9

COMPENSATION Ms. Shafer-Malicki (Chair) Mr. Brown Mr. Trice		•   Evaluates our officer and director compensation plans, policies and programs and our employee benefit plans. •   Approves and/or recommends to the Board for approval such officer and director compensation plans, policies and programs. •   Oversees our disclosures relating to compensation plans, policies and programs, including overseeing the preparation of the Compensation Discussion and Analysis included in this proxy statement. •   Acts in its sole discretion to retain or terminate any compensation consultant to be used to assist the Compensation Committee in the discharge of its responsibilities. For additional information on the role of compensation consultants, please see “Compensation Discussion and Analysis — Role of Compensation Committee, Compensation Consultant and Management” below. •   For 2012, the Compensation Committee authorized our Chief Executive Officer, in consultation with his direct reports, to establish individual goals under our Executive Incentive Compensation Plan (“EICP”) for our other executive officers who participate in the EICP. •   Under our 2009 McDermott International, Inc. Long-Term Incentive Plan (the “2009 LTIP”), the Compensation Committee may delegate some of its duties to our Chief Executive Officer or other senior officers. •   Under the McDermott International, Inc. Director and Executive Deferred Compensation Plan, which we refer to as the “DCP,” the Compensation Committee may delegate any of its powers or responsibilities to one or more members of the Committee or any other person or entity.		8 Meetings in 2012
FINANCE Mr. McWilliams (Chair) Mr. Bookout Mr. Hanks Ms. Shafer-Malicki		•   Reviews and oversees financial policies and strategies, mergers and acquisitions, financings, liabilities, investment performance of our pension plans and our capital structure. •   Recommends any change in dividend policies or stock repurchase programs. •   Oversees capital expenditures and capital allocation strategies. •   Oversees our tax structure and monitors any developments relating to changes in tax legislation. •   Generally has responsibility over such matters up to $50 million, and for activities involving amounts over $50 million, reviews each such activity and makes a recommendation to the Board.		5 Meetings in 2012

GOVERNANCE Mr. Brown (Chair) Mr. Bookout Mr. Schumann		•   Identifies individuals qualified to become Board members and recommends to the Board each year the director nominees for the next annual meeting of stockholders. •   Develops, reviews and recommends to the Board any changes to our Corporate Governance Guidelines the Governance Committee deems appropriate. •   Leads the Board in its annual review of the Board’s performance and, in conjunction with the Compensation Committee, oversees the annual evaluation of our Chief Executive Officer. •   Reviews our executive management succession plan on at least an annual basis. •   Recommends to the Board the directors to serve on each Board committee. •   Recommends to the Board the compensation of nonemployee directors. •   Serves as the primary committee overseeing our Compliance and Ethics Program, excluding certain oversight responsibilities assigned to the Audit Committee. •   Oversees our director and officer insurance program.		6 Meetings in 2012

Compensation Committee Interlocks and Insider Participation

All members of our Compensation Committee are independent in accordance with the New York Stock ExchangeNYSE listing standards. No member of the Compensation Committee (1) was, during the year ended December 31, 2010,2012, or had previously been, an officer or employee of McDermott or any of its subsidiaries, or (2) had any material interest in a transaction of McDermott or a business relationship with, or any indebtedness to, McDermott. No interlocking relationship existed during the year ended December 31, 20102012 between any member of the Board of Directors or the Compensation Committee and an executive officer of McDermott.

Director Nomination Process

Our Governance Committee has determined that a candidate for election to our Board of Directors must meet specific minimum qualifications. Each candidate should:

have a record of integrity and ethics in his/her personal and professional life;

have a record of professional accomplishment in his/her field;

be prepared to represent the best interests of our stockholders;

not have a material personal, financial or professional interest in any competitor of ours; and

be prepared to participate fully in Board activities, including active membership on at least one Board committee and attendance at, and active participation in, meetings of the Board and the committee(s) of which he or she is a member, and not have other personal or professional commitments that would, in the Governance Committee’s

 

	•	have a record of integrity and ethics inhis/her personal and professional life;
	•	have a record of professional accomplishment inhis/her field;
	•	be prepared to represent the best interests of our stockholders;
	•	not have a material personal, financial or professional interest in any competitor of ours; and
	•	be prepared to participate fully in Board activities, including active membership on at least one Board committee and attendance at, and active participation in, meetings of the Board and the committee(s) of which he or she is a member, and not have other personal or professional commitments that would, in the Governance Committee’s sole judgment, interfere with or limit his or her ability to do so.

In addition, the Governance Committee also considers it desirable that candidates possess the following qualities or skills:

	•	each candidate should contribute positively to the collaborative culture among Board members; and

each candidate should contribute positively to the collaborative culture among Board members; and

	•	each candidate should possess professional and personal experiences and expertise relevant to our businesses and industries.

each candidate should possess professional and personal experiences and expertise relevant to our business and industry.

While McDermott does not have a specific policy addressing board diversity, the Board recognizes the benefits of a diversified board and believes that any search for potential director candidates should consider diversity as to gender, ethnic background and personal and professional experiences. The Governance Committee solicits ideas for possible candidates from a number of sources — including independent director candidate search firms, members of the Board and our senior level executives.

In 2010,2012, our Governance Committee engaged Russell Reynolds Associates (“Russell Reynolds”), an independent director search firm, in order to assist in selecting director candidates. After review and consideration of approximately 25 prospective candidates identified by Russell Reynolds, Ms. Shafer-MalickiMr. Schumann was appointed to

the Board on February 17, 2011September 24, 2012 in consideration of herhis extensive experience in our industry and other qualifications.

Any stockholder may nominate one or more persons for election as one of our directors at an annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions contained in our By-Laws. See “Stockholders’ Proposals” in this proxy statement and our By-Laws, which may be found on our Web site atwww.mcdermott.comat “Corporate“About Us — Leadership & Corporate Governance — Governance Policies.Corporate Governance.”

The Governance Committee will consider candidates identified through the processes described above and will evaluate each of them, including incumbents, based on the same criteria. The Governance Committee also takes into account the contributions of incumbent directors as Board members and the benefits to us arising from their experience on the Board. Although the Governance Committee will consider candidates identified by stockholders, the Governance Committee has sole discretion whether to recommend those candidates to the Board. None of the director nominees for the 20112013 Annual Meeting are standing for election for the first time, with the exception of Mr. Johnson and Ms. Shafer-Malicki,Schumann, who werewas appointed to the Board in July 2010 and February 2011, respectively.September 2012.

 

14

COMPENSATIONOF DIRECTORS

In May 2011, at the request of the Governance Committee, Pay Governance LLC performed a market analysis of nonemployee director compensation and made recommendations regarding nonemployee director compensation to the Governance Committee. Based upon those recommendations, the Governance Committee recommended revisions to our 2011 nonemployee director compensation program, which were approved by the Board. No changes were made to the nonemployee director compensation program for 2012 as compared to 2011.

Under our 2012 nonemployee director compensation program, cash compensation for nonemployee directors consisted of retainers (paid monthly and prorated for partial terms) and meeting fees as follows:

annual Board member retainer: $75,000;

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additional retainer for the chair of each of the Audit Committee and Compensation Committee: $20,000;

additional retainer for the chair of Directorseach of the Finance Committee and Governance Committee: $10,000;

additional retainer for the Lead Director: $20,000; and

meeting fees of $2,500 for each meeting of the Board or a Committee (of which the nonemployee director is a member) attended, in person or by telephone, in excess of the eighth Board or Committee meeting per calendar year.

 

The table below summarizes the compensation earned by or paid to our nonemployee directors during the year ended December 31, 2010. In connection with the Spin-off, Messrs. Goldman and Kingsley and Admiral Mies resigned as members of the2012. Mr. Thomas C. Schievelbein retired from our Board of Directors on July 30, 2010.

effective September 26, 2012.

Director Compensation TableDIRECTOR COMPENSATION TABLE

		Fees Earned or				Stock
Name		Paid in Cash(1)				Awards(2)				Total
John F. Bookout, III		$	95,000			$	109,979			$	204,979
Roger A. Brown		$	106,750			$	109,979			$	216,729
Ronald C. Cambre		$	247,500			$	109,979			$	357,479
Robert W. Goldman		$	68,000			$	109,979			$	177,979
Stephen G. Hanks		$	91,750			$	109,979			$	201,729
Oliver D. Kingsley Jr.		$	57,250			$	109,979			$	167,229
D. Bradley McWilliams		$	108,250			$	109,979			$	218,229
Richard W. Mies		$	57,250			$	109,979			$	167,229
Thomas C. Schievelbein		$	107,750			$	109,979			$	217,729
David A. Trice		$	105,750			$	109,979			$	215,729

Name		Fees Earned or Paid in Cash				Stock Awards(1)				Total
John F. Bookout, III		$	75,000			$	119,996			$	194,996
Roger A. Brown		$	85,000			$	119,996			$	204,996
Stephen G. Hanks		$	75,000				$119,996			$	194,996
D. Bradley McWilliams		$	105,000			$	119,996			$	224,996
Thomas C. Schievelbein		$	71,250			$	119,996			$	191,246
William H. Schumann, III		$	18,750			$	75,276			$	94,026
Mary L. Shafer-Malicki		$	80,000			$	119,996			$	199,996
David A. Trice		$	95,000			$	119,996			$	214,996

(1)		See “Fees Earned or Paid in Cash” belowUnder our 2012 director compensation program, equity compensation for a discussion of the amounts reported in this column.
(2)		See “Stock and Option Awards” below for a discussion of the amounts reported in this column.

The compensation for nonemployee directors for 2010 was comprised of cash and equity compensation earned by directors in connection with their service as directors. The cash compensationnonemployee directors generally consisted of retainers and meeting fees described in more detail below. The equity compensation consisted of restricted stock awards issued under our 2009 LTIP. Employee directors do not receive any compensation for their service as directors.

Fees Earned or Paid in Cash.  Under our 2010 director compensation program, cash compensation for nonemployee directors consisted of the following:

	•	an annual retainer of $45,000 (prorated for partial terms);
	•	a fee of $2,500 for each Board meeting personally attended, $1,750 for each meeting of a committee of which they are a member personally attended and $1,000 for each Board meeting and meeting of a committee of which they are a member attended by telephone.

The Non-Executive Chairman receives a fee of $1,750 for any committee meeting personally attended and $1,000 for any committee meeting attended by telephone. Until its dissolution in August 2010, any director who attended a meeting of the Restructuring

Committee received a fee of $1,750 for each meeting personally attended and $1,000 for each meeting attended by telephone.

The chairs of Board committees and the Non-Executive Chairman receive additional annual retainers as follows (pro-rated for partial terms):

	•	the chair of the Audit Committee: $20,000;
	•	the chair of the Compensation Committee: $15,000;
	•	the chair ofdiscretionary annual stock grant. On May 15, 2012, each of the Finance Committee and the Governance Committee: $10,000; andnonemployee directors then serving as a director received a grant of 11,121 shares of restricted stock valued at $119,996. Because Mr. Schumann was not appointed to our Board until September 24, 2012, he received a grant of 5,979 shares of restricted stock on September 24, 2012 valued at $75,276, following his appointment to our Board, which reflected his partial-year service.

•The amounts reported represent the aggregate grant date fair value of the restricted stock or restricted stock units computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718, using the closing market price of McDermott common stock on the date of grant ($10.79 on May 15, 2012 and $12.59 on September 24, 2012). Under the terms of each award, the restricted stock vested immediately on the grant date and immediately became unrestricted shares of McDermott common stock.

the Non-Executive Chairman: $150,000.As of December 31, 2012, nonemployee directors had aggregate outstanding stock option awards as follows: Mr. Bookout — stock options to purchase 6,105 shares; Mr. Brown — stock options to purchase 38,085 shares; and Mr. McWilliams — stock options to purchase 900 shares. All of such stock options were fully vested.

The chair of the Restructuring Committee also received a retainer of $15,000 in 2010.

Since May 2009, all director annual retainers are paid in quarterly installments.

Stock and Option Awards.  In addition to the fees provided to our directors described above, we granted equity awards to our directors in 2010 under the 2009 LTIP.

Under the 2009 LTIP, nonemployee directors may be granted stock options, restricted stock, performance units, restricted stock units and performance share

15

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NEO PROFILES

awards, in such amounts and on such terms as the Compensation Committee or the Board may determine from time to time. In 2010, each of our nonemployee directors received 4,243 shares of restricted stock. Under the terms of each award, the restricted stock vested immediately on the grant date.

The amounts reported in the “Stock Awards” column represent the grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718. Under FASB ASC Topic 718, the

fair value of restricted stock is determined on the date of grant and is not remeasured. Grant date fair values are determined using the closing price of our common stock on the date of grant for restricted stock.

The following table reflects the number of shares and grant date fair value, computed in accordance with FASB ASC Topic 718, with respect to each restricted stock award granted to nonemployee directors in 2010 and the restricted stock and stock option awards each nonemployee director had outstanding as of December 31, 2010.

Equity Awards Granted to Directors in 2010 and
Outstanding at December 31, 2010

			Equity Awards
			Granted in 2010
							Shares of									Equity Awards Outstanding at
							Restricted				Grant Date					December 31, 2010
Name			Grant Date				Stock				Fair Value					Stock Awards				Option Awards
John F. Bookout, III				May 13, 2010				4,243			$	109,979					0				6,105
Roger A. Brown				May 13, 2010				4,243			$	109,979					0				38,085
Ronald C. Cambre				May 13, 2010				4,243			$	109,979					0				0
Robert W. Goldman				May 13, 2010				4,243			$	109,979					0				0
Stephen G. Hanks				May 13, 2010				4,243			$	109,979					0				0
Oliver D. Kingsley, Jr.				May 13, 2010				4,243			$	109,979					0				0
D. Bradley McWilliams				May 13, 2010				4,243			$	109,979					0				37,876
Richard W. Mies				May 13, 2010				4,243			$	109,979					0				0
Thomas C. Schievelbein				May 13, 2010				4,243			$	109,979					0				72,538
David A. Trice				May 13, 2010				4,243			$	109,979					0				0

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Named Executives Profiles

The following profiles provide summary information regarding the experience and 20102012 compensation of our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers, who were employed by McDermott as of December 31, 2010,2012, whom we refer to as our “Continuing Named Executives.“named executive officers” or “NEOs.”

The Continuing Named Executives, our former Chief Executive Officer, Mr. John A. Fees, who became Chairman of the Board of Directors of B&W following the Spin-off, our former Chief Financial Officer, Mr. Michael S. Taff, who became Chief Financial Officer of B&W following the Spin-off, and Mr. Brandon C. Bethards, who became the Chief Executive Officer of B&W following the Spin-off, and would have been one of our three other most highly compensated executive officers had he been employed by McDermott as of December 31, 2010, are collectively referred to as our “Named Executives.” Information on Messrs. Fees, Taff and Bethards is provided in the

Compensation Discussion and Analysis and the compensation-related tables included in this proxy statement.

The Continuing Named ExecutiveNEO profiles provide biographical information, including age as of May 6, 2011,7, 2013, and summarize the compensation disclosures that are

provided in the Compensation Discussion and Analysis (“CD&A”) and executive compensation tables in this proxy statement. These profiles are supplemental, and are being provided in addition to, and not in substitution for, the detailed compensation tables required by the Securities Exchange CommissionSEC that follow the Compensation Discussion and Analysis.CD&A. Please consult the more detailed compensation tables and the accompanying footnotes following the Compensation Discussion and AnalysisCD&A for an explanation of how the compensation information is calculated.

 

17

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STEPHEN M. JOHNSON

CHAIRMANOFTHE BOARD, PRESIDENTAND CHIEF EXECUTIVE OFFICER

Stephen M. Johnson

President & Chief Executive Officer & Director

Age: 59

Tenure with McDermott: 2 years

Mr. Johnson has served as our President and Chief Executive Officer since July 2010. Previously, he served as: President and Chief Executive Officer of J. Ray McDermott, S.A., one of our subsidiaries, from January 2010 to July 2010; our President and Chief Operating Officer from April 2009 to December 2009; and from 2001 to 2008 as Senior Executive Vice President and Member, Office of the Chairman, at Washington Group International, Inc. (“Washington Group”) and at URS Corporation, which acquired Washington Group in 2007. Prior to joining Washington Group, Mr. Johnson held various management positions within Fluor Corporation, an engineering, procurement, construction and maintenance services company, from 1973 through 2001.

2010 Compensation

Annual Base Salary
Base Salary Earned		$	827,083
Annual Incentive Compensation
Executive Incentive Compensation Plan		$	1,218,863
Long-Term Incentive Compensation
Restricted Stock Units(1)		$	1,249,956
Stock Options(1)		$	865,313
Retention Agreement Grant
Restricted Stock(1)		$	1,422,186
Pension Plan
Annual Change in Present Value of Accumulated Pension Benefit			N/A
Other Compensation
Deferred Compensation Plan Contribution		$	69,375
Thrift Match		$	7,095
Service-Based Thrift Contribution		$	7,350
TaxGross-Ups		$	21,025
Perquisites and Personal Benefits		$	58,838

2010 Total Compensation

Equity Awarded in 2010

Age: 61 Tenure with McDermott: 4 years Mr. Johnson has served as our President and Chief Executive Officer since July 2010. Previously, he served as: President and Chief Executive Officer of J. Ray McDermott, S.A., one of our subsidiaries, from January 2010 to July 2010 and our President and Chief Operating Officer from April 2009 to December 2009. From 2001 to 2008, Mr. Johnson was Senior Executive Vice President and Member, Office of the Chairman, at Washington Group International, Inc. (“Washington Group”) and at URS Corporation, which acquired Washington Group in 2007.

2012 COMPENSATION

Annual Base Salary

Base Salary Earned

$   950,000

Annual Incentive Compensation

Executive Incentive Compensation Plan

$   760,000

Long-Term Incentive Compensation(1)

Restricted Stock Units

$1,249,999

Stock Options

$1,249,999

Performance Shares

$2,499,980

Pension Plan(2)

Annual Change in Present Value of Accumulated Pension Benefit

N/A

Other Compensation

Deferred Compensation Plan Contribution

$   108,068

Thrift Match

$       6,979

Service-Based Thrift Contribution

$       7,500

Tax Gross-Ups

$              0

Perquisites

$     20,000

2012 TOTAL COMPENSATION

March 4, 2010

Stock Options

141,597 shares(2)

EQUITY AWARDEDIN 2012

March 4, 20105, 2012

Restricted Stock Units

95,493

86,565 units(2)

August 2, 2010

Restricted Stock

113,412

March 5, 2012

Stock Options

179,856 shares

March 5, 2012

Performance Shares

108,459 shares

(1)

All

(1)   Each equity grants aregrant is disclosed at the grant date fair value of the award. (2)   Mr. Johnson does not participate in our qualified defined benefit plan due to commencing his employment with the Company after the plan was closed to new participants in 2006.

PERRY L. ELDERS

SENIOR VICE PRESIDENTAND CHIEF FINANCIAL OFFICER

Age: 51 Tenure with McDermott: 3 years Mr. Elders has served as our Senior Vice President and Chief Financial Officer since July 2010, and served in that capacity at our subsidiary J. Ray McDermott, S.A. from April 2010 to July 2010. Previously, he served as: Executive Vice President and Chief Financial Officer from February 2006 to April 2009, and Senior Financial Advisor from November 2005 to February 2006, of Bristow Group, Inc., a worldwide provider of helicopter services; Director, Financial Consulting of Sirius Solutions, an independent business consulting firm, from July 2005 to February 2006; and Vice President and Chief Accounting Officer of Vetco International, Ltd., a provider of upstream oil and gas production facilities, process systems, technology and products, from August 2004 to May 2005. Mr. Elders spent 20 years (1983-2003) in public accounting firms where he became an audit partner specializing in multi-national energy service companies. Mr. Elders is a Certified Public Accountant.

2012 COMPENSATION

(2)

As adjusted pursuant to the equity conversion

Annual Base Salary

Base Salary Earned

$493,750

Annual Incentive Compensation

Executive Incentive Compensation Plan

$207,383

Long-Term Incentive Compensation(1)

Restricted Stock Units

$337,463

Stock Options

$337,499

Performance Shares

$674,973

Pension Plan(2)

Annual Change in connection with the Spin-off.Present Value of Accumulated Pension Benefit

N/A

18

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Perry L. Elders

Senior Vice President, Chief Financial Officer

Age: 49

Tenure with McDermott: 1 year

Mr. Elders has served as our Senior Vice President and Chief Financial Officer since July 2010, and served in that capacity at our subsidiary J. Ray McDermott, S.A. from April 2010 to July 2010. Previously, he served as: Executive Vice President and Chief Financial Officer from February 2006 to April 2009, and Senior Financial Advisor from November 2005 to February 2006, of Bristow Group, Inc., a worldwide provider of helicopter services; Director, Financial Consulting of Sirius Solutions, an independent business consulting firm, from July 2005 to February 2006; and Vice President and Chief Accounting Officer of Vetco International, Ltd., a provider of upstream oil and gas production facilities, process systems, technology and products, from August 2004 to May 2005. Mr. Elders spent 20 years(1983-2003) in public accounting firms where he became an audit partner specializing in multi-national energy service companies. Mr. Elders is a Certified Public Accountant.

2010 Compensation

Annual Base Salary
Base Salary Earned(1)		$	315,114
Annual Incentive Compensation
Executive Incentive Compensation Plan		$	398,147
Long-Term Incentive Compensation
Restricted Stock Units(2)		$	517,021
Stock Options(2)		$	396,788
Pension Plan
Annual Change in Present Value of Accumulated Pension Benefit			N/A
Other Compensation
Deferred Compensation Plan Contribution(1)		$	0
Thrift Match		$	6,709
Service-Based Thrift Contribution		$	7,350
TaxGross-Ups		$	0
Perquisites and Personal Benefits		$	0

2010 Total Compensation

Equity Awarded in 2010

Other Compensation

Deferred Compensation Plan Contribution

$  43,970

Thrift Match

$    7,500

Service-Based Thrift Contribution

$    7,500

Tax Gross-Ups

$           0

Perquisites

$  20,000

2012 TOTAL COMPENSATION

May 13, 2010

Stock Options

60,292 shares(3) EQUITY AWARDEDIN 2012

May 13, 2010

March 5, 2012

Restricted Stock Units

38,661

23,370 units(3)

March 5, 2012

Stock Options

48,561 shares

March 5, 2012

Performance Shares

29,283 shares

(1)

Mr. Elders’ base salary earned reflects his earnings from his April 30, 2010 hire date. No Deferred Compensation Plan contribution was made to Mr. Elders in 2010 because he was not an employee at the time such contributions were made.

(2)

All (1)   Each equity grants aregrant is disclosed at the grant date fair value of the award. (2)   Mr. Elders does not participate in our qualified defined benefit plan due to commencing his employment with the Company after the plan was closed to new participants in 2006.

GARY L. CARLSON

SENIOR VICE PRESIDENTAND CHIEF ADMINISTRATION OFFICER

Age: 58 Tenure with McDermott: 3 years Mr. Carlson has served as our Senior Vice President and Chief Administration Officer since February 2012. Previously, he served as: Senior Vice President, Chief Human Resources Officer from May 2011 to February 2012; Senior Vice President, Human Resources from July 2010 to May 2011; Senior Vice President, Human Resources and Organization Development for our subsidiary J. Ray McDermott, S.A. from March 2010 to July 2010; Senior Vice President, Human Resources of MWH Global, Inc., an energy and environmental engineering, construction and water resource management firm, from 2008 to 2010; and Vice President, Human Resources of KBR, Inc., an engineering, construction and services company, from 2004 to 2008.

2012 COMPENSATION

(3)

As adjusted pursuant to the equity conversion

Annual Base Salary

Base Salary Earned

$358,750

Annual Incentive Compensation

Executive Incentive Compensation Plan

$210,976

Long-Term Incentive Compensation(1)

Restricted Stock Units

$187,489

Stock Options

$187,483

Performance Shares

$374,931

Pension Plan(2)

Annual Change in connection with the Spin-off.Present Value of Accumulated Pension Benefit

N/A

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Gary L. Carlson

Senior Vice President, Human Resources

Age: 56

Tenure with McDermott: 1 year

Mr. Carlson has served as our Senior Vice President, Human Resources since July 2010. Previously, he served as: Senior Vice President, Human Resources and Organization Development for our subsidiary J. Ray McDermott, S.A. from March 2010 to July 2010; Senior Vice President, Human Resources of MWH Global, Inc., an energy and environmental engineering, construction and water resource management firm, from 2008 to 2010; and Vice President, Human Resources of KBR, Inc., an engineering, construction and services company, from 2004 to 2008.

2010 Compensation

Annual Base Salary
Base Salary Earned(1)		$	243,333
Annual Incentive Compensation
Executive Incentive Compensation Plan		$	334,400
Long-Term Incentive Compensation
Restricted Stock Units(2)		$	527,051
Stock Options(2)		$	165,771
Pension Plan
Annual Change in Present Value of Accumulated Pension Benefit			N/A
Other Compensation
Deferred Compensation Plan Contribution(1)		$	0
Thrift Match		$	6,583
Service-Based Thrift Contribution		$	7,300
TaxGross-Ups		$	24,600
Perquisites and Personal Benefits		$	68,367

2010 Total Compensation

Equity Awarded in 2010

Other Compensation

Deferred Compensation Plan Contribution

$  33,320

Thrift Match

$    6,088

Service-Based Thrift Contribution

$    7,500

Tax Gross-Ups

$           0

Perquisites

$  20,000

2012 TOTAL COMPENSATION

May 13, 2010

Stock Options

25,189 shares(3)

EQUITY AWARDEDIN 2012

May 13, 2010

March 5, 2012

Restricted Stock Units

39,411

12,984 units(3)

March 5, 2012

Stock Options

26,976 shares

March 5, 2012

Performance Shares

16,266 shares

(1)

Mr. Carlson’s base salary earned reflects his earnings from his March 29, 2010 hire date. No Deferred Compensation Plan Contribution was made to Mr. Carlson in 2010 because he was not an employee at the time such contributions were made.

(2)

All (1)   Each equity grants aregrant is disclosed at the grant date fair value of the award. (2)   Mr. Carlson does not participate in our qualified defined benefit plan due to commencing his employment with the Company after the plan was closed to new participants in 2006.

LIANE K. HINRICHS

SENIOR VICE PRESIDENT, GENERAL COUNSELAND CORPORATE SECRETARY

Age: 55 Tenure with McDermott: 14 years Ms. Hinrichs has been our Senior Vice President, General Counsel and Corporate Secretary since October 2008. Previously, she served as our: Vice President, General Counsel and Corporate Secretary from January 2007 to September 2008; Corporate Secretary and Associate General Counsel, Corporate Compliance and Transactions from January 2006 to December 2006; Associate General Counsel, Corporate Compliance and Transactions, and Deputy Corporate Secretary from June 2004 to December 2005; Assistant General Counsel, Corporate Secretary and Transactions from October 2001 to May 2004; and Senior Counsel from May 1999 to September 2001. Prior to joining McDermott in 1999, she was a partner in a New Orleans law firm.

2012 COMPENSATION

(3)

As adjusted pursuant to the equity conversion

Annual Base Salary

Base Salary Earned

$448,750

Annual Incentive Compensation

Executive Incentive Compensation Plan

$301,573

Long-Term Incentive Compensation(1)

Restricted Stock Units

$250,000

Stock Options

$249,992

Performance Shares

$499,955

Pension Plan

Annual Change in connection with the Spin-off.Present Value of Accumulated Pension Benefit

$103,766

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Liane K. Hinrichs

Senior Vice President, General Counsel & Corporate Secretary

Age: 53

Tenure with McDermott: 12 years

Ms. Hinrichs has been our Senior Vice President, General Counsel and Corporate Secretary since October 2008. Previously, she served as our: Vice President, General Counsel and Corporate Secretary from January 2007 to September 2008; Corporate Secretary and Associate General Counsel, Corporate Compliance and Transactions from January 2006 to December 2006; Associate General Counsel, Transactions, Corporate Compliance and Deputy Corporate Secretary from June 2004 to December 2005; Assistant General Counsel, Corporate Secretary and Transactions from October 2001 to May 2004; and Senior Counsel from May 1999 to September 2001. Prior to joining McDermott in 1999, she was a partner in a New Orleans law firm.

2010 Compensation

Annual Base Salary
Base Salary Earned		$	419,225
Annual Incentive Compensation
Executive Incentive Compensation Plan		$	317,673
Long-Term Incentive Compensation
Restricted Stock Units(1)		$	399,963
Stock Options(1)		$	276,912
Retention Agreement Grant
Restricted Stock(1)		$	654,563
Pension Plan
Annual Change in Present Value of Accumulated Pension Benefit		$	121,620
Other Compensation
Deferred Compensation Plan Contribution		$	29,549
Thrift Match		$	6,629
Service-Based Thrift Contribution		$	1,108
TaxGross-Ups		$	0
Perquisites and Personal Benefits		$	0

2010 Total Compensation

Equity Awarded in 2010

Other Compensation

Deferred Compensation Plan Contribution

$  37,662

Thrift Match

$    6,833

Service-Based Thrift Contribution

$    7,500

Tax Gross-Ups

$           0

Perquisites

$  20,000

2012 TOTAL COMPENSATION

March 4, 2010

Stock Options

45,313 shares(2)

EQUITY AWARDEDIN 2012

March 4, 20105, 2012

Restricted Stock Units

30,556

17,313 units(2)

August 2, 2010

Restricted Stock

52,198

March 5, 2012

Stock Options

35,970 shares

March 5, 2012

Performance Shares

21,690 shares

(1)

All

(1)   Each equity grants aregrant is disclosed at the grant date fair value of the award.

JOHN T. MCCORMACK

EXECUTIVE VICE PRESIDENTAND CHIEF OPERATING OFFICER

Age: 66 Tenure with McDermott: 10 years Mr. McCormack, 65, has served as our Executive Vice President and Chief Operating Officer since June 2011. Previously, he served as our Senior Vice President, Operations, from July 2010 to June 2011; Senior Vice President, Operations of our subsidiary J. Ray McDermott, S.A. from January 2006 to July 2010; Vice President of J. Ray McDermott, S.A. from May 2004 to January 2006; and Vice President, Project Services of J. Ray McDermott, S.A. from January 2003 to May 2004.

2012 COMPENSATION

(2)

As adjusted pursuant to the equity conversion

Annual Base Salary

Base Salary Earned

$535,000

Annual Incentive Compensation

Executive Incentive Compensation Plan

$308,208

Long-Term Incentive Compensation(1)

Restricted Stock Units

$374,978

Stock Options

$374,987

Performance Shares

$749,932

Pension Plan(2)

Annual Change in connection with the Spin-off.Present Value of Accumulated Pension Benefit

N/A

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John T. Nesser, III

Executive Vice President & Chief Operating Officer

Age: 62

Tenure with McDermott: 13 years

Mr. Nesser has been our Executive Vice President and Chief Operating Officer since July 2010. Previously, he served as: Executive Vice President and Chief Operating Officer of J. Ray McDermott, S.A. since October 2008; Executive Vice President, Chief Administrative and Legal Officer from January 2007 to September 2008; Executive Vice President and General Counsel from January 2006 to January 2007; Executive Vice President, General Counsel and Corporate Secretary from February 2001 to January 2006; Senior Vice President, General Counsel and Corporate Secretary from January 2000 to February 2001; Vice President and Associate General Counsel from June 1999 to January 2000; and Associate General Counsel from October 1998 to June 1999. Previously, he served as a managing partner of Nesser, King & LeBlanc, a New Orleans law firm, which he co-founded in 1985.

2010 Compensation

Annual Base Salary
Base Salary		$	509,381
Annual Incentive Compensation
Executive Incentive Compensation Plan		$	609,729
Long-Term Incentive Compensation
Restricted Stock Units(1)		$	324,986
Stock Options(1)		$	224,998
Retention Agreement Grant
Restricted Stock(1)		$	871,254
Pension Plan
Annual Change in Present Value of Accumulated Pension Benefit		$	160,951
Other Compensation
Deferred Compensation Plan Contribution		$	36,806
Thrift Match		$	6,577
Service-Based Thrift Contribution		$	0
TaxGross-Ups		$	0
Perquisites and Personal Benefits		$	0

2010 Total Compensation

Equity Awarded in 2010

Other Compensation

Deferred Compensation Plan Contribution

$  38,828

Thrift Match

$    7,500

Service-Based Thrift Contribution

$    7,500

Tax Gross-Ups

$           0

Perquisites

$  20,000

2012 TOTAL COMPENSATION

March 4, 2010

Stock Options

36,818 shares(2)

EQUITY AWARDEDIN 2012

March 4, 20105, 2012

Restricted Stock Units

24,828

25,968 units(2)

August 2, 2010

Restricted Stock

69,478

March 5, 2012

Stock Options

53,955 shares

March 5, 2012

Performance Shares

32,535 shares

(1)

All

(1)   Each equity grants aregrant is disclosed at the grant date fair value of the award.

(2)   Mr. McCormack does not participate in our qualified defined benefit plan because he had not met the applicable eligibility requirements at the time the plan was closed to new participants in 2006.

As adjusted pursuant to the equity conversion in connection with the Spin-off.

