Table of Contents

 

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  x

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

o

Preliminary Proxy Statement

o

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

Definitive Proxy Statement

o

Definitive Additional Materials

o

Soliciting Material under §240.14a-12

 

Matson, Inc.

(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):

x

No fee required.

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

o

Fee paid previously with preliminary materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 



Table of Contents

 

GRAPHIC

 

Matson, Inc.

 

1411 Sand Island Parkway, Honolulu, Hawaii 96819

 

March 13, 2017

 

To the Shareholders of Matson, Inc.:

 

You are invited to attend the 2017 Annual Meeting of Shareholders of Matson, Inc. (“Matson” or the “Company”), to be held in the Bankers Club on the 30th Floor of the First Hawaiian Center, 999 Bishop Street, Honolulu, Hawaii, on Thursday, April 27, 2017 at 8:30 a.m., Hawaii Standard Time.  At the meeting, we will have the opportunity to discuss the Company’s financial performance during 2016, and our future plans and expectations.

 

We have elected to provide access to our proxy materials over the internet under the Securities and Exchange Commission’s “notice and access” rules.  On or around March 13, 2017, we expect to distribute to our shareholders either (i) a copy of our proxy statement, the accompanying proxy card and our annual report, or (ii) the Notice of Internet Availability of Proxy Materials (the “Notice”) only.  The Notice contains instructions for how to access our proxy statement and annual report over the Internet and how to request a paper copy of the proxy statement and annual report.

 

Your vote is important—no matter how many or how few shares you may own.  Whether or not you plan to attend the Annual Meeting, please read the proxy statement and vote as soon as possible.  You may vote via the Internet, by telephone or, if you receive printed proxy materials, by mailing a proxy card.  Instructions for Internet and telephone voting are included in your proxy card and the proxy statement (if you receive your materials by mail).  Any shareholder attending the Annual Meeting may vote in person even if a proxy has been returned.

 

Thank you for your continued support of Matson.

 

 

Sincerely,

 

 

 

 

 

 

MATTHEW J. COX

 

President and Chief Executive Officer

 



Table of Contents

 

GRAPHIC

 

Matson, Inc.

 

1411 Sand Island Parkway, Honolulu, Hawaii 96819

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

The Annual Meeting of Shareholders of Matson, Inc. will be held in the Bankers Club on the 30th Floor of the First Hawaiian Center, 999 Bishop Street, Honolulu, Hawaii, on Thursday, April 27, 2017 at 8:30 a.m., Hawaii Standard Time, to:

 

1.                                      Elect the seven directors named in the proxy statement to serve until the next Annual Meeting of Shareholders and until their successors are duly elected and qualified;

 

2.                                      Approve, on an advisory basis, executive compensation;

 

3.                                      Approve, on an advisory basis, the frequency of advisory votes on executive compensation;

 

4.                                      Ratify the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the year ending December 31, 2017; and

 

5.                                      Transact such other business as properly may be brought before the meeting or any adjournment or postponement thereof.

 

The Board of Directors has set the close of business on February 21, 2017 as the record date for the meeting.  Owners of Matson, Inc. stock at the close of business on that date are entitled to receive notice of and to vote at the meeting.  Shareholders will be asked at the meeting to present valid photo identification.  Shareholders holding stock in brokerage accounts must present a copy of a brokerage statement reflecting stock ownership as of the record date.

 

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.  WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY VOTE VIA THE INTERNET OR BY TELEPHONE, OR IF YOU RECEIVE PRINTED PROXY MATERIALS, BY MAILING THE PROXY CARD.

 

 

By Order of the Board of Directors,

 

 

 

GRAPHIC

 

PETER T. HEILMANN

 

Senior Vice President, Chief Legal Officer and Corporate Secretary

March 13, 2017

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE SHAREHOLDER MEETING TO BE HELD ON APRIL 27, 2017

The Notice of Annual Meeting of Shareholders, Proxy Statement and the

Annual Report to Shareholders are available at www.proxyvote.com.

 



Table of Contents

 

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

1

PROPOSAL 1 — ELECTION OF DIRECTORS

6

CORPORATE GOVERNANCE

10

Director Independence

10

Board Leadership Structure

10

The Board’s Role in Risk Oversight

11

Pay Risk Assessment

11

Board of Directors and Committees of the Board

11

Nominating and Corporate Governance Committee Processes

12

Corporate Governance Guidelines

13

Compensation of Directors

14

Director Share Ownership Guidelines

15

Communications with Directors

15

SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS

15

CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS

17

Security Ownership of Directors and Executive Officers

17

Section 16(a) Beneficial Ownership Reporting Compliance

17

Certain Relationships and Transactions

17

Code of Ethics

18

Code of Conduct

18

Executive Officers

18

EXECUTIVE COMPENSATION

20

Compensation Discussion and Analysis

20

Compensation Committee Report

31

Compensation Committee Interlocks and Insider Participation

31

Summary Compensation Table

31

Grants of Plan-Based Awards

32

Outstanding Equity Awards at Fiscal Year End

34

Option Exercises and Stock Vested

34

Pension Benefits

35

Non-Qualified Deferred Compensation

36

Other Potential Post-Employment Payments

36

PROPOSAL 2 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

41

PROPOSAL 3 — ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION

42

Equity Compensation Plan Information

42

AUDIT COMMITTEE REPORT

42

PROPOSAL 4 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

43

OTHER BUSINESS

44

SHAREHOLDER PROPOSALS FOR 2018

44

SHAREHOLDERS WITH THE SAME ADDRESS

44

COPIES OF ANNUAL REPORT ON FORM 10-K

45

 



Table of Contents

 

GRAPHIC

 

Matson, Inc.

 

1411 Sand Island Parkway, Honolulu, Hawaii 96819

 

PROXY STATEMENT

 

Annual Meeting of Shareholders

Thursday, April 27, 2017

 

The Board of Directors (the “Board of Directors” or the “Board”) of Matson, Inc. (“Matson” or the “Company”) is soliciting your proxy to vote at the 2017 Annual Meeting of Shareholders to be held on Thursday, April 27, 2017 at 8:30 a.m., Hawaii Standard Time, and any adjournment or postponement of that meeting (the “Annual Meeting”).  The Annual Meeting will be held at the Bankers Club on the 30th Floor of the First Hawaiian Center, 999 Bishop Street, Honolulu, Hawaii.  This Proxy Statement and the accompanying proxy card and Notice of Annual Meeting of Shareholders were first mailed or otherwise made available, on or about March 13, 2017, to shareholders of record as of February 21, 2017, the record date for the Annual Meeting.

 

In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (“SEC”), instead of mailing a printed copy of our proxy materials to each shareholder of record, we are furnishing proxy materials on the Internet.  On or around March 13, 2017, we mailed to our shareholders (other than to certain registered holders, certain street name shareholders, or those who previously requested electronic or paper delivery) a Notice of Internet Availability of Proxy Materials, which contains instructions as to how you may access and review on the Internet all of our proxy materials, including this Proxy Statement and our annual report.  The Notice of Internet Availability of Proxy Materials also instructs you as to how you may vote your proxy on the Internet.  If you would prefer to receive printed proxy materials, please follow the instructions for requesting printed materials contained in the Notice of Internet Availability of Proxy Materials.  This process is designed to expedite shareholders’ receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources.

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

 

Who may attend the Annual Meeting?

 

All shareholders are invited to attend the Annual Meeting.  If you are the beneficial owner of shares held in the name of your broker, bank or other nominee, you must bring proof of ownership (e.g., a current broker’s statement) in order to be admitted to the Annual Meeting.

 

Who is entitled to vote at the Annual Meeting?

 

You are entitled to receive notice of, and to vote at, the Annual Meeting if you own shares of Matson common stock at the close of business on February 21, 2017, the record date for the Annual Meeting.  At the close of business on the record date, there were 43,119,933 shares of Matson common stock issued and outstanding.  Each share of common stock is entitled to one vote on each matter to be voted on at the Annual Meeting.

 

What matters will be voted on at the Annual Meeting?

 

There are four proposals scheduled to be considered and voted on at the Annual Meeting:

 

·                  Election of seven directors;

 

·                  Advisory vote to approve executive compensation;

 

1



Table of Contents

 

·                  Advisory vote on the frequency of advisory votes on executive compensation; and

 

·                  Ratification of appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2017.

 

What are the Board’s voting recommendations?

 

The Board recommends that you vote as follows:

 

·                  “FOR” each of the seven nominees for director;

 

·                  “FOR” the approval, on an advisory basis, of our executive compensation;

 

·                  to hold future shareholder advisory votes on the compensation of our named executive officers every ONE YEAR; and

 

·                  “FOR” the ratification of the appointment of our independent registered public accounting firm for the year ending December 31, 2017.

 

How do I vote by proxy before the Annual Meeting?

 

If you are a shareholder of record, you may submit a proxy by telephone, via the Internet or by mail.

 

·                  Submitting a Proxy by Telephone: You can submit a proxy for your shares by telephone until 11:59 p.m. Eastern Daylight Time (5:59 p.m. Hawaii Standard Time), on April 26, 2017, by calling 1-800-690-6903.  Telephone proxy submission is available 24 hours a day.  Easy-to-follow voice prompts allow you to submit a proxy for your shares and confirm that your instructions have been properly recorded.  Our telephone proxy submission procedures are designed to authenticate shareholders by using individual control numbers.

 

·                  Submitting a Proxy via the Internet: You can submit a proxy via the Internet until 11:59 p.m. Eastern Daylight Time (5:59 p.m. Hawaii Standard Time), on April 26, 2017, by accessing www.proxyvote.com and following the instructions you will find on the website.  Internet proxy submission is available 24 hours a day.  As with telephone proxy submission, you will be given the opportunity to confirm that your instructions have been properly recorded.

 

·                  Submitting a Proxy by Mail: If you choose to submit a proxy by mail, simply mark your proxy card, date and sign it, and return it in the postage paid envelope provided with the proxy card to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717.

 

By casting your vote in any of the three ways listed above, you are authorizing the individuals listed on the proxy to vote your shares in accordance with your instructions.  You may also attend the Annual Meeting and vote in person.

 

If you are a “street name” holder, you must provide instructions on voting to your broker, bank, trust or other nominee holder.

 

What is the difference between a “shareholder of record” and a “street name” holder?

 

These terms describe how your shares are held.  If your shares are registered directly in your name with our independent transfer agent and registrar, Computershare Shareowner Services LLC, you are a “shareholder of record.”  If your shares are held in the name of a brokerage, bank, trust or other nominee as a custodian, you are a “street name” holder and you are considered the “beneficial owner” of the shares.  As the beneficial owner of shares, you have the right to direct your broker, trustee or nominee how to vote your shares, and you will receive separate instructions from your broker, bank or other holder of record describing how to vote your shares.

 

2



Table of Contents

 

How many proxy cards might I receive?

 

You could receive multiple proxy cards if you hold your shares in different ways (e.g., joint tenancy, trusts and custodial accounts) or in multiple accounts.  If your shares are held in “street name,” you will receive your proxy card or other voting information from your broker, bank, trust or other nominee, and you will return your proxy card or cards to such broker, bank, trust or other nominee.  You should complete and sign each proxy card you receive, unless you are a “shareholder of record” and you elect to vote by telephone or via the Internet.

 

Can I vote my shares in person at the Annual Meeting?

 

Yes.  If you decide to join us in person at the Annual Meeting and you are a “shareholder of record,” you may vote your shares in person at the Annual Meeting.  If you hold your shares as a “street name” holder and wish to vote in person at the Annual Meeting, you must obtain a legal proxy from your broker, bank, trust or other nominee, giving you the right to vote the shares at the Annual Meeting.  You will be unable to vote your shares at the Annual Meeting without a legal proxy.

 

Can I revoke my proxy or change my vote after I have submitted a proxy?

 

You may revoke your proxy or change your vote at any time before it is exercised by:

 

·                  delivering to the Corporate Secretary a written notice of revocation, dated later than the proxy, before the vote is taken at the Annual Meeting;

 

·                  delivering to the Corporate Secretary an executed proxy bearing a later date, before the vote is taken at the Annual Meeting;

 

·                  submitting a proxy on a later date by telephone or via the Internet (only your last telephone or Internet proxy will be counted), before 11:59 p.m. Eastern Daylight Time (5:59 p.m. Hawaii Standard Time), on April 26, 2017; or

 

·                  attending the Annual Meeting and voting in person (your attendance at the Annual Meeting, in and of itself, will not revoke the proxy).

 

Any written notice of revocation, or later dated proxy, should be delivered to:

 

Peter T. Heilmann

Corporate Secretary

Matson, Inc.

555 12th Street

Oakland, California 94607

(510) 628-4000

 

Alternatively, you may hand deliver a written revocation notice, or a later dated proxy, to the Corporate Secretary at the Annual Meeting before we begin voting.

 

If your shares are held by a bank, broker or other nominee, you must follow the instructions provided by the bank, broker or other nominee if you wish to revoke your proxy or change your vote.

 

What constitutes a quorum for the Annual Meeting?

 

In order to take action on the proposals at the Annual Meeting, a quorum, consisting of a majority of the outstanding shares entitled to vote as of the record date, must be present in person or by proxy.  Abstentions and broker non-votes will be counted as shares that are present for purposes of determining quorum.

 

3



Table of Contents

 

What are the voting requirements for each of the proposals?

 

Provided a quorum is present:

 

Proposal 1 — Election of Directors: Directors will be elected by a plurality of the votes cast by the shares entitled to vote in the election of directors.  A “plurality” voting standard means that the seven nominees who receive the most “for” votes cast will be elected as directors.  As discussed below in the section “Corporate Governance—Corporate Governance Guidelines” below, the Company has a “plurality plus” policy in uncontested director elections.

 

Proposal 2 — Advisory vote to approve Executive Compensation: The affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting is required to approve the advisory vote to approve executive compensation.

 

Proposal 3 Advisory Vote on the Frequency of Advisory Votes on Executive Compensation: The option of one year, two years or three years that receives the highest number of votes cast will be the frequency of the vote on the compensation of our named executive officers that has been approved by shareholders on an advisory basis..

