based on experience and expertise |
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| • | Robust onboarding |
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| • | Tenure and overboarding guidelines |
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| • | Our Board refreshment has resulted in a decrease of the Board’s average tenure, with a greater mix of Directors with long-term knowledge of the Company, its strategy, opportunities and challenges, and those with new perspectives |
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Director Nominees
Board Attendance
In 2023, during their terms of service, all directors attended 100% of the Board meetings and all directors attended at least 75% of the committee meetings to which they were assigned. All directors then in office attended the May 2023 Annual Meeting.
10 2024 PROXY STATEMENT
Effective Shareholder Engagement
| Avenues of engagement | Discussion highlights | |
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| We hold in-person and/or virtual meetings with investor groups across the globe | › Company strategy, including acquisitions and divestitures › Financial and operating performance › Commercial and operational excellence goals › Safety, environment and sustainability › Inclusion and engagement efforts › Board oversight, refreshment and diversity › Executive compensation | |
| We conduct quarterly conference calls with analysts | ||
| We engage with investors continually through meetings, calls, written correspondence, and emails | ||
| We report investor feedback to the Management Development and Compensation Committee and the Board to assist in aligning pay and performance | ||
| We implemented a formal Fall Engagement Program |
Our Board, Management Development and Compensation Committee, Chair and Chief Executive Officer alongside our top executive management team from Legal, Finance, Human Resources and Investor Relations have a robust shareholder engagement program in place. This program is active year-round and accepts requests for engagement from shareholders and proactively reaches out to initiate dialogue with our shareholders on topics that are important to the Company.
The shareholder engagement team described above embarked on a comprehensive engagement effort in connection with our 2023 Annual Meeting of Shareholders, which included a shareholder proposal on the establishment within a year of greenhouse gas (GHG) reduction targets (GHG Proposal) and a lower than expected advisory vote on executive compensation (Say On Pay), reaching out to over 30 of our top shareholders, representing approximately 64% of outstanding shares for their feedback in regard to our executive compensation and our sustainability goals and actions. We continued those discussions throughout the year and commenced a Fall Engagement Program in October 2023 to discuss actions that the Management Development and Compensation Committee had taken in response to initial shareholder feedback and to ensure that any actionable feedback could be better incorporated into Management Development and Compensation Committee discussions and decisions for fiscal 2023 and beyond and to gauge the responsiveness of our efforts with respect to climate-related matters. As part of our Fall Engagement Program, we reached out to over 40 of our top shareholders, representing approximately 66% of our outstanding shares on the same matters and other topics.
In connection with our lower than expected Say On Pay vote, the following table describes shareholder feedback (“What We Heard”), our actions (“What We Did”) and the impact of the actions (“Why This is Important”) in connection with shareholder feedback regarding our Say On Pay vote.
| Shareholder Feedback (“What We Heard”) | Action (“What We Did”) | Impact of Action (“Why This is Important”) | |
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| Short Term Incentive (STI) | No concern with overall program and link to performance; desires a more formulaic plan and additional disclosure regarding performance metrics and applicable weightings. | In light of shareholder feedback and our lower than usual Say On Pay approval, a formulaic program was adopted for 2023 STI awards with the following features: • 80% is based on achievement of financial metrics (50% Adjusted Cash Gross Profit and 30% SG&A as a Percentage of Total Revenue) • 20% is based on achievement of safety and ESG metrics • An assessment of individual performance may provide for an adjustment of +/-20% | ✓ Provides a strong link between pay and performance ✓ Reduces discretion ✓ Improves disclosure |
| Long Term Incentive – Vested Awards | Recognized that the targets and formula were disclosed; no concern with program. | In addition to disclosure of targets, the Threshold and Maximum goals are also disclosed. | ✓ Improves disclosure ✓ Provides greater comparability |
| Long Term Incentive – Future Awards | Recognized that disclosure of forward-looking performance metrics is competitively sensitive and satisfied with disclosure at vesting. | Performance metrics will continue to be disclosed following vesting of the awards. | ✓ Balances disclosure needs of shareholders with the risk of competitive harm through disclosure of forward-looking performance metrics |
12 2024 PROXY STATEMENT
In addition, in connection with the GHG Proposal, which received 32% support from our shareholders, we engaged with the holders of almost 70% of our shares regarding the request even though we opposed the shareholder proposal for the reasons provided in our 2023 Proxy Statement. We took the following actions to be responsive to their feedback.
We also have a history of robust shareholder responsiveness. In prior years, we have made other meaningful changes to our compensation program based on feedback from shareholders including:
| • | The elimination of the excise tax gross-up in executive officers’ Employment Protection Agreements |
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| • | The elimination of the walk-right and value of perks in the severance calculation in executive officers’ Employment Protection Agreements |
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The decision to not include these provisions in future Employment Protection Agreements
| • | The elimination of the single-trigger vesting for equity awards beginning in 2019 |
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Proactively Engaging and Responding to Shareholders
Shareholder Governance Highlights:
| Majority voting standard for uncontested Director elections | Annual advisory vote to approve executive compensation |
| Longstanding active shareholder engagement | Annual Sustainability Report that provides information on our environmental footprint, safety record and community engagement • Created a new position to better focus on these important issues • Our Board committees review the Company’s goals and accomplishments with regard to sustainability |
| Annual advisory vote to ratify independent auditor | |
| No shares with enhanced voting rights | Updated Board Committee Charters for ESG matters, Diversity, Engagement and Inclusion, and Political Contributions |
14 2024 PROXY STATEMENT
Our Commitment to Our People and Pay-for-Performance
In 2023, we advanced our initiatives relating to employee inclusion and engagement
| ✓ | Completed a companywide inclusion and engagement awareness communications campaign to help managers and employees understand the criticality of inclusion and engagement and how inclusion and engagement are already ingrained in Martin Marietta’s culture and values. The campaign highlighted that ensuring we maintain an inclusive and engaging culture will enhance the Company’s competitive advantage. |
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| ✓ | Successfully launched Martin Marietta’s first three Employee Resource Groups: |
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- Military and Veterans Community (MVC) - Women Who Build (WWB) - MERGE (a Multi-Cultural ERG)
| ✓ | Created and filled a new Employee Engagement Manager position to support companywide inclusion and engagement programs. |
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Our Compensation Approach and Highlights
A substantial portion of compensation paid to our named executive officers (NEOs) is variable and performance-based. We use the 50th percentile of our peer group as a reference point when determining target compensation, but target pay is set based on a variety of factors and actual pay realized by our NEOs is dependent on our financial, operational and other related performance. Based on our record levels of performance in 2023, variable compensation payable under both our short-term and long-term incentive plans exceeded the target amounts established for each NEO, which is consistent with ourpay-for-performance philosophy. All compensation paid to our CEO and other NEOs for 2023 was performance-based other than base salary; approximately 90% of our CEO’s compensation was performance-based and 79% of our other NEOs’ actual compensation was performance based.*
- Based on grant date value of Performance Share Units (PSUs) and Restricted Stock Units (RSUs).
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.