LANDSTAR SYSTEM INC
For the period ended May 5, 2026. Filed Mar 23, 2026.
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May 5, 2026 · Filed Mar 23, 2026
Contents
Changes to Performance-Based Compensation Programs for 2026
As discussed above in the letter to stockholders from the Chairman of the Company’s Compensation Committee of the Board, the Company implemented several changes to its performance-based compensation programs in response to stockholder feedback received during the Company’s stockholder engagement efforts as well as in connection with advice and input from a newly engaged independent compensation consultant, FW Cook (more information on our engagement of FW Cook is described below under“Compensation Consultants”). These modifications to the short-term and long-term incentive compensation programs, include:
| • | Updated Annual Incentive Compensation Plan Design. For fiscal 2026, we updated the financial measure used in our annual cash incentive compensation plan from DEPS to operating income, to better align Named Executive short-term incentive compensation with other employees of the Company and to better reflect the elements of financial performance where the Named Executives have significant influence. |
| • | Updated Annual Incentive Compensation Plan Performance Thresholds. For our fiscal 2026 annual cash incentive plan design, we updated the threshold and target performance levels required for the funding and payout under our short-term incentive compensation plan, such that if operating income is more than 5% below budgeted operating income in fiscal 2026, then there will be no funding or payout pursuant to the cash incentive plan. For fiscal year 2025, the “threshold” amount of DEPS under the ICP referred to the amount of DEPS that would be required to achieve DEPS and give effect to a “one-time incentive payment”. For fiscal year 2026, the “threshold” amount of operating income under the ICP refers to 95% of the Company’s 2026 budgeted operating income, and the “target” amount of operating income under the ICP refers to the amount of operating income that would be required to achieve budgeted operating income and give effect to a “one-time incentive payment”. |
| • | Updated Performance Stock Unit Performance Measure. For fiscal 2026, we updated the financial measure used in our Performance-Based Regular RSU Awards to DEPS, from an average based on the percentage changes in operating income and pre-tax income per diluted share. We believe this change aligns the interests of recipients of these awards with our stockholders given the historical relationship between the Company’s DEPS performance and stockholder returns, while also simplifying the vesting formula and disclosure relating to these awards. |
| • | Updated Performance Stock Unit Performance Hurdle. For fiscal 2026, in conjunction with the change in the performance measure used to determine vesting, we also updated the applicable Performance Hurdle. For Performance-Based Regular RSU Awards granted in 2026, the Performance Hurdle means the positive percentage change in DEPS from continuing operations, from the most recently completed fiscal year as compared to the results from continuing operations for the base year (as may be adjusted for certain discrete items), and is as set forth in the chart below, with linear interpolation between Performance Hurdles: |
The changes in the financial measure and Performance Hurdle used in our Performance-Based Regular RSU Awards are, together, intended to better reflect prevailing market conditions amongst our publicly-traded freight transportation peers, and more generally, in the broader freight transportation sector.
Landstar System, Inc. 2026 Proxy Statement 49
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