 

Proposal 4 — Ratification of the appointment of Deloitte and Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017: The affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting is required to ratify the appointment of the Company’s independent registered public accounting firm.

 

What is a broker “non-vote”?

 

A broker “non-vote” occurs when a broker or other nominee who holds shares for a beneficial owner is unable to vote those shares for the beneficial owner because the broker or other nominee does not have discretionary voting power for the proposal and has not received voting instructions from the beneficial owner of the shares.  Brokers will have discretionary voting power to vote shares for which no voting instructions have been provided by the beneficial owner only with respect to the proposal to ratify the appointment of the Company’s independent registered public accounting firm.  Brokers will not have such discretionary voting power to vote shares with respect to the election of directors, the advisory vote to approve executive compensation, or the advisory vote on the frequency of advisory votes on executive compensation.

 

How will abstentions and broker non-votes affect the votes?

 

Abstentions and broker non-votes will have no effect on the voting results for any matter, as they are not considered to be votes cast.

 

How will my shares be voted if I give my proxy but do not specify how my shares should be voted?

 

If you provide specific voting instructions, your shares will be voted at the Annual Meeting in accordance with your instructions.  If you hold shares in your name and sign and return a proxy card without giving specific voting instructions, your shares will be voted “FOR” each of the director nominees named in this proxy statement, “FOR” on Proposals 2 and 4 and “ONE YEAR” on Proposal 3, in accordance with the Board’s recommendations.

 

Who will count the votes?

 

At the Annual Meeting, votes will be counted by an election inspector from the Company.  Such inspector will be present at the Annual Meeting to process the votes cast by our shareholders, make a report of inspection, count the votes cast by our shareholders and certify as to the number of votes cast on each proposal.

 

Who will conduct the proxy solicitation and how much will it cost?

 

We are soliciting proxies from shareholders on behalf of our Board and will pay for all costs incurred by it in connection with the solicitation.  In addition to solicitation by mail, the directors, officers and employees of Matson and its subsidiaries may solicit proxies from shareholders in person or by telephone, facsimile or email without additional compensation other than reimbursement for their actual expenses.

 

4



Table of Contents

 

We have retained Alliance Advisors, a proxy solicitation firm, to assist us in the solicitation of proxies for the Annual Meeting.  We will pay Alliance Advisors a fee of approximately $5,500 and reimburse the firm for reasonable out-of-pocket expenses.

 

Arrangements also will be made with brokerage firms and other custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of record by such persons, and we will reimburse such custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in connection with the forwarding of solicitation materials to the beneficial owners of our stock.

 

Where can I find the voting results of the Annual Meeting?

 

We will announce preliminary voting results at the Annual Meeting and publish final results on a Form 8-K filed with the SEC within four business days after the Annual Meeting.

 

If you have any questions about voting your shares or attending the Annual Meeting, please call our Corporate Secretary at (510) 628-4000 or Alliance Advisors toll free at (855)-723-7816.

 

5



Table of Contents

 

PROPOSAL 1 — ELECTION OF DIRECTORS

 

The number of directors is currently fixed at eight.  Walter A. Dods, Jr., having reached the mandatory retirement age under the Company’s Bylaws, is not standing for reelection at the 2017 Annual Meeting.  As a result of Mr. Dods’ retirement, effective on the date of the 2017 Annual Meeting, the size of the Board will be reduced to seven members.  Our Board extends its gratitude to Mr. Dods for his invaluable leadership and dedication.  If elected, each Director nominee will serve until the next Annual Meeting of Shareholders and until his or her successor is duly elected and qualified.

 

Director Nominees and Qualification of Directors

 

The nominees of the Board of Directors are the seven persons named below, all of whom currently are members of the Board of Directors.  The Board of Directors believes that all nominees will be able to serve.  However, if any nominee should decline or become unable to serve for any reason, the proxy holder will vote your shares to approve the election of any replacement nominee proposed by the Board of Directors or just for the remaining nominees, leaving a vacancy. Alternatively, the Board of Directors may reduce the size of the Board.

 

The following table provides the name, age (as of March 13, 2017) and principal occupation of each person nominated by the Board of Directors, their business experience during at least the last five years, the year each was first elected or appointed a director (including to predecessor companies) and qualifications of each director.  Our Board members have a diverse range of perspectives and are knowledgeable about our businesses.  Each director contributes in establishing a board climate of trust and respect, where deliberations are open and constructive.  In selecting nominees, the Board has considered these factors and has reviewed the qualifications of each nominated director, which includes the factors reflected below:

 

 

W. Blake Baird
Age: 56
Director Since: 2006

 

·                  Chairman of the Board and Chief Executive Officer, Terreno Realty Corporation, San Francisco, California (NYSE:TRNO) (real estate investment trust) (“Terreno”) since February 2010;

·                  Managing Partner and Co-Founder of Terreno Capital Partners LLC (real estate investment) from September 2007 to February 2010;

·                  President of AMB Property Corporation (“AMB”) (real estate investment trust), now known as ProLogis, Inc. (NYSE:PLD), from January 2000 to December 2006 and Director of AMB from May 2001 to December 2006; and

·                  Director of Sunstone Hotel Investors, Inc. (NYSE:SHO) (lodging real estate investment trust) since April 2016.

 

Director Qualifications

 

As Chairman of the Board, Chief Executive Officer and co-founder of Terreno, a publicly traded real estate investment trust, and as a former President and director of AMB, a large, publicly traded real estate investment trust, now known as ProLogis, Inc., Mr. Baird brings to the Board experience in managing complex business organizations that, among other business activities, lease real estate to logistics companies.  This experience has provided Mr. Baird with financial expertise and he has been designated by the Board of Directors as an Audit Committee Financial Expert.  In addition, Mr. Baird has business operating experience in the Company’s port markets and also in China, Japan and Singapore, which are important shipping nations.

 

6



Table of Contents

 

 

Michael J. Chun
Age: 73
Director Since: 1990

 

·                  Retired President and Headmaster of The Kamehameha Schools Kapālama Campus, Honolulu, Hawaii (educational institution) from June 1988 to June 2012; and

·                  Director of Bank of Hawaii Corporation (NYSE:BOH) (regional commercial bank) since April 2004.

 

Director Qualifications

 

As retired President and Headmaster of The Kamehameha Schools and its flagship campus at Kapālama, Oahu, Hawaii, a nationally recognized educational institution with a multi-billion dollar endowment and a presence extending throughout the South Pacific and Asia, Dr. Chun’s knowledge of and insights about Hawaii and Matson’s operating markets inform Matson’s strategic priorities.  He has an active involvement in Hawaii’s business community and community organizations, and as a former associate professor in engineering and public health at the University of Hawai’i at Manoa, his teaching and research accomplishments provide extensive knowledge of Micronesia and the South Pacific.  Dr. Chun also has public company board experience, both with the Company since 1990 and with Bank of Hawaii Corporation since 2004 and its banking subsidiary, Bank of Hawaii, Hawaii’s second largest financial institution, since 1993.

 

 

Matthew J. Cox
Age: 55
Director Since: 2012

 

·                  Chief Executive Officer of Matson since June 2012;

·                  President of Matson’s subsidiary, Matson Navigation Company, Inc. (“MatNav”) since October 2008;

·                  Executive Vice President and Chief Operating Officer of MatNav from July 2005 to September 2008;

·                  Senior Vice President and Chief Financial Officer of MatNav from June 2001 to June 2005;

·                  Variety of positions, including Vice President, Refrigerated Containers, at American President Lines (“APL”) (global container transportation company) from 1987 to 1999;

·                  Director of Standard Club Europe Ltd (England), a mutual association of ship owners that insures ship owners, operators and charterers for their liabilities to third parties arising out of ship operations, since February 2012; and

·                  Director of First Hawaiian, Inc. (NASDAQ:FHB) (bank holding company) since 2016 and its direct wholly owned subsidiary, First Hawaiian Bank, since 2014.

 

Director Qualifications

 

As a member of Matson’s senior management team for over 15 years and with more than 30 years of transportation and logistics experience, Mr. Cox brings to the Board an in-depth knowledge of all aspects of the Company’s operations, and is knowledgeable about Matson’s operating markets through his Matson, APL and other experience and his involvement in the Hawaii business community and local community organizations.

 

7



Table of Contents

 

 

Thomas B. Fargo
Age: 68
Director Since: 2011

 

·                  Non-Executive Chairman of the Board, Huntington Ingalls Industries (NYSE:HII) (military shipbuilder) since March 2011;

·                  Commander, U.S. Pacific Command, from 2002 to 2005;

·                  John M. Shalikasvili Chair in National Security Studies at the National Bureau of Asian Research from 2010 to March 1, 2016;

·                  Owner, Fargo Associates, LLC (defense and homeland/national security consultancy) since 2005;

·                  Chief Executive Officer, Hawaii Superferry, Inc. (interisland ferry) from 2008 to 2009;

·                  President, Trex Enterprises Corporation (defense research and development firm) from 2005 to 2008;

·                  Member, Operating Executive Board and Advisory Board (non-fiduciary), J.F. Lehman & Company (private equity firm);

·                  Director, Hawaiian Electric Industries, Inc. (NYSE:HE) (“HEI”) and Hawaiian Electric Company, Inc. (“HECO”), a subsidiary of HEI (electric utility/banking), since March 2005;

·                  Director, The Greenbrier Companies, Inc. (NYSE:GBX) (transportation equipment and services) since July 2015; and

·                  Director of Northrop Grumman Corporation (NYSE:NOC) (global defense and security) from 2008 to March 2011.

 

Director Qualifications

 

Through his various executive and leadership roles, Admiral Fargo brings to the Board experience in maritime and military operations and in managing complex business organizations.  He is knowledgeable about Hawaii and Matson’s operating markets through his involvement in the Hawaii business community and local community organizations.  Admiral Fargo also has extensive diplomatic, business and policy experience in Asia.  As the senior military commander in East Asia and the Pacific, he was responsible for U.S. security arrangements and engagement with the respective governments of the region.  He also has public company board experience via his service on a number of publicly traded companies, including Huntington Ingalls Industries, where he is Chairman of the Board, The Greenbrier Companies, Inc., and HEI.

 

 

Stanley M. Kuriyama
Age: 63
Director Since: 2016

 

·                  Chairman of Alexander & Baldwin, Inc. (NYSE:ALEX) (real estate and construction company) since June 2012;

·                  Chief Executive Officer of Alexander & Baldwin, Inc. from January 2010 to December 2015; Director of Alexander & Baldwin, Inc. from January 2010 through June 2012; and executive Chairman of Alexander & Baldwin, Inc. from January 2016 to December 2016; and

·                  Mr. Kuriyama was recommended to the Nominating and Corporate Governance Committee for nomination as director by one of the non-management independent directors, and was appointed to the Board of Directors by the Board of Directors in June 2016.

 

Director Qualifications

 

As the Chairman and former Chief Executive Officer of Alexander & Baldwin, Inc., Mr. Kuriyama brings to the Board an in-depth knowledge of Hawaii and Matson’s operating markets.  From September of 2009 to June of 2012, he also served as a Director and Chairman of the Board of the Company’s subsidiary, Matson Navigation Company, Inc., prior to the Company’s separation from Alexander & Baldwin, Inc., and is knowledgeable about all aspects of the Company’s operations.  Mr. Kuriyama also has extensive involvement in the Hawaii business community and local community organizations.

 

8



Table of Contents

 

 

Constance H. Lau
Age: 64
Director Since: 2004

 

·                  President, Chief Executive Officer and Director of HEI, Honolulu, Hawaii (NYSE:HE) (electric utility/banking) since May 2006;

·                  Chairman of the Boards and Director of American Savings Bank, F.S.B. (“ASB”) and HECO, subsidiaries of HEI, since May 2006; and

·                  Director of Associated Electric & Gas Insurance Services since June 2008.

 

Director Qualifications

 

As President, Chief Executive Officer and a director of HEI, a large, publicly-traded Hawaii corporation, and as Chair of the Board of HEI’s banking and utility subsidiaries, Ms. Lau brings to the Board experience with capital intensive infrastructure and regulated industries as well as in managing complex business organizations.  She also serves as Chair, National Infrastructure Advisory Council, which advises the President of the United States on the security of critical infrastructure sectors, including transportation, and their information systems.  In addition, Ms. Lau has extensive experience in the banking industry and has been designated by the Board of Directors as an Audit Committee Financial Expert.  She also is knowledgeable about Hawaii and Matson’s operating markets through her involvement in the Hawaii business community and local community organizations, including serving as chair of the Consuelo Foundation, which focuses on charitable efforts in the Philippines.

 

 

Jeffrey N. Watanabe
Age: 74
Director Since: 2003

 

·                  Lead Independent Director of Alexander & Baldwin, Inc. (post-separation from Matson) from June 2012 to April 2015;

·                  Non-Executive Chairman of the Board of HEI since May 2006; Director of HEI since April 1987;

·                  Director of HECO from February 1999 to July 2006 and from February 2008 to May 2011, and ASB since May 1988, each a subsidiary of HEI; and

·                  Retired Founder, Watanabe Ing LLP (“WI”), Honolulu, Hawaii (attorneys at law) since July 2007; Partner, WI, from 1971 to June 2007.

 

Director Qualifications

 

As Chairman of the Board of HEI, former Lead Independent Director of Alexander & Baldwin, Inc. and former managing partner and founder of a Honolulu law firm, Mr. Watanabe brings to the Board insights into corporate governance and leadership skills.  He has both public and private company board experience, and is knowledgeable about Hawaii and Matson’s operating markets through his involvement in the Hawaii business community and local community organizations.  In addition, Mr. Watanabe has extensive legal, business and board experience in the Asia and Pacific Region, including representing and sitting on boards of companies involved with the Asia Pacific Basin, formerly chairing the Consuelo Foundation, which focuses on charitable efforts in the Philippines, formerly serving as General Counsel to the East-West Center, which promotes better relations among the nations of Asia, the Pacific and the United States, and serving as a member on the former Japan Hawaii Economic Council and the Hawaii Asia Pacific Association.