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EXECUTIVE OFFICERS

Executive Officers

Set forth below is the age (as of May 6, 2011)7, 2013), the principal positions held with McDermott or our subsidiaries, and other business experience information for each of our current executive officers other than our Continuing Named Executives.NEOs. For information on our Continuing Named Executives,NEOs, see “Named Executives“NEO Profiles” above. Unless we otherwise specify, all positions described below are positions with McDermott International, Inc.

Scott V. Cummins, 48,50, has served as ourSenior Vice President and General Manager, Asia Pacific, of McDermott International Management, Inc. (“MIMI”) since July 2010.February 2012. Previously, he served as: our Senior Vice President and General Manager, Asia Pacific from November 2011 to February 2012; Vice President and General Manager, Asia Pacific, from July 2010 to November 2011; Vice President and General Manager, Asia Pacific, of our subsidiary J. Ray McDermott, S.A. (“JRM”) from April 2008 to July 2010; Vice President, Asia Pacific Business Development, Sales and Marketing, of JRM from September 2006 to April 2008; Business Development Director of JRM from September 2003 to August 2006; and Division Manager, Middle East Fabrication Operations of JRM from November 1999 to September 2003. Mr. Cummins joined McDermott in June 1986, and his earlier positions with the Company include positions in marine, fabrication and project operations roles.

Daniel M. Houser, 56,

Stewart A. Mitchell, 46, has served as our Senior Vice President, Operations, since November 2010. Previously, he served as: our Vice President and General Manager, Europe and Caspian, from July 2010 to November 2010; Vice President and General Manager of JRM from May 2000 to July 2010; Vice President of JRM from August 1999 to May 2000; Vice President and Area Executive of JRM from March 1998 to August 1999; and Vice President and Group Executive of JRM from March 1997 to March 1998. Mr. Houser has held various other positions since he joined McDermott in 1977.

John T. McCormack, 64, has served as our Senior Vice President, Operations, since July 2010. Previously, he served as: Senior Vice President, Operations of JRM from January 2006 to July 2010; Vice President of JRM from May 2004 to January 2006; and Vice President, Project Services of JRM since he joined McDermott in January 2003 to May 2004.

Stewart A. Mitchell, 44, has served as our Vice President and General Manager, Middle East, of MIMI since July 2010.February 2012. Previously, he served as: our Senior Vice President and General Manager, Middle East, from November 2011 to February 2012; Vice President and General Manager, Middle East, from July 2010 to November 2011; Vice President and General Manager of JRM from July 2007 to July 2010; General Manager of Middle East Projects of JRM from October 2005 to June 2007, Project Director and Manager of numerous projects for JRM from January 2002 to September 2005 and Construction Management and Field Operations of JRM from June 1992 to December 2001. Prior to joining McDermott in 1992, he held Project Engineering positions with European Marine Contractors (a joint venture company of Brown & Root and Saipem SpA).

Steven W. Roll, 52,54, has served as Vice President and General Manager, Atlantic, of MIMI since February 2012. Previously, he served as: our Vice President and General Manager, Atlantic, from November 2011 to February 2012; Vice President, Global Commercial Development from June 2011 to November 2011; Vice President, Global Business Development from May 2011 to June 2011; Vice President, Business Development and Operational Strategy sincefrom July 2010. Previously, he served as:2010 to May 2011; Vice President, Business Development and Operational Strategy of JRM from May 2010 to July 2010; Vice President of JRM from April 2008 to May 2010; and Vice President and General Manager of JRM from January 2002 to April 2008. Mr. Roll has held various other positions since he joined McDermott in 1980.

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COMPENSATION DISCUSSIONAND ANALYSIS

Compensation Discussion and Analysis

The following Compensation Discussion and Analysis, or CD&A, provides information relevant to understanding the 20102012 compensation of our executive officers identified in the Summary Compensation Table, whom we refer to as our Named Executives.NEOs. The following discussion also contains statements regarding future individual and company performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We caution investors not to apply these statements toin other contexts.

Executive Summary

Compensation Philosophy.

In 2010,

McDermott’s compensation programs are designed to develop, attract, retain and motivate qualified employees to develop, expand and execute sound business opportunities for our company. The Compensation Committee continued its commitmentis committed to targeting reasonable and competitive total direct compensation for our Named Executives,NEOs, with a significant portion of that compensation being performance-based. Our compensation programs provide competitive opportunities, but the earning of most of those opportunities is dependent upon achievement of performance goals and/or stock price performance. The Compensation Committee, also took into special considerationwith the intended Spin-offassistance of its compensation consultant, has designed and administered compensation programs with the participation of our subsidiary, B&W, which was completed on July 30, 2010. Becausemanagement in light of this philosophy. These programs generally seek to provide compensation that:

incentivizes and rewards short- and long-term performance, continuity of service and individual contributions; and

promotes retention of well-qualified executives, while aligning the complexity and significance of the anticipated Spin-off and the material changes it would have on the company and its operations, our Compensation Committee implemented compensation practices during this transitional year that differed from our traditional practices. Individual elementsinterests of our compensation structure during this transitional year sought to incentivize operational performance, long-term stock appreciation andexecutives with those of our stockholders.

2012 Compensation Program.

Reflecting the completion of the Spin-off, and the individual elements of total direct compensation were structured with these goals in mind.

Reflecting our Compensation Committee’s compensation philosophy, compensation arrangements in 20102012 provided for:

NEO target total direct compensation within approximately 5% of the median compensation for officers in comparable positions in our Named Executives (excluding retention payments mademarket;

NEO performance-based compensation accounting for over 64% of target total direct compensation, on average, as compared to 60% in connection with the Spin-off2011 and the sign-on equity grant provided to Mr. Carlson, as discussed46% in further detail below) resulted in:

	•	target total direct compensation within approximately 15% of the median compensation for officers in comparable positions in our market, with the exception of Messrs. Elders and Nesser;
	•	performance-based compensation accounting for over 46% of target total direct compensation, on average; and

2010; and

	•	performance-based compensation accounting for 50% of target long-term incentive compensation.

Performance-based compensation accounting for 75% of NEO target long-term incentive, or LTI, compensation.

As in prior years, our Compensation Committee continued to believe that a significant portion of a Named Executive’sNEO’s compensation should be performance-based, designed to promote and rewardfor the achievementpurpose of short-and longer-term objectivesaligning the interests of our NEOs with those of stockholders by rewarding performance that are expected to drivemeets or exceeds established goals, with the ultimate objective of increasing stockholder value. Performance-based compensation for 20102012 reflected a balance among the goals of driving operational performance and pursuing long-term stock appreciation and completing the Spin-off. As a result, McDermottappreciation. With these goals in mind, in 2012 we continued to utilize traditional metrics, such asthe approach of tying annual incentives to operating income and return on invested capital, and granting stock options and total shareholder return performance shares as a componentcomponents of long-term incentives, while adding incentivesLTI.

For the 2012 annual incentive compensation, the Compensation Committee revised target compensation such that 100% of the 2012 target award opportunity was attributable to financial performance goals. The target award for certain Named Executive OfficersMr. Johnson was then subject to adjustment by the Compensation Committee, in its sole discretion, based on completionobjectives established for Mr. Johnson by the Compensation Committee, and the target award for the other participants, including the remaining NEOs, was subject to adjustment by Mr. Johnson based on each participant’s individual performance, with any such adjustment subject to the approval of the Spin-off. Compensation Committee.

In using thesethe performance metrics and emphasizing longer-term performance incentives,described above for the 2012 compensation program, the Compensation Committee believes that our compensation practices help to create stockholder value without encouraging executives to take unnecessary and excessive risks to earn incentive compensation. See “Corporate

2012 Performance Highlights.

McDermott’s 2012 financial and operational performance highlights included:

Consolidated revenue of $3.6 billion, as compared to $3.4 billion for 2011;

Consolidated operating income of $319.3 million and operating margin of 8.8%, as compared to operating income of $250.7 million and operating margin of 7.4% for 2011;

Consolidated return on invested capital of 10.3%, as compared to 8% for 2011;

Basic earnings per share of $0.88, as compared to $0.59 for 2011;

Historic year-end backlog of $5.1 billion as of December 31, 2012, as compared to $3.9 billion as of December 31, 2011;

Award of the approximately $2 billion INPEX Ichthys project, representing the largest contract McDermott has been awarded to date; and

•

Continuation of the fleet renewal program with execution of contracts to construct theLV108 andDLV2000, which will be the

newest additions to McDermott’s high performance vessel fleet.

Realizable Value of Performance-Based Awards.

Notwithstanding the financial improvements and operational milestones noted above, the realizable value of NEOs’ performance-based compensation opportunities as of December 31, 2012 differed significantly from the grant date fair value of such opportunities. As of December 31, 2012, (1) the share price of our common stock did not exceed the strike price of the stock options granted in 2012, and (2) the estimated payout as a percent of target for the performance shares granted in 2012 was 59%, although as noted below, the estimated payout and share price may change during the term of the performance shares and stock options.

The following table summarizes the 2011 and 2012 performance-based compensation opportunities for each of our NEOs as compared to the realizable value of such opportunities as of December 31, 2012:

2011 & 2012 Performance-Based Compensation Opportunity vs. Realizable Value as of December 31, 2012

		EICP(1)				Performance Shares(2)(3)				Stock Options(2)(3)				Total
S. M. Johnson
2012 Opportunity		$	950,000			$	2,499,980			$	1,249,999			$	4,699,979
2012 Realizable Value		$	760,000			$	705,170			$	0			$	1,465,170
2011 Opportunity		$	942,603			$	2,382,132			$	944,089			$	4,268,824
2011 Realizable Value		$	0			$	0			$	0			$	0
P. L. Elders
2012 Opportunity		$	345,639			$	674,973			$	337,499			$	1,358,111
2012 Realizable Value		$	207,383			$	190,382			$	0			$	397,765
2011 Opportunity		$	336,911			$	595,438			$	236,000			$	1,168,349
2011 Realizable Value		$	0			$	0			$	0			$	0
G. L. Carlson
2012 Opportunity		$	251,162			$	374,931			$	187,483			$	813,576
2012 Realizable Value		$	210,976			$	105,748			$	0			$	316,724
2011 Opportunity		$	199,233			$	238,175			$	94,406			$	531,814
2011 Realizable Value		$	0			$	0			$	0			$	0
L. K. Hinrichs
2012 Opportunity		$	314,139			$	499,955			$	249,992			$	1,064,086
2012 Realizable Value		$	301,573			$	141,023			$	0			$	442,596
2011 Opportunity		$	261,381			$	535,894			$	212,421			$	1,009,696
2011 Realizable Value		$	0			$	0			$	0			$	0
J. T. McCormack
2012 Opportunity		$	428,066			$	749,932			$	374,987			$	1,552,985
2012 Realizable Value		$	308,208			$	211,529			$	0			$	519,737
2011 Opportunity		$	274,549			$	634,020			$	253,847			$	1,162,416
2011 Realizable Value		$	0			$	0			$	0			$	0

(1)	Opportunity Values for EICP are disclosed at the NEOs’ target EICP award.

(2)	Opportunity Values for performance shares and stock options are disclosed at the grant date fair value of the respective awards.

(3)

The 2011 and 2012 realizable values shown above are measured as of December 31, 2012, with the exception of the 2011 realizable value of EICP awards, which is shown as the value of the EICP award paid in 2012 for 2011 performance. The value of performance share awards shown above is based on the estimated payout as a percent of target, or 59% of the performance shares granted in 2012 and 0% of the performance shares granted in 2011, multiplied by the closing price of our common stock as reported on the New York Stock Exchange as of December 31, 2012 ($11.02). The number of the performance shares granted in 2011 and 2012 that ultimately vest, if any, will be determined by reference to our total shareholder return over three-, four- and five-year periods. See “Long-Term Incentive Compensation — Analysis of 2012 Equity Grants.” The vesting of any of these performance shares would impact the future realizable value of these performance share awards. In addition, an increase in our stock price compared to our stock price at December 31, 2012 may impact the future realizable value of the stock option awards granted in 2011 and 2012.

Compensation and Governance — Board of Directors and Its Committee — Policies and Practices on Risk” for information regarding the relationship betweenProcedures.

Below we highlight certain of our executive compensation practices and risks.governance policies and practices,

which we utilize to drive performance and serve our stockholders’ long-term interests:

 

In anticipation of the Spin-off, the Compensation Committee made certain adjustments within each element of total direct compensation as set forth below:

Our Policies and Practices Include		Our Policies and Practices Exclude
Performance-Based Pay •	Annual Base Salary:  For Messrs. Johnson’sWe structure our compensation program to align the interests of officers, including our NEOs, with the interests of our stockholders, and Bethards’ annual base salary increase effective April 1,therefore the Compensation Committee considered market rangemajority of target total direct compensation basedis tied to performance. Performance-based compensation accounts for over 64% of target total direct compensation, on the market dataaverage for the chief executive officerNEOs, and for over 68% of a standalone company rather than the chief executive officer of a business unit. The Compensation Committee determined this treatment was appropriate because, in anticipation of the pending Spin-off, Messrs. Johnson and Bethards had begun assuming responsibilities that were more typical of the chief executive officer of a standalone company, including meeting with investors and presenting to analysts.
	•	Annual Incentive:  The financial performance component of the annual incentive for Messrs. Johnson and Bethards was based

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		entirely on operating income attributable to their respective business units. The target annual incentive for those employees not employed by one of our business units prior to the Spin-off, our “Corporate” employees, including Messrs. Fees and Taff and Ms. Hinrichs, was tied to completing the Spin-off, prorated through the effective date of the Spin-off. For Corporate employees, the remainder of the year’s award opportunity consisted of a financial performance component and an individual performance component.

	•	Long-Term Incentive:  In 2010, our Compensation Committee awarded restricted stock units to emphasize retention of key employees and stock options to reward stock price appreciation. Although performance shares have been a component of our long-term incentive compensation in recent years, the Compensation Committee determined in 2010, in anticipation of the pending Spin-off, that it was more appropriate for the post-spin Board of Directors of each of the two standalone companies to establish performance targets and metrics tailored to the strategies of the post-spin companies. As a result, performance shares were not awarded during 2010. Additionally, Mr. Fees was not awarded a long-term incentive during 2010, because it was anticipated he would serve as Chairman of the Board of Directors of B&W following the Spin-off and would not be an employee of McDermott or B&W at that time. We have returned to the use of performance shares in 2011, granting performance shares that comprised 50% of long-term incentive for officers.

Highlights of McDermott’s performance in 2010 include:

	•	Completion of the Spin-off on July 30, 2010;
	•	Consolidated operating income of $314.9 million, which was the primary metric for annual incentivetotal direct compensation for our Named Executives;
	CEO. Tally Sheets •	Stock price appreciation from December 31, 2009We review tally sheets, reflecting historical compensation amounts, for our NEOs prior to December 31, 2010 of approximately 65%, excluding the value

making annual executive compensation decisions.

Double Trigger Change-in-Control Agreements

		attributed to the Spin-off distribution of B&W common stock.1

Following the completion of the Spin-off, we reviewed our compensation policies and practices and, based on this review, instituted the following changes:

	•	Our Compensation Committee and Board of Directors approved a new form ofchange-in-control agreement that was entered into with several of our executive officers following the Spin-off. The newchange-in-control agreements: (1) agreements contain what is commonly referred to as a “double trigger,” that is, they provide benefits only upon an involuntary termination or constructive termination of the executive officer within one year following a change in control; (2) do not provide for excise taxcontrol. gross-ups,Meaningful Stock Ownership Guidelines thereby eliminating thegross-up provisions in prior agreements; •    All of our NEOs and (3) require the applicable officer’s execution of a release priordirectors are subject to payment of certain benefits. For more information, please see “Employment and Severance Arrangements —Change-In-Control Agreements” in this Compensation Discussion and Analysis.
	•	In an effort to further align the interests of stockholders and our directors and officers, our Governance Committee approved revised stock ownership guidelines that require our officers at the levelretention of vice president or above and non-management directors to retain a significantly greater amountdollar value of McDermott stock than requiredbased on a multiple of their respective base salaries or annual retainers. Modest Perquisite Allowance •    We provide a modest perquisite allowance to certain officers, including the NEOs, in order to cover company-required physicals, financial planning and non-company-required spousal travel. Annual Review of Share Utilization •    We evaluate share utilization levels annually by reviewing overhang levels (the dilutive impact of equity compensation on our previousstockholders) and annual run rates (the aggregate shares awarded as a percentage of total outstanding shares).		We do not provide employment agreements for our NEOs •    Except for change-in-control agreements, we do not currently have any employment or severance agreements with any of our NEOs. We do not backdate or reprice any equity awards. We do not provide tax gross-ups for perquisite allowances. We do not provide excise tax gross-ups under our change in control agreements. We do not permit derivatives trading or hedging. •    We prohibit all directors, officers and employees from engaging in “short sales” or trading in puts, calls or other options on McDermott’s common stock, ownership guidelines. For more information, please see “Other Compensation Policies — Stock Ownership Guidelines”and from engaging in this Compensation Discussionhedging transactions and Analysis.from holding McDermott shares in a margin account or pledging McDermott shares as collateral for loans.

Our Policies and Practices Include		Our Policies and Practices Exclude
	Risk Assessment •	Our compensation consultant assists the Compensation Committee in conducting an annual risk assessment of our compensation programs. Clawback Policy •    We have adopted a clawback policy under which McDermott shallwe would seek to recover any incentive-based award granted to any executive officer as required by the provisions of the Dodd-Frank Wall-StreetWall Street Reform and Consumer Protection Act or any other “clawback” provision

¹The excluded value attributed to the distribution of B&W stock is based on the opening trading price of B&W common stock as quoted on the NYSE Consolidated Transactions Reporting System on August 2, 2010, the first day of “regular way” trading for B&W common stock following the Spin-off.

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		required by law or the listing standards of the New York Stock Exchange.

Additionally, in March 2011, our

Impact of 2012 Say-on-Pay Vote on Executive Compensation Committee returned to

In approving the use2013 compensation of performance shares as a component of long-term incentive compensation. Long — term incentive awards to Continuing Named Executives in 2011 were comprised of 50% performance shares, 25% restricted stock units and 25% stock options, excluding Mr. Nesser who did not receive any long-term incentive compensation for 2011 as a result of his intentions to retire by year-end 2011. Combining the grant of performance shares with the continued use of stock options, 75% of target long-term incentive compensation for 2011 is performance-based.

Overview of Compensation Programs and Objectives

Philosophy and Objectives.  Our compensation programs are based on our belief that our ability to attract, retain and motivate qualified employees to develop, expand and execute sound business opportunities is essential to the success of our company. To that end,NEOs, the Compensation Committee withreviewed the assistancevote on the say-on-pay proposal at the 2012 annual general meeting of stockholders. Approximately 97% of the votes cast on the say-on-pay proposal at that meeting were voted in favor of the proposal. The Compensation Committee believes this affirms stockholders’ support of the Company’s approach to executive compensation. Accordingly, the Compensation Committee did not adopt any specific changes based on the vote. The Compensation Committee will continue to consider the outcome of the Company’s say-on-pay votes when making future compensation decisions for the NEOs. The Compensation Committee expects to continue to hold the advisory vote to approve NEO compensation every year.

Role of Compensation Committee, Compensation Consultant and Management

Compensation Committee.    The Compensation Committee has primary responsibility for determining and approving, on an annual basis, the compensation of our CEO and other executive officers. The Compensation Committee receives information and advice from its compensation consultant has designedas well as from our human resources department and administeredmanagement to assist in compensation programs with the participation of our management. These programs generally seek to provide compensation that:

	•	incentivizes and rewards short- and long-term performance, continuity of service and individual contributions; and
	•	promotes retention of well-qualified executives, while aligning the interests of our executives with those of our stockholders.

For 2010, we structured compensation in anticipation of the Spin-off. As a result, compensation arrangements in 2010 sought to balance operational performance, long-term stock appreciation and the completion of the Spin-off.

determinations.

Compensation Consultant.  Our Compensation Committee determined it appropriate to engage a new compensation consultant following the completion of the Spin-off. After a selection process involving six compensation consulting firms,    Pay Governance LLC, or “Pay Governance,” was selected, and has served as the consultant to thebeen engaged by our Compensation Committee to serve as its consultant on executive and director compensation matters since November 2010. Pay Governance provides advice and analysis to the Compensation Committee on the

design, structure and level of executive and director

compensation, and, when requested by the Compensation Committee, attends meetings of the Compensation Committee and participates in executive sessions without members of management present. Prior to November 2010, Meridian Compensation Partners LLC or “Meridian,” (which was spun-off from Hewitt Associates LLC, or “Hewitt,” in February 2010), served as the consultantPay Governance reports directly to the Compensation Committee, on executive and director compensation. Prior to its spin-off of Meridian, Hewitt served as the consultant to the Compensation Committee since October 2007.

In connection with their services to the Compensation Committee, bothreviews, on an annual basis, Pay Governance’s performance and provides Pay Governance and Meridian sought and received input from our executive managementwith direct feedback on various matters and worked with our executive management to formalize proposals for the Compensation Committee.

In 2010, neitherits performance. Pay Governance nor Meridian performedalso attends meetings of the Governance Committee with respect to nonemployee director compensation.

During 2012, Pay Governance did not perform any services for McDermott other than as described above. Hewitt assistedIn January 2013, our management in preparingCompensation Committee assessed whether the performance graph included in our annual report onForm 10-Kwork performed by Pay Governance during 2012 raised any conflict of interest, and determined that Pay Governance’s work performed for the year ended December 31, 2010. Hewitt had been providing that service to management for several years prior to serving as the Compensation Committee’s consultant,Committee raised no conflict of interest.

Role of CEO and the fees for that service amounted to less than $2,000 in 2010.

Elements.Management.    With the objectives outlined above in mind,While the Compensation Committee has approved annualthe responsibility to approve and monitor all compensation for Named Executives, principally consistingour executive officers, management plays an important role in determining executive compensation. Management, at the request of the following three elements:Compensation Committee, recommends financial goals and works with Pay Governance to analyze competitive market data and to recommend compensation levels for our executive officers other than the CEO. Our Chief Executive Officer, Mr. Johnson, likewise assists the Compensation Committee by providing his evaluation of the performance of our other executive officers and recommending compensation for those officers, including via adjustments to their annual incentive compensation for 2012 based on individual performance.

 

Overview of Compensation Elements

The following table summarizes the principal elements of our compensation program for our NEOs, which we collectively refer to as “total direct compensation.”

Compensation Element		Objective		Key Features
Annual Base Salary		To provide a fixed level of compensation that helps attract and retain executives		•   Salary level recognizes an executive officer’s experience, skill and performance, with the goal of being market competitive based on the officer’s role and responsibilities within the organization. •   Adjustments may be made based on individual performance, inflation, pay relative to market and internal equity considerations. •   This element is paid in cash.
Annual Incentive		To motivate and reward the achievement of short-term company performance		•   The Compensation Committee establishes an annual incentive bonus opportunity for each NEO at the beginning of the year. •   The annual incentive aligns the NEOs’ interests with McDermott’s short-term corporate strategies and correlates pay with the achievement of short-term company goals. •   To qualify for a payout, McDermott must achieve a predetermined performance threshold based on financial performance. •   This element is paid in cash.
Long-Term Incentive	•	annual base salary;
	•    To motivate and reward the achievement of long-term company performance (typically three or more years), align executives’ interests with those of our stockholders and retain executives	annual incentives; and
	•	Long-term awards for our NEOs in 2012 consisted of 50% performance shares, 25% stock options and 25% restricted stock units. Performance Shares •   Structured to be paid out in shares of McDermott common stock at the end of three-, four- and five-year performance periods to the extent applicable performance goals are met. •   Performance goals are based on total shareholder return over the applicable performance period relative to McDermott’s peer group. Performance shares pay out at target if these goals are met, below target or not at all if the goals are not met, and above target if the goals are exceeded, up to 200% of the target award. •   Intended to align the NEOs’ interests with those of our stockholders with a focus on long-term incentives.results. Stock Options •   Structured to vest in one-third increments on the first, second and third anniversaries of the grant date. •   Intended to strengthen the relationship between the long-term value of our stock price and the potential financial gain for our NEOs, as the value of the stock options is realized on exercise only if our stock price increases from the date of grant. Restricted Stock Units •   Structured to be paid out in shares of McDermott common stock in one-third increments on the first, second and third anniversaries of the grant date. •   Intended to encourage retention of the NEOs as the restricted stock units vest based on continued employment with McDermott.

Collectively, we refer to these elements as

Defining Market Range Compensation — Benchmarking

To identify median compensation for each element of total direct compensation, the “total direct compensation”Compensation Committee relies on “benchmarking.” This involves reviewing the compensation of a Named Executive.

Annual base salary provides a fixed level of compensation that helps attract and retain highly qualified executives. Annual incentive and long-term incentive compensation are the principal performance-based components of a Named Executive’s compensation. The annual incentive element is cash-based compensation generally designed to incentivize a Named Executive to achieve performance goalsour NEOs relative to the then-current fiscal year. Long-term incentives are generally equity-basedcompensation paid to similarly situated executives at companies we consider our peers. As a result, the annual base salary, target annual incentive compensation and target LTI compensation as a whole for each of the NEOs is benchmarked. However, the specific performance metrics and performance levels used within elements of annual and long-term compensation are designed to retainfor the principal purpose of supporting our strategic and closely alignfinancial goals and/or driving the interestscreation of Named Executives with our stockholders. Performance-based long-term incentive compensation is designed to promotestockholder value, and, as a result, are not generally benchmarked.

At the achievementdirection of performance

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goals, only over a longer period — typically of three years. Additionally, in 2010, retention grants were made to certain of our Named Executives in connection with their continued employment through the Spin-off. The retention grants were made pursuant to the terms of the retention agreements entered into with those Named Executives in December 2009. For more information on these retention grants, see “Long-Term Incentive Compensation” below.

As we discuss in more detail below, the Compensation Committee, Pay Governance compiled market data from two groups, the Proxy Peer Group and the Survey Group, as discussed below. The Compensation Committee has been using these peer groups since 2011, with only minor modifications to reflect acquisitions of peer group companies since 2011.

Proxy Peer Group.    Pay Governance utilized market data based on a set of 17 comparator companies (the “Proxy Peer Group”) identified through a screen of companies whose business focus and/or operations are similar to McDermott and are considered by the Compensation Committee to be representative of competitors for managerial talent. The component companies of the Proxy Peer Group are included on page 40 of this CD&A. The Compensation Committee believes that identification of peers using a broad industry sector code is inadequate and does not establish similarity of operations and business models, nor identify historical competitors for managerial talent – factors the Compensation Committee considers in the selection of the Proxy Peer Group. It is the Compensation Committee’s practice to periodically review and consider the individual companies included in the Proxy Peer Group.

The Proxy Peer Group was used as the primary reference point for the NEOs, with the exception of Mr. Carlson, due to the lack of comparable information within the Proxy Peer Group for his position. Market data from the Proxy Peer Group represented 2010 compensation, as reported in the proxy statements of the companies in the Proxy Peer Group, and is not size-adjusted, although the

Compensation Committee is aware of these differences when making individual pay decisions.

Survey Peer Group.    Pay Governance also administers several plansutilized market data based on a set of 99 companies in similar industries which participate in Towers Watson surveys (the “Survey Peer Group��). The Survey Peer Group is intended to provide a reference point for pay levels within similar industries. Aside from screening companies on the basis of their industry classifications, no further refinements or judgments were applied in the identification of companies within the sample. The component companies of the Survey Peer Group are included on page 40 of this CD&A. The Survey Peer Group was used as parta secondary reference for the NEOs, with the exception of our post-employmentMr. Carlson, for whom Proxy Peer Group data was unavailable, making the Survey Peer Group data the primary reference. Market data from the Survey Peer Group represents 2010 compensation arrangements designedas reported to reward long-term servicethe survey and, performance.

when possible, was size adjusted. Corporate and business unit positions, including that of Mr. Carlson, were evaluated based on expected 2012 revenues of $3.8 billion.

In this CD&A, references to “market” or “our market” are references to the compensation of executives at companies within the Proxy Peer Group for each NEO, with the exception of Mr. Carlson, and the Survey Peer Group for Mr. Carlson.

Target Total Direct Compensation.Compensation

The Compensation Committee seeks to provide reasonable and competitive compensation. As a result, it targets the elements of total direct compensation for our Named ExecutivesNEOs generally within approximately 15% of the median compensation of our market for comparable positions. Throughout this CD&A, we refer to compensation that is within approximately 15% of market median as “market range” compensation.

The Compensation Committee may set elements of total direct compensation above or below the market range to account for a Named Executive’sNEO’s performance and experience, internal equity and other factors or situations that are not typically captured by looking at standard market data and practices and that the Compensation Committee deems relevant to the appropriatenessand/or competitiveness of a Named Executive’sNEO’s compensation.

When making decisions regarding individual compensation elements, the Compensation CommitteeCommit-

tee also consideredconsiders the effect on the Named Executive’sNEO’s target total direct compensation and target total cash-based compensation (annual base salary and annual incentives), as applicable. Our Compensation Committee’s goal is to establish target compensation for each element it considers appropriate to support the compensation objectives that, when combined, create a target total direct compensation award for each Named ExecutiveNEO that is reasonable and competitive.competitive and supports the Company’s compensation philosophy and objectives.

Defining Market Range Compensation — Benchmarking.2012 Overview  To identify median compensation for each element of total direct compensation, the Compensation Committee relies on “benchmarking” — reviewing the compensation of our Named Executives relative to the compensation paid to similarly situated executives at companies we consider our

peers. As a result, the annual base salary, target annual incentive compensation and target long-term incentive compensation as a whole for each of the Named Executives is benchmarked. However, the specific performance metrics and performance levels used within elements of annual and long-term compensation are designed for the principal purpose of supporting our strategic and financial goalsand/or driving the creation of stockholder value, and, as a result, are not generally benchmarked.

At the request of the Compensation Committee, Meridian conducted a market compensation analysis and provided advice regarding the median compensation of the three elements of total direct compensation for our officers, including the Named Executives. Using survey data from its proprietary compensation database (adjusted upwards by Meridian for the purpose of bringing the market data current), Meridian collected information from companies generally reflecting the size, scope and complexity of the business and executive talent at McDermott. To account for the size of our operations relative to peer companies, Meridian used regression analysis to adjust the market information on peer companies based on revenue. Prior to the Spin-off, Meridian analyzed information from two principal peer groups, the JRM/Corporate Group and the Babcock & Wilcox Group, to account for the diversity of geography and industry among our operations at that time. In anticipation of the Spin-off, Meridian also conducted a review of possible peer companies for McDermott and B&W post Spin-off. Through this review, the “Post-Spin Group” for McDermott was selected and approved by the Compensation Committee. In 2010, no Named Executives’ compensation was benchmarked against the Babcock & Wilcox Group other than Mr. Bethards. The component companies of each group are included on page 46 of this Compensation Discussion and Analysis.

JRM/Corporate Group.  With the exception noted below, the JRM/Corporate Group was the primary compensation benchmark prior to the Spin-off for our executives at the segments previously referred to as our corporate and Offshore Oil and Gas Construction segments, both of which are based in Houston, Texas. This group was compiled by Meridian with assistance from our management. The JRM/Corporate Group consisted of 43 companies with operations in engineering, construction, government operationsand/or energy, and was generally utilized in determining market range compensation for Messrs. Johnson, Fees, Taff, Carlson and Nesser and Ms. Hinrichs. For

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Mr. Johnson, the JRM/Corporate Group was adjusted by Meridian in consideration of the lower revenues of JRM as a standalone company as compared to McDermott. The Post-Spin Group was used as the benchmark for Mr. Johnson’s compensation adjustments in connection with his promotion to President and Chief Executive Officer of McDermott following the completion of the Spin-off.

Babcock & Wilcox Group.    The Babcock & Wilcox Group was the primary compensation benchmark for executives of our former Power Generation Systems and Government Operations segments, including Mr. Bethards. This group consisted of 27 engineering, constructionand/or governments operations companies that were more specifically representative of our former Power Generation Systems and Government Operations segments.

Post-Spin Group.  The Post-Spin Group was utilized as the primary compensation benchmark for McDermott’s officers following the Spin-off, including for Mr. Johnson’s promotion to President and Chief Executive Officer of McDermott on July 30, 2010. Because of the proximity of the Spin-off to Mr. Elders’ date of hire, the Post-Spin Group was also utilized in determining the market range compensation for Mr. Elders when he was hired in April 2010. Meridian compiled this group with assistance from our management. The group consisted of 14 energy equipment and services and construction and engineering companies.

Custom Peer Group.  The Custom Peer Group was used by Meridian on a limited basis as a comparator to the JRM/Corporate Group and the Babcock & Wilcox Group. This group was identified by Hewitt in October 2007 with the assistance of management. The Custom Peer Group consisted of nine engineering and construction companies and is the same group we used

in the performance graph included in our annual report onForm 10-K for the years ended December 31, 2007 and 2008. Compensation information for Custom Peer Group companies was based on information reported by those companies in publicly available Securities and Exchange Commission filings.

In this CD&A references to “market” or “our market” are references to the compensation of executives at companies within the JRM/Corporate Group, Babcock & Wilcox Group or Post-Spin Group, as applicable.