 

The Board of Directors recommends that shareholders vote “FOR” each of the seven nominees for director.

 

9



Table of Contents

 

CORPORATE GOVERNANCE

Director Independence

 

The NYSE listing standards and our Corporate Governance Guidelines require that a majority of our Board of Directors and every member of the Audit, Compensation and Nominating and Corporate Governance Committees be “independent.”  The Board has reviewed each of its current directors and has determined that all such members of the Board, with the exception of Mr. Cox, who is an executive officer of Matson, are independent under NYSE rules.  In making its independence determinations, the Board considered the transactions, relationships or arrangements described below in “Certain Information Regarding Directors and Executive Officers—Certain Relationships and Transactions”, as well as the following, none of which the Board deemed to be material to Matson: Dr. Chun—Matson’s banking relationships with Bank of Hawaii, an entity of which Dr. Chun is a director; Mr. Dods—Matson’s banking relationships with First Hawaiian Bank, an entity of which Mr. Dods is a director; Admiral Fargo—Matson’s banking relationships with American Savings Bank, the corporate parent of which Admiral Fargo is a director; Ms. Lau— Matson’s banking relationships with American Savings Bank, the corporate parent of which Ms. Lau is the president, chief executive officer, and a director; and Mr. Watanabe—Matson’s banking relationships with American Savings Bank, an entity of which Mr. Watanabe is a director.

 

With respect to Mr. Kuriyama, the Board considered Mr. Kuriyama’s positions as executive Chairman at Alexander & Baldwin, Inc. from January 2016 to December 2016 and as Chairman since January 2017, and prior to that as Alexander & Baldwin’s, Inc.’s Chairman and Chief Executive Officer.  Alexander and Baldwin, Inc. was formed in connection with the separation of the Company and Alexander & Baldwin, Inc.’s predecessor (also named Alexander & Baldwin, Inc.) in 2012.  The Company has done a de minimis amount of business with Alexander & Baldwin, Inc. in the last three fiscal years, and any such business did not exceed 1% of the Company’s or Alexander & Baldwin’s consolidated gross revenues for any of the last three fiscal years.  The Board has determined that these relationships are not material and do not impact his independence.

 

Board Leadership Structure

 

Mr. Dods, the current Chairman of the Board, has reached the mandatory retirement age under the Company’s Bylaws and is not standing for reelection at the 2017 Annual Meeting.  The Board recognizes that one of its key responsibilities is to evaluate and determine the optimal leadership structure to best serve the interests of shareholders.  The Board understands that there is no single, generally accepted approach to providing Board leadership.  Given the dynamic and competitive environment in which we operate, the right Board leadership structure may vary as circumstances warrant.

 

The Company’s Bylaws and Corporate Governance Guidelines provide the Board flexibility to determine whether it is in the best interests of the Company and its shareholders to have a combined or separate Chairman of the Board and Chief Executive Officer (“CEO”).

 

The Board currently has a separate Chairman of the Board and CEO.  In deciding to separate these two positions, the Board previously concluded that an independent Chairman would be beneficial in establishing a system of corporate checks and balances, and that managing the Board could be a time-intensive responsibility.  In addition, this leadership structure would allow the CEO additional time to focus on operating and managing the Company.  For these reasons, the Board had previously determined that this leadership structure was appropriate for Matson.  In light of Mr. Dods’ upcoming retirement, the Nominating and Corporate Governance Committee has begun the process of considering the leadership structure that will be most appropriate for the Board going forward and evaluating candidates for the position of Chairman.  Following the 2017 Annual Meeting, after receiving the recommendation of the Nominating and Corporate Governance Committee, the Board will appoint a new Chairman.

 

If the roles of Chairman and CEO are combined in one individual, the Company’s Corporate Governance Guidelines provide for the Board to designate a Lead Independent Director to consult with the Chairman of the Board on agendas and meeting schedules, facilitating the process for the Board’s self-evaluation, presiding at Board meetings in the absence of the Chairman, presiding at executive sessions of independent directors, and facilitating communication between the independent directors and the Chairman and CEO.

 

10



Table of Contents

 

The Board’s Role in Risk Oversight

 

The Board has oversight of the risk management process, which it administers in part through the Audit Committee.  One of the Audit Committee’s responsibilities involves discussing policies regarding risk assessment and risk management.  Risk oversight plays a role in all major Board decisions and the evaluation of risk is a key part of the decision-making process.  For example, the identification of risks and the development of sensitivity analyses are key requirements for capital requests that are presented to the Board.

 

This risk management process occurs throughout all levels of the organization, but is also facilitated through a formal process in which a risk management working group and a risk management steering committee (comprised of senior management) meet regularly to identify and address significant risks.  Risk management is reflected in the Company’s compliance, auditing and risk management functions, and its risk-based approach to strategic and operating decision-making.  Management reviews its risk management activities with the full Board of Directors on a regular basis.  The Board periodically receives various reports on risk-related matters, including presentations by senior management that cover an overview of the risk management program and include risk management perspectives from each of Matson’s business segments in the companywide strategic plan.

 

Pay Risk Assessment

 

In 2016, management worked with the Compensation Committee and Exequity LLP, an independent executive compensation consulting firm retained by the Compensation Committee, to review all Company incentive plans and related policies and practices, and the overall structure of total pay, pay mix, the risk management process and related internal controls.

 

The Company concluded that the risks arising from our incentive compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

 

Board of Directors and Committees of the Board

 

The Board of Directors held eight meetings during 2016.  In conjunction with six of these meetings, the non-management directors of Matson met in formally-scheduled executive sessions, led by the Chairman of the Board.  In 2016, all directors attended more than 75 percent of the aggregate meetings of the Board of Directors and the Committees of the Board on which they served.  In addition, Matson’s directors are strongly encouraged to attend the Annual Meeting of Shareholders.  Five of the then-serving seven directors attended the 2016 Annual Meeting.

 

The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each of which is governed by a charter, which is available on the corporate governance page of Matson’s website at www.matson.com.

 

Audit Committee: The members of the Audit Committee are:

 

·                  Ms. Lau, Chair,

 

·                  Mr. Baird, and

 

·                  Admiral Fargo.

 

Each member is an independent director under the applicable NYSE listing standards and SEC rules.  In addition, the Board has determined that Ms. Lau and Mr. Baird are “Audit Committee Financial Experts” under SEC rules.  The duties and responsibilities of the Audit Committee are set forth in a written charter adopted by the Board of Directors, and are summarized in the Audit Committee Report, which appears in this Proxy Statement.  The Audit Committee met five times during 2016.

 

11



Table of Contents

 

Compensation Committee: The members of the Compensation Committee are:

 

·                  Dr. Chun, Chair,

 

·                  Mr. Baird, and

 

·                  Mr. Watanabe.

 

Each member is an independent director under the applicable NYSE listing standards.  The Compensation Committee has general responsibility for management and other salaried employee compensation and benefits, including incentive compensation and stock incentive plans, and for making recommendations on director compensation to the Board.  The Compensation Committee may form subcommittees and delegate such authority as the Compensation Committee deems appropriate, subject to any restrictions by law or listing standard.  For further information on the processes and procedures for consideration of executive compensation, see “Executive Compensation—Compensation Discussion and Analysis” section below.  The Compensation Committee met four times during 2016.

 

Nominating and Corporate Governance Committee: The members of the Nominating and Corporate Governance Committee are:

 

·                  Mr. Watanabe, Chair,

 

·                  Dr. Chun,

 

·                  Mr. Dods, and

 

·                  Ms. Lau.

 

Each member is an independent director under the applicable NYSE listing standards.  The functions of the Nominating and Corporate Governance Committee include recommending to the Board individuals qualified to serve as directors; recommending to the Board the size and composition of committees of the Board and monitoring the functioning of the committees; advising on Board composition and procedures; reviewing corporate governance issues; overseeing the annual evaluation of the Board; and ensuring that an evaluation of management occurs.  The Nominating and Corporate Governance Committee met four times during 2016.

 

Nominating and Corporate Governance Committee Processes

 

The Nominating and Corporate Governance Committee identifies potential nominees by asking current directors to notify the Nominating and Corporate Governance Committee of qualified persons who might be available to serve on the Board.  From time to time, the Nominating and Corporate Governance Committee also engages firms that specialize in identifying director candidates.

 

The Nominating and Corporate Governance Committee will consider director candidates recommended by shareholders.  In considering such candidates, the Nominating and Corporate Governance Committee will take into consideration the needs of the Board and the qualifications of the candidate.  To have a candidate considered by the Nominating and Corporate Governance Committee, a shareholder must submit a written recommendation that meets the requirements of the Company’s Bylaws, including the name of the shareholder, evidence of the shareholder’s ownership of Matson stock (including the number of shares owned and the length of time of ownership), the name of the candidate, the candidate’s qualifications to be a director and the candidate’s consent for such consideration.

 

The shareholder recommendation and information described above must be sent to the Corporate Secretary at 555 12th Street, Oakland, California 94607.

 

The Nominating and Corporate Governance Committee believes that the minimum qualifications for serving as a director are high ethical standards, a commitment to shareholders, a genuine interest in Matson and a willingness and ability to devote adequate time to a director’s duties.  The Nominating and Corporate Governance Committee also may consider other factors it deems to be in the best interests of Matson and its shareholders, including whether nominees possess such knowledge, experience, skills, expertise and diversity to enhance the Board’s ability to manage and direct the business and affairs of the Company, including, when applicable, to enhance the ability of committees of the Board to fulfill their duties

 

12



Table of Contents

 

and/or to satisfy any independence requirements imposed by law, regulation or NYSE rules.  While the Nominating and Corporate Governance Committee does not have a written diversity policy, it considers diversity of knowledge, skills, professional experience, education, expertise, and representation in industries relevant to the Company, as important factors in its evaluation of candidates.  The Nominating and Corporate Governance Committee reviews annually with the Board the composition of the Board as a whole and recommends any measures to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity.

 

Once a potential candidate has been identified by the Nominating and Corporate Governance Committee, the Nominating and Corporate Governance Committee reviews information regarding the person to determine whether the person should be considered further.  If appropriate, the Nominating and Corporate Governance Committee may request information from the candidate, review the person’s accomplishments, qualifications and references, and conduct interviews with the candidate.  The Nominating and Corporate Governance Committee’s evaluation process does not vary based on whether or not a candidate is recommended by a shareholder.

 

Corporate Governance Guidelines

 

The Board of Directors has adopted Corporate Governance Guidelines to assist the Board in the exercise of its responsibilities and to promote the more effective functioning of the Board and its committees.  The guidelines provide details on matters such as:

 

·                  Goals and responsibilities of the Board;

 

·                  Selection of directors, including the Chairman of the Board;

 

·                  Board membership criteria and director retirement age;

 

·                  Stock ownership guidelines;

 

·                  Director independence and executive sessions of non-management directors;

 

·                  Board self-evaluation;

 

·                  Board compensation;

 

·                  Board access to management and outside advisors;

 

·                  Board orientation and continuing education; and

 

·                  Leadership development, including annual evaluations of the CEO and management succession plans.

 

“Plurality Plus” Policy.  Our Corporate Governance Guidelines provide that any director nominee who receives a greater number of “withhold” votes than “for” votes in an uncontested election is required to tender his or her resignation for consideration by the Nominating and Corporate Governance Committee of the Board.  The Nominating and Corporate Governance Committee will consider the resignation offer and recommend to the Board whether to accept or reject the resignation offer, or whether other action should be taken.  The Board will consider the recommendation of the Nominating and Corporate Governance Committee and will determine whether or not to accept the resignation offer.  Full details of this policy are set forth in our Corporate Governance Guidelines, which are available on the corporate governance page of Matson’s corporate website at www.matson.com.

 

13



Table of Contents

 

Compensation of Directors

 

The following table summarizes the compensation paid by Matson to directors for services rendered during 2016:

 

2016 DIRECTOR COMPENSATION

 

Name

 

Fees
Earned
or
Paid in
Cash
($)

 

Stock Awards
($)(1)(2)

 

Change in Pension Value
and Nonqualified
Deferred
Compensation Earnings
($)(3)

 

All Other
Compensation
($)(4)

 

Total
($)

 

(a)

 

(b)

 

(c)

 

(f)

 

(g)

 

(h)

 

W. Blake Baird

 

76,500

 

100,026

 

N/A

 

5,847

 

182,373

 

Michael J. Chun

 

80,000

 

100,026

 

0

(5)

328,841

 

508,867

 

Walter A. Dods, Jr.

 

138,800

 

151,010

 

N/A

 

9,811

 

299,621

 

Thomas B. Fargo

 

69,000

 

100,026

 

N/A

 

0

 

169,026

 

Stanley M. Kuriyama

 

35,000

 

100,025

 

N/A

 

0

 

135,025

 

Constance H. Lau

 

86,500

 

100,026

 

N/A

 

5,847

 

192,373

 

Jeffrey N. Watanabe

 

80,000

 

100,026

 

N/A

 

0

 

180,026

 

 


(1)                                 Represents the aggregate grant-date fair value of restricted stock unit awards granted in 2016 in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation.  Each director was granted approximately $100,000 in restricted stock units.  Mr. Dods was provided with an additional grant of approximately $51,000 in consideration for his role as Chairman of the Board.  At the end of 2016, Mr. Dods had 5,919 restricted stock units; Dr. Chun had 12,839 restricted stock units; Mr. Baird and Ms. Lau each had 3,786 restricted stock units; Mr. Kuriyama had 2,929 restricted stock units; and Admiral Fargo and Mr. Watanabe each had 12,316 restricted stock units.

 

(2)                                 Options have not been granted to directors since 2007.  No directors had any stock options awards outstanding at the end of 2016.

 

(3)                                 All amounts are attributable to the aggregate change in the actuarial present value of the director’s accumulated benefit under a frozen defined benefit pension plan.

 

(4)                                 Represents dividend equivalent amounts payable upon vesting of restricted stock units and, in the case of Dr. Chun, also includes a lump sum payment amount of $314,250, representing the full amount of retirement benefits earned and accrued under the Matson, Inc. Retirement Plan for Outside Directors.