Total Direct Compensation

2010 Overview.  Excluding the retention awards and the sign-on grant made to Mr. Carlson, the 20102012 target total direct compensation for each of our Named ExecutivesNEOs was within the market range of target total direct compensation, except for Messrs. Elders and Nesser. The target total direct compensation for Mr. Elders was set slightly above market range due to the level of compensation that was considered appropriate to induce Mr. Elders to accept the Chief Financial Officer position and the value of long-term incentives granted to him in connection with his hiring. The target total direct compensation for Mr. Nesser was set above market range based on his lengthy experience with and his depth of knowledge of McDermott.

compensation.

The chart below shows the 20102012 target total direct compensation by element for each Named Executive.NEO. Because the amount of compensation actually paid through the compensation elements that are performance-based is not fixed at the outset, Named ExecutivesNEOs may earn compensation above or below the market range for similarly situated executives in our market.

 

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20102012 Target Total Direct Compensation Summary⁽¹⁾

						Annual
						Incentive(2)				Long-Term
Named Executive		Annual Base Salary				(% of Salary)				Incentive
S. M. Johnson(3) Pres. & CEO, JRM		$	768,750				85	%		$	2,500,000
Pres. & CEO, MII		$	920,000				100	%			—
J. A. Fees		$	922,500				100	%			—
P. L. Elders		$	470,000				70	%		$	1,034,000
M. S. Taff		$	520,150				70	%		$	1,212,000
B. C. Bethards		$	539,360				70	%		$	2,500,000
G. L. Carlson(4)		$	320,000				55	%		$	432,000
L. K. Hinrichs		$	422,300				55	%		$	800,000
J. T. Nesser		$	512,500				70	%		$	650,000

NEO		Annual Base Salary				Annual Incentive(1) (% of Salary)		Long-Term Incentive(2)				Target Total Direct Compensation as Percent of Market(3)		Percent Performance- Based(4)
S. M. Johnson		$	950,000			100%		$	5,000,000			101%		68%
P. L. Elders		$	500,000			70%		$	1,350,000			95%		62%
G. L. Carlson		$	375,000			70%		$	750,000			102%		59%
L. K. Hinrichs		$	455,000			70%		$	1,000,000			101%		60%
J. T. McCormack		$	560,000			80%		$	1,500,000			102%		62%
Average Mix of Compensation Elements			19%			16%			65%			N/A		64%

(1)		When we refer to Total Direct Compensation in this “Compensation Discussion and Analysis,” we exclude the retention payments made in connection with the Spin-off. See “Compensation Discussion and Analysis — Employment and Severance Agreements — Retention Agreements” for a discussion of those payments.
(2)		When making decisions as to the elements of a Named Executive’sNEO’s total direct compensation, the Compensation Committee considers the dollar value of annual incentive compensation but typically awards this element as percentagesa percentage of annual base salary. This is primarily because our market generally targets annual incentive

(2)	The values provided in this column are the target values of LTI approved by the Compensation Committee. For more information on apercentage-of-salary basis.the grant date fair values of LTI, see the “Grants of Plan-Based Awards” table under “Compensation of Executive Officers” below.

(3)	Market = Median total direct compensation, based on the benchmark applicable to the executive. 100% represents median compensation.

(4)	In connection with Mr. Johnson’s promotion to President and Chief Executive OfficerPerformance-based compensation consists of McDermott on July 30, 2010, his annual base salary anda NEO’s target value annual incentive compensation and 75% of the target were increased. No additional long-term incentives were awardedvalue of LTI, representing that portion of LTI compensation attributable to Mr. Johnson in connection with his promotion.
(4)		Mr. Carlson’s target long-term incentive compensation reflected on this chart does not include a sign-on equity grant of restrictedperformance shares and stock units that was made to offset compensation and benefits he forfeited when he left his previous employer to join McDermott.options.

While the Compensation Committee does not set a specific target allocation among the elements of total direct compensation, it believes that a significant portion of a Named Executive’sNEO’s total direct compensation should be performance-based. Excluding the retention grants and Mr. Carlson’s sign-on grant,As shown above, on average, performance-based compensation accounted for approximately 46.5%64% of a Named Executive’s 2010NEO’s 2012 target total direct compensation and 50%75% of his or her long-term incentive compensation. The average 2010 mixLTI compensation, representing that portion of target total directLTI compensation elements for our Named Executives was as follows:attributable to performance shares and stock options.

 

(1) Excluding retention grants and Mr. Carlson’s sign-on equity grant.

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Annual Base Salary

2010 Base Salaries.  In considering the April 1, 2010 salary adjustments, the Compensation Committee was provided with and took into account (1) the recommendation of our then current Chief Executive Officer, Mr. Fees, as to 2010 base salaries for Messrs. Johnson, Taff, Bethards, Carlson and Nesser and Ms. Hinrichs, (2) Meridian’s analysis of market compensation for those individuals and for Mr. Fees (as adjusted by Meridian to bring the data forward to April 1, 2010) and (3) tally sheets showing the 2009 compensation and benefits of Messrs. Johnson, Fees, Taff and Bethards, who were each Named Executives in 2009, and annual and long-term incentives and

retention amounts previously awarded. Additionally, in May 2010, the Compensation Committee was provided with (1) the recommendation of our then current Chief Executive Officer, Mr. Fees, as to the 2010 base salary of Mr. Elders, and (2) Meridian’s analysis of market compensation for Mr. Elders.

In each instance, Meridian’s market analysis compared the recommended base salary and the target total direct compensation of each officer (assuming 2010 salary recommendations were approved and disregarding the retention payments and sign-on awards) to the median compensation of the applicable market.

The 20102012 base salaries for our Named ExecutivesNEOs, which reflect increases that became effective as of June 1, 2012, were as follows:

		2010 Annual				Percent				Percent of
Named Executive		Base Salary(1)				Increase				Market(2)
S. M. Johnson
Pres. & CEO, JRM		$	768,750				2.50	%			83	%
Pres. & CEO, MII		$	920,000				N/A				114	%
J. A. Fees		$	922,500				2.50	%			86	%
P. L. Elders		$	470,000				N/A				117	%
M. S. Taff		$	520,150				3.00	%			98	%
B. C. Bethards		$	539,360				2.50	%			51	%
G. L. Carlson		$	320,000				N/A				107	%
L. K. Hinrichs		$	422,300				3.00	%			98	%
J. T. Nesser		$	512,500				2.50	%			163	%

NEO		2012 Annual Base Salary				Percent Increase		Percent  of Market(1)
S. M. Johnson		$	950,000			0.00%		102%
P. L. Elders		$	500,000			3.09%		100%
G. L. Carlson		$	375,000			11.61%		91%
L. K. Hinrichs		$	455,000			3.41%		107%
J. T. McCormack		$	560,000			12.00%		100%

(1)		Base salary adjustments were effective April 1, 2010.
(2)		Market = Median annual base salary, based on the benchmark applicable to the executive. 100% represents median compensation.

The Compensation Committee typically approves base salary increases at its regularly scheduled February meeting, with such increases effective April 1. In consideration of the Company’s performance during the fourth quarter of 2011, however, the Compensation Committee deferred base salary increases until later in 2012 for each of the NEOs, as well as Corporate and Atlantic operating segment employees earning over a certain annual base salary threshold. Following the Company’s improved performance during the first quarter of 2012, the Compensation Committee reevaluated base salary increases and approved such increases effective June 1, 2012 for each of the NEOs, with the exception of Mr. Johnson. At Mr. Johnson’s request, the Compensation Committee did not provide any base salary increase to Mr. Johnson for 2012.

When considering base salaries, effective April 1, 2010, the Compensation Committee sought to set salaries within the market range, with increases in line with expected adjustments of 2-3% in our market as reported by Meridian.range. Accordingly, Messrs. Johnson, Fees, Taff, Bethards and Nesser and Ms. Hinrichs each received a salary increase within this range. Following such salary increases and the establishment of salary for Messrs. Elders and Carlson, our Named Executives’Compensation Committee set annual base salaries were generally within market range for each NEO, with year-over-year increases ranging from 0-5%, with the exception of Messrs. Carlson and McCormack. Mr. Nesser. Although Mr. Nesser’sCarlson received an 11.61% base salary was above market range, the Compensation Committee considered this to be appropriate, based uponincrease in light of his experience and depth of knowledge of our operations and in anticipation ofincreased job duties following his promotion to Senior Vice President and Chief Administration Officer in February 2012. Mr. McCormack received a 12% base salary increase to further align his annual base salary with market range following his promotion to Executive Vice President and Chief Operating Officer of McDermott following the Spin-off.in June 2011.

In August 2010, in consideration of the market compensation analysis and recommendation provided

by Meridian in connection with Mr. Johnson’s July 30, 2010 promotion to President and Chief Executive Officer of McDermott, the Compensation Committee increased Mr. Johnson’s base salary to $920,000, which was within market range.

Annual Incentive Compensation

20102012 Overview and Target Compensation.Compensation.    The Compensation Committee administers our annual incentive compensation program under our Executive Incentive Compensation Plan which we refer to as the EICP.

(the “EICP”).

The EICP is a cash incentive plan designed to motivate and reward our Named ExecutivesNEOs and other key employees for their contributions to business goals and other factors that we believe drive our earningsand/or create and promote creation of stockholder value.

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The target 20102012 EICP compensation for our Named ExecutivesNEOs was as follows:

		Target EICP
		(% of annual				Percent of
Named Executive		base salary)				Market(1)
S. M. Johnson(2)
Pres. & CEO, JRM			85	%			85	%
Pres. & CEO, MII			100	%			87	%
J. A. Fees			100	%			88	%
P. L. Elders			70	%			86	%
M. S. Taff (3)			70	%			96	%
B. C. Bethards(3)			70	%			88	%
G. L. Carlson			55	%			104	%
L. K. Hinrichs			55	%			89	%
J. T. Nesser			70	%			135	%

NEO		Target EICP (% of annual base salary)		Percent  of Market(1)
S. M. Johnson		100%		91%
P. L. Elders		70%		75%
G. L. Carlson		70%		90%
L. K. Hinrichs		70%		85%
J. T. McCormack		80%		78%

(1)		Market = Median target annual incentive compensation, based on the benchmark applicable to the executive. 100% represents median compensation.
(2)		Mr. Johnson’s target EICP was prorated based on his length of service at his current and former positions.
(3)		Information provided for Messrs. Taff and Bethards is through the effective date of the Spin-off.

No changes were made to 2010

The 2012 target EICP, as a percentage of base salary earned, for Messrs. Johnson and Elders remained unchanged from the 2009their respective 2011 targets. Mr. Carlson’s and Ms. Hinrichs’ respective targets exceptwere each increased to 70% of annual base salary earned for 2012, and Mr. Johnson, whose 2010McCormack’s target was increased to 80% of base salary earned for 2012, in order to bring their target EICP was increased effective and for the period beginning August 1, 2010 in connection with his promotionawards closer to President and Chief Executive Officer of McDermott. In connection with their hiring in 2010, the Compensation Committee setor within market range. Messrs. Elders’ and Carlson’s 2010McCormack’s target EICP at 70% and 55%, respectively, whichawards for 2012 were each below market range; however, combined with the other components of compensation for 2012, their target total direct compensation was within the market range for their positions. Mr. Elders’ 2010 target EICP was prorated to take into account his April 30, 2010 hire date. Notwithstanding Mr. Carlson’s March 29, 2010 hire date, his 2010 target EICP was not prorated, in order to partially offset Mr. Carlson’s forfeiture of compensation and benefits at his previous employer. The Compensation Committee set 2010 target EICP for Messrs. Taff, Nesser and Bethards at the same level for internal equity reasons.

range.

20102012 EICP Performance Goals.Goals.    Traditionally, EICP compensation has consisted of a financial performance component representing 70% of EICP compensation and an individual performance component.component representing 30% of EICP compensation. To further drive performance of McDermott’s operations, the 2010 EICP target compensation for business unit officers, including Messrs. Johnson and Bethards, was set utilizing the traditional financial and individual performance components. However, to drive the timely and successful completion of the Spin-off, 2010 EICP target compensation for our Corporate officers, including Messrs. Fees and Taff and

Ms. Hinrichs, was set based on the completion of the Spin-off. Generally, for non-Corporate executives the 2010 target EICP was split between financial and individual components as follows:

	•	70% of target EICP was attributable to financial performance; and
	•	30% of target EICP was attributable to individual performance.

Financial performance is the largest factor in determining EICP compensation, because2012 the Compensation Committee generally considers itrevised EICP compensation such that 100% of the 2012 target award opportunity was attributable to be more objective andfinancial performance goals. The target award for Mr. Johnson was then subject to more directly influence the creation of stockholder value, as compared to individual performance. Individual performance, however, serves as an important metric to help promote the achievement of strategic, non-financial goals. To reward significant individual contributions,adjustment by the Compensation Committee, maintainedin its sole discretion, based on objectives

established for Mr. Johnson by the Compensation Committee, and the target award for the other participants in the EICP, including the remaining NEOs, was subject to adjustment by Mr. Johnson based on each participant’s individual componentperformance, with any such adjustment subject to the approval of the Compensation Committee. The financial performance goals were attributable 70% to the Company’s consolidated operating income and 30% to return on invested capital, or ROIC, for 2010 at 30% ofdetermining the minimum (25%), target (100%) and maximum (200%) payment a participant would be eligible to earn under the EICP for 2010. However, toin 2012. To further maintain the emphasis on financial performance, payment ofearning any EICP compensation (including for individual performance)payment required the attainment of athe threshold level of operating income financial performance. Theperformance, and the maximum EICP compensation a Named ExecutiveNEO could earn in 20102012 was 200%a multiple of 2x his or her target EICP. For all Named Executives,award. Similarly, as in the recent past, the Compensation Committee had the discretion to decrease an EICP payment.

As a result, for Messrs. Johnson, Elders, Carlson and Nesser,

2012 Financial Performance Goals.    Consistent with 2011, the EICP payment amount was principally determined based on: (1) the attainment of annual financial goals (which represented up to 140% of EICP compensation); and (2) the attainment of annual individual goals (which represented up to 60% of EICP compensation).

In connection with the Spin-off, however, the Compensation Committee determined that for our Corporate executive officers, including Messrs. Fees and Taff and Ms. Hinrichs, the primary component of 2010 EICP compensation was completing the Spin-off. These Corporate Named Executives were eligible to receive target EICP compensation, prorated through the effective date of the Spin-off. For the Corporate executive officers who continued employment with McDermott following the Spin-off, EICP compensation for the balance of 2010 was set based on the traditional financial and individual components applicable to their post-spin employment, prorated for the balance of 2010.

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As a result, the EICP payment amount for Ms. Hinrichs was principally determined based on: (1) the completion of the Spin-off (which represented 100%, prorated for the period through the completion of the Spin-off); (2) the attainment of financial goals for the remainder of 2010 (which represented up to 140%, prorated for the balance of 2010); and (3) the attainment of individual goals for the remainder of 2010 (which represented up to 60%, prorated for the balance of 2010).

Mr. Fees’ EICP payment amount was determined based on the completion of the Spin-off, which represented 100% of target EICP, prorated for his period of service as a Corporate executive officer. Because of Mr. Taff’s departure to join B&W and Mr. Bethards’ continued employment with B&W following the Spin-off, and in accordance with the Employee Matters Agreement dated July 2, 2010 to which McDermott and B&W became parties in connection with the Spin-off (the “Employee Matters Agreement”), their EICP payment amounts were determined and paid by B&W in 2011.

The components of EICP compensation for each of the Continuing Named Executives are illustrated in the charts below.

2010 Financial Goals.  Historically, the Financial Goals for the EICP consisted of operating income levels

related to McDermottand/or business unit operatingand ROIC. Operating income relevant to each Named Executive. Those Named Executives who were considered Corporate executive officers had Financial Goals generally based on consolidated McDermott operating income, whereas those Named Executives who were the chief executive officerscomprised 70%, and ROIC comprised 30%, of the business units had Financial Goals generally based on both consolidated McDermott operating income and business unit operating income. As discussed above, however, in connection with the Spin-off the Compensation Committee determined that the 2010financial performance goal for each NEO’s target EICP award opportunity would be attributable to completing the Spin-off for Corporate executive officers. Additionally, the Compensation Committee determined that the chief executive officers of the business units (Messrs. Johnson and Bethards) should have Financial Goals entirely attributable to the operating income results of their respective business units. Accordingly, the respective business unit’s operating income was used for establishing each such Named Executive’s Financial Goals.

2012. The Compensation Committee

considers operating income an appropriate financial measure to use for compensation purposes because it is the primary driver of net income, which the Compensation Committee expects to drive our stock price. In comparisonThe Compensation Committee also considers ROIC an appropriate financial measure to net income, however, operating incomeuse for compensation purposes because it is more directly influencedan indicator of McDermott’s capital efficiency and productivity, and also incentivizes the management of assets and aligns management’s interests with those of our stockholders by measuring stockholder value creation and/or erosion when compared to the revenues generated and costs incurred as a resultcost of management action and is more readily allocable to our operating segments.

Historically, thecapital.

The Compensation Committee established three primary levels of operating income goals. These levelsand ROIC goals, which together would determine the threshold, target and maximum amounts that would be paid under the financial component ofEICP. In establishing the EICP, with target level, being based onthe Compensation Committee considered management’s internal estimatesprojections of operating income and ROIC, discussed those estimates with Mr. Johnson, and then set the target level and threshold and maximum levels set as a percentage of the target level. The Compensation Committee designs incentive compensation to drive target level performance and does not believe that compensation should be earned for performance substantially below that level. As a result, no EICP compensation would be earned (including for individual performance) unless athe threshold level of operating income financial performance was attained, irrespective of the level of ROIC attained. The Compensation Committee believes that Named ExecutivesNEOs should be rewarded for superior financial performance. It therefore establishes a maximum level performance goal to incentivize higher performance but caps the payout to maximize returns to stockholders for performance above theat a maximum payout level, thereby reducing risk related to incentive compensation.

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The performance range between the threshold level and the maximum level was relatively narrow prior to 2009. In 2009, however, the Compensation Committee sought to increase the performance range between threshold and maximum level goals, making the maximum payment more difficult relative to target and reducing the minimum performance required to be attained before any EICP compensation would be earned. In addition, the Compensation Committee established a range for target comprised of three separate operating income goals. The intended effect of these changes was to reduce the significance of the impact of minor variations in financial results. The Compensation Committee maintained this approach in 2010, considering a number of performance goals recommended by management, including threshold level goals as low as 50% of target operating income and maximum level goals as high as 120% of target operating income. Similar to 2009, and in consultation with Meridian, the Compensation Committee set the 2010 threshold level operating income goal at 70% of target and the maximum level operating income goal at 120% of target. The operating income goals at the

target level ranged from 95% of the target goal to 105% of the target goal.

A Named Executive would have been eligible to earn the following amounts under the 2010 EICP based on attaining the following levels of operating income:

		Payout (as % of
Operating Income Performance Level		target EICP award)
Threshold (70% of Target)			25	%
Target (Min) (95% of Target)			98	%
Target (100%)			100	%
Target (Max) (105% of Target)			102	%
Maximum (120% of Target)			200	%

level. For other levels of operating income and ROIC between threshold and maximum, the percentage paid would have beenbe determined by linear interpolation using the two neighboring pre-established performance levels and percentage payout as a multiple of target award. No payment

A NEO would have been earnedeligible to earn the following amounts under the 2012 EICP for 2010 ifbased on attaining the following levels of operating income results had been below the threshold level.

The operating income goals for 2010 EICP compensation were as follows:and ROIC:

 

2012 EICP Payout Matrix

		Performance Goal		Consolidated Operating Income (in millions)				Payout(1) (as a multiple of target EICP award)				Performance Goal		Consolidated ROIC		Payout(2) (as a multiple of target EICP award)
		>120%			>$390			2.00				>120%		>13.2%		2.00
Maximum		120%			$390			2.00				120%		13.2%		2.00
		110%			$358			1.50				110%		12.1%		1.50
Target		100%			$325			1.00				100%		11.0%		1.00
		90%			$293			0.75				97%		10.7%		0.75
		80%			$260			0.50				93%		10.2%		0.50
Threshold		70%			$228			0.25				90%		10.0%		0.25
		< 70%			<$228			0.00				<90%		<10.0%		0.00

		Threshold		Target (Min)		Target		Target (Max)		Maximum
		(70% of Target)		(95% of Target)		(100%)		(105% of Target)		(120% of Target)
JRM   • Offshore Oil & Gas Construction		$222 million		$301 million		$317 million		$333 million		$380 million
B&W(1)		$210 million		$285 million		$300 million		$315 million		$360 million

(1)	The payout for consolidated operating income is a multiple of target EICP award with respect to the 70% portion of financial performance goals attributable to operating income.

(2)

The Compensation Committee set B&Wpayout for consolidated ROIC is a multiple of target EICP award with respect to the 30% portion of financial performance goals based on internal budgets, excluding $33 million of mPower expenses expectedattributable to be incurred in 2010, to avoid the adverse impact of strategic investments on a long-term initiative on a Named Executive’s EICP compensation.ROIC.

2012 Individual Performance Goals.    While EICP target award opportunities for 2012 are 100% attributable to financial performance goals, the Compensation Committee recognizes the importance of individual performance, which serves as an important metric to help promote the achievement of strategic goals that may not be measured in an annual financial metric. Accordingly, Mr. Johnson’s EICP award was subject to adjustment by the Compensation Committee, in its sole discretion, based on Mr. Johnson’s individual performance, including but not limited to the individual performance objectives established for Mr. Johnson by the Compensation Committee. The EICP awards of the other NEOs

2010 Individual Goals.were subject to adjustment by Mr. Johnson based on each NEO’s individual performance, with any such adjustment subject to the approval of the Compensation Committee. Individual goals established for each Named ExecutiveNEO were tailored to the individual’s position and focused on supporting strategic initiatives and achieving common goals. Each NEO, with the exception of Mr. Fees established the individual goals for Messrs. Johnson, and Bethards. Messrs. Elders, Carlson and Nesser each proposed theirhis or her respective individual goals, which were approved by Mr. Johnson. No pre Spin-off individual goals were establishedJohnson, in addition to a goal for Messrs. Feesall NEOs to effectively manage general and Taff and Ms. Hinrichs because their pre Spin-off EICP award

was entirely attributable to completing the Spin-off. At the time the target EICP awards were determined, individual goals relating to post Spin-off employment with either McDermott or B&W were deferred to be addressed by the respective company, as applicable. Ms. Hinrichs proposed her post Spin-off individual goals, which were approved by Mr. Johnson.administrative costs. The individual goals and their respective weightings forconsidered in connection with our Continuing Named Executives’ 2010NEOs’ 2012 EICP compensation are set forth in the table below.

 

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Stephen M. Johnson:
Stephen M. Johnson:		•    Lead McDermott using a philosophy that is well understood, widely supported, consistently applied and effectively implemented; •    Continue to implement the strategy for McDermott to conserve cash and leverage capital expenditures in a conservative manner; •    Establish new executive leadershipappropriate annual and long-term financial objectives; ensure that appropriate systems are maintained to protect assets and maintain effective control of operations; •    Develop, attract, retain, motivate and supervise an effective top management team to assist McDermott with post Spin-off transitional activities and guide McDermott in the future (0-15%);
		•    Establish clearly articulated strategy for cash management and capital expenditures (0-15%);
		•    Establish succession plancapable of achieving objectives; provide for executive officersmanagement succession planning; •    Serve as the chief spokesperson for McDermott, communicating effectively with stockholders and one management layer beneath executives (0-15%); and
		other stakeholders; •    Enhance working relationshipWork closely with McDermottthe Board of Directors (0-15%).to keep the Board fully informed on all important aspects of our company; make timely recommendations for Board action and respond to suggestions and directives from the Board and its committees; •    Achieve specific safety goals and objectives and promote safe work practices as the highest operational priority; and •    Assure that all operations and business dealings are conducted with the utmost compliance with applicable laws and regulations and the highest level of ethical behavior is exhibited by our company.

Perry L. Elders:		•    ReviewSupport project execution excellence to drive improved financial returns; •    Enhance capital discipline; •    Work closely with the operating units on ventures; and assess post Spin-off capital structure, including liquidity •    Develop talent of finance team through new/expanded duties by movement of people among functions and leverage (0-12%);locations.
		•    Develop capital expenditure process, including authorization and monitoring (0-12%);
Gary L. Carlson:		•    Enhance financial departmentLead, develop, attract, retain and motivate an effective Human Resources leadership team; •    Recruit and hire a Vice President, Human Resources; •    Facilitate talent development and succession planning (0-12%);
		•    Develop roles and processesactivities throughout McDermott finance organization (0-12%); and
		•    Enhance working relationship throughout McDermott (0-12%).
Gary L. Carlson:		•    Establish a globally integrated talent development program (0-12%);
		the organization; •    Develop and implementdeploy a succession planning program(0-12%); global requisition management solution; •    Lead, develop, attract, retain and motivate an effective Information Technology leadership team; •    Recruit and hire a Vice President and Chief Technology Officer; and •    Oversee the 2012 information technology initiatives on time and within budget.
		•    Establish working relationship with Compensation Committee (0-12%);
Liane K. Hinrichs:		•    AssessLead the integration of the Records and recommend go-forward planInformation Management function into the Legal Department; •    Lead the review of risk mitigation analysis pertaining to certain specific risks; •    Lead and facilitate the integrated working group teams for enterprise information technology (0-12%);specific country restructurings; and •    Enhance terms and conditions for certain potential contractual matters.
		•    Build cohesive global human resources organization to meet needs of McDermott post-spin (0-12%).
Liane K. Hinrichs: John T. McCormack:		•    Complete Spin-off related activities (0-60%).
John T. Nesser:		•    Oversee operational transition following the Spin-off to stand alone marine construction company (0-12%);
		•    Achieve established operating income goals (0-12%);
		•    Increase backlog, in quantity and quality, from level at December 31, 2009 (0-12%);
		•    Enhance operations development and succession planning(0-12%); and
		•    Maintain high ethical standards through oversight and training and meet or exceed establishedspecific safety goals (0-12%).
and objectives; •    Implement management reserve policy; •    Implement project management best practices on capital expenditure projects; •    Optimize vessel utilization; •    Ensure focus and adequate resources applied to “Delivering Certainty” initiative; •    Ensure acceptable goals achieved in Atlantic region turnaround; and •    Identify and pursue subsea firms for acquisition and partnering.

20102012 Annual Incentive Compensation Payments.The 20102012 target and final EICP compensation amounts for each Named ExecutiveNEO are shown in the table below. No information is provided for Messrs. Taff or Bethards. Pursuant to the Employee Matters Agreement, B&W assumed responsibility for

the grant and payment of 2010 annual incentive compensation for certain employees, including Messrs. Taff and Bethards, which compensation was earned in connection with their employment with B&W following the Spin-off and paid by B&W in 2011.

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20102012 EICP Payment Summary

NEO		2012 EICP Target % of Salary		Final 2012 Annual Incentive Payment
S. M. Johnson		100%		$	760,000
P. L. Elders		70%		$	207,383
G. L. Carlson		70%		$	210,976
L. K. Hinrichs		70%		$	301,573
J. T. McCormack		80%		$	308,208

		2010 EICP
Named		Target				Total 2010
Executive		% of Salary				Annual Incentive
S. M. Johnson(1)						$	1,218,863
Pres. & CEO, JRM			85	%
Pres. & CEO, MII			100	%
J. A. Fees			100	%		$	535,808
P. L. Elders			70	%		$	398,147
G. L. Carlson			55	%		$	334,400
L. K. Hinrichs			55	%		$	317,673
J. T. Nesser			70	%		$	609,729

(1)		Mr. Johnson’s target EICP was prorated based on his length of service at his current and former positions.

Analysis of 20102012 EICP Payments.Payments.    In February 2011,2013, the Compensation Committee considered (1) McDermott’s 20102012 consolidated operating income as adjusted to compare to the established JRM operating income performance goals;and ROIC; (2) the non-management directors’ assessment of the individual performance of Mr. Johnson; (3) Mr. Johnson’s self-assessment of his individual performance relative to his individual goals; (3) the nonemployee directors’ assessment of the individual performance of Mr. Johnson; and (4) Mr. Johnson’s recommendation of adjustments to each other Continuing Named Executive’s 2010NEO’s 2012 EICP compensation based on his assessment of the financial andeach other NEO’s individual performance applicable to each of those Continuing Named Executives.

performance.

In February 2010, the financial performance goals for 2010 EICP compensation were established based on the operating income of JRM, which was comprised of the reporting segment we previously referred to as the Offshore Oil & Gas Construction segment. As a result of the Spin-off, however, the Offshore Oil & Gas Construction segment no longer exists as a segment for financial reporting purposes. Therefore, in order to determine whether the financial goals were attained, the Compensation Committee utilized McDermott’s consolidated operating income, which was $319.3 million, and consolidated ROIC of $314.9 million, taking into account legacy corporate general and administrative expenses to establish10.3%. The consolidated ROIC percentage was derived from the operatingfollowing formula:

Net Income

(Total Assets — Current Liabilities)

; provided, however, that (1) Net Income included continuing operations only, (2) Net Income was determined before the deduction for net income attributable to JRM hadnon-controlling interests (minority interest expense), (3) Total Assets and Current Liabilities included continuing operations only, and (4) (Total Assets — Current Liabilities) was calculated quarterly, and the Spin-off not occurred. The Compensation Committee also specifically considered certain impairments and charges totaling approximately $73.1 million, including costs incurred in connection with the discontinuance of our fabrication yard in Kazakhstan, impairment charges on twoaverage of the four vessels we are retaining fromquarterly periods were used in the Secunda acquisition, which charges diminishedequation above for determining ROIC.

Based on the combined operating income and alsoROIC performance, participants in the asset impairment costsEICP were eligible to earn approximately 0.8x of our charter fleet business,their target EICP compensation, subject to adjustments for individual performance as discussed above. The consolidated operating income of $319.3 million resulted in our Annual

Report onForm 10-K fora notional payout level of approximately 0.669x with respect to the year ended December 31, 2010.

Mr. Johnson.  Mr. Johnson earned approximately 160.3%70% portion of his 2010the financial performance goals attributable to operating income, and the consolidated ROIC of 10.3% resulted in a notional payout of 0.136x with respect to the 30% portion of financial performance goals attributable to consolidated ROIC, resulting in a target EICP or $1,218,863. Based onpayout of 0.8x.

Mr. Johnson.    As a result of McDermott’s 20102012 financial results,performance, Mr. Johnson was eligible to earn 190%$760,000 of his 20102012 target EICP compensation, subject to the assessment of his individual goals. Mr. Johnson’s 160.3% was comprised 132% under the financial performance component based on McDermott’s operating income and 28.3% under the individual component basedaward. Based on the Governance Committee’s assessment of Mr. Johnson’s individual performance against stated goals.

goals, the Compensation Committee affirmed and approved Mr. Fees.  In connection with the Spin-off and Mr. Fees’ terminationJohnson’s 2012 EICP award, resulting in a final EICP award of employment for “good reason” as defined in his retention agreement, Mr. Fees was paid his prorated 2010 EICP compensation in August 2010. Per the terms of his retention agreement, Mr. Fees was to be paid a cash payment equal to his target bonus under the EICP times a fraction, the numerator of which was the number of days elapsed in the year in which the termination took place and the denominator of which was 365. Based on his July 30, 2010 termination date, Mr. Fees’ target bonus of $922,500 was prorated such that he received an EICP payment of $535,808.

$760,000.

Mr. Elders.  Mr. Elders earned approximately 181.5%As a result of his 2010 target EICP (which was prorated based on his length of service with McDermott during 2010), or $398,147. Based on McDermott’s 20102012 financial results,performance, Mr. Elders was eligible to earn 190%$276,511 of his 20102012 target EICP compensation. Mr. Elders’ 181.5% was comprised 133.7% under the financial performance component based on McDermott’s operating income and 47.8% under the individual component basedaward. Based on Mr. Johnson’s assessment of Mr. Elders’Elder’s individual performance against stated goals.

goals, Mr. Johnson recommended an adjustment to Mr. Elder’s 2012 EICP award, which the Compensation Committee approved, resulting in a final EICP award of $207,383.

Mr. Carlson.    Mr. Carlson earned 190%As a result of his 2010 target EICP, or $334,400. Based on McDermott’s 20102012 financial results,performance, Mr. Carlson was eligible to earn 190%$200,930 of his 20102012 target EICP compensation. Mr. Carlson’s 190% was comprised 133% under the financial performance component based on McDermott’s operating income and 57% under the individual component basedaward. Based on Mr. Johnson’s assessment thatof Mr. Carlson met or exceeded hisCarlson’s individual goals.performance against stated goals, Mr. Johnson recommended an adjustment to Mr. Carlson’s 2012 EICP award, which the Compen-

sation Committee approved, resulting in a final EICP award of $210,976.