 

(5)                                 The change in pension value was a decrease of $3,877.

 

For 2016, non-employee directors received cash retainers as follows, all of which were pro-rated and paid quarterly.  All non-employee directors other than Mr. Dods received an annual cash retainer of $60,000 for their service on the Board, except than Mr. Kuriyama received a pro-rated cash retainer of $35,000 for the portion of the year in which he served on the Board.  Mr. Dods received an annual cash retainer of $131,300 for serving as non-executive Chairman of the Board.  Ms. Lau received an annual cash retainer of $19,000 for serving as Chair of the Audit Committee.  All other Audit Committee members received an annual cash retainer of $9,000.  Dr. Chun received an annual cash retainer of $12,500 for serving as Chair of the Compensation Committee.  All other Compensation Committee members received an annual cash retainer of $7,500.  Mr. Watanabe received an annual cash retainer of $11,000 for serving as Chair of the Nominating and Corporate Governance Committee.  All other Nominating and Corporate Governance Committee members received an annual cash retainer of $6,000.  For any telephonic or in-person board meetings in excess of seven meetings, a per meeting fee of $1,500 was paid to each director who attended such meetings.  Directors who are employees of Matson or its subsidiaries did not receive compensation for serving as directors.  Non-employee directors may defer half or all of their annual cash retainer and meeting fees until retirement or until a later date they may select; Ms. Lau deferred all of her annual cash retainer and meeting fees in 2016.

 

Under the terms of the 2007 Incentive Compensation Plan, an automatic grant of approximately $100,000 in restricted stock units was awarded to each director who is elected or reelected as a non-employee director at each Annual Meeting of Shareholders.  An additional annual grant of approximately $51,000 in restricted stock units was awarded to Mr. Dods, as non-executive Chairman of the Board.  These awards have 100% cliff vesting on the earlier of the grant date

 

14



Table of Contents

 

anniversary or the next annual shareholders meeting following the date of the grant.  Under the terms of the 2016 Incentive Compensation Plan, an automatic grant of approximately $100,000 in restricted stock units was awarded to Mr. Kuriyama upon his appointment to the Board.  The award has 100% cliff vesting on the earlier of the grant date anniversary or the next annual shareholders meeting following the date of the grant.  Non-employee directors may defer all or a portion of their vested shares until cessation of board service or the fifth anniversary of the award date, whichever is earlier.  Mr. Watanabe elected to make such a deferral in 2016.

 

Under Matson’s retirement plan for directors, which has been frozen since 2004, a director with five or more years of service will receive a lump-sum payment upon retirement or attainment of age 72, whichever occurs first, that is actuarially equivalent to a payment stream for the life of the director consisting of 50 percent of the amount of the annual retainer fee in effect at the time of his or her departure from the Board, plus 10 percent of that amount for each year of service as a director over five years (up to an additional 50 percent).  Effective December 31, 2004, these retirement benefits were frozen based on a director’s service and retainer on that date and no further benefits accrue.  In 2016, Dr. Chun received a lump sum payment amount of $314,250, representing the full amount of retirement benefits earned and accrued under the Matson, Inc. Retirement Plan for Outside Directors.  No additional directors are eligible for future payments under the retirement plan for directors.

 

Directors have business travel accident coverage of $200,000 for themselves and $50,000 for their spouses while accompanying directors on Matson business.  They also may participate in the Company’s matching gifts program for employees, in which the Company matches contributions to qualified cultural and educational organizations up to a maximum of $3,000 annually.

 

Director Share Ownership Guidelines

 

The Board has a Share Ownership Guideline Policy that encourages each non-employee director to own Matson common stock (including restricted stock units) with a value of five times the amount of the current cash retainer within five years of becoming a director.  All non-employee directors have met the established guidelines.

 

Communications with Directors

 

Shareholders and other interested parties may contact any of the directors, or the independent directors as a group, by mailing correspondence “c/o Matson Law Department” to Matson’s corporate offices at 555 12th Street, Oakland, California 94607.  The Law Department will forward such correspondence to the appropriate director(s).  However, the Law Department reserves the right not to forward any offensive or otherwise inappropriate materials.

 

SECURITY OWNERSHIP OF CERTAIN SHAREHOLDERS

 

The following table lists the names and addresses of the only shareholders known by Matson to have owned beneficially more than five percent of Matson’s common stock outstanding as of December 31, 2016, the number of shares they beneficially own, and the percentage of outstanding shares such ownership represents, based upon the most recent reports filed with the SEC.  Except as indicated in the footnotes, such shareholders have sole voting and dispositive power over shares they beneficially own.

 

15



Table of Contents

 

Name and Address of Beneficial Owner

 

Amount of
Beneficial Ownership

 

Percent of
Class

 

BlackRock, Inc.
55 East 52nd Street
New York, NY 10055

 

5,617,740

(a)

13.11

%

 

 

 

 

 

 

The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355

 

3,647,909

(b)

8.51

%

 

 

 

 

 

 

Dimensional Fund Advisors LP
Building One
6300 Bee Cave Road
Austin, TX 78746

 

2,891,403

(c)

6.75

%

 

 

 

 

 

 

T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 21202

 

2,711,352

(d)

6.33

%

 

 

 

 

 

 

Fuller & Thaler Asset Management, Inc.
411 Borel Avenue, Suite 300
San Mateo, CA 94402

 

2,606,646

(e)

6.08

%

 


(a)                                 As reported in Amendment No. 8 to Schedule 13G filed with the SEC on January 12, 2017 (the “BlackRock 13G”). According to the BlackRock 13G, as of December 31, 2016, BlackRock, Inc. has sole voting power over 5,546,821 shares and sole dispositive power over all 5,617,740 shares, and does not have shared voting or shared dispositive power over any shares.

 

(b)                                 As reported in Amendment No. 4 to Schedule 13G filed with the SEC on February 10, 2017 (the “Vanguard 13G”). According to the Vanguard 13G, as of December 31, 2016, The Vanguard Group has sole voting power over 64,626 shares, sole dispositive power over 3,583,183 shares, shared dispositive power over 64,726 shares and shared voting power over 500 shares.

 

(c)                                  As reported in Amendment No. 5 to Schedule 13G filed with the SEC on February 9, 2017 (the “Dimensional Fund 13G”).  According to the Dimensional Fund 13G, as of December 31, 2016, Dimensional Fund Advisors LP has sole voting power over 2,802,530 shares and sole dispositive power over all 2,891,403 shares (subject to the provision of Note 1 of the Dimensional Fund 13G), and does not have shared voting or shared dispositive power over any shares.

 

(d)                                 As reported in a Schedule 13G filed with the SEC on February 7, 2017 (the “T. Rowe Price 13G”).  According to the T. Rowe Price 13G, as of December 31, 2016, T. Rowe Price Associates, Inc. has sole voting power over 543,571 shares and sole dispositive power over all 2,711,352 shares, and does not have shared voting or shared dispositive power over any shares.

 

(e)                                  As reported in a Schedule 13G filed with the SEC on February 15, 2017 (the “Fuller & Thaler 13G”).  According to the Fuller & Thaler 13G, as of December 31, 2016, Fuller & Thaler Asset Management, Inc. has sole voting power over 2,556,914 shares and sole dispositive power over all 2,606,646 shares, and does not have shared voting or shared dispositive power over any shares.

 

16



Table of Contents

 

CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS

 

Security Ownership of Directors and Executive Officers

 

The following table shows the number of shares of Matson common stock beneficially owned as of February 21, 2017 by each director and nominee, by each executive officer named in the “Executive Compensation—Summary Compensation Table” below, and by directors, nominees and executive officers as a group.  Except as indicated in the footnotes, directors, nominees and executive officers have sole voting and dispositive power over shares they beneficially own.

 

Name or Number in Group

 

Number of Shares Owned(a)

 

Restricted Stock
Units and
Stock Options(b)

 

Total

 

Percent of
Class

 

W. Blake Baird

 

13,959

 

3,786

 

17,745

 

*

 

Michael J. Chun

 

40,901

 

12,839

 

53,740

 

*

 

Matthew J. Cox

 

189,844

 

138,779

 

328,623

 

*

 

Walter A. Dods, Jr.

 

140,281

 

5,919

 

146,200

 

*

 

Thomas B. Fargo

 

6,245

 

12,316

 

18,561

 

*

 

Stanley M. Kuriyama

 

23,619

 

2,929

 

26,548

 

*

 

Constance H. Lau

 

40,472

 

3,786

 

44,258

 

*

 

Jeffrey N. Watanabe

 

11,150

 

12,316

 

23,466

 

*

 

Joel M. Wine

 

72,684

 

110,962

 

183,646

 

*

 

Peter T. Heilmann

 

18,475

 

16,626

 

35,101

 

*

 

Ronald J. Forest

 

63,123

 

61,281

 

124,404

 

*

 

Rusty K. Rolfe

 

34,773

 

17,288

 

52,061

 

*

 

14 Directors, Nominees, and Executive Officers
as a Group

 

706,380

 

416,796

 

1,123,176

 

2.60

%

 


(a)                                 Amounts include shares as to which directors, nominees and executive officers have shared voting and dispositive power, as follows: Dr. Chun and spouse—8,363 shares, Mr. Dods—2,000 shares, and Mr. Forest and spouse—61,710 shares.

 

(b)                                 Amounts include shares deemed to be owned beneficially by directors, nominees and executive officers because they may be acquired within 60 days from February 21, 2017 through the exercise of stock options.

 

*                                         Represents less than 1% of the issued and outstanding shares of the Company’s common stock as of February 21, 2017.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires Matson’s directors and executive officers, and persons who own more than 10 percent of Matson’s common stock, to file reports of ownership and changes in ownership with the SEC.

 

Based solely on a review of those reports provided to us and any written representations that no other reports were required, Matson believes that, during fiscal 2016, its directors and executive officers and persons who own more than 10 percent of Matson’s common stock filed all reports required to be filed under Section 16(a) on a timely basis, except that Mr. Kuriyama’s initial Form 3 filing on June 23, 2016 and a subsequent Form 4 filing on June 23, 2016 inadvertently omitted 6,650 shares.  Upon learning of his omission, Mr. Kuriyama promptly reported ownership of these shares in an amendment to the Form 3 on July 13, 2016.

 

Certain Relationships and Transactions

 

Matson has adopted a written policy under which the Audit Committee must pre-approve all related person transactions that are disclosable under SEC Regulation S-K, Item 404(a).  Prior to entering into a transaction with Matson, directors and executive officers (and their family members) and shareholders who beneficially own more than five percent of Matson’s common stock must make full disclosure of all facts and circumstances to the Law Department.  The Law Department then determines whether such transaction requires the approval of the Audit Committee.  The Audit Committee

 

17



Table of Contents

 

considers all of the relevant facts available, including (if applicable) but not limited to: the benefits to the Company; the impact on a director’s independence in the event the person in question is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer; the availability of other sources for comparable products or services; the terms of the transaction; and the terms available to unrelated third parties or to employees generally.  The Audit Committee will approve only those related person transactions that are in, or are not inconsistent with, the best interests of the Company and its shareholders.

 

The Audit Committee has established written procedures to address situations when approvals need to be sought between meetings.  Whenever possible, proposed related person transactions will be included as an agenda item at the next scheduled Audit Committee meeting for review and approval.  However, if it appears that a proposed related person transaction will occur prior to the next scheduled Audit Committee meeting, approval will be sought from Audit Committee members between meetings.  Approval by a majority of the Audit Committee members will be sufficient to approve the related person transaction.  If a related person transaction is approved in this manner, the action will be reported at the next Audit Committee meeting.

 

Constance Lau, a director of Matson, is President, Chief Executive Officer and Director of HEI, as well as Chairman of the Board of American Savings Bank, F.S.B., a subsidiary of HEI.  American Savings Bank currently has a 6.25 percent participation in the Company’s $400,000,000, five-year unsecured revolving credit facility.  The credit facility, including American Saving Bank’s participation, was entered into in the ordinary course of business; was made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender; and did not involve more than the normal risk of collectability or present other unfavorable features.  Ms. Lau abstained from voting when the Board approved the amendment and restatement of the revolving credit facility in 2015.

 

The parents of Vicente S. Angoco, the Senior Vice President, Pacific of Matson, own and operate a company which provides drayage of some Matson containers in Guam.  The approximate dollar value of the payment from Matson in connection with this service in 2016 was $343,000.  The brother of Mr. Angoco owns and operates a company with which the Company contracts for chassis repair and maintenance services in Guam.  The approximate dollar value of the payment from Matson in connection with this service in 2016 was $1.06 million.  The brother-in-law of Mr. Angoco owns and operates a company with which the Company contracts for the provision of temporary and contract workers in Guam.  The approximate dollar value of the payment from Matson in connection with this service in 2016 was $688,000.  Mr. Angoco has no monetary or other interest in any of the businesses described above.

 

Code of Ethics

 

Matson has adopted a Code of Ethics that applies to the CEO, the Chief Financial Officer (“CFO”) and the Controller.  A copy of the Code of Ethics is posted on the corporate governance page of Matson’s corporate website, www.matson.com.  Matson intends to disclose any changes in or waivers from its Code of Ethics by posting such information on its website.

 

Code of Conduct

 

Matson has adopted a Code of Conduct, which is applicable to all directors, officers and employees, and is posted on the corporate governance page of Matson’s corporate website.  Matson intends to disclose any changes in its Code of Conduct or waivers from its Code of Conduct granted to directors or executive officers by posting such information on its website.

 

Executive Officers

 

The name of each executive officer of Matson (in alphabetical order), age (in parentheses) as of March 13, 2017, and present and prior positions with Matson and business experience for the past five years are given below.  Generally, the term of office of executive officers is at the pleasure of the Board of Directors.

 

Vicente S. Angoco, Jr. (50): Senior Vice President, Pacific since June 2012; Senior Vice President, Pacific of MatNav, January 2011 — present; Vice President, Pacific of MatNav March 2008 — January 2011; General Manager, Guam and Micronesia of MatNav December 2006 — March 2008; first joined Matson or a subsidiary in 1995.