Ms. Hinrichs.    As a Corporate employee, Ms. Hinrichs had 2 EICP periods during 2010. For

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the period prior to the Spin-off, and becauseresult of the completion of the Spin-off, Ms. Hinrichs earned 100% of her target EICP compensation, prorated for her length of service as a Corporate employee, or 7/12 of the year. For the period following the Spin-off,McDermott’s 2012 financial performance, Ms. Hinrichs was eligible to earn 190%$251,311 of her 20102012 target EICP compensation, prorated for the balance of 2010, or 5/12 of the year. Following the Spin-off, Ms. Hinrichs earned 190% of her 2010 target EICP compensation, which was comprised 133% under the financial performance component based on McDermott’s operating income and 57% under the individual component basedaward. Based on Mr. Johnson’s assessment thatof Ms. Hinrichs met or exceeded herHinrichs’ individual goals. performance against stated goals, Mr. Johnson recommended an adjustment to Ms. Hinrichs’ 2012 EICP award, which the Compensation Committee approved, resulting in a final EICP award of $301,573.

Mr. McCormack.    As a result Ms. Hinrichs earned 190% of her 2010 target EICP for 5/12 of the year, which combined with the pre Spin-off period, totaled $317,673.

McDermott’s 2012 financial performance, Mr. Nesser.  Mr. Nesser earned approximately 171% of his 2010 target EICP, or $609,729. Based on McDermott’s 2010 financial results, Mr. NesserMcCormack was eligible to earn 190%$342,453 of his 20102012 target EICP compensation. Mr. Nesser’s 171% was comprised 133% under the financial performance component based on McDermott’s operating income and 38% under the individual component basedaward. Based on Mr. Johnson’s assessment of Mr. Nesser’sMcCormack’s individual performance against stated goals.

goals, Mr. Johnson recommended an adjustment to Mr. McCormack’s 2012 EICP award, which the Compensation Committee approved, resulting in a final EICP award of $308,208.

Long-Term Incentive Compensation

The Compensation Committee believes that the interests of our stockholders are best served when a significant percentage of executive compensation is comprised of equity and other long-term incentivesLTI that appreciate in value contingent upon increases in the value of our common stock and other performance measures that reflect improvements in McDermott’s business fundamentals. Therefore, long-term incentiveLTI compensation represents the single largest element of our Named Executives’NEOs’ total direct compensation.

Analysis of 20102012 Equity Grants.

Mix of 2010 Equity.2012 Equity  In 2010, the type and mix of equity the Compensation Committee granted was principally a function of two factors: (1) the Compensation Committee’s desire to maintain a strong correlation between pay and performance.    Consistent with 2011, in long-term incentives and (2) the anticipated Spin-off. As a result,2012, the Compensation Committee allocated long-term incentiveLTI compensation to officers, including certain Named Executives,the NEOs, as follows (excluding retention

follows:

payments made in connection with the Spin-off and the sign-on grant made to Mr. Carlson):

50% performance shares;

	•	50% restricted stock units; and
	•	50% non-qualified stock options.

25% non-qualified stock options; and

To promote the retention of employees,

25% restricted stock units represented a larger percentage of a Named Executive’s long-term incentive compensation than in the recent past. At the time of grant, the Compensation Committee anticipated that the restricted stock units would be converted at the Spin-off into restricted stock units of either McDermott or B&W, depending primarily on which company the recipient’s employment continued with post-spin. As a result, restricted stock units were intended to provide an immediate long-term retention for continuing employees. The restricted stock units generally vest one-third on the first, second and third anniversaries of the grant date.units.

To maintainfurther emphasize its commitment to performance-based compensation, the Compensation Committee utilizedcontinued using performance shares in 2012. The Compensation Committee believes the granting of total shareholder return (“TSR”) performance shares is an appropriate element of incentive compensation, in that TSR performance shares align the NEOs’ interests with those of our stockholders, with a focus on long-term results. The amount of performance shares that vest, if any, is

scheduled to initially be determined at the end of a three-calendar year period (including 2012) based on McDermott’s TSR relative to the Proxy Peer Group during the same period, with subsequent measurements of TSR relative to the Proxy Peer Group at the end of four- and five- calendar year periods (including 2012). The total percentage of performance shares which will vest, if any, may range in amount between 0% and 200% of the number of shares granted, depending on McDermott’s TSR relative to the Proxy Peer Group over the applicable measurement periods. As of December 31, 2012, the estimated payout as a percentage of target for the performance shares granted in 2012 was 59%.

As it has in recent years, in 2012 the Compensation Committee continued to use stock options, which reward and drive performance based on absolute stock price improvement. The stock options also generally vest in one-third increments on the first, second and third anniversaries of the grant date and have an option term of 7seven years. As of December 31, 2012, the price of the Company’s shares did not exceed the strike price of the stock options granted in 2012.

As it has in recent years, in 2012 the Compensation Committee awarded restricted stock units to the NEOs. Restricted stock units are intended to promote the retention of employees, including the NEOs, and generally vest in one-third increments on the first, second and third anniversaries of the grant date.

For more information regarding the 2012 performance shares, stock options and restricted stock units, see the “Grants of Plan-Based Awards” table under “Compensation of Executive Officers” below.

Value of 2012 LTI Compensation.    The 2012 target LTI compensation for our NEOs was as follows:

NEO		Target LTI Value				Percent  of Market(1)
S. M. Johnson		$	5,000,000			104%
P. L. Elders		$	1,350,000			101%
G. L. Carlson		$	750,000			113%
L. K. Hinrichs		$	1,000,000			105%
J. T. McCormack		$	1,500,000			114%

(1)	Market = Median target LTI based on the benchmark applicable to the executive. 100% represents median compensation.

When considering the target values of LTI to be provided to the NEOs, the Compensation Committee

sought to set target values within the market range. Accordingly, each NEO’s target LTI value was within market range.

As of December 31, 2012, (1) the estimated payout as a percent of target for the performance shares granted in 2012 was 59%, and (2) the share price of our common stock did not exceed the strike price of the stock options granted in 2012. However, the amount of performance shares granted in 2012 that ultimately vest, if any, will be determined by reference to our total shareholder return over three-, four- and five-year periods. The vesting of these performance shares would impact the future realizable value of these performance shares. In addition, an increase in our stock price compared to our stock price at December 31, 2012 may impact the future realizable value of the stock options granted in 2012.

Sizing LTI Compensation.    The Compensation Committee generally determines the size of equity-based grants as a dollar value, rather than granting a targeted number of shares. The number of restricted stock units and performance shares and shares underlying stock options granted can be expressed through the following formula:

target value of target LTI($)/FMV($).

The fair market value of one restricted stock unit was computed based on the full fair market value of McDermott’s common stock based on the closing price of our common stock on the New York Stock Exchange on the date of grant. The fair market value of one performance share was determined by Pay Governance using a Monte Carlo valuation model. The fair market value of an option to acquire one share of our common stock was determined by Pay Governance using a Black-Scholes model. Both of these valuation models consider the full fair market value of our common stock on the date of grant in conjunction with other valuation inputs. Full fair market value may differ from grant date fair value dependent on the analysis performed under Accounting Standards Codification Topic 718.

Timing of Equity Grants.    To avoid timing equity grants ahead of the release of material nonpublic information, the Compensation Committee generally grants equity awards effective as of the first day of the next open trading window following the meeting at which the grants are approved, which is generally the third NYSE trading day following the filing of our annual report on Form 10-K or quarterly report on Form 10-Q with the SEC. This practice was followed for all long-term incentive compensation grants to NEOs in 2012.

 

Consistent

Perquisites

In 2012, our Compensation Committee adopted a perquisite allowance for certain officers, including our NEOs, in the amount of $20,000, consistent with 2011. The perquisite allowance was provided in order to cover company-required physicals, financial planning and non-company-required spousal travel.

Additionally, and consistent with our past practice, we may reimburse NEOs for the travel expenses of a guest accompanying a NEO, including the provision of a gross-up for any imputed income, but only when the presence of that guest is related to the underlying business purpose of the trip. We also provide our NEOs with a tax gross-up on any relocation-related expense reimbursements that may be subject to tax.

Retirement Plans

Thrift Plan.    We provide retirement benefits for most of our U.S. employees, including our NEOs, through sponsorship of the McDermott Thrift Plan, a qualified defined contribution 401(k) plan, which we refer to as our “Thrift Plan.”

Retirement and Excess Plans.    We do not provide qualified defined benefit pension plans to any of our NEOs, with the exception of Ms. Hinrichs, who was eligible for participation under the McDermott (U.S.) Retirement Plan (the “Retirement Plan”) before it was closed to new participants in 2006. Benefit accruals under the Retirement Plan were frozen altogether in 2010.

Ms. Hinrichs is also a participant in our unfunded, nonqualified excess retirement plan (the “Excess Plan”), which covers a small group of highly compensated employees whose ultimate benefits under the Retirement Plan are reduced by Internal Revenue Code limits on the amount of benefits which may be provided under qualified plans and the amount of compensation which may be taken into account in computing benefits under qualified plans. Benefits under the Excess Plan are paid from our general assets. As is the case with the Retirement Plan, benefits under the Excess Plan have been frozen since 2010, and no further benefits are accruing to Ms. Hinrichs under the Excess Plan.

See the “Pension Benefits” table under “Compensation of Executive Officers” below for more information regarding the Retirement Plan and the Excess Plan.

Deferred Compensation Plan.    The Deferred Compensation Plan, or the DCP, is a defined contribution supplemental executive retirement plan established by our Board and the Compensation Committee to help maintain the competitiveness of our post-employment compensation as compared to our market. The DCP is an unfunded, nonqualified plan that provides each participant in the plan with benefits based on the participant’s notional account balance at the time of retirement or termination. Under the DCP, on an annual basis the Compensation Committee has the discretion to credit a specified participant’s notional account with an amount equal to a percentage of the participant’s prior-year base salary and annual bonus paid in the prior year. We refer to such credit as a “Company Contribution.” In 2012, each of the NEOs were participants in the DCP and their respective accounts in the DCP received a Company Contribution in an amount equal to 5% of their respective prior-year base salaries paid in the prior year.

The Compensation Committee has designated deemed mutual fund investments to serve as indices for the purpose of determining notional investment gains and losses to each participant’s account for any Company Contribution or participant elected deferrals. Each participant allocates any Company Contributions and deferrals among the various deemed investments. DCP benefits are based on the participant’s vested notional account balance at the time of retirement or termination. Please see the “Nonqualified Deferred Compensation” table and accompanying narrative below for more information about the DCP and Company Contributions to our NEOs’ DCP accounts.

Employment and Severance Arrangements

Employment and Severance Agreements.    Except for change-in-control agreements described below, we do not currently have any employment or severance agreements with any of our NEOs.

Change-in-Control Agreements.    In our experience, change-in-control agreements for certain executive officers are common within our industry, and our Board and Compensation Committee believe that providing these agreements to our NEOs protects stockholders’ interests by helping to assure management continuity and focus through and beyond a change in control. Accordingly, the Compensation Committee has offered change-in-control agreements to key senior

executives since 2005. Our change-in-control agreements contain what is commonly referred to as a “double trigger,” that is, they provide benefits only upon an involuntary termination or constructive termination of the executive officer within one year following a change in control. The change-in-control agreements generally provide a cash severance payment of two (2.99 for Mr. Johnson) times the sum of the NEO’s annual base salary and target EICP and a pro-rated bonus payment under the EICP. In addition, upon a change in control, each such officer would become fully vested in any outstanding and unvested equity-based awards and his or her respective account balance in the DCP.

The change-in-control agreements: (1) do not provide for excise tax gross-ups; (2) require the applicable officer’s execution of a release prior to payment of certain benefits; and (3) provide for the potential reduction in payments to an applicable officer in order to avoid excise taxes. See the “Potential Payments Upon Termination or Change in Control” table under “Compensation of Executive Officers” below and the accompanying disclosures for more information regarding the change-in-control agreements with our NEOs, as well as other plans and arrangements that have different trigger mechanisms that relate to a change in control.

Other Compensation Policies

Stock Ownership Guidelines.    To assist with the alignment of the interests of directors, executive officers and stockholders, we believe our directors and officers should have a significant financial stake in McDermott. To further that goal, we have adopted stock ownership guidelines requiring generally that our nonemployee directors and our officers at the level of vice president or above maintain a minimum ownership interest in McDermott. The stock ownership requirements are as follows:

Level		Base Salary or Annual Retainer Multiple
CEO			5x
Executive Officers directly reporting to CEO			3x
Other Elected Vice Presidents			2x
Nonemployee Directors			5x

Directors and officers have five years from the effective date of the stock ownership guidelines (as amended in August 2010), their initial election as a director/officer, or a change in position which increases the expected ownership level, whichever is later, to comply with the guidelines. All NEOs currently meet or exceed their ownership requirement, or are within the five-year period to achieve compliance.

Derivatives Trading and Hedging.    McDermott’s Insider Trading Policy prohibits all directors, officers and employees, including our NEOs, from engaging in “short sales” or trading in puts, calls or other options on McDermott’s common stock. Additionally, directors, officers and employees are prohibited from engaging in hedging transactions and from holding McDermott shares in a margin account or pledging McDermott shares as collateral for a loan.

Clawback Policy.    Our Compensation Committee has adopted a clawback policy under which McDermott would seek to recover any incentive-based award granted to any executive officer as required by the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange.

Forfeiture Provisions.    Additionally, consistent with our recent past practice, our grant agreements for awards made in 2010 contained2012 contain a forfeiture provision. In 2010,2012, this provision provided that in the event that, while the grantee is employed by McDermott or performing services on behalf of McDermott under any consulting agreement, the grantee is convicted of a felony or misdemeanor involving fraud, dishonesty or moral turpitude or a felony, or the grantee engages in conduct that adversely affects or, in the sole judgment of the Compensation Committee, may reasonably be expected to adversely affect, the business reputation or economic interests of the Company, then all rights and benefits awarded under the respective agreements are immediately forfeited, terminated and withdrawn.

 

The Compensation Committee also considered using performance shares in 2010, as it had each year since 2006. However, the Compensation Committee elected not to utilize performance shares as a component of long-term compensation during 2010, because it determined it was more appropriate for the post-spin board of directors at each post Spin-off company to establish performance targets and metrics tailored to the strategies of the post-spin company. The decision not to award performance shares was influenced by observed complexities in establishing goals for McDermott in the midst of significant change during the measurement period.

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2012 PEER GROUPS

We anticipate that future long-term incentive compensation will continue to emphasize performance-based equity awards, including the use of performance shares. In March 2011, the Compensation Committee’s long-term compensation allocation for officers, excluding Mr. Nesser, who informed McDermott that he intends to retire by year-end 2011, was as follows:

Proxy Peer Group:
Baker Hughes Incorporated	•	50% performance shares;FMC Technologies, Inc.		Noble Corporation
Cal Dive International, Inc.	•	25% restricted stock units; andHalliburton Company		Oceaneering International, Inc.
Cameron International Corporation	•	25% non-qualified stock options.Helix Energy Solutions Group, Inc.		Oil States International, Inc.

For more information regarding the 2010 restricted stock units and stock options, see the Grants of Plan-Based Awards table under “Compensation of Executive Officers” below and disclosures under “Compensation of Executive Officers — Estimated Future Payouts Under Equity Incentive Plan Awards.”

Value of 2010 Long-Term Incentive Compensation.  The 2010 target long-term incentive compensation for our Named Executives was as follows:

		Target LTI				Percent of
Named Executive(1)		Value				Market(2)
S. M. Johnson		$	2,500,000				84	%
P. L. Elders		$	1,034,000				130	%
M. S. Taff		$	1,212,000				102	%
B. C. Bethards		$	2,500,000				79	%
G. L. Carlson(3)		$	432,000				120	%
L. K. Hinrichs		$	800,000				101	%
J. T. Nesser		$	650,000				102	%

Chicago Bridge & Iron Company		Jacobs Engineering Group, Inc.		Shaw Group, Inc.
Dresser-Rand Group, Inc.		KBR, Inc.		Tidewater Inc.
Foster Wheeler AG		National Oilwell Varco, Inc.
(1)Survey Peer Group:			No long-term incentive award was granted to Mr. Fees in 2010 in anticipation of his termination of employment from McDermott in connection with the Spin-off.
(2)		Market = Median target long-term incentives based on the benchmark applicable to the executive. 100% represents median compensation.
(3)		Mr. Carlson’s target long-term incentive compensation does not include a sign-on equity grant of restricted stock units that was made to offset compensation and benefits he forfeited when he left his previous employer to join McDermott.

Meridian advised the Compensation Committee that due to economic and stock market conditions in 2010, the long-term incentive compensation of companies in our market decreased 10%-20% as compared to 2009. As a result of these market decreases, most of our executive officers, including Messrs. Johnson, Taff and Nesser and Ms. Hinrichs, received a lesser value of target long-term incentive compensation as compared to the 2009 target value awards (exclusive of the retention grants discussed below) in order for the

Compensation Committee to maintain their long-term incentive compensation within market range. The value of Messrs. Elders’ and Carlson’s long-term incentive compensation was above market range in order to induce Messrs. Elders and Carlson to accept positions at JRM with the expectation that they would become executive officers of McDermott upon completion of the Spin-off. As a result of internal equity considerations, the Compensation Committee set the same target long-term incentive value for Mr. Johnson and Mr. Bethards, although market data indicated that Mr. Bethards’ target long-term incentive compensation was approximately 21% below market — with the difference attributable to the use of different benchmarks for these positions.

As previously mentioned, Mr. Carlson was also granted additional long-term incentives in 2010 in the form of a sign-on grant of restricted stock units made to offset compensation and benefits he forfeited when he left his previous employer to join McDermott. The value of this sign-on grant was not included in setting Mr. Carlson’s target long-term incentive compensation.

Additionally, in connection with the Spin-off and pursuant to the retention agreements entered into by McDermott with certain key members of management in December 2009, as discussed in further detail below, Messrs. Johnson and Nesser and Ms. Hinrichs each received an additional award based on their continued employment with McDermott on the effective date of the Spin-off. Each of these Named Executives received an award of restricted stock equal in value to the sum of the Named Executive’s annual base salary and target bonus under the EICP in effect immediately prior to the effective date of the Spin-off. The restricted stock awards vest 100% on July 30, 2011, which is the first anniversary of the effective date of the Spin-off, provided the Named Executive remains employed with McDermott through that date. The Compensation Committee did not consider the retention agreement restricted stock awards when determining the value of long-term incentive to be awarded in 2010 because the restricted stock awards were an incentive to retain key members of management through the completion of and for one year following the Spin-off rather than to incentivize long-term performance. Additionally, pursuant to the retention agreements entered into in December 2009, at the time the 2010 target long-term incentive value was determined in early 2010, the restricted stock awards remained contingent and were not awarded until the completion of the Spin-off. The value of

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the retention agreement restricted stock award grants to Messrs. Johnson and Nesser and Ms. Hinrichs were as follows:

		Grant Date Fair
Named Executive		Value of Award				Shares Granted
S. M. Johnson		$	1,422,186				113,412
L. K. Hinrichs		$	654,563				52,198
J. T. Nesser		$	871,254				69,478

Messrs. Bethards and Taff each received similar retention payments in the form of restricted stock award grants made by B&W equal in value to the sum of their respective annual base salary and target bonus in effect immediately prior to the effective date of the Spin-off, except that one-third of the value of Mr. Taff’s retention award was made in cash.

Sizing Long-Term Incentive Compensation.  The Compensation Committee generally determines the size of equity-based grants as a dollar value, rather than granting a targeted number of shares. The number of restricted stock units and stock options granted can be expressed through the following formula:

target value of target long-termincentive($) / FMV($).

The fair market value of one restricted stock unit or share of restricted stock was computed based on the full fair market value of McDermott’s common stock on the date of grant. The fair market value of one stock option was determined by Meridian using a Black-Scholes formula based also on the full fair market value of our common stock on the date of grant. For example, for the long-term incentive compensation granted to all of the Named Executives (except Messrs. Elders and Carlson) in February 2010, the fair market value of our common stock as of the date the grants were calculated (based on the closing price of our common stock on the New York Stock Exchange) was $25.37, compared to the discounted value of $17.11 for an option to acquire one share of our common stock. Because the long-term incentive compensation grants vest over three years, the number of shares calculated were rounded to the nearest multiple of three.

In prior years, fair market value of the stock was determined using a discounted share price to reflect the vesting conditions and transfer restrictions characterizing the equity awards. The valuation methodology was changed with respect to awards made in 2010, which had the intended effect of lowering the number of shares and units that otherwise would have been granted.

All outstanding long-term incentive awards prior to the Spin-off, including those granted in 2010, were converted or adjusted in connection with the Spin-off. For more information, see “Treatment of Equity-Based Compensation in Connection with the Spin-off” below.

Timing of Equity Grants.  To avoid timing equity grants ahead of the release of material non-public information, the Compensation Committee generally grants stock option and other equity awards effective as of the first day of the next open trading window following the meeting at which the grants are approved, which is generally the third NYSE trading day following the filing of our annual report onForm 10-K or quarterly report onForm 10-Q with the Securities and Exchange Commission. This practice was followed for all long-term incentive compensation grants to Named Executives in 2010, with the exception of the restricted stock award retention grants made to Messrs. Johnson and Nesser and Ms. Hinrichs pursuant to their retention agreements. The retention grants of restricted stock were earned on the effective date of the Spin-off and, therefore, were made on the first business day following that date.

Treatment of Equity-Based Compensation in Connection with the Spin-off.  In connection with the Spin-off, McDermott sought to preserve the intrinsic value of outstanding equity awards as of the date of the Spin-off. As a result, McDermott’s outstanding equity-based compensation awards were generally treated as follows:

Ameron International Corporation	•	Each outstanding option to purchase sharesThe Goodyear Tire & Rubber Company		Parker Hannifin Corporation
Anadarko Petroleum Corporation		Graco Inc.		Parsons Corporation
A.O. Smith Corporation		Greif, Inc.		Pittsburgh Corning Corporation
Ball Corporation		HD Supply, Inc.		Polymer Group, Inc.
Barnes Group, Inc.		Herman Miller, Inc.		PolyOne Corporation
Beam, Inc.		Hess Corporation		PulteGroup, Inc.
Bemis Company, Inc.		HNTB Corporation		Saudi Arabian Oil Co.
BG US Services		Holcim Ltd.		SCA Americas, Inc.
Bovis Lend Lease International Ltd.		Hunt Consolidated, Inc.		Schlumberger Limited
BP p.l.c.		Husky Injection Molding Systems Ltd.		Sealed Air Corp.
Brady Corporation		Illinois Tool Works Inc.		Shell Oil Company
Building Materials Corporation of McDermott common stock held by a director, officer or employee of McDermott who remained a director, officer or employee of McDermott and did not become a director, officer or employee of B&W immediately after the Spin-off was replaced with an adjusted option to purchase McDermott common stock. Each of those adjusted options reflected adjustments generally intended to preserve the intrinsic value of the original option and the ratio of the exercise price to the fair market value of the stock subject to the option, each as of the date of the Spin-off. America		Ingersoll Rand plc		Simpson Manufacturing Company, Inc.
Calgon Carbon Corporation		ION Geophysical Corporation		Sonoco Products Co.
Cameron International Corporation		Irving Oil Commercial G.P.		Spectra Energy Corp
Caterpillar Inc.		ITT Corporation		SPX Corporation
Cemex Internacional S.A de C.V.		Jacobs Engineering Group, Inc.		Stantec Inc.
Chevron Corporation		KBR, Inc.		Sunoco, Inc.
CH2M Hill Companies, Ltd.		Key Energy Services, Inc.		Swagelok Company
Cimarex Energy Co.		Koch Industries, Inc.		Terex Corporation
Connell Limited Partnership		Lafarge North America Inc.		Tesoro Corporation
ConocoPhillips		L.B. Foster Company		Textron Inc.
Cooper Industries plc		Magellan Midstream Partners, L.P.		Thermadyne Industries, Inc.
Corning Incorporated		MAG Industrial Automation Systems LLC		Thomas & Betts Corporation
DCP Midstream LLC		The replacement options were generally made subject to the same terms and conditions as the options that were replaced. To the extent the options that were replaced had already vested, the replacement options were also vested.Manitowoc Company, Inc.		3M Company

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Deere & Company		Marathon Oil Corporation		The Timken Company
Devon Energy Corporation		Matthews International Corporation		The Toro Company
Donaldson Company, Inc.		MeadWestvaco Corporation		Trinity Industries, Inc.
Eaton Corporation		Milacron LLC		Unifi, Inc.
EMCOR Group, Inc.		Mine Safety Appliances Company		USG Corporation
Exterran Holdings, Inc.		Murphy Oil Corporation		Valero Energy Corporation
Exxon Mobil Corporation		MWH Global, Inc.		Watts Water Technologies, Inc.
Ferrovial, S.A.		Occidental Petroleum Corporation
Flowserve Corporation	•	Each outstanding option to purchase shares of McDermott common stock held by a person who was or became a director of B&W (but not of McDermott) or by a person who was or became an officer or employee of B&W immediately after the Spin-off was replaced with a substitute option to purchase shares of B&W common stock. Each of those substitute options have terms generally intended to preserve the intrinsic value of the original option and the ratio of the exercise price to the fair market value of the stock subject to the option, each as of the date of the Spin-off. The substitute options were generally made subject to the same terms and conditions as the options that were replaced. To the extent the options that were replaced had already vested, the substitute options were also vested.
	•    Owens Corning	Each outstanding option to purchase shares of McDermott common stock that was held by (1) a person who was a director of McDermott and who remained on the board of directors of McDermott and was also on the board of directors of B&W immediately after the Spin-off or (2) a person who was one of a small number of officers of B&W who would not serve as officers of B&W after the Spin-off (the “Former B&W Officers”) were replaced with both an adjusted McDermott stock option and a substitute B&W stock option. Both options, when combined, have terms that were generally intended to preserve the intrinsic value of the original option and the ratio of the exercise price to the fair market value of the stock subject to the option, each as of the date of the Spin-off. Both the replacement and the substitute options were generally made subject to the same terms and conditions as the original options. All McDermott stock options held by directors of McDermott as of the date of the Spin-off were previously vested pursuant to their original terms. Accordingly, all adjusted or substitute options issued to McDermott directors were also vested.
	•	The McDermott restricted stock awards, restricted stock unit awards and deferred stock unit awards of officers or employees of McDermott who remained officers or employees of McDermott and did not

Fluor Corporation		become officers or employees of B&W immediately after the Spin-off were replaced with adjusted McDermott awards, each of which generally preserved the value of the original award as of the date of the Spin-off. The adjusted awards were generally made subject to the same terms and conditions as the awards that were replaced. As of the distribution date, none of McDermott’s directors held any restricted stock awards, restricted stock unit awards, deferred stock unit awards or performance share awards.Owens-Illinois, Inc.
	•	The McDermott restricted stock awards, restricted stock unit awards and deferred stock unit awards of persons who were or became officers or employees of B&W immediately after the Spin-off were converted into substitute B&W awards, each of which generally preserved the value of the original award as of the date of the Spin-off. The adjusted awards were generally made subject to the same terms and conditions as the awards being replaced.
	•	The McDermott restricted stock unit awards and deferred stock unit awards of the Former B&W Officers were converted into rights to receive (1) an equivalent number of unrestricted shares of McDermott common stock and (2) one share of B&W common stock for every two shares of McDermott common stock, in accordance with the Spin-off. In the Spin-off, Former B&W Officers maintained their shares of McDermott restricted stock, which were already issued and outstanding on the record date of the Spin-off. As a result, Former B&W Officers received the distribution of B&W common stock payable with respect to these restricted shares in the Spin-off.
	•	The McDermott performance share awards of officers or employees of McDermott who remained officers or employees of McDermott and did not become officers or employees of B&W immediately after the spin-off were converted into unvested rights to receive the value of deemed target performance in restricted stock units of McDermott common stock, with the same vesting terms as the original awards.

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COMPENSATION COMMITTEE REPORT

	•	The McDermott performance share awards of persons who were or would be officers or employees of B&W immediately after the Spin-off were converted into unvested rights to receive the value of deemed target performance in restricted stock units of B&W common stock, with the same vesting terms as the original awards.
	•	The McDermott performance share awards of the Former B&W Officers were converted into rights to receive the value of deemed target performance in restricted stock units of McDermott common stock and B&W common stock, in accordance with theone-for-two ratio used in the Spin-off.
	•	One-half of Mr. Taff’s McDermott stock options, restricted stock, restricted stock units and performance shares were converted as if he were an officer of McDermott following the Spin-off, and the other half of such awards was converted as if he were an officer of B&W following the Spin-off.

In the case of adjusting McDermott options or granting substitute B&W options, the conversion formula resulted in fractional shares or fractional cents in some cases. Any fractional shares that were subject to adjusted McDermott options and substitute B&W options were disregarded, and the number of shares subject to such options was rounded down to the next lower whole number of shares. The exercise price for such options was rounded up to the next higher whole cent. There were no stock appreciation rights outstanding under the McDermott incentive plans at the time of the Spin-off.

Perquisites

Perquisites are not factored into the determination of the total direct compensation of our Named Executives, because they are typically provided to Named Executives on an exception basis.

We own a fractional interest in one aircraft through an aircraft management company, which we use for business purposes and make available to our Named Executives for limited personal use. When we permit the personal use of aircraft by a Named Executive, we have a choice regarding the amount of income imputed to the executive officer for that use. Under current Internal Revenue Service rules, we may impute to the executive officer the actual cost incurred by us for the flight or an amount based on Standard

Industry Fare Level (“SIFL”) rates set by the U.S. Department of Transportation. Imputing income based on SIFL rates usually results in less income tax liability to the executive officer but higher income taxes to us due to limitations on deducting aircraft expenses that exceed the income imputed to employees. To minimize our cost of permitting the personal use of the aircraft, we impute income for personal use of aircraft to our Named Executives in an amount that results in the least amount of tax burden for McDermott.

As required by applicable Securities and Exchange Commission rules, for purposes of our compensation related disclosures in this proxy statement, we calculate compensation in respect of personal use of corporate aircraft based on our “incremental cost.” We compute incremental cost for personal use of aircraft based on the actual cost incurred by us for the flight, including:

	•	the cost of fuel;
	•	a usage charge equal to the hourly rate charged by our flight operator multiplied by the flight time;
	•	“dead head” costs, if applicable, of flying aircraft without passengers to and from locations; and
	•	the dollar amount of increased income taxes we incur as a result of disallowed deductions under IRS rules.

Since the aircraft is used primarily for business travel, incremental costs generally exclude fixed costs such as the purchase price of our interest in the aircraft, aircraft management fees, depreciation, maintenance and insurance. Our cost for flights, whether business or personal, is not affected by the number of passengers. As a result, we do not assign any amount, other than the amount of any disallowed deduction, when computing incremental costs for the presence of guests accompanying a Named Executive on such flights. While we do not generally incur any additional cost, this travel may result in imputed income to the Named Executive and disallowed deductions on our income taxes. We will reimburse the Named Executive for the travel expenses of a guest accompanying a Named Executive, including the provision of agross-up for any imputed income, but only when the presence of that guest is related to the underlying business purpose of the trip. We also provide our Named Executives with a taxgross-up for income incurred in connection with a relocation with McDermott or one of our

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affiliated companies. During 2010, in connection with the Spin-off and the realignment of the management teams for McDermott and B&W, relocation benefits, including taxgross-ups, were provided to certain executives under our relocation program.

On February 28, 2011 the Compensation Committee adopted a perquisite allowance for certain officers, including our Named Executives.

Retirement Plans

Overview.  We have provided retirement benefits for most of our U.S. employees, including our Named Executives, through sponsorship of a combination of qualified defined benefit pension plans, which we refer to as our “Retirement Plans,” and a qualified defined contribution 401(k) plan, which we refer to as our “Thrift Plan.” Prior to the Spin-Off, we sponsored the following Retirement Plans under which the eligible Named Executives were covered:

	•	“Retirement Plan for Employees of McDermott Incorporated and Participating Subsidiary and Affiliated Companies” (the “MI Retirement Plan”);
	•	“Retirement Plan for Employees of J. Ray McDermott Holdings, LLC and Participating Subsidiary and Affiliated Companies” (the “JRM Retirement Plan”);
	•	“Retirement Plan for Employees of Babcock & Wilcox Governmental Operations” (the “B&W Governmental Operations Retirement Plan”); and
	•	“Retirement Plan for Employees of Babcock & Wilcox Commercial Operations” (the “B&W Commercial Operations Retirement Plan”).

As a result of the Spin-off, we are no longer a sponsor of the B&W Government Operations Retirement Plan or the B&W Commercial Operations Retirement Plan.

In addition to the broad-based qualified plans described above, we sponsor unfunded, nonqualified excess retirement plans, which we refer to as “Excess Plans.” The Excess Plans cover a small group of highly compensated employees, including Messrs. Fees, Bethards and Nesser and Ms. Hinrichs, whose ultimate benefits under the Retirement Plans are reduced by Internal Revenue Code limits on the amount of benefits which may be provided under qualified plans and the amount of compensation which may be taken into

account in computing benefits under qualified plans. Benefits under the Excess Plans are paid from our general assets.

In 2003, we closed the JRM Retirement Plan to new participants and froze benefit accruals for existing participants. In lieu of future defined benefit plan accruals under the JRM Retirement Plan, we amended our Thrift Plan to provide affected employees with an automatic cash contribution to their Thrift Plan account equal to 3% of the employee’s base pay, plus overtime pay, expatriate pay and commissions, which we refer to collectively as “thriftable earnings.”

In 2006, we closed the MI Retirement Plan, B&W Governmental Operations Retirement Plan and B&W Commercial Operations Retirement Plan to new salaried participants and froze benefit accruals for existing salaried participants with less than five years of credited service as of March 31, 2006, subject to specific annualcost-of-living increases. In lieu of future defined benefit plan accruals under those Plans, we further amended our Thrift Plan to provide an automatic cash contribution to the Thrift Plan accounts of affected employees and new hires in an amount between 3% and 8% of the employee’s thriftable earnings, based on their length of service. Mr. Taff did not participate in a Retirement Plan or an Excess Plan because he had not met the MI Retirement Plan eligibility requirements at the time that Plan was closed to new participants.

In 2007, we offered salaried participants in the MI Retirement Plan, B&W Governmental Operations Retirement Plan, and B&W Commercial Operations Retirement Plan with between five and 10 years of credited service as of January 1, 2007 the one-time irrevocable choice between (i) continuing to accrue future benefits under the Retirement Plan or (ii) freezing their Retirement Plan accrued benefit as of March 31, 2007, subject to annualcost-of-living increases, and receiving an automatic service-based cash contribution to their Thrift Plan account instead. Mr. Nesser and Ms. Hinrichs met this credited service criteria under the MI Retirement Plan and thus were affected by this action. Mr. Nesser and Ms. Hinrichs elected to continue accruing benefits under the Retirement Plan. As discussed below, as of June 30, 2010, all benefit accruals under the Retirement Plan were frozen, including Mr. Nesser’s and Ms. Hinrichs’ benefits under the Retirement Plan.

Messrs. Johnson, Elders, Taff and Carlson do not participate in a Retirement Plan or an Excess Plan, because their employment with McDermott

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commenced after new participation in the applicable Retirement Plan was closed, as discussed above.

During 2010, and in connection with the Spin-off, the Retirement Plans were realigned, such that assets and liabilities under these Plans which were attributable to B&W employees and certain former employees were transferred to the B&W Government Operations Retirement Plan and the B&W Commercial Operations Retirement Plan, as applicable, and the MI Retirement Plan was merged into the JRM Retirement Plan. These changes are described further below, under “Recent Changes to Retirement Plans.” Since the Spin-off, the only Retirement Plan we sponsor is the consolidated JRM Retirement Plan, which has been renamed the “McDermott (U.S.) Retirement Plan”.

See the Pension Benefit table under “Compensation of Executive Officers” below for more information regarding our Retirement Plans and our Excess Plans.

Recent Changes to Retirement Plans Covering Named Executives.  As of April 30, 2010, and in anticipation of the Spin-off, the assets and liabilities attributable to participants in the MI Retirement Plan who were either (1) active employees of B&W or one of its subsidiaries on July 1, 2010 (“B&W Employees”), or (2) terminated employees of McDermott, B&W or a subsidiary on July 1, 2010, but originally hired by B&W or one of its subsidiaries (“Former B&W Employees”), were transferred to the B&W Governmental Operations Retirement Plan, and, effective May 1, 2010, a subsidiary of B&W assumed sponsorship of the B&W Governmental Operations Retirement Plan from McDermott. The participants affected by this transfer became covered under the B&W Governmental Operations Retirement Plan, and are entitled to benefits under that Plan identical to those which they had accrued under the MI Retirement Plan as of the date of the transfer. For purposes of eligibility and vesting under the B&W Governmental Operations Retirement Plan, the affected participants were credited with service for any period of employment with McDermott or a subsidiary to the same extent that such service would be credited if it had been performed for B&W or one of its subsidiaries. For purposes of benefit levels, accruals and benefit commencement entitlements under the B&W Governmental Operations Retirement Plan, the affected participants were credited with service for any period of employment with McDermott or a subsidiary to the same extent that such service would have been taken into account pursuant to the terms of the MI

Retirement Plan. Mr. Fees was affected by this change, based on his status as a Former B&W Employee on the relevant date, and therefore his coverage was transferred from the MI Retirement Plan to the B&W Governmental Operations Retirement Plan.

All remaining assets and liabilities of the MI Retirement Plan were then transferred as of May 31, 2010 to the JRM Retirement Plan, and the MI Retirement Plan was merged into the JRM Retirement Plan and thereafter renamed “McDermott (U.S.) Retirement Plan” (referred to herein as the “McDermott Retirement Plan”). As of June 30, 2010, all benefit accruals under the McDermott Retirement Plan were frozen and any furthercost-of-living increases on accrued benefits ceased. As active employees of McDermott on the relevant date participating in the MI Retirement Plan, Ms. Hinrichs and Mr. Nesser were affected by the merger of the two Plans. Moreover, based on Mr. Nesser’s and Ms. Hinrichs’ 2007 elections to continue accruing benefits under the retirement plan in lieu of receiving the service-based cash contribution under the Thrift Plan, their benefit accruals under the McDermott Retirement Plan were frozen.

Also in connection with the Spin-off, the B&W Commercial Operations Retirement Plan and other qualified pension plans and Excess Plans sponsored by B&W or a subsidiary prior to the Spin-off were transferred to B&W.

Deferred Compensation Plan.  In 2005, as part of our determination to move away from defined benefit plans, our management recommended that the Board of Directors and the Compensation Committee terminate our then-existing non-qualified defined benefit supplemental executive retirement plan. In its place, our Board of Directors and Compensation Committee established a new defined contribution supplemental executive retirement plan, which we referred to as the “SERP,” to help maintain the competitiveness of our post-employment compensation as compared to our market. In November 2010, our Board of Directors and Compensation Committee approved amendments to the SERP which (1) changed the name of the SERP to the McDermott International, Inc. Director and Executive Deferred Compensation Plan, which we refer to as our Deferred Compensation Plan, (2) provided for the participation of members of our Board in the Deferred Compensation Plan, and (3) provided for other updates to the Deferred Compensation Plan.

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The Deferred Compensation Plan is an unfunded, nonqualified plan that provides participants with benefits based on the participant’s notional account balance at the time of retirement or termination. Under the Deferred Compensation Plan, on an annual basis the Compensation Committee has the discretion to credit a specified participant’s notional account with an amount equal to a percentage of the participant’s prior-year base salary and annual bonus paid in the prior year. We refer to such credit as a “Company Contribution.” In 2010, Messrs. Fees, Taff, Bethards and Nesser and Ms. Hinrichs each were participants in the Deferred Compensation Plan and received a Company Contribution in an amount equal to 5% of their respective prior-year base salaries and annual bonuses paid in the prior year. Mr. Johnson was also a participant and received a Company Contribution in an amount equal to 5% of his prior-year base salary paid. In addition, Mr. Johnson received a discretionary contribution equal in value to 5% of his target bonus for 2010 and the value of the prior-year target base salary he would have earned for the period January 1, 2009 through his April 1, 2009 hire date. No Company Contribution was made for Messrs. Elders or Carlson, because they were not participants in the Deferred Compensation Plan at the time such contributions were made.

Additionally, under the amendments to the Deferred Compensation Plan adopted in November 2010, beginning in 2011 any eligible employee, including our Continuing Named Executives, may defer up to 50% of his or her annual salaryand/or up to 100% of any bonus earned in any plan year, and any director may elect to defer up to 100% of his or her annual retainer and fees earned in any plan year.

The Compensation Committee has designated deemed mutual fund investments to serve as indices for the purpose of determining notional investment gains and losses to each participant’s account for any Company Contribution or participant elected deferrals. Each participant allocates any Company Contributions and deferrals among the various deemed investments. Deferred Compensation Plan benefits are based on the participant’s vested notional account balance at the time of retirement or termination. Please see the Nonqualified Deferred Compensation table and accompanying narrative below for more information about the Deferred Compensation Plan and Company Contributions to our Named Executives’ Deferred Compensation Plan accounts.

Employment and Severance Arrangements

Employment and Separation Agreements.  Except forchange-in-control agreements and retention agreements, we do not currently have any employment or severance agreements with any of our Named Executives.

Change-in-Control Agreements.  In our experience,change-in-control agreements for certain executive officers are common within our industry, and our Board and Compensation Committee believe that providing these agreements to our Named Executives protects stockholders’ interests by helping to assure management continuity and focus through and beyond a change in control. Accordingly, the Compensation Committee has offeredchange-in-control agreements to key senior executives since 2005. Following the Spin-off, on August 6, 2010, our Board of Directors approved a new form ofchange-in-control agreement for Messrs. Johnson and Nesser and Ms. Hinrichs, and providedchange-in-control agreements to Messrs. Elders, and Carlson. Ourchange-in-control agreements generally provide a cash severance payment of two (2.99 for Mr. Johnson) times the sum of the Named Executive’s annual base salary and target EICP and a pro-rated bonus payment under the EICP. In addition, each such officer would become fully vested in any outstanding and unvested equity-based awards and his or her respective account balance in our Deferred Compensation Plan.

Ourchange-in-control agreements contain what is commonly referred to as a “double trigger,” that is, they provide benefits only upon an involuntary termination or constructive termination of the executive officer within one year following a change in control. In addition, the newchange-in-control agreements: (1) do not provide for excise taxgross-ups; (2) require the applicable officer’s execution of a release prior to payment of certain benefits; and (3) provide for the potential reduction in payments to an applicable officer in order to avoid excise taxes. Because they are no longer employed by McDermott, Messrs. Fees, Taff and Bethards no longer havechange-in-control agreements with McDermott. See the Potential Payments Upon Termination or Change in Control table under “Compensation of Executive Officers” below and the accompanying disclosures for more information regarding thechange-in-control agreements with our Continuing Named Executives, as well as other plans and arrangements that have different trigger mechanisms that relate to a change in control.

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Retention Agreements.  In connection with the December 2009 announcement of our plans to complete the Spin-off, and to ensure retention of key employees and executives through the completion of the separation of B&W from McDermott and for one year thereafter, on December 10, 2009, we entered into retention agreements with 17 key members of management, including Messrs. Johnson, Fees, Taff, Nesser and Bethards and Ms. Hinrichs.

Generally, the retention agreements provided either a retention or severance payment to the Named Executives in connection with the Spin-off. The retention agreements generally provided a retention payment in the form of a restricted stock grant made near the time of the Spin-off that vests one year following the effective date of the Spin-off, equal to 100% (149.5% in the case of Mr. Fees) of the sum of the Named Executive’s annual base salary plus target annual incentive. That amount represented one-half of the severance payment that otherwise would have been provided under each Named Executive’s retention agreement in the event of a qualifying termination on a change in control, and discussed below. Accordingly, on the first NYSE trading day following the effective date of the Spin-off, McDermott made grants of restricted stock to Messrs. Johnson and Nesser and Ms. Hinrichs in connection with their continued employment with McDermott. The grants of restricted stock made to Messrs. Taff and Bethards were made by B&W pursuant to the terms of their respective retention agreements, which were assumed by B&W on completion of the Spin-off pursuant to the Employee Matters Agreement. With respect to Mr. Taff, one-third of his retention payment was payable in cash on the effective date of the Spin-off, in recognition of his agreement to serve as the Chief Financial Officer of B&W following the Spin-off, and that payment was made by B&W.

Although the Spin-off did not constitute a change in control for purposes of thechange-in-control agreements or other McDermott compensation plans, the Compensation Committee determined that the need to maintain continuity of management and personnel that exists under a change in control scenario equally existed in connection with the Spin-off. As a result, the retention agreements provide for severance payments that would generally be the same as the severance payments that would be made in connection with a qualifying termination on or following a change in control. Accordingly, the retention agreements provide for a cash severance payment of two (2.99 for Mr. Fees) times the sum of the Named Executive’s annual base

salary and target EICP, prorated target annual incentive compensation and a cash payment equal to two years of medical benefits as well as the full vesting of outstanding long-term incentive grants and Deferred Compensation Plan balance. The only payments provided for under the retention agreement not otherwise payable in a change in control were (1) a cash payment equal to two years of medical benefits and (2) the potential early vesting of the Named Executive’s Thrift Plan account. Under the terms of the Thrift Plan, unvested balances would become vested in the event a participant is involuntarily terminated in connection with a reduction in force. Because involuntary terminations for reasons other than cause in connection with the Spin-off generally would have been considered to be associated with a reduction in force, the Compensation Committee determined to add the vesting of Thrift Plan accounts to the severance benefits to avoid any ambiguity on that point. The Thrift Plan normally vests after three years of service. As a result of his commencement of employment in 2009, Mr. Johnson is the only Named Executive with a retention agreement to which this benefit may be applicable.

Mr. Fees’ retention agreement also contained restrictions on his ability to compete with McDermott (including both B&W and JRM), or solicit our employees, for two years following the termination of his employment.

See the Potential Payments Upon Termination or Change in Control table under “Compensation of Executive Officers — Retention Agreements” below and the accompanying disclosures for more information regarding the retention agreements with certain of our Named Executives.

Other Compensation Policies

Stock Ownership Guidelines.  To assist with the alignment of the interests of directors, executive officers and stockholders, we believe our directors and officers should have a significant financial stake in McDermott. To further that goal, we adopted stock ownership guidelines in 2005, as amended effective August 9, 2010, requiring generally that our non-management directors and our officers at the level of vice president or above maintain a minimum ownership interest in McDermott. The stock ownership requirements are as follows:

	•	Chief Executive Officer — five times annual base salary;

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	•	Executive Officers directly reporting to the Chief Executive Officer — three times annual base salary;
	•	Other Elected Vice Presidents — two times annual base salary; and
	•	Non-management Directors — five times annual retainer.

Directors and officers have five years from the effective date of the amended stock ownership guidelines or their initial election as a director/officer, whichever is later, to comply with the guidelines. The Governance Committee reviews each director’s and officer’s progress towards the requirements of the stock ownership guidelines annually, and may waive or modify the stock ownership guidelines for directors and officers in the Governance Committee’s sole discretion.

Derivatives Trading and Hedging.  McDermott’s Insider Trading Policy prohibits all directors, officers and employees, including our Continuing Named Executives, from engaging in “short sales” or trading in puts, calls or other options on McDermott’s common stock. Additionally, directors, officers

and employees are prohibited from engaging in hedging transactions, and from holding McDermott shares in a margin account or pledging McDermott shares as collateral for a loan.

Clawback Policy.  Our Compensation Committee has adopted a clawback policy under which McDermott shall seek to recover any incentive-based award granted to any executive officer as required by the provisions of the Dodd-Frank Wall-Street Reform and Consumer Protection Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange.

Additionally, consistent with our recent past, our grant agreements for awards made in 2010 contain a forfeiture provision. In 2010, this provision provided that in the event the grantee is convicted of a felony or misdemeanor involving fraud, dishonesty or moral turpitude, or the grantee engages in conduct that adversely affects or, in the sole judgment of the Compensation Committee, may reasonably be expected to adversely affect, the business reputation or economic interests of the Company, then all rights and benefits awarded under the respective agreements are immediately forfeited, terminated and withdrawn.

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2010 Peer Groups

JRM/Corporate Group:

Alliant Techsystems Inc.

Ameron International Corp.

Anadarko Petroleum Corp.

Baker Hughes, Inc.

BJ Services Company

Cameron International, Inc.

Chicago Bridge & Iron Company N.V.          

Cooper Industries Plc

Curtiss-Wright Corporation

Devon Energy Corporation

Dover Corporation

Eaton Corporation

El Paso Corporation

ESCO Technologies Inc.

Flowserve Corporation

FMC Technologies, Inc.

Foster Wheeler AG

General Dynamics Corporation

Granite Construction Incorporated

Halliburton Company

Honeywell International, Inc.

Hubbell Incorporated

Illinois Tool Works Inc.

Ingersoll-Rand plc

ITT Corp.

Joy Global Inc.

KBR, Inc.

Lockheed Martin Corporation

Martin Marietta Materials, Inc.

Noble Corporation

Northrop Grumman Corporation

Pioneer Natural Resources Company

Raytheon Company

Rockwell Collins, Inc.

The Shaw Group Inc.

The Williams Companies, Inc.

Terex Corporation

Textron Inc.

Thomas & Betts Corporation

USG Corporation

Valmont Industries, Inc.

Vulcan Materials Company

Walter Industries, Inc.

Babcock & Wilcox Group:

Ameron International Corp.

Chicago Bridge & Iron Company N.V.          

Cooper Industries Plc

Curtiss-Wright Corporation

Dover Corporation

Eaton Corporation

ESCO Technologies Inc.

Flowserve Corporation

General Dynamics Corporation

Honeywell International, Inc.

Hubbell Inc.

Illinois Tool Works Inc.

Ingersoll-Rand plc

ITT Corporation

Joy Global Inc.

Lockheed Martin Corporation

Martin Marietta Materials, Inc.

Northrop Grumman Corporation

Raytheon Company

Rockwell Collins, Inc.

The Shaw Group Inc.

Terex Corporation

Textron, Inc.

Thomas & Betts Corporation

USG Corporation

Valmont Industries, Inc.

Vulcan Materials Company

Post-Spin Group:

Cal Dive International, Inc.

Cameron International, Inc.

Chicago Bridge & Iron Company N.V.          

Dresser Rand Group, Inc.

Foster Wheeler AG

Fluor Corporation

Global Industries, Inc.

Helix Energy Solutions Group, Inc.

KBR, Inc.

Oceaneering International, Inc.

Oil States International, Inc.

The Shaw Group, Inc.

Tetra Technologies, Inc.

URS Corporation

Custom Peer Group:

Cal Dive International, Inc.

Chicago Bridge & Iron Company N.V.          

Fluor Corporation

Foster Wheeler AG

Jacobs Engineering Group, Inc.

KBR, Inc.

Oceaneering International, Inc.

The Shaw Group Inc.

URS Corporation.

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Compensation Committee Report

We have reviewed and discussed the Compensation Discussion and Analysis with McDermott’s management and, based on our review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

THE COMPENSATION COMMITTEE

Thomas C. Schievelbein,

Mary L. Shafer-Malicki, Chairman

Roger A. Brown

Mary Shafer-Malicki

David A. Trice

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COMPENSATIONOF EXECUTIVE OFFICERS

Compensation of Executive Officers

The following table summarizes the prior three years’ compensation of our current and former Chief Executive Officers,Officer, our current and former Chief Financial Officers,Officer, our three highest paid executive officers who did not serve as our CEO and CFO during 20102012 and were employed by McDermott as of December 31, 2010, and Mr. Bethards, who would have been one of our three highest paid executive officers but for the fact that he was not employed by McDermott as of December 31, 2010.2012. We refer to these persons as our Named Executives.NEOs. No compensation information is provided for Mr. JohnsonMcCormack for 20082010 because he joined our company in 2009, no information is provided for Mr. Elders for 2008 or 2009 because he joined our company in 2010, and no information is provided for Mr. Carlson or Ms. Hinrichs for 2008 or 2009 because they did not become Named Executivesa NEO until 2010.

2011.

Summary Compensation TableSUMMARY COMPENSATION TABLE

																										Change in
																										Pension
																										Value and
																										Nonqualified
																						Non-Equity				Deferred
														Stock				Option				Incentive Plan				Compensation				All Other
Name and Principal Position		Year				Salary(1)				Bonus(2)				Awards(3)				Awards(4)				Compensation(5)				Earnings(6)				Compensation(7)				Total
S.M. Johnson			2010			$	827,083			$	0			$	2,672,142			$	865,313			$	1,218,863				N/A			$	163,683			$	5,747,084
President and Chief			2009			$	562,500			$	0			$	2,664,402			$	1,435,394			$	1,131,563				N/A			$	83,929			$	5,877,788
Executive Officer			2008				N/A				N/A				N/A				N/A				N/A				N/A				N/A				N/A
J.A. Fees			2010			$	455,625			$	0			$	0			$	0			$	535,808			$	374,757			$	5,820,921			$	7,187,111
Former Chief Executive			2009			$	900,000			$	0			$	3,543,276			$	1,995,846			$	1,665,000			$	399,782			$	111,407			$	8,615,311
Officer			2008			$	592,500			$	270,223			$	6,835,450			$	0			$	570,803			$	143,028			$	148,310			$	8,560,314
P.L. Elders			2010			$	315,114			$	0			$	517,021			$	396,788			$	398,146				N/A			$	14,059			$	1,641,128
Senior Vice President and			2009				N/A				N/A				N/A				N/A				N/A				N/A				N/A				N/A
Chief Financial Officer			2008				N/A				N/A				N/A				N/A				N/A				N/A				N/A				N/A
M.S. Taff			2010			$	256,288			$	0			$	302,996			$	209,757			$	0				N/A			$	74,609			$	843,650
Former Senior Vice			2009			$	505,000			$	0			$	980,544			$	552,314			$	707,000				N/A			$	59,315			$	2,804,173
President and Chief			2008			$	440,000			$	110,000			$	1,671,638			$	0			$	141,207				N/A			$	45,757			$	2,408,602
Financial Officer
B.C. Bethards			2010			$	311,337			$	0			$	1,249,955			$	865,319			$	0			$	509,958			$	87,074			$	3,023,643
President and Chief			2009			$	526,200			$	0			$	840,544			$	473,450			$	663,012			$	305,160			$	65,693			$	2,874,059
Executive Officer, Former			2008			$	438,675			$	10,000			$	1,207,512			$	0			$	509,298			$	158,014			$	54,831			$	2,378,330
Subsidiary B&W
G.L. Carlson			2010			$	243,333			$	0			$	527,051			$	165,771			$	334,400				N/A			$	106,850			$	1,377,405
Senior Vice President,			2009				N/A				N/A				N/A				N/A				N/A				N/A				N/A				N/A
Human Resources			2008				N/A				N/A				N/A				N/A				N/A				N/A				N/A				N/A
L.K. Hinrichs			2010			$	419,225			$	0			$	1,054,526			$	276,912			$	317,673			$	121,620			$	37,286			$	2,227,242
Senior Vice President,			2009				N/A				N/A				N/A				N/A				N/A				N/A				N/A				N/A
General Counsel and			2008				N/A				N/A				N/A				N/A				N/A				N/A				N/A				N/A
Corporate Secretary
J.T. Nesser			2010			$	509,381			$	0			$	1,196,240			$	224,998			$	609,729			$	160,951			$	43,383			$	2,744,682
Executive Vice President,			2009			$	500,000			$	0			$	418,899			$	235,945			$	595,000			$	155,330			$	93,156			$	1,998,330
Chief Operating Officer			2008			$	500,000			$	100,000			$	2,697,009			$	0			$	136,122			$	104,864			$	74,933			$	3,612,928

Name and Principal Position		Year				Salary(1)				Bonus				Stock Awards(2)				Option Awards(2)				Non-Equity Incentive Plan Compensation(3)				Change in Pension Value and Nonqualified Deferred Compensation Earnings(4)				All Other Compensation(5)				Total
S.M. Johnson President and Chief Executive Officer			2012			$	950,000			$	0			$	3,749,979			$	1,249,999			$	760,000				N/A			$	142,547			$	6,852,525
			2011			$	942,500			$	0			$	3,382,092			$	944,089			$	0				N/A			$	132,099			$	5,400,780
			2010			$	827,083			$	0			$	2,672,142			$	865,313			$	1,218,863				N/A			$	163,683			$	5,747,084
P.L. Elders Senior Vice President and Chief Financial Officer			2012			$	493,750			$	0			$	1,012,436			$	337,499			$	207,383				N/A			$	78,970			$	2,130,038
			2011			$	481,250			$	0			$	845,428			$	236,000			$	0				N/A			$	76,763			$	1,639,441
			2010			$	315,114			$	0			$	517,021			$	396,788			$	398,146				N/A			$	14,059			$	1,641,128
G.L. Carlson Senior Vice President and Chief Administration Officer			2012			$	358,750			$	0			$	562,420			$	187,483			$	210,976				N/A			$	66,908			$	1,386,537
			2011			$	332,000			$	0			$	354,863			$	94,406			$	0				N/A			$	120,619			$	901,888
			2010			$	243,333			$	0			$	527,051			$	165,771			$	334,400				N/A			$	106,850			$	1,377,405
L.K. Hinrichs Senior Vice President, General Counsel and Corporate Secretary			2012			$	448,750			$	0			$	749,955			$	249,992			$	301,573			$	103,766			$	71,995			$	1,926,031
			2011			$	435,575			$	0			$	792,653			$	212,421			$	0			$	76,760			$	77,550			$	1,594,959
			2010			$	419,225			$	0			$	1,054,526			$	276,912			$	317,673			$	121,620			$	37,286			$	2,227,242
J.T. McCormack Executive Vice President and Chief Operating Officer			2012			$	535,000			$	0			$	1,124,910			$	374,987			$	308,208				N/A			$	73,828			$	2,416,933
			2011			$	447,381			$	0			$	915,194			$	253,847			$	0				N/A			$	70,870			$	1,687,292
			2010				N/A				N/A				N/A				N/A				N/A				N/A				N/A				N/A

(1)	The amounts reported in this column for 2010 for Messrs. Fees, Taff and Bethards represent their base salary earned through the effective date of the Spin-off. The amounts reported for Messrs. Elders and Carlson represent their base salarypartial-year service.

(2)

The amounts reported in this column represent the aggregate grant date fair value of stock awards or option awards, as applicable, granted to each NEO and computed in accordance with FASB ASC Topic 718. See the “Grants of Plan-Based Awards” table for more information regarding the stock awards and option awards we granted in 2012.

(3)

The amounts reported in this column are attributable to the annual incentive awards earned from their respective hire dates.in fiscal years 2010, 2011 and 2012, but paid in 2011, 2012 and 2013, respectively. See the “Grants of Plan-Based Awards” table for more information regarding the annual incentive awards earned in 2012.

(2) (4)

See “Bonus” below for a discussionThe amounts reported in this column represent the changes in actuarial present values of the accumulated benefits under defined benefit plans, determined by comparing the prior completed fiscal year end amount to the covered fiscal year end amount.

(5)	The amounts includedreported in this column.
(3)	See “Stock Awards” belowcolumn for a discussion of2012 are attributable to the amounts included in this column.
(4)	See “Option Awards” below for a discussion of the amounts included in this column.
(5)	See “Non-Equity Incentive Plan Compensation” below for a discussion of the amounts included in this column.
(6)	See “Change in Pension Value and Nonqualified Deferred Compensation Earnings” below for a discussion of the amounts included in this column.
(7)	See “All Other Compensation” below for a discussion of the amounts included in this column.following:

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Bonus.  The amounts reported in the “Bonus” column are attributable to discretionary bonus awards made in 2008 due to circumstances in that year. No discretionary bonuses were made to any of the Named Executives during 2009 or 2010.

Stock Awards.  The amounts reported in the “Stock Awards” column represent the aggregate grant date fair value of stock awards granted in 2010 and computed in accordance with FASB ASC Topic 718. The grant date fair values shown for Messrs. Johnson, Elders, Carlson and Taff and Ms. Hinrichs are based on (1) the number of shares or units as converted in connection with the Spin-off, and (2) the closing price of our common stock on the date of grant as adjusted to reflect the Spin-off; provided, that the grant date fair value shown for Mr. Taff is attributable to the one-half of his pre Spin-off McDermott awards that were converted to post Spin-off McDermott awards. The grant date fair value shown for Mr. Bethards represents the pre Spin-off grant date fair value of his award. The aggregate grant date fair values shown for Messrs. Johnson and Nesser and Ms. Hinrichs include the grant of restricted stock awards made pursuant to their respective retention agreements in connection with the completion of the Spin-off.

See the “Grants of Plan-Based Awards” table for more information regarding the stock awards we granted in 2010.

Option Awards.  The amounts reported in the “Option Awards” column represent the aggregate grant date fair value of all option awards granted in 2010 and computed in accordance with FASB ASC Topic 718. The grant date fair values shown for Messrs. Johnson, Elders, Carlson and Taff and Ms. Hinrichs are based on (1) the number of options as converted in connection with the Spin-off, and (2) the closing price of our common stock on the date of grant as adjusted to reflect the Spin-off; provided,

that the grant date fair value shown for Mr. Taff is attributable to the one-half of his pre Spin-off McDermott awards that were converted to post Spin-off McDermott awards. The grant date fair value shown for Mr. Bethards represents the pre Spin-off grant date fair value of his award. We use a Black-Scholes option-pricing model for measuring the fair value of stock options. The determination of the fair value of an award on the date of grant using an option-pricing model requires various assumptions, such as the expected life of the award and stock price volatility. For a discussion of the valuation assumptions, see Note 9 to our consolidated financial statements included in our annual report onForm 10-K for the year ended December 31, 2010.

See the “Grants of Plan-Based Awards” table for more information regarding the option awards we granted in 2010.

Non-Equity Incentive Plan Compensation.  The amounts reported in the “Non-Equity Incentive Plan Compensation” column are attributable to the annual incentive awards earned in fiscal years 2008, 2009 and 2010, but paid in 2009, 2010 and 2011, respectively. See the “Grants of Plan-Based Awards” table for more information regarding the annual incentive awards earned in 2010.

Change in Pension Value and Nonqualified Deferred Compensation Earnings.  The amounts reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column represent the changes in actuarial present values of the accumulated benefits under defined benefit plans, determined by comparing the prior completed fiscal year end amount to the covered fiscal year end amount.

All Other Compensation.  The amounts reported for 2010 in the “All Other Compensation” column are attributable to the following:

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All Other Compensation

		Deferred								Service-Based
		Compensation Plan								Thrift
		Contribution				Thrift Match				Contribution				Tax Gross-Ups				Perquisites				Other
S. M. Johnson		$	69,375			$	7,095			$	7,350			$	21,025			$	58,838				—
J. A. Fees		$	87,051			$	7,150				—			$	32,763			$	76,188			$	5,617,769
P. L. Elders			—			$	6,709			$	7,350				—				—				—
M. S. Taff		$	37,810			$	7,350			$	7,671			$	646			$	21,132				—
B. C. Bethards		$	52,275			$	4,900				—				—			$	29,899				—
G. L. Carlson			—			$	6,583			$	7,300			$	24,600			$	68,367				—
L. K. Hinrichs		$	29,549			$	6,629			$	1,108				—				—				—
J. T. Nesser		$	36,806			$	6,577				—				—				—				—

Deferred Compensation Plan Contribution.  See the “Nonqualified Deferred Compensation” table for more information regarding the Deferred Compensation Plan contributions made in 2010.

Thrift Match and Service-Based Thrift Contribution.  We refer to our defined contribution plan as our Thrift Plan. For information regarding our Thrift Plan matching contributions and service-based Thrift Plan contributions, see “Compensation Discussion and Analysis — Post-employment Compensation — Retirement Plans” above.

TaxGross-Ups.  The taxgross-ups reported for 2010 under “All Other Compensation” are attributable to the following:

		Deferred Compensation Plan Contribution(A)				Thrift  Match(B)				Service-Based Thrift Contribution(B)				Perquisites(C)				Tax Gross-Ups(D)
S. M. Johnson		$	108,068			$	6,979			$	7,500			$	20,000				—
P. L. Elders		$	43,970			$	7,500			$	7,500			$	20,000				—
G. L. Carlson		$	33,320			$	6,088			$	7,500			$	20,000				—
L. K. Hinrichs		$	37,662			$	6,833			$	7,500			$	20,000				—
J. T. McCormack		$	38,828			$	7,500			$	7,500			$	20,000				—

(A)

The amounts reported in this column are attributable to contributions made by McDermott under the Deferred Compensation Plan.

•

Mr. Johnson(B)

The amounts reported in these columns are attributable to contributions made under our defined contribution plan, which we refer to as our Thrift Plan.

	(C)	The amounts reported in this column are attributable to a lump-sum perquisite allowance in the amount of $20,000 received taxgross-ups associated with income imputed to him as a result of amounts we paid him by reason of expenses he incurred in connection with his relocation from Idaho to Texas, following his appointment as Chief Operating Officercertain officers of McDermott in 2009.
•	Mr. Fees received taxgross-ups associated with income imputed to him as a result of amounts we paid him by reason of expenses he incurred in connection with his relocation from Texas to Virginia following his retirement as Chief Executive Officer of McDermott and appointment as Chairman2012, including each of the Board of Directors of B&W and as a result of his spouse accompanying him on business travel duringNEOs. With the period he was Chief Executive Officer of McDermott.
•	Mr. Taff received taxgross-ups associated with income imputed to him as a result of his spouse accompanying him on business travel.
•	Mr. Carlson received taxgross-ups associated with income imputed to him as a result of amounts

	we paid him by reason of expenses he incurred in connection with his relocation from Colorado to Texas, following his appointment as Senior Vice President, Human Resources and Organizational Development of JRM in 2010.