 

18



Table of Contents

 

Matthew J. Cox (55): President and Chief Executive Officer of Matson since June 2012; President of MatNav, October 2008 — present; Executive Vice President and Chief Operating Officer of MatNav, July 2005 — September 2008; first joined Matson or a subsidiary in 2001.

 

Ronald J. Forest (61): Senior Vice President, Operations since June 2012; Senior Vice President, Operations of MatNav, April 2003 — present; first joined Matson or a subsidiary in 1995.

 

Kenneth J. Gill (49): Vice President, Alaska of MatNav since June 2015; Senior Director of Operations, Horizon Lines, Inc., June 2013 — May 2015; Director of Operations, Horizon Lines, Inc., 2009 — June 2013; first joined Matson or a subsidiary in 2004.

 

Peter T. Heilmann (48): Senior Vice President and Chief Legal Officer since March 2014; Senior Vice President and General Counsel of MatNav since March 2014; Vice President and Deputy General Counsel of MatNav, May 2012 — February 2014; Partner, Gibson, Dunn & Crutcher, January 2002 — May 2012; first joined Matson or a subsidiary in 2012.

 

John P. Lauer (56): Senior Vice President, Ocean Services since March 2015; Senior Vice President, Ocean Services of MatNav since March 2015; Vice President, Transpacific Services of MatNav from 2012 to March 31, 2015; Director, Transpacific Services of MatNav from 2010 to 2012; first joined Matson or a subsidiary in 2007.

 

Rusty K. Rolfe (57): Senior Vice President since June 2012; President of Matson Logistics, July 2012 — present; Executive Vice President, Matson Logistics, August 2011 — July 2012; Executive Vice President, Matson Integrated Logistics, April 2006 — August 2011; first joined Matson or a subsidiary in 2001.

 

Joel M. Wine (45): Senior Vice President and Chief Financial Officer, September 2011 — present; Senior Vice President and Chief Financial Officer of MatNav since June 2012; first joined Matson or a subsidiary in 2011.

 

19



Table of Contents

 

EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

In this Compensation Discussion and Analysis (“CD&A”), Matson explains the material elements of its 2016 compensation practices for the executive officers named in the Summary Compensation Table on page 31 (collectively, the “Named Executive Officers” or “NEOs”).  The NEOs for 2016 are:

 

·                  Matthew J. Cox, President and Chief Executive Officer,

 

·                  Joel M. Wine, Senior Vice President and Chief Financial Officer,

 

·                  Peter T. Heilmann, Senior Vice President and Chief Legal Officer,

 

·                  Rusty K. Rolfe, President, Matson Logistics, and

 

·                  Ronald J. Forest, Senior Vice President, Operations.

 

Executive Summary

 

For 2016, Matson produced net income of $80.5 million, or $1.85 per diluted share, as compared to net income of $103.0 million, or $2.34 per diluted share, generated in 2015.  2016 EBITDA of $288.6 million was modestly lower than the $302.1 million recorded in 2015.  While 2016 financial performance fell short of the exceptional results of 2015, which benefitted from record rates in Matson’s expedited China service and competitive gains in its Hawaii service, the Company made critical strategic decisions to finalize its Hawaii fleet renewal program with the order of two Kanaloa class vessels and to expand its Logistics platform into Alaska with the acquisition of Span Alaska.

 

While the Company’s 2016 results generally fell below the annual performance measures that were incorporated into the Board of Directors approved 2016-2018 Operating Plan, Matson’s three-year performance under the equity compensation program exceeded target performance, as set in the 2014-2016 Operating Plan.  Each operating plan is Matson’s tactical and strategic view of future performance, and contains a three-year projection of financial and operating results, the key elements of which are incorporated as performance targets in the Company’s incentive compensation plans, as discussed in this CD&A.  As the acquisition of Span Alaska was not taken into consideration when the various performance goals for the NEOs were set, in accordance with the Cash Incentive Plan (“CIP”), 2016 cash incentive payouts were determined without taking into account the Span Alaska acquisition.  Similarly, in accordance with the Performance Share award provisions under the 2016 Incentive Compensation Plan (“2016 Plan”), the 2014-2016 equity award settlement did not take into consideration the Alaska trade lane and Span Alaska acquisitions, as well as the Kanaloa class vessel construction.

 

Pay for Performance.  In line with Matson’s continued emphasis on managing a compensation program that links pay to performance, compensation awarded to the NEOs for fiscal 2016 performance reflected Matson’s financial results:

 

·                  Annual Cash Incentive: Below threshold performance of the overall Company goals and above target performance of individual goals resulted in payouts for NEOs ranging from approximately 47 percent to 92 percent of their respective targets.  See “Components of Executive Compensation — Annual Cash Incentives.”

 

·                  2014-2016 Performance Shares: Matson’s Performance Share award plan (“Performance Shares”) is focused on multi-year performance over a three-year measurement period with vesting determined based on the average annual ROIC and three-year cumulative total shareholder return (“TSR”).  Extraordinary performance of the Company’s average ROIC combined with strong relative TSR positioning resulted in payouts for NEOs of 200 or 240 percent of their respective targets, depending on the applicability of the TSR modifier.   See “Components of Executive Compensation — Equity-Based Compensation.”

 

20



Table of Contents

 

Matson’s Compensation Philosophy

 

The objective of Matson’s executive compensation program is to help attract, retain and motivate talented executives who provide strong leadership for Matson and develop and execute effective strategies that maximize long-term shareholder value.  The program is designed to be market competitive and emphasize pay-for-performance by making the majority of NEO compensation “at risk.” This is accomplished by aligning incentive pay with the achievement of key annual and long-term operating goals, growth in shareholder value and individual performance.  In 2016, 83% of the CEO’s and approximately 66% of the other NEO’s target total direct compensation was based on annual and long-term incentive pay opportunities.  The material elements of compensation for Matson’s NEOs are base salaries, annual cash incentives and equity incentives.  Annual equity awards are split evenly between time-based restricted stock units (“time-based RSUs”) and Performance Shares that are measured over a 3-year performance period.  NEOs are also eligible for retirement, severance and change in control termination benefits and participate in other employee health and welfare programs.

 

All elements of executive compensation are generally benchmarked against the 50th percentile of competitive market practices.  However, market data is only one of many factors considered in determining individual executive pay, including demonstrated performance, experience in the position, scope of impact and internal equity with other executives.

 

In order to promote the compensation philosophy described above, Matson continues to monitor its existing pay practices, as highlighted below, to ensure that it adopts the best practices to the extent they are aligned to the business goals and strategy of the Company, as well as shareholder interests.

 

Promote Good Pay Practices

 

Discourage Bad Pay Practices

·                  Change in control agreements that include double triggers requiring both a change in control event and termination of employment before any severance payments can be made.

·                  Pay package for the CEO that is in line with the Company’s peer group.

·                  Multiple, balanced different performance metrics to determine incentive payments in annual and long-term incentive awards.

·                  Vesting of 50% of annual equity award is tied to achievement of specified performance goals.

·                  Share ownership requirements for senior executives and board members.

·                  Minimum vesting periods of three years on all equity awards to senior executives.

·                  Clawback policy that applies to all senior management.

·                  Policy prohibiting hedging and other speculative transactions involving Company stock.

 

·                  No employment contracts with any executive officer.

·                  No guaranteed bonus payments to senior executives.

·                  No bonus payouts that are not tied to performance.

·                  No single trigger vesting of equity in change of control.

·                  No pension payouts that are not proportional to pension payouts to employees generally.

·                  No excessive perquisites.

·                  No excessive severance or change in control provisions.

·                  No tax reimbursements or gross-ups.

·                  No dividend or dividend equivalents paid on unvested Performance Shares.

·                  No unreasonable internal pay disparity.

·                  No re-pricing or replacing of underwater stock options, without prior shareholder approval.

 

Matson’s Continued Focus on Pay-for-Performance

 

Say-on-Pay Vote in 2016.  At the 2016 Annual Meeting of Shareholders, an advisory vote approved the compensation of the NEOs with 97 percent of votes cast voting in favor of the executive compensation program.  The Compensation Committee took these results into consideration and concluded it should continue to apply the same basic compensation philosophy.  It also determined that it should continue to look for opportunities to make improvements in the executive pay programs, as it has in previous years.

 

Pay-for-Performance Emphasis.  The following features of the NEOs’ compensation structures, which were first implemented in fiscal 2013, continued to be applied in the fiscal 2016 executive compensation program, emphasizing Matson’s focus on pay-for-performance:

 

·                  Performance Metrics are Aligned with Shareholder Value.  Matson’s performance-based awards are determined using the following performance metrics: earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the Company’s annual incentive plan and ROIC and TSR relative to peer indices for the Company’s Performance Shares.  These performance metrics align with Matson’s strategic objectives for profitable growth, efficient use of capital and increasing the value of Matson’s Common Stock for shareholders.  The financial performance metrics used for annual cash and long-term incentive compensation are also different in order to avoid focusing the NEOs’ attention on a single performance goal at the expense of achieving other important goals for maximizing the long-term value of the Company for shareholders.

 

21



Table of Contents

 

·                  Multi-Year Performance Periods to Emphasize Long-Term Growth.  Matson grants Performance Shares focused on multi-year performance over a three-year measurement period with vesting determined at the end of the period based on average annual ROIC and three-year cumulative TSR relative to the companies comprising the S&P Transportation Select Industry Index and S&P Midcap 400 Index.  The three-year performance period is intended to encourage Matson’s NEOs to focus on growth of the Company and shareholder value over a multi-year period of time.  Performance Shares granted in fiscal 2016 will not be settled until 2019 following the end of the three-year performance period (FY 2016-18), based on financial performance during this three-year performance period.

 

·                  No Stock Option Grants.  With its emphasis on granting awards that contain specific performance goals, such as the Performance Shares, Matson again did not grant stock options to its NEOs in 2016.

 

Compensation Decision Process

 

Role of the Compensation Committee.  The Compensation Committee of Matson’s Board makes all decisions about compensation of Matson NEOs.  The process that it follows is different for the CEO from the process for all other NEOs

 

Determining CEO Compensation.  For decisions affecting the compensation of the CEO, the Board has a formal performance review process which begins at the beginning of the year with the Chairman of the Board’s analysis and establishment of the CEO’s future performance goals.  In developing these objectives, the Chairman reviews a variety of factors, including the CEO’s prior performance objectives, the CEO’s achievement of those objectives, the performance of the Company, and the Company’s operating plan.  The Chairman also reviews the Compensation Committee’s independent consultant’s market analysis and recommendations of CEO pay, including target annual incentive levels and equity grants.

 

The Chairman of the Board then receives input from the Board of Directors, after which the Board finalizes the CEO’s annual performance objectives.  The objectives for any given year include, but are not limited to, achieving the annual Operating Plan results, any growth initiatives, other strategic initiatives, and core CEO responsibilities.  The objectives are documented as part of setting the CEO’s annual compensation package.  After completion of the fiscal year, the Chairman of the Board and the Compensation Committee evaluate the CEO’s performance against the objectives and provide their assessment to the full Board of Directors.  The Board of Directors discusses the results of the assessment, including the areas of greatest strength and areas where improvements could be made.  The result of this process is considered by the Compensation Committee in determining the CEO’s actual salary for the next fiscal year, payout of the CEO’s annual incentive award and sizing of future equity grants.

 

Determining Compensation of other NEOs.  For decisions affecting the compensation of the other NEOs, the Compensation Committee follows a similar process.  However, instead of the development of initial recommendations by the Chairman, in the case of other NEOs, the Committee takes into consideration any recommendations made by the CEO.

 

In evaluating pay actions and the mix of pay elements for all NEOs (including the CEO), the Compensation Committee reviews:

 

·                  A summary of the value of all compensation elements provided to the executive during the year;

 

·                  Competitive market peer group and broader industry survey data;

 

·                  Health and welfare benefits and retirement plan balances;

 

·                  Prior compensation decisions for the past five years through tally sheets;

 

·                  Business strategic goals and performance expectations;

 

·                  Expected and actual Company and individual performance; and

 

·                  Insight from the shareholder Say-on-Pay vote results.

 

The Compensation Committee uses the above information to evaluate the following:

 

·                  Alignment of the pay program with the Compensation Committee’s commitment to pay for performance;

 

·                  Consistency with competitive market practices;

 

22



Table of Contents

 

·                  Reasonableness and balance of pay elements as they relate to pay risk;

 

·                  Year-to-year pay movement for each NEO to ensure it reflects any variations in annual performance and market conditions;

 

·                  Internal pay equity with other executives based on individual performance, job scope and impact; and

 

·                  The effect of potential future payments, awards and plan design changes on the executive’s total pay package.

 

Role of the CEO.  The CEO recommends annual compensation actions for other NEOs to the Compensation Committee.  In consultation with each NEO, the CEO develops individual performance plans that serve as the basis for the determination of annual incentive awards.  After the completion of the fiscal year, the CEO reviews executive officer performance relative to individual goals and Company performance and makes recommendations to the Compensation Committee about the officer’s incentive award.  In addition to performance results, the CEO considers any changes in job scope, merit increase guidelines and market pay studies to recommend changes in base salary and equity awards for Compensation Committee approval.

 

Role of Independent Consultant.  The Compensation Committee believes that using an independent compensation consultant is important in developing executive compensation programs that are reasonable, consistent with Matson’s pay philosophy and market competitive.  Since the end of 2012, the Compensation Committee has retained Exequity LLP, an independent executive compensation consulting firm, to provide executive compensation services.  Exequity reports directly to the Compensation Committee and the Compensation Committee Chairman pre-approves all executive compensation engagements, including the nature, scope and fees of assignments.  Exequity advised the Compensation Committee on all aspects of executive compensation including the following during 2016:

 

·                  Recommended peer group assessment criteria and identified and recommended potential peer companies;

 

·                  Provided information on trends and regulatory developments for executive compensation;

 

·                  Evaluated the size and structure of the components of Matson’s executive compensation program relative to the Company’s peer group and broader market practices;

 

·                  Reviewed and commented on recommendations regarding CEO and NEO pay, including target annual incentive levels and equity grants;

 

·                  Reviewed compensation risk assessment;

 

·                  Assessed Board pay levels and the structure of Board compensation; and

 

·                  Reviewed and assisted in the preparation of the executive compensation disclosure in the annual proxy statement.