Perquisites.  Perquisites and other personal benefits received by a Named Executive are not included if their aggregate value does not exceed $10,000. During 2010, in connection with the Spin-off and the realignment of the management teams for McDermott and B&W, relocation benefits were provided to certain executives under our relocation program. For Messrs. Johnson, Fees, Taff, Carlson and Bethards the values of the perquisites and other personal benefits reported for 2010 are as follows:

•	Mr. Johnson:  $42,198 is attributable to the costs of providing him relocation assistance in connection with his move from Idaho to Texas, and $16,640 is attributable to tax preparation and financial planning fees.
•	Mr. Fees:  $58,382 is attributable to the costs of providing him relocation assistance in connection with his move from Texas to Virginia, and $12,544 is attributable to a retirement gift provided to Mr. Fees by McDermott. The remainder is attributable to the cost of club dues, the costs resulting from his spouse accompanying him on business travel, the cost of promotional merchandise in connection with a board of directors meeting and the cost of a physical examination.
•	Mr. Taff:  $14,852 is attributable to the costs of financial advisory fees. The remainder is attributable to the costexception of an executive physical required by McDermott, the costs resulting from his spouse accompanying him on business travel,perquisite allowance was permitted to be used for any purpose determined by the cost of a gift providedrecipient.

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	(D)	No tax gross-ups were provided to Mr. Taff by McDermott in connection withany of the Spin-off and the cost of tax preparation fees.NEOs during 2012.

•	Mr. Carlson:  $66,717 is attributable to the costs of providing him relocation assistance in connection with his move from Colorado to Texas, and the remainder is attributable to the cost of a physical examination.
•	Mr. Bethards:  $20,978 is attributable to the costs of providing him relocation assistance in connection with his move from Virginia to North Carolina following his appointment as Chief Executive Officer of B&W, $7,500 is attributable to financial planning fees and the remainder is attributable to the cost of club dues.

Other.  In connection with Mr. Fees’ termination of employment for “good reason” as defined under his retention agreement, Mr. Fees received (1) a cash severance payment in the amount of $5,516,550, (2) payment of his 2010 target EICP award, prorated to take into account his length of service in 2010, in the amount of $535,808, (3) two times the full annual cost of coverage for medical, dental and vision benefits in the amount of $30,257, and (4) unused vacation for 2010 in the amount of $70,962. See “Compensation Discussion and Analysis — Employment and Severance Arrangements — Retention Agreements” above for more information regarding Mr. Fees’ retention agreement.

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GRANTSOF PLAN-BASED AWARDS

Grants of Plan-Based Awards

The following Grants of Plan-Based Awards table provides additional information about stock awards and equity and non-equity incentive plan awards we granted to our Named ExecutivesNEOs during the year ended December 31, 2010.

																																		All Other				All Other
																																		Stock				Option
																																		Awards:				Awards:				Exercise				Grant Date
										Estimated Possible Payouts Under																								Number of				Number of				or Base				Fair Value
						Committee				Non-Equity Incentive Plan Awards(1)												Estimated Future Payouts Under Equity Incentive Plan Awards												Shares of				Securities				Price of				of Stock and
						Action																Threshold				Target				Maximum				Stock				Underlying				Option				Option
Name		Grant Date				Date				Threshold				Target				Maximum				(#)				(#)				(#)				or Units(2)				Options(3)				Awards				Awards(4)
S. M. Johnson			02/25/10				02/25/10			$	133,091			$	760,521			$	1,521,042				—				—				—				—				—				—				—
			03/04/10				02/25/10																—				—				—				95,493				—				—			$	1,249,956
			03/04/10				02/25/10																—				—				—				—				141,597			$	13.09			$	865,313
			08/02/10				08/02/10																—				—				—				113,412				—				—			$	1,422,186
J. A. Fees			02/25/10				02/25/10			$	601,699			$	916,875			$	1,298,906				—				—				—				—				—				—				—
P. L. Elders			05/06/10				05/06/10			$	38,383			$	219,333			$	438,667				—				—				—				—				—				—				—
			05/13/10				05/06/10																—				—				—				38,661				—				—			$	517,021
			05/13/10				05/06/10																—				—				—				—				60,292			$	13.37			$	396,788
M. S. Taff			02/25/10				02/25/10			$	237,204			$	361,454			$	512,059				—				—				—				—				—				—				—
			03/04/10				02/25/10																—				—				—				23,148				—				—			$	302,996
			03/04/10				02/25/10																—				—				—				—				34,324			$	13.09			$	209,757
B. C. Bethards(5)			02/25/10				02/25/10			$	65,669			$	375,249			$	750,498				—				—				—				—				—				—				—
			03/04/10				02/25/10																—				—				—				49,269				—				—			$	1,249,955
			03/04/10				02/25/10																—				—				—				—				73,056			$	25.37			$	865,319
G.L. Carlson			02/25/10				02/25/10			$	30,800			$	176,000			$	352,000				—				—				—				—				—				—				—
			05/13/10				05/06/10																—				—				—				39,411				—				—			$	527,051
			05/13/10				05/06/10																—				—				—				—				25,189			$	13.37			$	165,771
L. K. Hinrichs			02/25/10				02/25/10			$	151,314			$	230,574			$	326,646				—				—				—				—				—				—				—
			03/04/10				02/25/10																—				—				—				30,556				—				—			$	399,963
			03/04/10				02/25/10																—				—				—				—				45,313			$	13.09			$	276,912
			08/02/10				08/02/10																—				—				—				52,198				—				—			$	654,563
J. T. Nesser			02/25/10				02/25/10			$	62,398			$	356,563			$	713,125				—				—				—				—				—				—				—
			03/04/10				02/25/10																—				—				—				24,828				—				—			$	324,986
			03/04/10				02/25/10																—				—				—				—				36,818			$	13.09			$	224,998
			08/02/10				08/02/10																—				—				—				69,478				—				—			$	871,254

2012.

Name		Grant Date				Committee Action Date				Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)						Estimated Future Payouts Under Equity Incentive Plan Awards(2)						All Other Stock Awards: Number of Shares of Stock or Units(3)		All Other Option Awards: Number of Securities Underlying Options(4)		Exercise or Base Price of Option Awards		Grant Date Fair Value of Stock and Option Awards(5)
										Threshold		Target		Maximum		Threshold (#)		Target (#)		Maximum (#)
S.M. Johnson
EICP			02/29/12				02/29/12			$166,250		$950,000		$1,900,000		—		—		—		—		—		—			—
PShares			03/05/12				02/29/12			—		—		—		54,230		108,459		216,918		—		—		—		$	2,499,980
RSUs			03/05/12				02/29/12			—		—		—		—		—		—		86,565		—		—		$	1,249,999
Stock Options			03/05/12				02/29/12			—		—		—		—		—		—		—		179,856		$14.44		$	1,249,999
P.L. Elders
EICP			02/29/12				02/29/12			$60,487		$345,639		$691,279		—		—		—		—		—		—			—
PShares			03/05/12				02/29/12			—		—		—		14,642		29,283		58,566		—		—		—		$	674,973
RSUs			03/05/12				02/29/12			—		—		—		—		—		—		23,370		—		—		$	337,463
Stock Options			03/05/12				02/29/12			—		—		—		—		—		—		—		48,561		$14.44		$	337,499
G.L. Carlson
EICP			02/29/12				02/29/12			$43,953		$251,162		$502,325		—		—		—		—		—		—			—
PShares			03/05/12				02/29/12			—		—		—		8,133		16,266		32,532		—		—		—		$	374,931
RSUs			03/05/12				02/29/12			—		—		—		—		—		—		12,984		—		—		$	187,489
Stock Options			03/05/12				02/29/12			—		—		—		—		—		—		—		26,976		$14.44		$	187,483
L.K. Hinrichs
EICP			02/29/12				02/29/12			$54,974		$314,139		$628,279		—		—		—		—		—		—			—
PShares			03/05/12				02/29/12			—		—		—		10,845		21,690		43,380		—		—		—		$	499,955
RSUs			03/05/12				02/29/12			—		—		—		—		—		—		17,313		—		—		$	250,000
Stock Options			03/05/12				02/29/12			—		—		—		—		—		—		—		35,970		$14.44		$	249,992
J.T. McCormack
EICP			02/29/12				02/29/12			$74,911		$428,066		$856,131		—		—		—		—		—		—			—
PShares			03/05/12				02/29/12			—		—		—		16,268		32,535		65,070		—		—		—		$	749,932
RSUs			03/05/12				02/29/12			—		—		—		—		—		—		25,968		—		—		$	374,978
Stock Options			03/05/12				02/29/12			—		—		—		—		—		—		—		53,955		$14.44		$	374,987

(1)

This column reflects the threshold, target and maximum payout opportunities under the Executive Incentive Compensation Plan, or EICP. For 2012, the EICP awards were based 100% on the attainment of financial goals. Mr. Johnson’s award was then subject to adjustment by the Compensation Committee, in its sole discretion, based on objectives established for Mr. Johnson by the Compensation Committee, and the target award for the other NEOs was subject to adjustment by Mr. Johnson based on each NEO’s individual performance, with any such adjustment subject to the approval of the Compensation Committee. The attainment of the financial goals was based 70% on consolidated operating income and 30% on consolidated return on invested capital. The financial goals contain threshold, target and maximum performance levels which, if achieved, result in payments of 25%, 100% and 200%, respectively. The threshold payout amount provided was determined based on achieving the consolidated operating income threshold (or 17.50% of the target amounts shown), which, if not achieved, would result in no amounts being paid on an EICP award.

On February 29, 2012, our Compensation Committee established target EICP awards expressed as a percentage of the NEO’s 2012 annual base salary earned, as follows: Mr. Johnson — 100%, Mr. Elders — 70%, Mr. Carlson — 70%, Ms. Hinrichs — 70% and Mr. McCormack — 80%. The target amounts shown were computed according to the following formula: Target % * [(2011 base salary * 152/366) + (2012 base salary * 214/366)]. The actual EICP payouts for the NEOs for 2012 are provided in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column.

(2)

This column reflects the target, threshold and maximum payout opportunities of grants of performance shares under the 2009 LTIP. Each grant represents the right to receive one share of McDermott common stock for each vested performance share. The amount of performance shares that vest, if any, is scheduled to initially be determined on December 31, 2014 based on our total shareholder return relative to the Proxy Peer Group during the same period, with subsequent measurements of total shareholder return relative to the Proxy Peer Group on December 31, 2015 and December 31, 2016. The amounts shown in the “threshold” column represent the number of performance shares that will vest, which is 50% of the amount granted, and the amounts shown in the “maximum” column represent the number of performance shares that will vest, which is 200% of the amount granted, based on our total shareholder return relative to the Proxy Peer Group. The maximum number of performance shares which will vest based on performance through December 31, 2014 is 150% of the amount granted if our total shareholder return ranks in the 75th percentile or higher relative to the Proxy Peer Group. A maximum of

200% of the number of performance shares granted may vest based on performance through December 31, 2015 and 2016, less any amount previously vested. The following table provides the measurement periods, total shareholder return percentile rank and corresponding vesting percentage of the amount of performance shares granted:

(1) Measurement Period	See “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” below	Total Shareholder Return Percentile Rank		Vesting Percentage of Performance Shares Granted
36 Months Ending December 31, 2014		³90th Percentile      75th Percentile      50th Percentile      25th Percentile   < 25th Percentile		150% 150% 100% 50% 0%
48 Months Ending December 31, 2015		³90th Percentile      75th Percentile      50th Percentile      25th Percentile   < 25th Percentile		200%* 150%* 100%* 50%* 0%*
60 Months Ending December 31, 2016		³90th Percentile      75th Percentile      50th Percentile      25th Percentile   < 25th Percentile		200%* 150%* 100%* 50%* 0%*

*Less

any amounts vested through prior measurement periods.

(3)

This column reflects grants of restricted stock units under the 2009 LTIP. Each restricted stock unit represents the right to receive one share of McDermott common stock and is generally scheduled to vest in one-third increments on the first, second and third anniversaries of the date of grant. Upon vesting, the restricted stock units are converted into shares of McDermott common stock.

(4)

This column reflects grants of stock options under the 2009 LTIP. Each grant represents the right to purchase at the exercise price shares of McDermott common stock over a period of seven years. The stock options are generally scheduled to vest and become exercisable in one-third increments on the first, second and third anniversaries of the date of grant.

(5)	This column reflects the full grant date fair values of the equity awards computed in accordance with FASB ASC Topic 718. Grant date fair values are determined using the closing price of our common stock on the date of grant for restricted stock units, a Monte Carlo simulation model for performance shares, and the Black-Scholes option pricing model for stock options. The Monte Carlo simulation model for performance shares and the Black-Scholes option pricing model for stock options each requires various assumptions, including assumptions about the expected life of the award and stock return and stock price volatility. For more information regarding the compensation expense related to 2012 awards, and a discussion of the amountsvaluation assumptions utilized in performance share and option pricing, see Note 8 to our consolidated financial statements included in this column.
(2)	See “All Other Stock Awards” belowour annual report on form 10-K for a discussion of the amounts included in this column.
(3)	See “All Other Option Awards” below for a discussion of the amounts included in this column.
(4)	See “Grant Date Fair Value of Stock and Option Awards” below for a discussion of the amounts included in this column.
(5)	Equity award amounts provided for Mr. Bethards reflect the pre Spin-off awards granted to him by McDermott. In connection with the Spin-off, Mr. Bethards’ outstanding equity awards were converted into B&W equity awards. For more information, see “Compensation Discussion and Analysis — Long-Term Incentive Compensation — Treatment of Equity-Based Compensation in Connection with the Spin-off” above.year ended December 31, 2012.

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OUTSTANDING EQUITY AWARDSAT FISCAL YEAR-END

Estimated Possible Payouts Under Non-Equity Incentive Plan Awards

Our Compensation Committee administers the Executive Incentive Compensation Plan, an annual cash incentive program, which we refer to as the EICP. The payment amount, if any, of an EICP award is determined based on: (1) the attainment of short-term financial goals; (2) the attainment of short-term individual goals; and (3) the exercise of the Compensation Committee’s discretionary authority. Each year, our Compensation Committee establishes financial goals and, with respect to our Chief Executive Officer, individual goals. For 2010, our Chief Executive Officer established or approved individual goals for the other Named Executives.

The financial goals contain threshold, target and maximum performance levels which, if achieved, result in payments of 25%, 100% and 200% of the financial component, respectively. If the threshold financial goal is not achieved, no amount is paid on an EICP. For purposes of evaluating McDermott’s performance under the financial performance component, our Compensation Committee may adjust our results prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for unusual, nonrecurring or other items in the Committee’s discretion, subject to certain limitations set forth in the EICP. For 2010, payment is made on an EICP award under the individual component only if the threshold financial goal is achieved. Any such payment is based on the attainment of the Named Executive’s individual goals as determined and evaluated by our Chief Executive Officer or, with respect to our Chief Executive Officer, by our Governance Committee. In addition, our Compensation Committee may decrease an EICP award in its discretion. The maximum EICP award a Named Executive can earn is 200% of his or her target EICP award.

The amounts shown reflect grants of 2010 EICP awards. Our Compensation Committee established target EICP awards expressed as a percentage of the Named Executive’s 2010 base salary. With the exception of Messrs. Johnson, Elders and Carlson, the amount shown in the “target” column represents the value of the target EICP award determined by multiplying the target percentage established for each Named Executive by the Named Executive’s 2009 and 2010 base salaries, prorated to take into account the April 1, 2010 effective date of the 2010 base salaries. For 2010, the target percentage of base salary for each Named Executive and the formula used to

compute the target EICP award (with the exception of Messrs. Johnson, Elders and Carlson) were as follows:

Named Executive		Target Percentage of Base Salary
J. A. Fees		100%
M. S. Taff		70%
B. C. Bethards		70%
L. K. Hinrichs		55%
J. T. Nesser		70%
Formula to Compute Target EICP Awards:
Target % * [(2009 base salary *1/4) + (2010 base salary *3/4)]

In connection with Mr. Johnson’s July 30, 2010 promotion from President and Chief Executive Officer of JRM to President and Chief Executive Officer of McDermott, on August 5, 2010 our Compensation Committee approved a base salary increase and an increase in the target EICP award for Mr. Johnson. Accordingly, the amount shown in Mr. Johnson’s target column represents his target EICP award under his former and current position, prorated based on the length of service in each position and to take into account the changes in base salary that occurred throughout the year. For 2010, the target percentage of base salary for Mr. Johnson and the formula used to compute the target EICP award were as follows:

Named Executive		Target Percentage of Base Salary
S. M. Johnson
Pres. & CEO, JRM		85%
Pres. & CEO, MII		100%
Formula to Compute Target EICP Award:
85% * [(2009 base salary *3/12) + (2010 JRM salary *4/12)]
+
100% * (2010 MII salary *5/12)

Because Mr. Elders was hired on April 30, 2010, the amount shown in his “target” column represents the value of the target EICP award determined by multiplying the target percentage established for Mr. Elders by his 2010 base salary, prorated to take into account his time of employment during the year. For 2010, the target percentage of base salary for

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Mr. Elders and the formula used to compute the target EICP award were as follows:

Named Executive		Target Percentage of Base Salary
P. L. Elders		70%
Formula to Compute Target EICP Award:
70% * (2010 base salary *2/3)

The amount shown in Mr. Carlson’s “target” column represents the value of the target EICP award determined by multiplying the target percentage established for Mr. Carlson by his 2010 base salary. For 2010, the target percentage of base salary for Mr. Carlson and the formula used to compute the target EICP award were as follows:

Named Executive		Target Percentage of Base Salary
G. L. Carlson		55%
Formula to Compute Target EICP Award:
55% * 2010 base salary

With the exception of Messrs. Fees and Taff and Ms. Hinrichs, the amount shown in the “threshold” column represents the amount payable under the EICP assuming the threshold level of the financial goals, but no individual goal, is attained and our Compensation Committee does not exercise any discretion over the EICP award. The financial goal represents 70% of the target EICP award. Attaining only the threshold level, or 25%, of the financial goal results in an EICP payment of 17.50% of the target EICP award. Prior to the completion of the Spin-off, the Compensation Committee determined that for all EICP participants not employed through one of McDermott’s pre-Spin-off operating segments (our Corporate executive officers), including Messrs. Fees and Taff and Ms. Hinrichs, the 2010 target award opportunity through the effective date of the Spin-off would be attributable to the completion of the Spin-off. Accordingly, the amount shown in the “threshold” column for Messrs. Fees and Taff and Ms. Hinrichs represents the amount payable under the EICP assuming the target award opportunity, but prorated based on the actual period of service during 2010 as a Corporate executive officer through the effective date of the Spin-off. For Ms. Hinrichs, who continued to be

employed by McDermott following the Spin-off, 70% and 30% of the 2010 target award opportunity for the period in 2010 after the effective date of the Spin-off was attributable to financial performance and individual performance, respectively, prorated for the period in 2010 after the effective date of the Spin-off.

The amount shown in the “maximum” column represents the maximum amount payable under the EICP, which is 200% of the target amount shown, with the exception of Messrs. Fees and Taff and Ms. Hinrichs. The amount shown in the “maximum” column for these individuals is comprised of 100% of their target EICP award, prorated for the actual period of service during 2010 as a Corporate executive officer through the effective date of the Spin-off, and 200% of their target EICP award, prorated for the balance of 2010. See “Compensation Discussion and Analysis — Annual Incentive Compensation” above for more information about the 2010 EICP awards and performance goals.

All Other Stock Awards

The amounts shown reflect grants of restricted stock units and restricted stock under the 2009 LTIP.

Each restricted stock unit represents the right to receive one share of McDermott common stock and, with the exception of the restricted stock units granted to Mr. Carlson, are scheduled to vest in one-third increments on the first, second and third anniversaries of the date of grant. The restricted stock units granted to Mr. Carlson are scheduled to vest on the first, second and third anniversaries of his date of hire. Upon vesting, the restricted stock units are converted into shares of McDermott common stock.

The August 2, 2010 grants were grants of restricted stock made in accordance with the indicated Named Executives’ retention agreements and are scheduled to vest one year following the completion of the Spin-off. Upon vesting, the restrictions on the shares lapse. With the exception of the restricted stock awards granted on August 2, 2010 and the stock awards made to Mr. Bethards, the stock awards reflect the as-adjusted number of restricted stock units following adjustments made to the awards in connection with the Spin-off. See “Compensation Discussion and Analysis — Long-Term Incentive Compensation” above for more information regarding the 2010 restricted stock units and restricted stock and the treatment of equity-based awards in connection with the Spin-off.

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All Other Option Awards

The amounts shown reflect grants of stock options under the 2009 LTIP. Each grant represents the right to purchase at the exercise price shares of McDermott common stock over a period of seven years. With the exception of grants of stock options awarded to Mr. Carlson, the stock options are generally scheduled to vest and become exercisable in one-third increments on the first, second and third anniversaries of the date of grant. The stock options granted to Mr. Carlson are scheduled to vest and become exercisable on the first, second and third anniversaries of his date of hire. With the exception of grants of stock options awarded to Mr. Bethards, the stock options and exercise prices included are the as-adjusted number of stock options and exercise prices following conversions made to the awards in connection with the Spin-off. See “Compensation Discussion and Analysis — Long-Term Incentive Compensation” above for more information regarding the 2010 stock options and the treatment of equity-based awards in connection with the Spin-off.

Grant Date Fair Value of Stock and Option Awards

The amounts included in the “Grant Date Fair Value of Stock and Option Awards” column represent

the full grant date fair values of the equity awards computed in accordance with FASB ASC Topic 718. The grant date fair values shown for Messrs. Johnson, Elders, Carlson and Taff and Ms. Hinrichs are based on (1) the number of shares, units or options as converted in connection with the Spin-off, and (2) the closing price of our common stock on the date of grant as adjusted to reflect the Spin-off; provided, that the grant date fair values shown for Mr. Taff are attributable to the one-half of his pre Spin-off McDermott awards that were converted to post Spin-off McDermott awards. The grant date fair values shown for Mr. Bethards represent the pre Spin-off grant date fair value of his awards. We use a Black-Scholes option-pricing model for measuring the fair value of stock options granted. The determination of the fair value of an award on the date of grant using an option-pricing model requires various assumptions, such as the expected life of the award and stock price volatility. For more information regarding the compensation expense related to 2010 awards, and a discussion of valuation assumptions utilized in option pricing, see Note 9 to our consolidated financial statements included in our annual report onForm 10-K for the year ended December 31, 2010.

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Outstanding Equity Awards at Fiscal Year-End

The following Outstanding Equity Awards at Fiscal Year-End table summarizes the equity awards we have made to our Named ExecutivesNEOs which were outstanding as of December 31, 2010. With the exception of the restricted stock awards granted on August 2, 2010, the awards in this table reflect the original grant date and the as-adjusted award amounts outstanding and as-adjusted exercise prices following adjustments and conversions in connection with the Spin-off. See “Compensation Discussion and Analysis — Long-Term Incentive Compensation — Treatment of Equity-Based Compensation in Connection with the Spin-off.”

								Option Awards(1)																					Stock Awards(2)
																																									Equity
																																									Incentive
																																									Plan Awards:
																																					Equity				Market
																																					Incentive				or Payout
																Equity																					Plan Awards:				Value of
																Incentive																	Market				Number of				Unearned
																Plan Awards:																	Value of				Unearned				Shares,
								Number of				Number of				Number													Number of				Shares or				Shares,				Units or
								Securities				Securities				of Securities													Shares or				Units of				Units or				Other
								Underlying				Underlying				Underlying													Units of				Stock That				Other				Rights That
								Unexercised				Unexercised				Unexercised				Option				Option					Stock That				Have Not				Rights That				Have
								Options				Options				Unearned				Exercise				Expiration					Have Not				Vested				Have Not				Not Vested
Name			Grant Date					Exercisable				Unexercisable				Options				Price				Date					Vested				(3)				Vested				(3)
S. M. Johnson
Stock Options				05/14/09					85,248				170,496				—			$	9.36				05/14/16
Stock Options				03/04/10					—				141,597				—			$	13.09				03/04/17
RSU				05/14/09																										120,149			$	2,485,883				—				—
RSU(4)				05/14/09																										104,302			$	2,158,008				—				—
RSU				03/04/10																										95,493			$	1,975,750				—				—
Restricted Stock				08/02/10																										113,412			$	2,346,494				—				—
J. A. Fees
RSU				10/01/08																										142,445			$	2,947,187				—				—
P. L. Elders
Stock Options				05/13/10					—				60,292				—			$	13.37				05/13/17
RSU				05/13/10																										38,661			$	799,896				—				—
M. S. Taff
Stock Options				03/05/09					—				52,870				—			$	5.64				03/05/16
Stock Options				03/04/10					—				34,324				—			$	13.09				03/04/17
Restricted Stock				03/03/08																										2,225			$	46,035				—				—
RSU(4)				03/03/08																										24,092			$	498,463				—				—
RSU				03/05/09																										37,258			$	770,868				—				—
RSU(4)				03/05/09																										32,343			$	669,177				—				—
RSU				03/04/10																										23,148			$	478,932				—				—
G. L. Carlson
Stock Options				05/13/10					—				25,189				—			$	13.37				03/29/17
RSU				05/13/10																										39,411			$	815,414				—				—
L. K. Hinrichs
Stock Options				03/05/09					—				54,405				—			$	5.64				03/05/16
Stock Options				03/04/10					—				45,313				—			$	13.09				03/04/17
Restricted Stock				03/03/08																										2,616			$	54,125				—				—
RSU(4)				03/03/08																										28,317			$	585,879				—				—
Restricted Stock				11/10/08																										7,417			$	153,458				—				—
RSU				03/05/09																										38,337			$	793,193				—				—
RSU(4)				03/05/09																										33,283			$	688,625				—				—
RSU				03/04/10																										30,556			$	632,204				—				—
Restricted Stock				08/02/10																										52,198			$	1,079,977				—				—
J. T. Nesser
Stock Options				03/05/09					—				45,172				—			$	5.64				03/05/16
Stock Options				03/04/10					—				36,818				—			$	13.09				03/04/17
Restricted Stock				03/03/08																										4,651			$	96,229				—				—
RSU(4)				03/03/08																										17,113			$	354,068				—				—
Restricted Stock				08/14/08																										3,754			$	77,670				—				—
RSU(4)				08/14/08																										9,240			$	191,176				—				—
RSU				03/05/09																										23,874			$	493,953				—				—
RSU(4)				03/05/09																										18,516			$	383,096				—				—
RSU				03/04/10																										24,828			$	513,691				—				—
Restricted Stock				08/02/10																										69,478			$	1,437,500				—				—

2012.

						Option Awards(1)																		Stock Awards
Name		Grant Date				Number of Securities Underlying Unexercised Options Exercisable				Number of Securities Underlying Unexercised Options Unexercisable				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options		Option Exercise Price				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested(2)				Market Value of Shares or Units of Stock That Have Not Vested(3)				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(4)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3)
S.M. Johnson
Stock Options			05/14/09				255,744				—			—		$	9.36				05/14/16
Stock Options			03/04/10				94,398				47,199			—		$	13.09				03/04/17
Stock Options			03/04/11				32,711				65,422			—		$	25.64				03/04/18
Stock Options			03/05/12				—				179,856			—		$	14.44				03/05/19
RSUs			03/04/10																						31,832			$	350,789				—				—
RSUs			03/04/11																						26,000			$	286,520				—				—
RSUs			03/05/12																						86,565			$	953,946				—				—
Performance Shares			03/04/11																						—				—				28,265			$	311,475
Performance Shares			03/05/12																						—				—				108,459			$	1,195,218
P.L. Elders
Stock Options			05/13/10				40,195				20,097			—		$	13.37				05/13/17
Stock Options			03/04/11				8,177				16,354			—		$	25.64				03/04/18
Stock Options			03/05/12				—				48,561			—		$	14.44				03/05/19
RSUs			05/13/10																						12,887			$	142,015				—				—
RSUs			03/04/11																						6,500			$	71,630				—				—
RSUs			03/05/12																						23,370			$	257,537				—				—
Performance Shares			03/04/11																						—				—				7,065			$	77,856
Performance Shares			03/05/12																						—				—				29,283			$	322,699
G.L. Carlson
Stock Options			05/13/10				16,793				8,396			—		$	13.37				03/29/17
Stock Options			03/04/11				3,271				6,542			—		$	25.64				03/04/18
Stock Options			03/05/12				—				26,976			—		$	14.44				03/05/19
RSUs			05/13/10																						13,137			$	144,770				—				—
RSUs			03/04/11																						3,034			$	33,435				—				—
RSUs			03/05/12																						12,984			$	143,084				—				—
Performance Shares			03/04/11																						—				—				2,826			$	31,143
Performance Shares			03/05/12																						—				—				16,266			$	179,251
L.K. Hinrichs
Stock Options			03/05/09				27,203				—			—		$	5.64				03/05/16
Stock Options			03/04/10				30,209				15,104			—		$	13.09				03/04/17
Stock Options			03/04/11				7,360				14,720			—		$	25.64				03/04/18
Stock Options			03/05/12				—				35,970			—		$	14.44				03/05/19
RSUs			03/04/10																						10,186			$	112,250				—				—
RSUs			03/04/11																						6,676			$	73,570				—				—
RSUs			03/05/12																						17,313			$	190,789				—				—
Performance Shares			03/04/11																						—				—				6,359			$	70,071
Performance Shares			03/05/12																						—				—				21,690			$	239,024
J.T. McCormack
Stock Options			03/05/09				14,155				—			—		$	5.64				03/05/16
Stock Options			03/04/10				17,037				8,518			—		$	13.09				03/04/17
Stock Options			03/04/11				3,802				7,604			—		$	25.64				03/04/18
Stock Options			05/13/11				6,104				12,208			—		$	20.47				05/13/18
Stock Options			03/05/12				—				53,955			—		$	14.44				03/05/19
RSUs			03/04/10																						5,745			$	63,310				—				—
RSUs			03/04/11																						3,022			$	33,302				—				—
RSUs			05/13/11																						5,372			$	59,199				—				—
RSUs			03/05/12																						25,968			$	286,167				—				—
Performance Shares			03/04/11																						—				—				3,285			$	36,201
Performance Shares			05/13/11																						—				—				5,637			$	62,120
Performance Shares			03/05/12																						—				—				32,535			$	358,536

(1)		See “Option Awards” below for a discussion of the amounts reportedThe awards in this column includingrepresent grants of stock options, which generally become exercisable in accordance with the following vesting datesschedule: 1/3 per year on first, second and third anniversaries of unexercisable option awards.grant date. The only exception to this is the grants to Mr. Carlson on May 13, 2010, which vest 1/3 per year on March 29, 2011, 2012 and 2013 (the first, second and third anniversaries of Mr. Carlson’s hire date).

(2)		See “Stock Awards” below for a discussion of the amounts reportedThe awards in this column includingrepresent grants of restricted stock units, which generally vest in accordance with the following vesting datesschedule: 1/3 per year on first, second and third anniversaries of outstanding stock awards.grant date. The only exception to this is the grants to Mr. Carlson on May 13, 2010, which vest 1/3 per year on March 29, 2011, 2012 and 2013 (the first, second and third anniversaries of Mr. Carlson’s hire date).

(3)		Market values in these columns are based on the closing price of our common stock as of December 31, 2010 ($20.69), as reported on the New York Stock Exchange.
(4)		The grant of restricted stock units was converted from an original grant of performance shares in connection with the Spin-off, and generally vests 100% on the third anniversary of the grant date.
(5)		No information is provided for Mr. Bethards because he had no outstanding equity awards granted by McDermottExchange as of December 31, 2010. In connection with the Spin-off, all of Mr. Bethards’ outstanding equity awards, and one half of Mr. Taff’s equity awards, were converted to equity awards of The Babcock & Wilcox Company. See “Compensation Discussion and Analysis — Long-Term Incentive Compensation — Conversion of Equity in Connection with the Spin-off” for more information.2012 ($11.02).

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Option Awards.  Information presented in the “Option Awards” columns relates to options to purchase shares of our common stock held by our Named Executives as of December 31, 2010. With the exception of Mr. Carlson, whose unexercisable options vest in three equal installments on the first, second and third anniversaries of his

(4)

The awards in this column represent grants of performance shares, which generally may vest on the third, fourth and/or fifth anniversaries of the grant date based on the attainment of performance levels as of December 31, 2013, 2014 and 2015. The number and value of performance shares reported with a grant date of hire, all unexercisable options generally vest in three equal installments on the first, second and third anniversaries of the grant date, as follows: Grant Date One third of grant vests on: 03/05/09 March 5, 2011 and 2012 05/14/09 May 14, 2011 and 2012 03/04/10 March 4, 2011 2012is based on achieving threshold performance as of the December 31, 2013 measurement date. The number and 2013 05/13/10 Mr. Carlson: March 29, 2011, 2012 and 2013 05/13/10 Mr. Elders: May 13, 2011, 2012 and 2013 Stock Awards.  Information presented in the Stock Awards columns relates to awards of restricted stock and restricted stock units held by our Named Executives as of December 31, 2010. The awards reported in the “Number of Shares or Units of Stock that have not Vested” column reflect stock awards subject to service-based vesting. Restricted Stock Awards.  With the exception of the restricted stock granted on August 2, 2010, shares of restricted stock are generally scheduled to vest in one-third increments on the first, second and third anniversaries of the grant date. The restricted stock awards granted on August 2, 2010 were granted pursuant to retention agreements we entered into with certain of our Named Executives in connection with the Spin-off. See “Compensation Discussion and Analysis — Employment and Severance Arrangements — Retention Agreements” above for more information regarding the retention agreements. The vesting schedule of the restricted stock outstanding as of December 31, 2010 is as follows: Grant Date Restricted Stock Awards vest: 03/03/08 One-third of grant vests on March 3, 2011 08/14/08 One-third of grant vests on August 14, 2011 11/10/08 One-third of grant vests on November 10, 2011 08/02/10 100% of grant vests on July 30, 2011 Restricted Stock Units.  Restricted stock units represent the right to receive one share of our common stock for each vested restricted stock unit. With the exception of restricted stock units that were converted from performance shares in connection with the Spin-off and restricted stock units granted to Mr. Carlson, restricted stock units outstanding as of December 31, 2010 are generally scheduled to vest in one-third increments on the first, second and third anniversaries of the grant date. Restricted stock units that were converted from performance shares in connection with the Spin-off generally vest 100% on the third anniversary of the grant date, as discussed in footnote (4) to the “Outstanding Equity Awards at Fiscal Year-End” table above. Restricted stock units granted to Mr. Carlson generally vest in three equal installments on the first, second and third anniversaries of his date of hire. The vesting schedule of the restricted stock units outstanding as of December 31, 2010 is as follows: Grant Date Vesting Schedule: 03/03/08(1) 100% of grant vests on March 3, 2011 08/14/08(1) 100% of grant vests on August 14, 2011 10/01/08(2) 100% of grant is vested 03/05/09 One-third of grant vests on March 5, 2011 and 2012 03/05/09(1) 100% of grant vests on March 5, 2012 05/14/09 One-third of grant vests on May 14, 2011 and 2012 05/14/09(1) 100% of grant vests on May 14, 2012 03/04/10 One-third of grant vests on March 4, 2011, 2012 and 2013 05/13/10 Mr. Carlson: One-third of grant vests on March 29, 2011, 2012 and 2013 05/13/10 Mr. Elders: One-third of grant vests on May 13, 2011, 2012 and 2013 (1) The grant of restricted stock units was converted from an original grantvalue of performance shares in connectionreported with the Spin-off. (2) Thea grant date of restricted stock units was converted from an original grant ofMarch 5, 2012 is based on achieving target performance shares in connection with the Spin-off. 100%as of the grant is vested, but will settle on October 1, 2011 in accordance with the terms of Mr. Fees’ retention agreement.December 31, 2014 measurement date. 57 OPTION EXERCISESAND STOCK VESTED Option Exercises and Stock Vested The following Option Exercises and Stock Vested table provides additional information about the value realized by our Named ExecutivesNEOs on exercises of option awards and vesting of stock awards during the year ended December 31, 2010.                                       Option Awards   Stock Awards     Shares       Shares         Acquired   Value Realized   Acquired   Value Realized   Name   on Exercise (#)   on Exercise   on Vesting (#)   on Vesting S. M. Johnson     0       N/A       30,995     $ 743,620.10   J. A. Fees     295,716     $ 1,832,421.36       467,935     $ 7,770,761.52   P. L. Elders     0       N/A       0       N/A   M. S. Taff     48,724     $ 462,249.66       59,019     $ 1,471,140.67   B. C. Bethards(1)     23,383     $ 332,155.52       70,427     $ 1,783,605.96   G. L. Carlson     0       N/A       0       N/A   L. K. Hinrichs     14,035     $ 205,612.75       52,827     $ 1,274,986.04   J. T. Nesser     11,653     $ 169,609.42       151,031     $ 2,847,018.83   2012.      Option Awards      Stock Awards(1)   Name    Shares Acquired on Exercise (#)      Value Realized on Exercise      Shares Acquired on Vesting (#)      Value Realized on Vesting   S. M. Johnson      0         N/A         209,208       $ 2,490,026    P. L. Elders      0         N/A         16,137       $ 194,170    G. L. Carlson      0         N/A         14,654       $ 192,232    L. K. Hinrichs      0         N/A         65,975       $ 954,025    J. T. McCormack      0         N/A         37,232       $ 530,133    (1) The number of shares acquired on vesting reported represents the aggregate number of shares that vested during 2012 in connection with awards of restricted stock units. The value realized on vesting was calculated based on the fair market value of the underlying shares on the vesting date. The following table sets forth the number of shares withheld by McDermott to satisfy the minimum statutory withholding tax due upon vesting of such restricted stock units: (1)Name Information provided for Mr. Bethards is through July 31, 2010. In connection with the Spin-off, Mr. Bethards’ outstanding option and stock awards were converted to B&W option and stock awards. See “Compensation Discussion and Analysis — Long-Term Incentive Compensation — ConversionShares Acquired by McDermott on Vesting of Equity in Connection with the Spin-off” for more information.Stock Awards (#) S. M. Johnson 68,877 P. L. Elders 4,352 G. L. Carlson 3,938 L. K. Hinrichs 17,559 J. T. McCormack 9,925 Option Awards.  Each stock option exercise reported in the Option Exercises and Stock Vested table was effected as a simultaneous exercise and sale, with the exception of one stock option exercise without a simultaneous sale of the underlying shares by each of Messrs. Fees, Bethards and Nesser and Ms. Hinrichs representing 98,572, 23,383, 11,653 and 14,035 shares, respectively. For simultaneous exercise and sales, the value realized on exercise was calculated based on the difference between the exercise prices of the stock options and the prices at which the shares were sold. For the exercise without a simultaneous sale of the underlying shares of options by Messrs. Fees, Bethards and Nesser and Ms. Hinrichs, the value realized on exercise was calculated based on the difference between the exercise price of the stock options and the average of the highest and lowest reported trading price of our common stock on the date of exercise. Stock Awards.  For each Named Executive, the number of shares acquired on vesting reported in the Option Exercises and Stock Vested table represents the aggregate number of shares that vested during 2010 in connection with awards of performance shares, restricted stock, restricted stock unitsand/or deferred stock units. The awards of deferred stock units reflected in this table were payable entirely in cash in an amount equal to the number of vested units multiplied by the average of the highest and lowest price of our common stock on the date of vesting. As a result, no shares of stock were actually acquired upon the vesting of these deferred stock units. The following table sets forth the amount of shares attributable to performance shares, restricted stock, restricted stock units and deferred stock units, for each Named Executive:                                                                       Performance Shares   Restricted Stock   Restricted Stock Units   Deferred Stock Units     Number of       Number of       Number of       Number of         Shares   Value   Shares   Value   Shares   Value   Shares   Value     Acquired on   Realized   Acquired   Realized   Acquired   Realized   Acquired   Realized  Name   Vesting   on Vesting   on Vesting   on Vesting   on Vesting   on Vesting   on Vesting   on Vesting S. M. Johnson     0       N/A       0       N/A       30,995     $ 743,260.10       0       N/A   J. A. Fees     63,600     $ 1,603,356.00       32,880     $ 458,417.60       362,305     $ 5,470,996.42       9,150     $ 237,991.50   P. L. Elders     0       N/A       0       N/A       0       N/A       0       N/A   M. S. Taff     33,000     $ 831,930.00       2,296     $ 58,938.32       19,223     $ 490,474.85       4,500     $ 89,797.50   B. C. Bethards     44,400     $ 1,119,324.00       1,310     $ 33,627.70       24,717     $ 630,654.26       0       N/A   G. L. Carlson     0       N/A       0       N/A       0       N/A       0       N/A   L. K. Hinrichs     33,300     $ 839,493.00       8,767     $ 160,520.99       9,890     $ 252,343.35       870     $ 22,628.70   J. T. Nesser     52,500     $ 1,323,525.00       6,153     $ 110,922.42       85,988     $ 1,246,367.51       6,390     $ 166,203.90   58 The number of shares acquired in connection with the exercise of stock options, to the extent applicable, and the vesting of performance shares, restricted stock awards and restricted stock units includes the following number of shares withheld by us at the election of each Named Executive to satisfy the minimum statutory withholding tax due upon exercise or vesting. For more information on the withholding of shares to cover taxes due upon exercise or vesting, see the “Certain Relationships and Related Transactions” section of this proxy statement.                       Shares Acquired by McDermott   Shares Acquired by McDermott  Name   on Exercise of Stock Options   on Vesting of Stock Awards S. M. Johnson     N/A       11,297   J. A. Fees     62,550       155,899   P. L. Elders     N/A       N/A   M. S. Taff     N/A       17,777   B. C. Bethards     15,744       27,163   G. L. Carlson     N/A       N/A   L. K. Hinrichs     8,123       16,943   J. T. Nesser     7,423       51,304   59 PENSION BENEFITS Pension Benefits The following Pension Benefits table shows the present value of accumulated benefits payable to each of our Named ExecutivesNEOs under the qualified defined benefit pension plansplan (referred to as the Retirement Plans)Plan) and nonqualified pension plansplan (referred to as the Excess Plans)Plan) that we sponsored prior to the Spin-off and those we have continued to sponsor since the Spin-off.                               Present Value of   Payments         Number of Years   Accumulated   During Name   Plan Name   Credited Service   Benefit(1)   2010 S.M. Johnson   N/A   N/A   N/A   N/A     N/A   N/A   N/A   N/A J.A. Fees(2)   B&W Governmental Operations Retirement Plan   31.167   $1,224,477   $0     B&W Governmental Operations Excess Plan   31.167   $3,216,141   $0 P.L. Elders   N/A   N/A   N/A   N/A     N/A   N/A   N/A   N/A M.S. Taff   N/A   N/A   N/A   N/A     N/A   N/A   N/A   N/A B.C. Bethards(3)   B&W Governmental Operations Retirement Plan   37.000   $1,246,422   $0     B&W Governmental Operations Excess Plan   37.000   $1,719,768   $0 G.L. Carlson   N/A   N/A   N/A   N/A     N/A   N/A   N/A   N/A L.K. Hinrichs   McDermott Retirement Plan   11.167   $315,251   $0     McDermott Excess Plan   11.167   $131,970   $0 J.T. Nesser   McDermott Retirement Plan   11.750   $391,366   $0     McDermott Excess Plan   11.750   $440,724   $0 sponsor. Name    Plan Name    Number of Years Credited Service      Present Value of Accumulated Benefit(1)      Payments During 2012   S. M. Johnson    N/A      N/A         N/A         N/A       N/A      N/A         N/A         N/A    P. L. Elders    N/A      N/A         N/A         N/A       N/A      N/A         N/A         N/A    G. L. Carlson    N/A      N/A         N/A         N/A       N/A      N/A         N/A         N/A    L. K. Hinrichs    McDermott Retirement Plan      11.167       $ 422,505       $ 0       McDermott Excess Plan      11.167       $ 185,241       $ 0    J. T. McCormack    N/A      N/A         N/A         N/A       N/A      N/A         N/A         N/A    (1) In connection with the Spin-off and pursuant to the Employee Matters Agreement, the accumulated pension benefits of Messrs. Fees and Bethards were transferred to B&W on June 30, 2010. The present valuesvalue of accumulated benefits provided for Messrs. Fees and Bethards arereflected above is based on a 5.6%4.0% discount rate and the 1994 Group Annuity Mortality Table projected to 2010, which are the assumptions used by B&WIRS static table for valuation years beginning in computing the present values. (2) In connection with Mr. Fees’ retirement from McDermott on July 30, 2010, Mr. Fees commenced receiving an unreduced early retirement benefit under the B&W Governmental Operations Retirement Plan as of August 1, 2010. Such payments were made by B&W and are not included in the table above. (3) The number of years of credited service for Mr. Bethards includes 0.417 years (July31-December 31, 2010) when he was no longer an employee of McDermott following the Spin-off.2013. Overview of Qualified Plans.Plan. The Retirement Plans we sponsor in which the eligible Named Executives participate arePlan is funded by trustsa trust and generally covercovers eligible regular full-time employees of McDermott and its subsidiaries, as described below in the section entitled “Participation and Eligibility.” Nonresident alien employees who do not earn income in the United States and temporary resident alien employees are not eligible to participate in the Retirement Plans.Plan. In reviewing pension benefits payable to our Named Executives,NEOs, it is important to note: •     Ms. Hinrichs and Mr. Nesser participated in the MI Retirement Plan until their participation was transferred to the JRM Retirement Plan through the merger of the MI Of the NEOs, only Ms. Hinrichs participates in the Retirement Plan; and Retirement Plan into the JRM Retirement Plan in connection with the Spin-off; the JRM Retirement Plan was thereafter renamed the “McDermott (U.S.) Retirement Plan” (referred to herein as the “McDermott Retirement Plan”) and provides benefits for eligible McDermott employees. As of June 30, 2010, benefit accruals under the McDermott Retirement Plan were frozen for all participants, including Ms. Hinrichs and Mr. Nesser; •     Mr. Fees participated in the MI Retirement Plan until his participation was transferred to the B&W Governmental Operations Retirement Plan in connection with the Spin-off; 60During 2006, all new participation in the Retirement Plan was closed, and benefit accruals under the Retirement Plan were frozen for all participants, including Ms. Hinrichs, as of June 30, 2010. •     Mr. Bethards participates in the B&W Governmental Operations Retirement Plan; and •     Due to their respective employment dates, Messrs. Johnson, Elders, Taff and Carlson do not participate in our Retirement Plans. For more information on our Retirement Plans,retirement plans, see “Compensation Discussion and Analysis — Post-employment Compensation — Retirement Plans.” Participation and Eligibility.Eligibility  Generally,. The Retirement Plan includes provisions related to eligibility, participation and benefit formulas for employees over the age of 21 years who were hired before April 1, 2005 are eligibleemployed by McDermott’s subsidiary J. Ray McDermott Holdings, LLC and other designated affiliates thereof, as well as for employees who were employed by McDermott Incorporated (now known as McDermott Investments, LLC) and certain former salaried employees of a subsidiary of The Babcock & Wilcox Company who transferred to participate inemployment with McDermott Incorporated. Benefits. Ms. Hinrichs’ benefits under the McDermott Retirement Plan or the B&W Governmental Operations Retirement Plan, subject to the following: •     For participants with less than five years of service as of March 31, 2006 — The plans were closed to new salaried participants and benefit accruals were frozen as of that date, butcost-of-living increases continued to be paid, as discussed further below. Affected employees received annual service-based company cash contributions to their Thrift Plan accounts. On June 30, 2010, the provision of thecost-of-living increase under the McDermott Retirement Plan was terminated, and, for affected participants, the Thrift Plan service-based contribution was replaced by a cash contribution equal to 3% of thriftable earnings. •     For participants with more than five but less than ten years of service as of January 1, 2007 — If a participant made an election to do so, benefit accruals were frozen as of March 31, 2007, with the electing participants receiving annual service-based company cash contributions to their Thrift Plan accounts. As of June 30, 2010, benefit accruals under the McDermott Retirement Plan were frozen altogether, and in lieu of any service-based cash contributions, affected participants now receive a cash contribution to their Thrift Plan accounts equal to 3% of thriftable earnings. •     Frozen accrued benefits of affected employees under these plans increased annually in line with increases in the Consumer Price Index, up to a maximum of 8% and a minimum of 1%, for each year the employee remained employed. However, as of June 30, 2010, the provision of thecost-of-living increase under the McDermott Retirement Plan was terminated and the accrued benefits under the McDermott Retirement Plan were frozen altogether. Benefits.  Benefits applicable to Named Executives under these Plans are calculated as follows: •     For participants originally employed by our former Power Generation Systems or Government Operations segments (“Tenured Employees”) before April 1, 1998 (which includes Messrs. Fees and Bethards) — benefits are calculated based on years of credited service and final average cash compensation (including bonuses and commissions). •     For salaried participants originally hired by our subsidiary formerly known as McDermott Incorporated on or after April 1, 1998 (which includes Mr. Nesser and Ms. Hinrichs) — benefits are calculated as 1.2% of final average monthly compensation up to the Social Security limit times credited service up to 35 years, plus 1.65% of final average monthly compensation in excess of the Social Security limit times credited service up to 35 years. Final average monthly compensation excludes bonuses and commissions. The present value of accumulated benefits reflectedfinal average monthly compensation as of June 30, 2010 up to the Social Security limit times credited service up to 35 years, plus 1.65% of final average monthly compensation as of June 30, 2010 in excess of the Pension Benefit Table above is based on a 5.25% discount rateSocial Security limit times credited service up to 35 years. Final average monthly compensation excludes bonuses and the 1994 Group Annuity Mortality Table projected to 2005. commissions. Retirement and Early Retirement.Retirement. Under each of these plans,the Retirement Plan, normal retirement is age 65. The normal form of payment is a single-life annuity or a 50% joint and survivor annuity, depending on the employee’s marital status when payments are scheduled to begin. Early retirement eligibility and benefits under these plansthe Retirement Plan depend on the employee’s date of hire and age. Mr. Bethards is currently eligible for early retirement. Mr. Fees retired on July 31, 2010 and at that time was eligible for an unreduced early retirement benefit. For Tenured Employees hired before April 1, 1998 (which includes Messrs. Fees and Bethards): •     an employee is eligible for early retirement if the employee has completed at least 15 years of credited service and attained the age of 50; and 61 •     early retirement benefits are based on the same formula as normal retirement, but the pension benefit is unreduced if the sum of the employee’s age and years of service equals 75 or greater at the date benefits commence; otherwise the pension benefit is reduced 4% for each “point” less than 75. For employees hired on or after April 1, 1998:1998 (including Ms. Hinrichs): an employee is eligible for early retirement after completing at least 15 years of credited service and attaining the age of 55; and early retirement benefits are based on the same formula as normal retirement, but the pension benefit is generally reduced 0.4% for each month that benefits commence before age 62.   •     an employee is eligible for early retirement after completing at least 15 years of credited service and attaining the age of 55; and •     early retirement benefits are based on the same formula as normal retirement, but the pension benefit is generally reduced 0.4% for each month that benefits commence before age 62. Mr. Fees commenced receiving an unreduced early retirement benefit under the B&W Governmental Operations Retirement Plan as of August 1, 2010. Neither Mr. Nesser nor Ms. Hinrichs havehas not accrued enough credited service to be eligible for early retirement under the McDermott Retirement Plan. Overview of Nonqualified Plans.(Excess) Plan. To the extent benefits payable under thesethe Retirement PlansPlan are limited by Section 415(b) or 401(a)(17) of the U.S. Internal Revenue Code, pension benefits will be paid directly by the applicable subsidiary of McDermott or B&W under the terms of the unfunded excess benefit plansplan maintained by themMcDermott (referred to as the “Excess Plans”Plan”). Effective January 1, 2006, the Excess Plans were Plan was amended to limit the annual bonus payments taken into account in calculating the Excess Plan benefits to the lesser of the actual bonus paid or 25% of the prior year’s base salary. Furthermore, because benefits entitlement under the Excess Plan and the Retirement Plan are linked, benefits under the Excess Plan have been frozen since 2006, when benefit accruals under the Retirement Plan were frozen. Ms. Hinrichs is the only NEO who participates in the Excess Plan.   Mr. Nesser, Ms. Hinrichs, Mr. Fees and Mr. Bethards each participate in an Excess Plan. Mr. Fees retired on July 31, 2010 and commenced receiving an Excess Plan benefit on February 1, 2011. His benefit commencement was subject to a six-month delay following his retirement date, based on his status as a “specified employee” as defined in Code Section 409A(a)(2)(B)(i) and related IRS regulations and rulings. 62 NONQUALIFIED DEFERRED COMPENSATION Nonqualified Deferred Compensation The following Nonqualified Deferred Compensation table summarizes our Named Executives’NEOs’ compensation under the McDermott International, Inc. Director and Executive Deferred Compensation Plan (the “Deferred Compensation Plan”). The compensation shown in this table is entirely attributable to ourthe Deferred Compensation Plan.                                               Executive   Company   Aggregate   Aggregate   Aggregate     Contributions in   Contributions in   Earnings   Withdrawals/   Balance Name   2010   2010   in 2010   Distributions   at 12/31/10 S. M. Johnson   $ 0     $ 69,375     $ 7,252     $ 0     $ 76,627   J. A. Fees   $ 0     $ 87,051     $ 49,735     $ 0     $ 422,469   P. L. Elders   $ 0     $ 0     $ 0     $ 0     $ 0   M. S. Taff   $ 0     $ 37,810     $ 20,439     $ 0     $ 198,227   B. C. Bethards   $ 0     $ 52,275     $ 25,782     $ 0     $ 524,588   G. L. Carlson   $ 0     $ 0     $ 0     $ 0     $ 0   L. K. Hinrichs   $ 0     $ 29,549     $ 0     $ 0     $ 91,059   J. T. Nesser   $ 0     $ 36,806     $ 83,667     $ 0     $ 746,029   Overview of our Deferred Compensation Plan.  OurThe Deferred Compensation Plan is an unfunded, defined contribution retirement plan for directors and officers of McDermott and its subsidiaries selected to participate by our Compensation Committee. Benefits under the Deferred CompensationCompensa- tion Plan are based on (1) the participant’s deferral account, which is comprised of the notional account balance reflecting any executive contributions of deferred compensation, and (2) the participant’s vested percentage in his or her company account, which is comprised of the notional account balance reflecting any company contributions. A participant is at all times 100% vested in his or her deferral account. A participant generally vests in his or her company account 20% each year, subject to accelerated vesting for death, disability and termination without cause or termination within 24 months following a change in control. In connection with the Spin-off, the Deferred Compensation Plan accounts of Messrs. Fees, Taff and Bethards were transferred, and B&W assumed the liabilities of those accounts, pursuant to the Employee Matters Agreement.   Executive Contributions in 2010.  In November 2010, our Compensation Committee approved the deferral of eligible executives’ compensation beginning January 1, 2011. Under the terms of our Deferred Compensation Plan, an eligible executive may defer up to 50% of his or her annual salaryand/or up to 100% of any bonus earned in any year. No executive contributions were made in 2010. Company Contributions in 2010.  We make annual contributions to specified employees’ notional accounts equal to a percentage of the employee’s prior-year compensation. Under the terms of the SERP, the contribution percentage does not need to be the same for each participant. Additionally, our Compensation Committee may make a discretionary contribution to a participant’s account at any time. With the exception of Mr. Johnson, for 2010, our contributions on behalf of Named Executives who were participants equaled 5% of the Named Executives’ base salaries and annual incentive compensation awards paid in 2009. Mr. Johnson received a company contribution in an amount equal to 5% of his prior-year base salary paid, and received a discretionary contribution equal in value to 5% of his target bonus for 2010 and the value of his prior-year target base salary for the period January 1, 2009 through his April 1, 2009 hire date. Because Messrs. Elders and Carlson were added as participants to the Deferred Compensation Plan in August 2010, no contributions were made to their respective accounts during the year. To the extent a contribution was made, all of our 2010 contributions are included in the Summary Compensation Table above as “All Other Compensation.” Aggregate Earnings in 2010.  The amount reported in this table as earnings represents hypothetical accrued gains during 2010 on each Named Executive’s account. The accounts are “participant-directed,” in that each participating officer personally directs the investment of contributions made on his or her behalf. As a result, any accrued gains or losses are 63 Name    Executive Contributions  in 2012(1)      Company Contributions  in 2012(2)      Aggregate Earnings in  2012(3)      Aggregate Withdrawals/ Distributions      Aggregate Balance at  12/31/12(4)   S. M. Johnson    $ 0       $ 108,068       $ 42,526       $ 0       $ 315,501    P. L. Elders    $ 0       $ 43,970       $ 12,301       $ 0       $ 97,017    G. L. Carlson    $ 0       $ 33,320       $ 7,314       $ 0       $ 65,148    L. K. Hinrichs    $ 0       $ 37,662       $ 0       $ 0       $ 172,232    J. T. McCormack    $ 0       $ 38,828       $ 10,841       $ 0       $ 87,221    attributable to the performance of the Named Executive’s notional mutual fund investments. No amount of the earnings shown is reported as compensation in the Summary Compensation Table. Aggregate Balance at12/31/10.  The balance of a participating officer’s account consists of contributions made by us and hypothetical accrued gains or losses. The balances shown represent the accumulated account values (including gains and losses) for each Named Executive as of December 31, 2010. The balances shown include contributions from previous years which have been reported as compensation to the Named Executives in the Summary Compensation Table for those years — to the extent a Named Executive was included in the Summary Compensation Table during those years. The amounts and years reported are as follows:                           Amount Named Executive(1)   Year   Reported J.A. Fees     2009     $ 64,774.00         2008     $ 54,155.00   M.S. Taff     2009     $ 41,378.00         2008     $ 31,125.00   B.C. Bethards     2009     $ 44,948.00         2008     $ 31,042.00   J. T. Nesser     2009     $ 55,104.00         2008     $ 44,926.00   (1) In November 2010, our Compensation Committee approved the deferral of eligible executives’ compensation beginning January 1, 2011. Under the terms of our Deferred Compensation Plan, an eligible executive may defer up to 50% of his or her annual salary and/or up to 100% of any bonus earned in any year. (2) We make annual contributions to specified participants’ notional accounts equal to a percentage of the participant’s prior-year compensation. Under the terms of the Deferred Compensation Plan, the contribution percentage does not need to be the same for each participant. Additionally, our Compensation Committee may make a discretionary contribution to a participant’s account at any time. In 2012, our contributions on behalf of NEOs equaled 5% of their respective base salaries paid in 2011. Those contributions are included in the Summary Compensation Table above as “All Other Compensation.” (3) The amounts reported in this column represent notional accrued gains or losses during 2012 on each NEO’s account. The accounts are “participant-directed,” in that each participant personally directs the investment of contributions made on his or her behalf. As a result, any accrued gains or losses are attributable to the performance of the NEO’s notional mutual fund investments. No informationamount of the earnings shown is providedreported as compensation in the Summary Compensation Table. (4) The amounts reported in this column consist of contributions made by McDermott and notional accrued gains or losses as of December 31, 2012. The balances shown include contributions from previous years which have been reported as compensation to the NEOs in the Summary Compensation Table for those years – to the extent a NEO was included in the Summary Compensation Table during those years. The amounts of such contributions previously included in the Summary Compensation Table and years reported are as follows: Mr. Johnson because he was notreceived contributions from McDermott of $97,932 in 2011 and $69,375 in 2010; Mr. Elders received a participantcontribution from McDermott of $39,950 in 2011; Mr. Carlson received a contribution from McDermott of $24,800 in 2011; Ms. Hinrichs received contributions from McDermott of $43,511 in 2011 and $29,549 in 2010; and Mr. McCormack received a contribution from McDermott of $36,170 in 2011. As of December 31, 2012, Messrs. Johnson, Elders, Carlson and McCormack are 40% vested in their respective Deferred Compensation Plan balances shown as a result of becoming participants in the Deferred Compensation Plan prior to 2010. No information is provided for Messrs. Elders and Carlson andduring 2011. Ms. Hinrichs because they did not become Named Executives until 2010.is 100% vested in her Deferred Compensation Plan balance shown. POTENTIAL PAYMENTS UPON TERMINATIONOR CHANGEIN CONTROL As of December 31, 2010, Mr. Johnson is 0% vested in his Deferred Compensation Plan balance shown as a result of becoming a participant in the Deferred Compensation Plan during 2010. Messrs. Fees, Taff, Nesser and Bethards are each 100% vested in their Deferred Compensation Plan balance shown. In May 2009, our Compensation Committee amended the Deferred Compensation Plan to vest Deferred Compensation Plan balances that were unvested as of December 31, 2008 (including future gains and losses thereon). Amounts allocated on or after January 1, 2009 vest pursuant to the participant’s vested percentage, based on years of participation. Accordingly, Ms. Hinrichs is 72.95% vested in her Deferred Compensation Plan balance shown. 64 Potential Payments Upon Termination or Change in Control The following tables show potential payments to certain of our Named ExecutivesNEOs under existing contracts, agreements, plans or arrangements, whether written or unwritten, for various scenarios under which a payment would be due (assuming each is applicable) involving a change in control or termination of employment of each of our Named Executives,NEOs, assuming a December 31, 20102012 termination date and, where applicable, using the closing price of our common stock of $20.69$11.02 as of December 31, 2012 (as reported on the New York Stock Exchange) as of December 31, 2010.. These tables do not reflect amounts that would be payable to the Named ExecutivesNEOs pursuant to benefits or awards that are already vested. The amounts reported in the below tables for stock options, restricted stock units and restricted stock units,performance shares represent the value of unvested and accelerated shares or units, as applicable, calculated by: •     for stock options: multiplying the number of accelerated options by the difference between the exercise price and $11.02 (the closing price of our common stock on December 31, 2012, as reported on the New York Stock Exchange); and for restricted stock units and performance shares: multiplying the number of accelerated options by the difference between the exercise price and $20.69 (the closing price of our common stock on December 31, 2010, as reported on the New York Stock Exchange); and •     for restricted stock and restricted stock units: multiplying the number of accelerated shares or units by $20.69 (the closing price of our common stock on December 31, 2010, as reported on the New York Stock Exchange). In connection with the Spin-off, Messrs. Fees, Taff and Bethards terminated employment with McDermott effective July 30, 2010. Because Mr. Taff joined B&W following the Spin-off, and Mr. Bethards continued employment with B&W following the Spin-off, no termination event occurred under which they were entitled to any payments. Payments made to Mr. Fees in connection with his termination are discussed below under the “Estimated Value of Benefits to Be Received Upon Termination under the Restructuring Transaction Retention Agreements” table. Estimated Value of Benefits to Be Received Upon Termination under the Restructuring Transaction Retention Agreements The following table shows the estimated value of payments and other benefits due to certain of the Named Executives assuming termination under the restructuring transaction retention agreements as of December 31, 2010.                                               S.M. Johnson   P.L. Elders   G.L. Carlson   L.K. Hinrichs   J.T. Nesser Severance Payments   $ 3,361,042       —            —          $ 1,305,748     $ 1,738,126   EICP   $ 920,000       —            —          $ 232,265     $ 358,750   Deferred Compensation Plan   $ 76,627       —            —          $ 24,634       —        Benefits   $ 8,843       —            —          $ 2,664     $ 26,974   Thrift Plan   $ 12,658       —            —            —            —        Stock Options (unvested and accelerated)   $ 1,931,720       —            —          $ 818,795     $ 679,839   Restricted Stock (unvested and accelerated)     —            —            —          $ 207,583     $ 173,899   Restricted Stock Units (unvested and accelerated)   $ 4,643,891       —            —          $ 2,067,697     $ 1,422,293   TaxGross-Up     —            —            —            —            —                                                  Total   $ 10,954,781       —            —          $ 4,659,386     $ 4,399,881   In contemplation of the Spin-off, on December 10, 2009, we entered into retention agreements with certain key members of our management, including Messrs. Johnson and Nesser and Ms. Hinrichs. The retention agreements provide either a retention or severance payment to these employees in connection with the disposition of all or substantially all of the stock or assets of B&W or JRM (whether by a spin-off, sale or otherwise), which we have referred to as a “restructuring transaction” in the retention agreements. In the event the applicable employee is terminated prior to the first anniversary of the effective date of the restructuring transaction, either (1) by the employer company for any reason other than cause or disability or (2) by the employee for good reason, the employer company would be required to pay the employee a cash severance payment, an EICP payment, 200% of the annual cost of coverage for medical, 65 dental and vision benefits, and an amount equal to the unvested portion of the Named Executive’s Thrift Plan account. The employee would also receive accelerated vesting with respect to the unvested portion of his or her Deferred Compensation Plan account balance and certain of his or her outstanding, unvested equity awards. Severance Payment.  The severance payment that would be made to the applicable Named Executive in connection with his or her termination of employment is a cash payment equal to 200% of the sum of his or her annual base salary prior to termination and his or her EICP target award applicable to the year in which the termination occurs. For a hypothetical termination as of December 31, 2010, the severance payment under a restructuring transaction would have been calculated in the same manner as a severance payment under a change in control. For more information, see “Estimated Value of Benefits to be Received Upon Change in Control — Severance Payment.” Severance payments under a restructuring transaction would be in lieu of any payment under any severance policy generally applicable to the salaried employees of McDermott. EICP Payment.  The EICP Payment that would be made to each applicable Named Executive in connection with his or her termination of employment would be calculated in the same manner as an EICP Payment under a change in control. For more information, see “Estimated Value of Benefits to be Received Upon Change in Control — EICP Payment” below. Deferred Compensation Plan.  The amounts reported represent 100% of Mr. Johnson’s and 27.05% of Ms. Hinrichs’ respective Deferred Compensation Plan balance as of December 31, 2010 that would become vested if terminated under the retention agreements. Benefits.  The amounts reported represent two times the full annual cost of coverage for medical, dental and vision benefits provided to the applicable Named Executive and the Named Executive’s covered dependents for the year ended December 31, 2010. Thrift Plan.  The amount reported represents the unvested portion of the Named Executive’s Thrift Plan account balance as of December 31, 2010. Equity Awards.  The amounts reported for stock options, restricted stock and restricted stock units represent the value of unvested and accelerated shares or units by $11.02 (the closing price of our common stock on December 31, 2012, as applicable, for the 2008 and 2009 grants of such awards. The amount reported for restricted stock units also includes the value of unvested and accelerated units resulting from the conversion of the 2008 and 2009 grants of performance shares into restricted stock units in connection with the Spin-off. For more information on the conversion or adjustment of equity awards, see “Compensation Discussion and Analysis — Long-Term Incentive Compensation — Treatment of Equity-Based Awards in Connection with the Spin-off”New York Stock Exchange). Mr. Fees terminated his employment with McDermott for good reason effective July 30, 2010. In connection with his termination, Mr. Fees received (1) a cash severance payment in the amount of $5,516,550, (2) payment of his 2010 target EICP award, prorated to take into account his length of service in 2010, in the amount of $535,808, (3) two times the full annual cost of coverage for medical, dental and vision benefits in the amount of $30,257, (4) unused vacation for 2010 in the amount of $70,962, (5) the value of unvested and accelerated stock options in the amount of $1,360,294, (6) the value of unvested and accelerated restricted stock in the amount of $379,354, and (7) the value of unvested and accelerated restricted stock units in the amount of $3,698,622. Mr. Fees also was fully vested in a grant of 144,540 restricted stock units that have not settled in accordance with his retention agreement. The value of these restricted stock units, less a number of restricted stock units that were forfeited in connection with the payment of certain taxes, will be determined on the original measurement date, which is October 1, 2011. In addition, Mr. Fees received, in accordance with the Employee Matters Agreement, a number of shares of B&W common stock generally equal to the number of shares that would have been distributed in the Spin-off with respect to the number of shares of McDermott common stock received on his vested McDermott equity awards. His outstanding McDermott equity was converted pursuant to the Employee Matters Agreement. 66 Estimated Value of Benefits to Be Received Upon Retirement The following table shows the estimated value of payments and other benefits due the Continuing Named Executives assuming their retirement as of December 31, 2010. This table does not reflect amounts that would be payable pursuant to benefits or awards that are already vested; for example, pension benefits. See the “Pension Benefits” table above for more information on pension benefits. Mr. Nesser informed the Company that he intends to retire by year-end 2011.                                               S.M. Johnson     P.L. Elders     G.L. Carlson     L.K. Hinrichs     J.T. Nesser   Severance Payments     —        —        —        —        —    EICP     —        —        —        —        —    Deferred Compensation Plan     —        —        —        —        —    Stock Options (unvested and accelerated)     —        —        —        —      $ 169,960   Restricted Stock (unvested and accelerated)     —        —        —        —      $ 86,950   Restricted Stock Units (unvested and accelerated)     —        —        —        —        —                                              Total   $ 0.00     $ 0.00     $ 0.00     $ 0.00     $ 256,910     Deferred Compensation Plan.  Under the terms of the Deferred Compensation Plan, participants are eligible for retirement upon attaining age 65. None of the Named Executives are currently eligible for retirement under the terms of the Deferred Compensation Plan. Equity Awards.  Generally, the terms of our restricted stock and option award grants define retirement as a voluntary termination of employment after attaining age 60 and completing 10 years of service with McDermott, and the terms of our restricted stock unit award grants define retirement as attaining age 60 and completing 10 years of service with McDermott. Under this definition, the only Named Executive eligible for retirement as of a December 31, 2010 is Mr. Nesser. With the exception of grants of restricted stock under the retention agreements, the outstanding grants of restricted stock and the unvested grants of stock options provide for accelerated vesting of a percentage of the Named Executive’s outstanding shares if his or her retirement date is on or after the first anniversary of the grant date, and a greater percentage of accelerated vesting if his or her retirement date is on or after the second anniversary of the grant date. The outstanding grants of restricted stock units provide for accelerated vesting of a percentage of the Named Executive’s outstanding units if the date he or she becomes retirement eligible is on or after the first anniversary of the grant date, and a greater percentage of accelerated vesting if he or she becomes retirement eligible on or after the second anniversary of the grant date. 67 Estimated Value of Benefits to Be Received Upon Termination Due to Death or Disability The following table shows the value of payments and other benefits due the Continuing Named ExecutivesNEOs assuming their death or disability as of December 31, 2010.                                               S.M. Johnson   P.L. Elders   G.L. Carlson   L.K. Hinrichs   J.T. Nesser Severance Payments     —       —       —       —       —   EICP     —       —       —       —       —   Deferred Compensation Plan   $ 76,627       —       —     $ 24,634       —   Stock Options (unvested and accelerated)   $ 3,007,857     $ 441,337     $ 184,383     $ 1,163,174     $ 959,655   Restricted Stock (unvested and accelerated)   $ 2,346,494       —       —     $ 1,287,559     $ 1,611,399   Restricted Stock Units (unvested and accelerated)   $ 6,619,641     $ 799,896     $ 815,414     $ 2,699,900     $ 1,935,984                                             Total   $ 12,050,619     $ 1,241,233     $ 999,797     $ 5,175,267     $ 4,507,038   Deferred Compensation Plan.  The amount reported represents 100% of Mr. Johnson’s and 27.05% of Ms. Hinrichs’ respective Deferred Compensation Plan balance as of December 31, 2010 that would become vested on death or disability. Each of Messrs. Elders and Carlson has a zero balance in his Deferred Compensation Plan account as of December 31, 2010. Mr. Nesser was 100% vested in his Deferred Compensation Plan balance as of December 31, 2010. Equity Awards.  Under the terms of the awards outstanding for each Named Executive as of December 31, 2010, all unvested stock awards become vested and all unvested option awards become vested and exercisable on death or disability. 68 2012.      S.M. Johnson     P.L. Elders     G.L. Carlson     L.K. Hinrichs     J.T. McCormack   Severance Payments     —        —        —        —        —    EICP     —        —        —        —        —    Deferred Compensation Plan(1)   $ 189,301      $ 58,210      $ 39,089      $ 0      $ 52,333    Stock Options(2) (unvested and accelerated)   $ 0      $ 0      $ 0      $ 0      $ 0    Restricted Stock Units(3) (unvested and accelerated)   $ 1,591,255      $ 471,182      $ 321,288      $ 376,609      $ 441,979    Performance Shares(4) (unvested)   $ 1,818,168      $ 478,411      $ 319,393      $ 379,165      $ 555,177    Total   $ 3,598,724      $ 1,007,803      $ 679,770      $ 755,774      $ 1,049,489    (1) The amounts reported represent 60% of Messrs. Johnson’s, Elders’, Carlson’s and McCormack’s respective Deferred Compensation Plan balance as of December 31, 2012 that would become vested on his death or disability. Because Ms. Hinrichs is 100% vested in her Deferred Compensation Plan balance, no additional amount would become vested on her death or disability. (2) Under the terms of the stock option awards outstanding for each of the NEOs as of December 31, 2012, all unvested option awards would become vested and exercisable on death or disability. Due to the exercise price of the stock options outstanding and the closing price of our common stock on December 31, 2012, the aggregate value of stock options that would become vested and exercisable on death or disability for all NEOs would be $0. (3) Under the terms of the restricted stock unit awards outstanding for each of the NEOs as of December 31, 2012, all unvested restricted stock unit awards would become vested and exercisable on his or her death or disability. (4) Under the terms of the performance share awards outstanding for each of the NEOs as of December 31, 2012, 100% of the initial performance shares granted would vest on the third, fourth and fifth anniversary of the grant date on his or her death or disability. The number of performance shares that would vest is the number of performance shares that would have vested based on actual performance had the NEO remained employed with McDermott until the third, fourth and fifth anniversaries of the grant date. Accordingly, each NEO may vest in a number of performance shares ranging from 0% — 200% of the initial performance shares granted, depending on McDermott’s total shareholder return relative to its peers during the applicable measurement periods. The amounts reported assume a total of 100% of the initial performance shares granted will vest during the applicable measurement periods, valued at the closing price of McDermott stock as reported on the NYSE on December 31, 2012, although the actual value of such performance shares that may vest on the third, fourth and fifth anniversary of the date of grant could be $0 for each NEO and up to $3,636,336 for Mr. Johnson, $956,823 for Mr. Elders, $638,785 for Mr. Carlson, $758,330 for Ms. Hinrichs and $1,110,353 for Mr. McCormack, in each case representing a total of 200% of the initial performance shares granted. Additionally, the value of McDermott stock could be greater or less than the amount used to value the performance shares for this table. Estimated Value of Benefits to Be Received Upon Change in Control The following table shows the estimated value of payments and other benefits due the Continuing Named Executives assuming a change in control and termination as of December 31, 2010.                                               S.M. Johnson   P.L. Elders   G.L. Carlson   L.K. Hinrichs   J.T. Nesser Severance Payments   $ 5,024,758     $ 1,378,666     $ 992,000     $ 1,305,748     $ 1,738,126   EICP   $ 920,000     $ 329,000     $ 176,000     $ 232,265     $ 358,750   Deferred Compensation Plan   $ 76,627       —       —     $ 24,634       —   Stock Options (unvested and accelerated)   $ 3,007,857     $ 441,337     $ 184,383     $ 1,163,174     $ 959,655   Restricted Stock (unvested and accelerated)   $ 2,346,494       —       —     $ 1,287,559     $ 1,611,399   Restricted Stock Units (unvested and accelerated)   $ 6,619,641     $ 799,896     $ 815,414     $ 2,699,900     $ 1,935,984                                             Total   $ 17,995,377     $ 2,948,899     $ 2,167,797     $ 6,713,280     $ 6,603,914   We havechange-in-control agreements with various officers, including each of our Named Executives.NEOs. Generally, under these agreements, if a Named ExecutiveNEO is terminated within one year following a change in control either (1) by the company for any reason other than cause or death or disability;disability, or (2) by the Named ExecutiveNEO for good reason, the companyMcDermott is required to pay the Named ExecutiveNEO a cash severance payment based on the NEO’s salary and ana severance payment based on the NEO’s target EICP payment.percentage. In addition to these payments, the Named ExecutiveNEO would be entitled to various accrued benefits earned through the date of termination, such as earned but unpaid salary, earned but unused vacation and reimbursements. Under these agreements, a “change in control” generally occurs on the occurrence of any of the following: a person becomes the beneficial owner of 30% or more of the combined voting power of McDermott’s then outstanding voting stock unless such acquisition is made directly from McDermott in a transaction approved by a majority of McDermott’s incumbent directors; individuals who are incumbent directors cease for any reason to constitute a majority of McDermott’s board; completion of a merger or consolidation of McDermott with another company or an acquisition by McDermott or its subsidiaries, unless immediately following such merger, consolidation or acquisition: (1) all or substantially all of the individuals or entities that were the beneficial owners of outstanding McDermott voting securities immediately before such merger, consolidation or acquisition beneficially own at least 50% of the then outstanding shares of voting stock of the parent corporation resulting from the merger, consolidation or acquisition in the same relative proportions as their ownership immediately before such merger, consolidation or acquisition; (2) if such merger, consolidation or acquisition involves the issuance or payment by •     a person becomes the beneficial owner of 30% or more of the combined voting power of McDermott’s then outstanding voting stock unless such acquisition is made directly from McDermott in a transaction approved by a majority of McDermott’s incumbent directors; •     individuals who are incumbent directors cease for any reason to constitute a majority of McDermott’s board; •     completion of a merger or consolidation of McDermott with another company or an acquisition by McDermott or its subsidiaries, unless immediately following such merger, consolidation or acquisition: (1) all or substantially all of the individuals or entities that were the beneficial owners of outstanding McDermott voting securities immediately before such merger, consolidation or     acquisition beneficially own at least 50% of the then outstanding shares of voting stock of the parent corporation resulting from the merger, consolidation or acquisition in the same relative proportions as their ownership immediately before such merger, consolidation or acquisition; (2) if such merger, consolidation or acquisition involves the issuance or payment by McDermott of consideration to another entity or its shareholders,stockholders, the total fair market value of such consideration plus the principal amount of the consolidated long-term debt of the entity or business being acquired, does not exceed 50% of the sum of the fair market value of the outstanding McDermott voting stock plus the principal amount of the Company’s consolidated long-term debt; (3) no person beneficially owns 30% or more of the then outstanding shares of the voting stock of the parent company resulting from such merger, consolidation or acquisition; and (4) a majority of the members of the board of directors of the parent corporation resulting from such merger, consolidation or acquisition were incumbent directors of McDermott immediately before such merger, consolidation or acquisition; •     completion of the sale or disposition of 50% or more of the assets of McDermott and its subsidiaries on a consolidated basis, unless immediately following such sale or disposition: (1) the individuals and entities that were beneficial owners of outstanding McDermott voting stock immediately before such sale or disposition beneficially own at least 50% of the then outstanding shares of voting completion of the sale or disposition of 50% or more of the assets of McDermott and its subsidiaries on a consolidated basis, unless immediately following such sale or disposition: (1) the individuals and entities that were beneficial owners of outstanding McDermott voting stock immediately before such sale or disposition beneficially own at least 50% of the then outstanding shares of voting stock of McDermott and of the entity that acquires the largest portion of such assets, and (2) a majority of the members of the McDermott Board (if it continues to exist) and the board of directors of the entity that acquires the largest portion of such assets were incumbent directors of McDermott immediately before the completion of such sale or disposition; or any other set of circumstances is deemed by the Board in its sole discretion to constitute a change in control. 69The change-in-control agreements do not provide for excise tax gross-ups. They do, however, provide for the potential reduction in payments to the applicable officer in order to avoid excise taxes. The following table shows the estimated value of payments and other benefits due the NEOs assuming a change in control and termination as of December 31, 2012.      S.M. Johnson     P.L. Elders     G.L. Carlson     L.K. Hinrichs     J.T. McCormack   Salary-Based Severance Payment(1)   $ 5,681,000      $ 1,691,279      $ 1,252,325      $ 1,538,279      $ 1,976,131    EICP-Based Severance Payment(2)   $ 950,000      $ 350,000      $ 262,500      $ 318,500      $ 448,000    Deferred Compensation Plan(3)   $ 189,301      $ 58,210      $ 39,089      $ 0      $ 52,333    Stock Options(4) (unvested and accelerated)   $ 0      $ 0      $ 0      $ 0      $ 0    Restricted Stock Units(4) (unvested and accelerated)   $ 1,591,255      $ 471,182      $ 321,288      $ 376,609      $ 441,979    Performance Shares(4) (unvested and accelerated)   $ 1,818,167      $ 478,411      $ 319,393      $ 379,165      $ 555,177    Total   $ 10,229,723      $ 3,049,082      $ 2,194,595      $ 2,612,553      $ 3,473,620    (1) stock of McDermott and of the entity that acquires the largest portion of such assets, and (2) a majority of the members of the McDermott Board (if it continuesThe salary-based severance payment made to exist) and the board of directors of the entity that acquires the largest portion of such assets were incumbent directors of McDermott immediately before the completion of such sale or disposition; or •     any other set of circumstances is deemed by the Board in its sole discretion to constitute a change in control. Severance Payment.  The severance payment made to each Continuing Named Executive,each NEO, with the exception of Mr. Johnson, in connection with a change in control would be a cash payment equal to 200% of the sum of his or her annual base salary prior to termination and his or her EICP target award applicable to the year in which the termination occurs. The severance payment made to Mr. Johnson in connection with a change in control would be a cash payment equal to 299% of the sum of his annual base salary prior to termination and his EICP target award applicable to the year in which the termination occurs. The severance payment made to Mr. Johnson in connection with a change in control would be a cash payment equal to 299% of the sum of his annual base salary prior to termination and his EICP target award applicable to the year in which the termination occurs.