 

In the course of fulfilling these responsibilities, a representative of Exequity attended all Compensation Committee meetings during the year, participated in executive sessions of the Compensation Committee without management present, and met with management from time to time to gather relevant information and provide input in assessing management proposals.  The Compensation Committee’s executive compensation decisions, including the specific amounts paid to Matson’s executive officers, are made through the exercise of its own judgment and may reflect factors and considerations other than the information and recommendations provided by Exequity, including the executive’s role and organizational impact, experience, tenure, sustained performance over time, and internal pay relationships.  Exequity has not provided any other services to the Compensation Committee and has received no compensation other than with respect to the services described above.

 

Pursuant to SEC rules, the Company has assessed the independence of Exequity and concluded that no conflict of interest exists that would prevent Exequity from independently representing the Compensation Committee.

 

Role of Management.  Management assists the Compensation Committee in its role of determining executive compensation in a number of ways, including:

 

·                  Providing management’s perspective on compensation plan structure and implementation;

 

23



Table of Contents

 

·                  Identifying appropriate performance measures and establishing individual performance goals that are consistent with the Board-approved Operating Plan;

 

·                  Providing the data used to measure performance against established goals, with the CEO providing perspective on individual executive performance and compensation amounts; and

 

·                  Providing recommendations, based on information provided by Exequity, regarding pay levels for NEOs in 2016 on the basis of plan formulas, salary structures and the CEO’s assessment of individual officer performance.

 

Role of Market Data.  As there are few companies directly comparable to Matson in business mix, size and location of operation, based on the recommendation of Exequity, the Compensation Committee used a combination of peer group proxy statement data and published general industry survey data as a benchmark reference in the 2016 compensation decision-making process.  This competitive market data provides only one of many factors the Compensation Committee considers in assessing and determining appropriate pay levels as it exercises its business judgment.  Other factors the Committee considers include Matson’s pay philosophy, incumbent job scope of responsibility, tenure, organization impact, internal equity, company and individual performance, and historical pay actions.

 

Exequity conducted an independent review of the peer group and established the following selection criteria to develop a recommended peer group for the Compensation Committee’s approval:

 

·                  Transportation-related companies (including air freight, airline, marine, railroad, trucking and logistics management operations);

 

·                  Companies with similar size characteristics, including annual revenues generally within one-half to two times Matson’s annual revenue and having a market capitalization that is generally less than five times Matson’s market capitalization; and

 

·                  Additional companies that may be outside these size parameters but have other relevant business and operating characteristics to Matson and are influenced by similar economic and regulatory factors.

 

Based on these factors, Exequity recommended and the Compensation Committee approved a peer group of the following twenty public transportation-related companies (“peer group”) for pay comparisons starting in 2015 for 2016 pay assessments:

 

·             ArcBest Corporation

·             Atlas Air Worldwide Holdings, Inc.

·             Bristow Group, Inc.

·             Con-Way Inc.

·             Echo Global Logistics

·             Genesee & Wyoming Inc.

·             Hawaiian Holdings, Inc.

·             Hornbeck Offshore Services, Inc.

·             Hub Group, Inc.

·             Knight Transportation, Inc.

·             Kansas City Southern

·             Kirby Corporation

·             Landstar System, Inc.

·             Old Dominion Freight Line, Inc.

·             Overseas Shipholding Group, Inc.

·             Saia, Inc.

·             SEACOR Holdings Inc.

·             Swift Transportation Company

·             Tidewater Inc.

·             Werner Enterprises, Inc.

 

Matson is currently between the 40th and 55th percentiles of this peer group in revenue and market capitalization.  Given the limited number of relevant publicly traded transportation companies similar enough to Matson’s profile to serve as meaningful comparisons, the Compensation Committee believes the peer group recommended by Exequity provides a reasonable basis for analyzing compensation for Matson’s NEOs.  The Compensation Committee will continue to collect general industry data for similar revenue size companies as additional reference for competitive market analysis, particularly for NEOs other than the CEO, given the limited number of similarly sized companies in the peer group and competition for talent with other industry segments.

 

24



Table of Contents

 

Components of Executive Compensation

 

The material elements of compensation for Matson’s NEOs are base salaries, annual bonuses and equity incentives.  NEOs also are eligible for retirement, severance and change in control termination benefits and participate in other employee benefit programs.

 

Base Salary: Salary is intended to provide a minimum fixed rate of pay which comprises less than 42% of an NEO’s target total direct compensation.  Salary increases can be awarded in recognition of superior performance, organizational advancement and increasing levels of responsibility as well as projections for market movement and merit guidelines established for the organization.  Generally, base salaries for Matson’s NEOs are based on the Compensation Committee’s determination of appropriate salary levels, taking into consideration peer group and survey information, the CEO’s recommendations (for NEOs other than himself), the executive’s role in the organization, his performance during the prior fiscal year  and relative pay position to other Matson executives.  In 2016, the Compensation Committee increased the base salary 14% for Mr. Cox reflecting his individual performance, contributions to the Company and competitive positioning relative to market levels. In connection with Matson’s overall merit program, base salaries for all other NEOs were increased 3% to keep up with inflation and to be consistent with market pay practices.

 

Annual Cash Incentives: Annual incentives for NEOs are provided through the CIP.  The CIP was designed to align performance incentives at all participating organization levels, to motivate executives to contribute to the Company’s success and reward them if they achieve specific pre-established corporate and individual goals.  These goals are established in February of each year based on the use of the metrics described below.

 

Weighting of Goals.  The weighting of the corporate and individual goals depends on the executive’s position and responsibilities.  The intention is to place a significant portion of the awards on the financial results of the Company, but balance that with important strategic and operating goals that have been established for the year through the individual portion.  The 2016 weighting is as follows:

 

Weighting of 2016 CIP Goals for NEOs

 

NEO

 

Corporate/
Business Unit

 

Individual

 

Matthew J. Cox

 

70%

 

30%

 

Joel M. Wine

 

70%

 

30%

 

Peter T. Heilmann

 

70%

 

30%

 

Rusty K. Rolfe(1)

 

20%/50%

 

30%

 

Ronald J. Forest

 

70%

 

30%

 

 


(1)  Mr. Rolfe’s corporate/business unit component is weighted 20% consolidated EBITDA and 50% Logistics EBITDA.

 

Determination of Annual Cash Incentive Award. Each component—corporate and individual—is evaluated against the respective performance goals. There are three levels of award opportunities for each component: threshold, target and extraordinary. In 2016, the target award opportunity levels for NEOs ranged from 50 percent to 100 percent of salary, which is consistent with competitive market targets. If a threshold goal is not achieved, there is no payout for that component. If threshold goals are achieved, a participant receives 50 percent of the target award opportunity set for that component. If target or extraordinary goals are achieved, a participant receives 100 or 200 percent, respectively, of the target award opportunity for that component. Awards are prorated for performance between the threshold, target and extraordinary levels, as applicable. No additional award is provided for performance above the extraordinary goal level. The maximum achievable award in the aggregate is 200 percent of the NEO’s target award opportunity.

 

The CEO reviews the annual individual incentive award calculations for each individual other than himself and makes recommendations to the Compensation Committee regarding payouts. For the CEO’s individual incentive award calculation, the Chairman reviews the CEO’s individual performance achievement and provides the results to the Compensation Committee. The Compensation Committee reviews and approves all awards and has discretion to modify recommended awards to take into consideration factors it believes appropriately reflect the performance of the Company and the individual. Such factors vary, but may include, for individuals, adjustments for an executive taking on temporary but significant responsibilities in addition to his normal job role, or for the Company or a business unit, adjustments for extraordinary or unusual events.

 

25



Table of Contents

 

Company Performance. The corporate component measure in 2016 was based on the Operating Plan approved by the Board of Directors and was weighted 100 percent on consolidated EBITDA performance and, for Mr. Rolfe, an additional measure based on EBITDA performance of the Logistics business. EBITDA is defined as operating income plus depreciation and amortization, subject to any adjustments made to accurately reflect the Company’s 2016 performance. Any adjustments are at the sole discretion of the Compensation Committee. EBITDA was selected as the CIP corporate performance measure because the Company believes it best reflects the annual operating results of business execution and profitability levels. The Company believes that EBITDA is a critical annual operating performance measure and, in combination with the multi-year performance measures of ROIC and TSR (described below in “Performance Shares”), provides focus and alignment with shareholder interests.

 

Annual incentive goals at threshold, target and extraordinary (maximum) are approved by the Compensation Committee in February of each year. The 2016 annual corporate and business unit targets reflected the Company’s Board-approved Operating Plan. When establishing the Operating Plan, management and the Board of Directors consider the historical performance of the Company, external elements such as economic conditions and competitive factors and Company capabilities. In 2016, the Compensation Committee set threshold performance at 90 percent of plan target and extraordinary performance at 120 percent of target for EBITDA results. The threshold and extraordinary goals were determined on the basis of the level of difficulty in achieving the target objective as well as establishing a reasonable range of performance variability around the Operating Plan target.

 

For determination of CIP award levels for 2016, the Company’s operating performance, excluding any financial impact related to the Span Alaska acquisition in accordance with the terms of the CIP, was compared to the performance goals approved by the Compensation Committee in February 2016. Corporate goals and the actual result were as follows:

 

Company Performance Results Related to the 2016 CIP

 

Corporate Goal

 

Threshold

 

Target

 

Extraordinary

 

Actual

 

EBITDA (000s)

 

$

297,824

 

$

330,915

 

$

397,098

 

$

287,245

 

Logistics EBITDA (000s)

 

$

9,908

 

$

11,009

 

$

13,211

 

$

10,916

 

 

Individual Performance. In addition to the corporate performance goal, 30 percent of each NEO’s 2016 award was based on achieving individual goals, which reflect the NEO’s position in the Company and the activities of the NEO’s business function. Individual goals are reviewed by the Compensation Committee each year. Performance against individual goals is assessed at threshold, target and extraordinary levels; achievement of some but not all individual goals can result in a partial payout. The primary individual NEO goals are listed below.

 

NEO

 

Individual Goals

Matthew J. Cox

 

· Perform core CEO responsibilities effectively

 

 

· Achieve the Company’s strategic growth initiatives

 

 

· Complete integration of the Horizon Lines acquisition

 

 

· Achieve Company’s cost reduction and margin improvement initiatives

 

 

 

Joel M. Wine

 

· Perform core CFO responsibilities effectively

 

 

· Implement effective department organizational and process improvements

 

 

· Support strategic growth initiatives

 

 

· Lead other critical initiatives within the Company

 

 

· Achieve Company’s cost reduction and margin improvement initiatives

 

 

 

Peter T. Heilmann

 

· Oversee general regulatory compliance and Company efforts related to the Jones Act

 

 

· Lead and oversee team focused on resolving government investigations, general claims and litigation matters, and mitigate future litigation risks through compliance

 

 

· Manage and oversee legal aspects of significant corporate initiatives

· Perform core Corporate Secretary responsibilities effectively

 

 

 

Rusty K. Rolfe

 

· Achieve Company’s cost reduction and margin improvement initiatives

 

 

· Achieve 53’ private container profitability objectives

 

 

· Achieve overall warehouse performance objectives

 

 

· Achieve Company’s cost reduction and margin improvement initiatives

 

26



Table of Contents

 

Ronald J. Forest

 

 

 

 

· Achieve Guam China service objectives

 

 

· Achieve Hawaii service standards

 

 

· Achieve operations expense and income objectives

 

 

· Achieve capital plan, dry-dock plan, vessel Maintenance & Repair plan and Hull & Machinery insurance reserve

 

 

· Lead Company’s new vessel projects

 

Total Performance for 2016. Actual CIP awards earned versus target averaged approximately 60 percent of the overall targeted goal payouts and were as follows:

 

2016 CIP Payouts for NEOs

 

 

 

 

 

 

 

 

 

 

 

Corporate/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Unit

 

Overall

 

Individual

 

 

 

2016

 

Actual

 

 

 

Corporate/

 

Component

 

Individual

 

Component

 

 

 

Target

 

Award for

 

% of

 

Business Unit

 

Payout(1)

 

Performance

 

Payout

 

NEO

 

Award

 

2016

 

Target

 

Performance

 

(70% Weighting)

 

Rating

 

(30% Weighting)

 

Matthew J. Cox

 

$

750,000

 

$

354,375

 

47

%

86.8%

 

$

0

 

Above Target

 

$

354,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joel M. Wine

 

$

340,521

 

$

199,204

 

58

%

86.8%

 

$

0

 

Slightly Below

 

$

199,204

 

 

 

 

 

 

 

 

 

 

 

 

 

Extraordinary

 

 

 

Peter T. Heilmann

 

$

222,789

 

$

128,661

 

58

%

86.8%

 

$

0

 

Slightly Below

 

$

128,661

 

 

 

 

 

 

 

 

 

 

 

 

 

Extraordinary

 

 

 

Rusty K. Rolfe

 

$

165,170

 

$

152,700

 

92

%

86.8%/99.2%

 

$

79,116

 

Above Target

 

$

73,584

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ronald J. Forest

 

$

170,028

 

$

81,613

 

48

%

86.8%

 

$

0

 

Above Target

 

$

81,613

 

 


(1)     86.8% corporate EBITDA performance resulted in a 0% corporate component payout. 99.2% Logistics EBITDA performance resulted in a 95.8% Logistics component payout for Mr. Rolfe.

 

Equity-Based Compensation: The equity portion of the total compensation program is designed to:

 

·                  Align management and shareholder interests;

 

·                  Provide incentive to achieve strategic operating goals and increase shareholder value over the longer-term; and

 

·                  Motivate and retain Matson’s executives.

 

Performance Shares. In 2016, Matson continued the use of Performance Share awards focused on multi-year performance over a three-year measurement period that was originally implemented in 2013. Settlement of the Performance Shares granted in 2016 is determined at the end of the three-year performance period (i.e., December 31, 2018). The actual number of shares that vest is based on Matson’s three-year annual average ROIC performance against pre-established goals approved by the Compensation Committee in January 2016 (the primary performance measure) and Matson’s TSR as measured against the S&P Transportation Select Industry Index and S&P Midcap 400 Index over the three-year period (the performance modifier). The total number of Performance Shares earned may range from zero to 200% of the target grant size based on the Company’s primary performance measure results and then further adjusted +/- 25% based on the TSR performance modifier results. No Performance Shares will vest sooner than three years from the date of grant except in connection with the occurrence of a change in control of the ownership of Matson under certain circumstances.

 

On December 31, 2016, the performance period for the 2014-2016 Performance Share grant ended. For determination of the Performance Share award levels, the Company’s operating performance, excluding any financial impact related to the Alaska trade lane and Span Alaska acquisitions, as well as the Kanaloa class vessel construction, in accordance with the terms of the Performance Share award provisions, and relative TSR performance were compared to the performance goals approved by the Compensation Committee in February 2014. Corporate goals and the actual results were as follows:

 

27



Table of Contents

 

Company Performance Results Related to the 2014-2016 Performance Share Awards

 

Corporate Goals

 

Threshold

 

Target

 

Extraordinary

 

Actual

 

3-Year Average ROIC

 

7.9%

 

9.8%

 

11.8%

 

13.8%

 

3-Year Relative TSR —MidCap 400

 

25th

 

50th

 

75th

 

75th

 

3-Year Relative TSR —Transportation

 

25th

 

50th

 

75th

 

66th

 

 

Settlement of 2014-2016 Performance Share Grant. Actual Performance Share awards earned versus target were 240 percent or 200 percent of the overall targeted goal payouts, depending on participation in the TSR modifier, as follows:

 

2014-2016 Performance Share Award Settlement for NEOs

 

NEO

 

2014-2016
Target
Award (#)

 

ROIC
Performance

 

ROIC
Payout
%

 

TSR
Performance

 

TSR Modifier
%

 

2014-2016
Actual
Award (#)

 

Matthew J. Cox

 

40,306

 

141.2%

 

200%

 

75th/66th

 

+20%

 

96,735

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joel M. Wine

 

11,668

 

141.2%

 

200%

 

75th/66th

 

+20%

 

28,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter T. Heilmann(1)

 

3,395

 

141.2%

 

200%

 

N/A

 

N/A

 

6,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rusty K. Rolfe

 

5,304

 

141.2%

 

200%

 

75th/66th

 

+20%

 

12,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ronald J. Forest

 

6,365

 

141.2%

 

200%

 

75th/66th

 

+20%

 

15,276

 

 


(1)    The Performance Share awards for Mr. Heilmann are calculated only on ROIC performance, consistent with other senior management who were not executive officers at the time the grant was made.

 

Pursuant to the vesting provisions of the 2014-2016 Performance Share grants, time-based vesting of the awards occurred on January 29, 2017, while approval of the performance results associated with the awards took place on January 25, 2017. Therefore, the awards are included in the Outstanding Equity Awards at Fiscal Year End table below.

 

Restricted Stock Units. In 2016, the Company granted time-based RSUs to the NEOs. Time-based RSU grants align participant interests directly with shareholders and are intended to focus the efforts of executives on improving long-term stock price performance, increase executive beneficial share ownership and strengthen retention of participants through a three-year vesting period, prorated on the basis of the number of full or partial months employed during the vesting period.

 

Equity-based grants are generally considered and granted annually in January by the Compensation Committee. The CEO makes recommendations for each NEO (other than himself) to the Compensation Committee, which retains full discretion to set the grant amount. In determining the type and size of a grant to an executive officer, the Compensation Committee generally considers, among other things:

 

·                  Company and individual performance;

 

·                  The executive officer’s current and expected future contributions to the Company;

 

·                  Effect of a potential award on total compensation and pay philosophy;

 

·                  Internal pay equity relationships;

 

·                  Competitive market data;

 

·                  Potential dilutive impact on shareholders and available share pool; and

 

·                  Size and potential value of recent equity grants outstanding.

 

Standard equity grants were made to executives at Matson’s January 2016 Compensation Committee meeting and NEO grants were allocated 50/50 between Performance Shares and time-based RSUs. In recognition of the successful execution of the Alaska trade acquisition, certain NEOs were also awarded a one-time supplemental grant of time-based RSUs, as reported below.

 

28



Table of Contents

 

2016 Equity Awards for NEOs

 

 

 

Standard Annual Equity Award

 

Supplemental

 

 

 

NEO

 

Performance
Shares

 

Time-Based
RSUs

 

Time-Based
RSUs

 

Total Equity Value

 

Matthew J. Cox

 

$

1,200,000

 

$

1,200,000

 

$

400,000

 

$

2,800,000

 

Joel M. Wine

 

$

300,000

 

$

300,000

 

$

250,000

 

$

850,000

 

Peter T. Heilmann

 

$

200,000

 

$

200,000

 

$

250,000

 

$

650,000

 

Rusty K. Rolfe

 

$

150,000

 

$

150,000

 

 

$

300,000

 

Ronald J. Forest

 

$

150,000

 

$

150,000

 

$

100,000

 

$

400,000

 

 

Combination of Total Direct Pay Elements: The Company’s combination of pay elements for its NEOs is designed to place the emphasis on incentive compensation, while at the same time focusing on long-term talent retention and maintaining a balanced program to ensure an appropriate relationship between pay and risk. The Compensation Committee believes this is consistent with one of its key compensation objectives, which is to align management and shareholder interests.

 

Percentage of Target Total Direct Compensation Provided by Each Pay Element for 2016

 

 

 

2016 Pay Elements

 

NEO

 

Salary

 

Annual
Incentives

 

Long-Term
Incentives

 

Matthew J. Cox

 

17

%

17

%

66

%

Joel M. Wine

 

29

%

20

%

51

%

Peter T. Heilmann

 

30

%

18

%

52

%

Rusty K. Rolfe

 

41

%

21

%

38

%

Ronald J. Forest

 

37

%

19

%

44

%

 

Retirement Benefits: Matson provides various benefit plans to meet the retirement needs of all employees, including NEOs. Retirement plans are an important part of the Company’s total compensation program designed to provide executives with the ability to plan for their future while keeping them focused on Matson’s present success. The Pension Benefits table of this Proxy Statement provides a more detailed description and estimated values for each of the NEOs related to the Retirement Plan for Employees of Matson and Matson Excess Benefits Plan. The basic objective of these plans is to provide long-term eligible employees with retirement benefits proportional to their cash-based compensation from Matson.

 

Matson Individual Deferred Compensation and Profit Sharing Plan: The Company has a tax-qualified defined contribution retirement plan (the “Profit Sharing Retirement Plan”) available to all salaried non-bargaining unit employees. In 2010, the Company suspended the profit sharing component of this plan and replaced it with a cash-based profit sharing incentive program, with an award of zero to three percent of eligible base salary. This component provides for discretionary contributions to participants’ retirement savings account of up to three percent of compensation based on the degree of achievement of income before taxes as established in the Company’s annual Board-approved Operating Plan. As the Company did not meet the threshold level of performance requirement, there was no profit sharing contribution for 2016. The Individual Deferred Compensation (401(k)) component of the Profit Sharing Retirement Plan, available to all salaried non-bargaining unit employees, provides for a discretionary match of the compensation deferred by a participant during the fiscal year. The matching contribution for 2016 was 3.0 percent. The value of the Company’s 2016 Individual Deferred Compensation matching contributions for NEOs are included in the Summary Compensation Table of this Proxy Statement.

 

Retiree Health and Welfare Plan: The Company provides NEOs with the same retiree medical and life insurance benefits as are provided in general to all salaried non-bargaining unit employees, which is limited to only those who joined the Company prior to January 1, 2008. These benefits aid in retaining long-term service employees and provide for health care costs in retirement. The Company limits its contribution towards the monthly premium, based on the employee’s age and years of service. The benefits from this plan are reflected in the “—Other Potential Post-Employment Payments” section of this Proxy Statement. The plan was amended effective January 1, 2012 to allow for the continued eligibility under the Retiree Health and Welfare Plan for employees hired prior to January 1, 2008.

 

No Perquisites: The Company provides no perquisites to the NEOs, with the exception of Company-provided parking. The cost of parking in 2016 was less than $10,000 for each NEO.

 

29



Table of Contents

 

Severance Plan and Change in Control Agreements: The Company maintains the Matson Executive Severance Plan (the “Severance Plan”) that covers each of the NEOs. The Company has entered into change in control agreements (“Change in Control Agreements”) with all NEOs to retain talent during transitions due to a change in control or other covered event, and to provide a competitive pay package. Change in Control Agreements promote the continuation of management to ensure a smooth transition. The Compensation Committee designed the agreement to provide a competitively structured program, and yet be conservative overall in the amounts of potential benefits. The Compensation Committee’s decisions regarding other compensation elements are affected by the potential benefits under these arrangements, as the Compensation Committee considers how the terms of these arrangements and the other pay components interrelate. These agreements and the Severance Plan are described in further detail in the “—Other Potential Post-Employment Payments” section of this Proxy Statement.

 

Tax and Accounting Considerations

 

In evaluating the compensation structure, the Compensation Committee considers tax and accounting treatment, balancing the effects on the individual and the Company. Section 162(m) of the Internal Revenue Code limits the tax deductibility of certain executive compensation in excess of $1,000,000 for any fiscal year, except for certain “performance-based compensation.” The Compensation Committee does not limit executive compensation to that amount, but considers it as one factor in its decision-making. The 2016 Incentive Compensation Plan is designed to provide for the grant of awards intended to qualify for tax deductibility under Section 162(m), if certain conditions are met, though the Compensation Committee reserves the right to determine whether to make use of the performance-based compensation exception. In 2016, the Performance Share grants are intended to qualify as “performance-based” under Section 162(m) while time-based RSUs and the annual CIP are not. The Compensation Committee will continue to evaluate program designs and the ability to maximize compensation tax deductibility in the future.

 

Policies and Practices

 

Share Ownership Guidelines: To enhance shareholder alignment and ensure commitment to longer-term decision-making that enhances shareholder value, the Company has share ownership guidelines. Executives are required to own a value of stock equal to the salary multiple below within a five-year period:

 

Position

 

Salary Multiple

 

CEO

 

5X

 

Other NEOs

 

3X

 

 

As a result of the Company’s separation from Alexander & Baldwin, Inc. and new roles related to leading a public company, Messrs. Cox, Forest and Rolfe started a new five-year measurement period in 2012 to achieve the aforementioned share ownership guidelines. Mr. Wine’s measurement period commenced upon joining the Company in 2011 and Mr. Heilmann’s measurement period started in 2014 in connection with his promotion. All NEOs have met or are on track to meet this requirement within the prescribed five year period.

 

Equity Granting Policy: Equity awards are typically granted for current employees at the same time of year at the January Compensation Committee meeting, and the meeting is generally scheduled on the fourth Wednesday of the month. Equity grants for new hires or promoted employees are approved at regularly scheduled Compensation Committee meetings, which meetings are scheduled approximately 8-12 months in advance of the meeting date. The timing of these grants is made without regard to anticipated earnings or other major announcements by the Company. The exercise price for stock option grants under the 2016 Plan, including predecessor plans, is the closing price on the date of the grant, as specified by the 2016 Plan.

 

Policy Regarding Speculative Transactions and Hedging: The Company has adopted a formal policy prohibiting directors, officers and employees from (i) entering into speculative transactions, such as trading in options, warrants, puts and calls or similar instruments involving Matson stock, or (ii) hedging or monetization transactions, such as zero-cost collars and forward sale contracts, involving Matson stock.

 

Policy Regarding Recoupment of Certain Compensation: The Company has adopted a formal “clawback” policy for senior management, including all NEOs. Pursuant to such policy, the Company will seek to recoup certain incentive compensation, including cash bonuses and equity awards based upon the achievement of financial performance metrics, from executives in the event that the Company is required to restate its consolidated financial statements.

 

Compensation Risk Assessment: Matson conducted a detailed compensation risk assessment and concluded that the risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

 

30



Table of Contents

 

Compensation Committee Report

 

The Compensation Committee has reviewed and discussed the CD&A section of this Proxy Statement with management and, based on these discussions and review, it has recommended to the Board of Directors that the CD&A disclosure be included in this Proxy Statement.

 

The foregoing report is submitted by Dr. Chun (Chairman), Mr. Baird and Mr. Watanabe.

 

Compensation Committee Interlocks and Insider Participation

 

No member of the Compensation Committee is, or was during or prior to fiscal 2016, an officer or employee of the Company or any of its subsidiaries. None of the Company’s executive officers serves or served as a director or member of the compensation committee of another entity where an executive officer of such other entity serves or served as a director or member of the Compensation Committee of the Company.

 

Summary Compensation Table

 

The following table summarizes the compensation paid by Matson to the NEOs in 2016, 2015 and 2014:

 

2016 SUMMARY COMPENSATION TABLE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonqualified

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Equity

 

Deferred

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Option

 

Incentive Plan

 

Compensation

 

All Other

 

 

 

Name and

 

 

 

Salary

 

Bonus

 

Awards

 

Awards

 

Compensation

 

Earnings

 

Compensation

 

Total

 

Principal Position

 

Year

 

($)

 

($)

 

($)(1)

 

($)(2)

 

($)(3)

 

($)(4)

 

($)

 

($)

 

(a)

 

(b)

 

(c)

 

(d)

 

(e)

 

(f)

 

(g)

 

(h)

 

(i)

 

(j)

 

Matthew J. Cox

 

2016

 

725,591

 

 

2,801,915

(5)

 

354,375

 

187,192

 

65,651

(6)

4,134,724

 

President and Chief Executive

 

2015

 

665,372

 

 

2,400,040

 

 

1,232,153

 

66,775

 

82,469

 

4,446,809

 

Officer

 

2014

 

633,778

 

 

1,900,024

 

 

1,185,726

 

264,785

 

84,152

 

4,068,465

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joel M. Wine

 

2016

 

482,699

 

 

850,540

(5)

 

199,204

 

30,852

 

25,519

(6)

1,588,814

 

Senior Vice President and Chief

 

2015

 

477,564

 

 

600,010

 

 

651,289

 

27,193

 

36,693

 

1,792,749

 

Financial Officer

 

2014

 

454,887

 

 

550,030

 

 

512,690

 

46,555

 

42,495

 

1,606,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter T. Heilmann

 

2016

 

368,445

 

 

650,362

(5)

 

128,661

 

24,799

 

21,944

(6)

1,194,211

 

Senior Vice President and Chief

 

2015

 

366,210

 

 

400,055

 

 

426,112

 

21,776

 

28,862

 

1,243,015

 

Legal Officer (7)

 

2014

 

297,643

 

 

300,053

 

 

291,968

 

21,900

 

25,861

 

937,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rusty K. Rolfe

 

2016

 

327,786

 

 

300,305

(5)

 

152,700

 

67,319

 

14,621

(6)

862,731

 

President, Matson Logistics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ronald J. Forest

 

2016

 

337,427

 

 

400,315

(5)

 

81,613

 

147,650

 

16,296

(6)

983,301

 

Senior Vice President,

 

2015

 

333,837

 

 

300,005

 

 

299,818

 

31,620

 

25,739

 

991,019

 

Operations

 

2014

 

317,986

 

 

300,046

 

 

278,225

 

291,245

 

27,897

 

1,215,399

 

 


(1)  Represents the grant-date fair value of time-based RSUs and the grant-date fair value of Performance Shares (assuming the target level of performance is attained) for the fiscal year identified in column (b).

(2)  No stock option grants were made in 2014, 2015 or 2016.

(3)  Represents the NEO’s award under the CIP for the fiscal year identified in column (b) payable in cash in February of the following year.

(4)  All amounts are attributable to the aggregate change in the actuarial present value of the NEO’s accumulated benefit under all defined benefit and actuarial pension plans.

(5)  Includes the grant date fair value of Performance Shares at target of $1,201,914 for Mr. Cox, $300,507 for Mr. Wine, $200,338 for Mr. Heilmann, $150,272 for Mr. Rolfe, and $150,272 for Mr. Forest. The grant date fair value of these Performance Share awards at maximum are $3,004,803 for Mr. Cox, $751,286 for Mr. Wine, $500,844 for Mr. Heilmann, $375,680 for Mr. Rolfe, and $375,680 for Mr. Forest.

(6)  Represents (i) dividends paid on unvested time-based RSUs ($57,729 for Mr. Cox, $17,774 for Mr. Wine, $14,112 for Mr. Heilmann, $6,693 for Mr. Rolfe, and $8,527 for Mr. Forest), and (ii) 401k match ($7,922 for Mr. Cox, $7,745 for Mr. Wine, $7,832 for Mr. Heilmann, $7,928 for Mr. Rolfe, and $7,769 for Mr. Forest).  The Company did not fund a profit-sharing contribution in 2016.

(7)  Mr. Heilmann was appointed Senior Vice President and Chief Legal Officer effective March 1, 2014.

 

31



Table of Contents

 

Grants of Plan-Based Awards

 

The following table contains information concerning the equity and non-equity grants under Matson’s incentive plans during 2016 for the NEOs:

 

2016 GRANTS OF PLAN-BASED AWARDS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Other

 

Grant

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Date Fair

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Awards:

 

Value of

 

 

 

 

 

Estimated Future Payouts

 

Estimated Future Payouts

 

Number of

 

Stock

 

 

 

 

 

Under Non-Equity Incentive

 

Under Equity Incentive

 

Shares of

 

and

 

 

 

 

 

Plan Awards(1)

 

Plan Awards(2)

 

Stock or

 

Option

 

 

 

Grant

 

Threshold

 

Target

 

Maximum

 

Threshold

 

Target

 

Maximum

 

Units

 

Awards

 

Name

 

Date

 

($)

 

($)

 

($)

 

(#)

 

(#)

 

(#)

 

(#)(3)(4)

 

($)(5)

 

(a)

 

(b)

 

(c)

 

(d)

 

(e)

 

(f)

 

(g)

 

(h)

 

(i)

 

(l)

 

Matthew J. Cox

 

 

375,000

 

750,000

 

1,500,000

 

 

 

 

 

 

 

 

1/27/2016

 

 

 

 

5,978

 

31,881

 

79,703

 

 

1,201,914

 

 

 

1/27/2016

 

 

 

 

 

 

 

31,881

 

1,200,001

 

 

 

1/27/2016

 

 

 

 

 

 

 

10,627

 

400,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joel M. Wine

 

 

170,261

 

340,521

 

681,043

 

 

 

 

 

 

 

 

1/27/2016

 

 

 

 

1,495

 

7,971

 

19,928

 

 

300,507

 

 

 

1/27/2016

 

 

 

 

 

 

 

7,971

 

300,028

 

 

 

1/27/2016

 

 

 

 

 

 

 

6,642

 

250,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter T. Heilmann

 

 

111,395

 

222,789

 

445,578

 

 

 

 

 

 

 

 

1/27/2016

 

 

 

 

997

 

5,314

 

13,285

 

 

200,338

 

 

 

1/27/2016

 

 

 

 

 

 

 

5,314

 

200,019

 

 

 

1/27/2016

 

 

 

 

 

 

 

6,642

 

250,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rusty K. Rolfe

 

 

82,585

 

165,170

 

330,340

 

 

 

 

 

 

 

 

1/27/2016

 

 

 

 

748

 

3,986

 

9,965

 

 

150,272

 

 

 

1/27/2016

 

 

 

 

 

 

 

3,986

 

150,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ronald J. Forest

 

 

85,014

 

170,028

 

340,055

 

 

 

 

 

 

 

 

1/27/2016

 

 

 

 

748

 

3,986

 

9,965

 

 

150,272

 

 

 

1/27/2016

 

 

 

 

 

 

 

3,986

 

150,033

 

 

 

1/27/2016

 

 

 

 

 

 

 

2,657

 

100,010

 

 


(1)       Amounts reflected in this section relate to estimated payouts under the CIP. The value of the actual payouts is included in the Non-Equity Incentive Compensation column of the Summary Compensation Table.

 

(2)       Amounts in this section reflect Performance Share grants made in 2016 with award achievement determined at the end of the 3-year performance period as of December 31, 2018. Actual number of Performance Shares earned will be determined based on the Company’s 3-year annual average ROIC and 3-year TSR measured relative to the companies comprising the S&P Transportation Select Industry Index and S&P MidCap 400 Index.

 

(3)       Amounts in this section reflect time-based RSU grants.  In addition to their standard annual equity grants, Messrs. Cox, Wine, Heilmann, and Forest received one-time, supplemental RSU grants in recognition of their performance in connection with the Alaska trade acquisition.  These one-time grants are listed separately from the standard annual equity grants.

 

(4)       No stock option grants were made in 2016.

 

(5)       Based upon the $37.64 closing price of Matson common stock on the date of grant for time-based RSUs and a grant date fair value of $37.70 for performance share awards.

 

The CIP is based on corporate and individual goals. Performance measures, weighting of goals and target opportunities are discussed in the Compensation Discussion & Analysis Section entitled “Components of Executive Compensation — Annual Cash Incentives”.

 

Under the predecessor plans to the 2016 Plan, the Company has issued stock options that vest in equal increments over three years and have a maximum term of 10 years. They continue to vest and are exercisable for three years after disability, normal retirement at age 65 or older or approved early retirement at age 55 (with five years of service). Vesting automatically accelerates in the event of death and the executive’s personal representative has up to 12 months to exercise the stock options. Stock options automatically vest on the specified effective date of a change in control if the participant is involuntarily terminated or awards are not assumed or replaced by the successor company. If an employee is terminated due to misconduct or engages in conduct considered materially detrimental to the business, then the option terminates immediately. If an employee ceases to be employed for any other reason the option may be exercised within three months of termination to the degree vested at the time of termination. Stock options cannot be re-priced under the 2016 Plan without shareholder approval. No stock options were granted in 2014, 2015 or 2016.

 

32



Table of Contents

 

Under the 2016 Plan, including predecessor plans, the Company has issued time-based RSUs that vest in equal increments over three years. Time-based RSUs that are unvested will automatically vest upon death or permanent disability. Time-based RSUs will partially vest on a prorated basis upon normal retirement at age 65 or older or approved early retirement at age 55 (with five years of service). Upon the effective date of any change in control, any unvested time-based RSUs automatically vest if the participant is involuntarily terminated or awards are not assumed or replaced by the successor company. Under the 2016 Plan, grantees receive dividend equivalents on the full amount of time-based RSUs granted, regardless of vesting, at the same rate as is payable on the Company’s common stock.

 

In January 2016, the Company granted Performance Shares. The actual number of Performance Shares earned will be determined at the end of the performance period as of December 31, 2018 based on the Company’s 3-year annual average ROIC (primary measure) and 3-year TSR measured relative to the companies comprising the S&P Transportation Select Industry Index and S&P MidCap 400 Index (award modifier), as shown in the table below. Actual performance at the target performance level for the ROIC measure results in earning 100 percent of the target Performance Share award; actual performance at the 80% threshold level ROIC results in earning 25 percent of the target award; actual performance below the threshold ROIC level results in no awards earned; and actual performance at the extraordinary ROIC level results in earning the maximum number of units equal to 200 percent of the target number of Performance Shares. For actual performance between threshold, target and extraordinary, awards are determined on a prorated basis. If TSR performance is at the 50th percentile of the market indexes, there is no modification to the number of Performance Shares earned based on ROIC; if TSR performance is at or better than the 75th percentile of the market indexes, the number of Performance Shares earned will be increased by 25%; if TSR performance is at or below the 25th percentile of the market indexes, the number of Performance Shares earned will be reduced by 25%. Award adjustment for relative TSR results between these performance levels will be interpolated on a straight-line basis. Maximum total Performance Shares awarded can be up to 250% of target. If participants receiving a Performance Share award terminate employment prior to vesting for any reason other than death, permanent disability, normal retirement or approved early retirement, their awards will not vest. If a participant terminates due to death, permanent disability, normal retirement or approved early retirement, his or her award will be prorated on the basis of the number of full or partial months employed during the performance period and the actual amount earned at the end of the performance period. If there is a change in control, the performance vesting requirements applicable to the Performance Shares will terminate and the number of Performance Shares that may become issuable to each participant will become fixed based on the formula described below under the heading “Other Potential Post-Employment Payments” and any unvested Performance Shares will automatically vest if the participant is involuntarily terminated or awards are not assumed or replaced by the successor company. No dividend equivalents are paid on outstanding Performance Shares.

 

TSR Modifier and Payout Adjustment:

 

Relative TSR Performance

 

TSR Modifier Adjustment

 

>75th percentile

 

+25%

 

50th percentile

 

0%

 

< 25th percentile

 

-25%

 

 

Adjustment for TSR Modifier between performance levels will be interpolated on a straight-line basis:

 

 

 

ROIC Performance

 

TSR Performance

 

Performance Level

 

Performance as a % of
Target

 

Payout as a % of
Target

 

TSR Modifier

 

Total Payout as a % of
Target

 

Extraordinary

 

120%

 

200%

 

-25% to +25%

 

150% - 250%

 

Target

 

100%

 

100%

 

-25% to +25%

 

75% - 125%

 

Threshold

 

80%

 

25%

 

-25% to +25%

 

18.75% - 31.25%

 

 

33



Table of Contents

 

Outstanding Equity Awards at Fiscal Year End

 

The following table contains information concerning the outstanding equity awards owned by the NEOs on December 31, 2016:

 

2016 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

 

 

 

Option Awards

 

Stock Awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity Incentive

 

Equity Incentive

 

 

 

 

 

 

 

Equity Incentive

 

 

 

 

 

 

 

 

 

Plan Awards:

 

Plan Awards:

 

 

 

 

 

 

 

Plan Awards:

 

 

 

 

 

 

 

Market Value

 

Number of

 

Market or

 

 

 

Number of

 

Number of

 

Number of

 

 

 

 

 

Number of

 

of Shares or

 

Unearned

 

Payout Value of

 

 

 

Securities

 

Securities

 

Securities

 

 

 

 

 

Shares or

 

Units of

 

Shares, Units

 

Unearned

 

 

 

Underlying

 

Underlying

 

Underlying

 

 

 

 

 

Units of

 

Stock that

 

or Other Rights

 

Shares, Units

 

 

 

Unexercised

 

Unexercised

 

Unexercised

 

Option

 

Option

 

Stock that

 

Have Not

 

that Have 

 

or Other Rights

 

 

 

Options

 

Options 

 

Unearned

 

Exercise

 

Expiration

 

Have Not

 

Vested

 

Not

 

that Have Not

 

Name

 

Exercisable (#)

 

Unexercisable (#)

 

Options (#)

 

Price

 

Date

 

Vested (#)

 

($)(1)

 

Vested (#)(2)

 

Vested ($)

 

(a)

 

(b)

 

(c)

 

(d)

 

(e)($)

 

(f)

 

(g)

 

(h)

 

(i)

 

(j)

 

Matthew J. Cox

 

35,042

 

 

 

N/A

 

23.28

 

1/29/2018

 

78,012

(3)

2,760,845

 

161,720

(4)

5,723,271

 

 

 

31,861

 

 

 

 

 

23.74

 

1/24/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Joel M. Wine

 

60,381

 

 

 

N/A

 

21.46

 

8/31/2021

 

24,019

(5)

850,032

 

44,251

(6)

1,566,043

 

 

 

29,954

 

 

 

 

 

23.74

 

1/24/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter T. Heilmann

 

N/A

 

N/A

 

N/A

 

 

 

 

 

18,730

(7)

662,855

 

17,622

(8)

622,643

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rusty K. Rolfe

 

3,047

 

 

 

N/A

 

16.94

 

1/26/2020

 

8,850

(9)

313,202

 

20,165

(10)

713,639

 

 

 

5,574

 

 

 

 

 

20.84

 

1/25/2021