For a hypothetical termination as of December 31, 2010,2012, the salary-based severance payment under a change in control would have been calculated based on the following base salary and target EICP awards:

	•	Mr. Johnson: $920,000 base salary and $760,521 target EICP;
	•	Mr. Elders: $470,000 base salary and $219,333 target EICP;
	•	Mr. Carlson: $320,000 base salary and $176,000 target EICP;
	•	Ms. Hinrichs: $422,300 base salary and $230,574 target EICP; and
	•	Mr. Nesser: $512,500 base salary and $356,563 target EICP.

awards. See “Grants of Plan-Based Awards — Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” above for more information on the calculation of target EICP awards.

NEO		Annual Base Salary				Target EICP Award
S. M. Johnson		$	950,000			$	950,000
P. L. Elders		$	500,000			$	345,639
G. L. Carlson		$	375,000			$	251,162
L. K. Hinrichs		$	455,000			$	314,139
J. T. McCormack		$	560,000			$	428,066

(2)	Each NEO could receive up to two EICP-based severance payments in connection with a change in control depending on the timing of the termination relative to the payment of an EICP award, as follows:

If an EICP Payment.  The EICP is an annual cash-based performance incentive plan under which payments are made inaward for the year followingprior to termination is paid to other EICP participants after the date of the NEO’s termination, the NEO would be entitled to a cash payment equal to the product of the NEO’s target EICP percentage (or, if greater, the actual amount of the bonus determined under the EICP for the year prior to termination) and the NEO’s annual base salary for the applicable period. No such payment would have been due a NEO on a December 31, 2012 termination, because the 2011 EICP awards had already been paid prior to the NEO’s termination date.

The NEO would be entitled to a prorated EICP payment based upon the NEO’s target EICP percentage for the year in which performance is measured. For example, 2010the termination occurs and the number of days in which the NEO was employed with us during that year. Based on a hypothetical December 31, 2012 termination, each NEO would have been entitled to an EICP awards are paid in 2011 for performance achieved during 2010. As a result, dependingpayment equal to 100% of his or her 2012 target EICP percentage times annual base salary, calculated based on the timingfollowing base salary and target EICP percentage:

NEO		Annual Base Salary				Target EICP Percentage
S. M. Johnson		$	950,000				100	%
P. L. Elders		$	500,000				70	%
G. L. Carlson		$	375,000				70	%
L. K. Hinrichs		$	455,000				70	%
J. T. McCormack		$	560,000				80	%

(3)

The amounts reported represent 60% of Messrs. Johnson’s, Elders’, Carlson’s and McCormack’s respective Deferred Compensation Plan balance as of December 31, 2012 that would become vested in connection with a termination of employment following a change in control. Because Ms. Hinrichs is 100% vested in her Deferred Compensation Plan balance, no additional amount would become vested in connection with a termination of employment following a change in control. Under the Deferred Compensation Plan, a “change in control” generally occurs if:

a person (other than a McDermott employee benefit plan or a corporation owned by McDermott stockholders in substantially the same proportion as the ownership of McDermott voting shares) is or becomes the beneficial owner of 30% or more of the termination relativecombined voting power of McDermott’s then outstanding voting stock;

during any period of two consecutive years, individuals who at the beginning of such period constitute McDermott’s Board of Directors, and any new director whose election or nomination by McDermott’s Board was approved by at least two-thirds of the directors of McDermott’s Board then still in office who either were directors at the beginning of the period or whose election or nomination was previously approved, cease to constitute a majority of McDermott’s Board;

a merger or consolidation of McDermott with any other corporation or entity has been completed, other than a merger or consolidation which results in the paymentoutstanding McDermott voting securities immediately prior to such merger or consolidation continuing to represent at least 50% of the combined voting power of the voting securities of McDermott or the surviving entity outstanding immediately after such merger or consolidation;

McDermott’s stockholders approve (1) a plan of complete liquidation of McDermott; or (2) an EICP award,agreement for the sale or disposition by McDermott of all or substantially all of McDermott’s assets; or

within one year following the completion of a Namedmerger or consolidation transaction involving McDermott, (1) individuals who, at the time of execution and delivery of definitive agreements completing such transaction constituted the Board, cease for any reason (excluding death, disability or voluntary resignation) to constitute a majority of the Board; or (2) either individual, who at the first execution and delivery of definitive agreements completing the transaction, served as Chief Executive could receive upOfficer or Chief Financial Officer does not, for any reason (excluding death, disability or voluntary resignation), serve as the Chief Executive Officer or Chief Financial Officer, as applicable, of McDermott, or if McDermott does not continue as a registrant with a class of equity securities registered pursuant to two

EICP paymentsSection 12(b) of the Securities Exchange Act of 1934, as amended, as the Chief Executive Officer or Chief Financial Officer, as applicable, of a corporation or other entity that is (A) a registrant with a class of equity securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended, and (B) the surviving entity in connection withsuch transaction or a parent entity of the surviving entity or McDermott following the completion of such transaction; provided, however, that a change in control as follows:would not be deemed to have occurred pursuant to this clause in the case of a merger or consolidation which results in the voting securities of McDermott outstanding immediately prior to the completion of the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 55% of the combined voting power of the voting securities of the McDermott or the surviving entity outstanding immediately after such merger or consolidation.

(4)
	•	If an EICP award forUnder the year prior to termination is paid to other EICP participants after the dateterms of the Named Executive’sstock option and restricted stock unit awards outstanding, all unvested stock options would become vested and exercisable and all unvested restricted stock units would become vested on a change in control, regardless of whether there is a subsequent termination of employment. Due to the Named Executiveexercise price of the stock options outstanding for our NEOs and the closing price of our common stock on December 31, 2012, the aggregate value of stock options that would become vested and exercisable on a change in control, regardless of whether there is a subsequent termination of employment, would be entitled to a cash payment equal to$0. Under the productterms of the Named Executive’s EICP targetperformance share awards outstanding, the greater of (1) 100% of the initial performance shares granted, or (2) the vested percentage of initial performance shares determined in accordance with the grant agreement would become vested on a change in control, regardless of whether there is a subsequent termination of employment. Under our 2001 D&O Plan and 2009 LTIP, a “change in control” generally occurs under the same circumstances described above with respect to our Deferred Compensation Plan, except that the 2001 D&O Plan and the Named Executive’s annual base salary for2009 LTIP do not include, as a change in control event, the applicable period. No such payment would have been due a Named Executive on a December 31, 2010 termination, becauseevent described in the 2009 EICP awards had already been paid prior to the Named Executive’s termination date.
	•	The Named Executive would be entitled to a prorated EICP payment based upon the Named Executive’s target award for the yearlast bullet in which the termination occurs and the number of days in which the executive was employed with us during that year. Based on a hypothetical December 31, 2010 termination, each Continuing Named Executive would have been entitled to an EICP payment equal to 100% of his or her 2010 target EICP. See the schedule of target EICP amounts for each Named Executive under “Severance Payment”note (3) above.

Deferred Compensation Plan.  The amount reported represents 100% of Mr. Johnson’s and 27.05% of Ms. Hinrichs’ respective Deferred Compensation Plan balance as of December 31, 2010 that would become vested in connection with a termination of employment following a change in control. Each of Messrs. Elders and Carlson has a zero balance in his Deferred Compensation Plan account as of December 31, 2010. Mr. Nesser was 100% vested in his Deferred Compensation Plan balance as of December 31, 2010. Under the Deferred Compensation Plan, a “change in control” generally occurs if:

	•	a person (other than a McDermott employee benefit plan or a corporation owned by McDermott shareholders in substantially the same proportion as the ownership of McDermott voting shares) is or becomes the beneficial owner of 30% or more of the combined voting power of McDermott’s then outstanding voting stock;
	•	during any period of two consecutive years, individuals who at the beginning of such

70

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ADVISORY VOTETO APPROVE NEO COMPENSATION

(ITEM 2)

		period constitute McDermott’s Board of Directors, and any new director whose election or nomination by McDermott’s Board was approved by at least two-thirds of the directors of McDermott’s Board then still in office who either were directors at the beginning of the period or whose election or nomination was previously approved, cease to constitute a majority of McDermott’s Board;

	•	a merger or consolidation of McDermott, with any other corporation or entity has been completed, other than a merger or consolidation which results in the outstanding McDermott voting securities immediately prior to such merger or consolidation continuing to represent at least 50% of the combined voting power of the voting securities of McDermott or the surviving entity outstanding immediately after such merger or consolidation;
	•	McDermott’s stockholders approve (1) a plan of complete liquidation of McDermott; or (2) an agreement for the sale or disposition by McDermott of all or substantially all of McDermott’s assets;
	•	within one year following the completion of a merger or consolidation transaction involving McDermott, (1) individuals who, at the time of execution and delivery of definitive agreements completing such transaction constituted the Board, cease for any reason (excluding death, disability or voluntary resignation) to constitute a majority of the Board; or (2) either individual, who at the first execution and delivery of definitive agreements completing the transaction, served as Chief Executive Officer or Chief Financial Officer does not, for any reason (excluding death, disability or voluntary resignation), serve as the Chief Executive Officer or Chief Financial Officer, as applicable, of McDermott, or if McDermott does not continue as a registrant with a class of equity securities registered pursuant to Section 12(b) of the Securities Exchange Act

		of 1934, as amended, as the Chief Executive officer or Chief Financial Officer, as applicable, of a corporation or other entity that is (A) a registrant with a class of equity securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended, and (B) the surviving entity in such transaction or a parent entity of the surviving entity or McDermott following the completion of such transaction; provided, however, that a Change in Control shall not be deemed to have occurred pursuant to this clause in the case of a merger or consolidation which results in the voting securities of the McDermott outstanding immediately prior to the completion of the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 55% of the combined voting power of the voting securities of the McDermott or the surviving entity outstanding immediately after such merger or consolidation.

TaxGross-Up.  Thechange-in-control agreements do not provide for excise taxgross-ups.

Equity Awards.  Under the terms of the awards outstanding, all unvested restricted stock and restricted stock units would become vested on a change in control, regardless of whether there is a subsequent termination of employment. All unvested stock options would become vested and exercisable on a change in control, regardless of whether there is a subsequent termination of employment. Under our 2001 D&O Plan and 2009 LTIP, a “change in control” generally occurs under the same circumstances described above with respect to our Deferred Compensation Plan, except that the 2001 D&O Plan and the 2009 LTIP do not include, as a change in control event, the event described in the last bullet above under “Deferred Compensation Plan.”

Excise Tax Cutback Provision.  Thechange-in-control agreements provide for the potential reduction in payments to the applicable officer in order to avoid excise taxes.

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Advisory Vote on Executive Compensation

(Item 2)

As required by Section 14A(a)(1) of the Exchange Act, we are providing our stockholders with an advisory vote on executiveto approve NEO compensation.

The Compensation Committee has overall responsibility for our compensation plans, policies and programs with respect to the Named Executives.NEOs. Additional information regarding the Compensation Committee and its role is described under “Compensation Discussion and Analysis” and the related tables and narrative disclosures. Our compensation programs are based on our belief that our ability to develop, attract, retain and motivate qualified employees to develop, expand and execute sound business opportunities is essential to the success of our company. To that end, the Compensation Committee, with the assistance of its compensation consultant, designs and administers compensation programs with the participation of our management. These programs generally seek to provide compensation that:

incentivizes and rewards short- and long-term performance, continuity of service and individual contributions; and

promotes retention of well-qualified executives, while aligning the interests of our executives with those of our stockholders.

	•	incentivizes and rewards short- and long-term performance, continuity of service and individual contributions; and
	•	promotes retention of well-qualified executives, while aligning the interests of our executives with those of our stockholders.

We believe our compensation programs motivate and retainencourage the Continuing Named Executives,retention of the NEOs, while allowing for appropriate levels of business risk through some of the following features:

	•		Reasonable and Competitive Compensation Programs — Using the elements of total direct compensation, the Compensation Committee seeks to provide compensation opportunities for the Named Executivesemployees targeted within approximately 15% ofat or near the median compensation of comparable positions in our market. As a result, we believe the total direct compensation of the Named Executivesexecutive officer employees provides ana reasonable and appropriate mix of cash and equity, annual and longer-term incentives, and performance metrics.

•

Emphasize Long-Term Incentive Compensation Over Annual Incentive Compensation — Long-term incentive compensation typically makes up a larger percentage of a Named Executive’san executive officer employee’s total direct compensation than

		than annual incentive compensation. Incentive compensation helps drive performance and align the interests of the Named Executivesour employees with those of stockholders. Furthermore,In addition, tying a significant portion of a Named Executive’san employee’s total direct compensation to long-term incentives (which typically vest over a period of three or more years) helps to promote longer-term perspectives regarding companyour company’s performance.

	•		Clawback Policy — The Compensation Committee has adopted a policy under which McDermott shall seek to recover any incentive-based award granted to any executive officer as required by the provisions of the Dodd-Frank Wall-StreetWall Street Reform and Consumer Protection Act or any other “clawback” provision required by law or the listing standards of the New York Stock Exchange.

	•		Long-Term Incentive Compensation Subject to Forfeiture — The Compensation Committee may terminate any outstanding stock award if the recipient, while employed by McDermott or performing services on behalf of McDermott under any consulting agreement: (1) is convicted of a misdemeanor involving fraud, dishonesty or moral turpitude or a felony,felony; or (2) engages in conduct that adversely affects or, in the sole judgment of the Compensation Committee, may reasonably be expected to adversely affect, our business reputation or economic interests.

	•		Linear and Capped Incentive Compensation Payouts — The Compensation Committee establishes financial performance goals which are used to plot a linear payout formula for annual incentive compensation, eliminating payout “cliffs” between the established performance goals. The maximum payout for the annual incentive compensation is capped at 200% percent of target.

•

Use of Multiple and Appropriate Performance Metrics — Utilizing diversified performance measures helps prevent compensation opportunities from being overly weighted toward the performance result of a single measure. In

general, our incentive programs are historically based on a mix of financial and individual goals. In recent years our primary financial

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		performance metric has been operating income. OperatingCompared to other financial metrics, operating income is a measure of the profitability of our business. Use of this measurebusiness which helps drive accountability at our operating segments, thereby reducing risks related to incentive compensation by putting the focus on quality of revenues, not quantity. Additionally, commencing in 2011, the Compensation Committee utilized total shareholder return and return on invested capital as additional performance measures.

	•		Stock Ownership Guidelines — The Named ExecutivesOur executive officers and directors are subject to sharestock ownership guidelines, which also helpshelp promote longer-term perspectives and align the interests of the Named Executivesour executive officers and directors with those of our stockholders. In 2010, we increased the stock ownership requirements for our Named Executivesexecutive officers and nonemployee directors to further promoteemphasize this alignment of interests.

As discussed in more detail under “Compensation Discussion and Analysis,” the

Reflecting these compensation payments we made to several Named Executives in 2010 included substantial payments, primarily in the form of restricted stock grants, made pursuant to retention agreements we entered into in contemplation of the Spin-off. We entered into those retention agreements to assist in our efforts to retain the Named Executives through the spin-off process and to motivate them to contribute towards the successful completion of the Spin-off, which was completed on July 30, 2010. Upon completion of the Spin-off, one of the Named Executives retired and became the Chairman of the Board of B&W, and two of the Named Executives became the CEO and CFO, respectively, of B&W.

Reflecting our Compensation Committee’s compensation philosophy,objectives, compensation arrangements in 20102012 provided for:

NEO target total direct compensation within approximately 5% of the median compensation for officers in comparable positions in our Named Executives (excluding retention payments mademarket;

NEO performance-based compensation accounting for over 64% of target total direct compensation, on average, as compared to 60% in connection with2011 and 46% in 2010; and

Performance-based compensation accounting for 75% of NEO target long-term incentive compensation.

McDermott’s 2012 financial and operational performance highlights included:

Consolidated revenue of $3.6 billion, as compared to $3.4 billion for 2011;

Consolidated operating income of $319.3 million and operating margin of 8.8%, as compared to consolidated operating income of $250.7 million and operating margin of 7.4% for 2011;

Consolidated return on invested capital of 10.3%, as compared to 8% for 2011;

Basic earnings per share of $0.88, as compared to $0.59 for 2011;

Historic year-end backlog of $5.1 billion as of December 31, 2012, as compared to $3.9 billion as of December 31, 2011;

Award of the Spin-offapproximately $2 billion INPEX Ichthys project, representing the largest contract McDermott has been awarded to date; and the sign-on equity grant provided to Mr. Carlson, as discussed in further detail below) resulted in:

	•	target total direct compensation within approximately 15%	Continuation of the medianfleet renewal program with execution of contracts to construct theLV108 andDLV2000, which will be the newest additions to McDermott’s high performance vessel fleet.

The following table summarizes the 2011 and 2012 performance-based compensation opportunities for each of our NEOs as compared to the realizable value of such opportunities as of December 31, 2012:

2011 & 2012 Performance-Based Compensation Opportunity vs. Realizable Value as of December 31, 2012

		EICP(1)				Performance Shares(2)(3)				Stock Options(2)(3)				Total
S. M. Johnson
2012 Opportunity		$	950,000			$	2,499,980			$	1,249,999			$	4,699,979
2012 Realizable Value		$	760,000			$	705,170			$	0			$	1,465,170
2011 Opportunity		$	942,603			$	2,382,132			$	944,089			$	4,268,824
2011 Realizable Value		$	0			$	0			$	0			$	0
P. L. Elders
2012 Opportunity		$	345,639			$	674,973			$	337,499			$	1,358,111
2012 Realizable Value		$	207,383			$	190,382			$	0			$	397,765
2011 Opportunity		$	336,911			$	595,438			$	236,000			$	1,168,349
2011 Realizable Value		$	0			$	0			$	0			$	0
G. L. Carlson
2012 Opportunity		$	251,162			$	374,931			$	187,483			$	813,576
2012 Realizable Value		$	210,976			$	105,748			$	0			$	316,724
2011 Opportunity		$	199,233			$	238,175			$	94,406			$	531,814
2011 Realizable Value		$	0			$	0			$	0			$	0
L. K. Hinrichs
2012 Opportunity		$	314,139			$	499,955			$	249,992			$	1,064,086
2012 Realizable Value		$	301,573			$	141,023			$	0			$	442,596
2011 Opportunity		$	261,381			$	535,894			$	212,421			$	1,009,696
2011 Realizable Value		$	0			$	0			$	0			$	0
J. T. McCormack
2012 Opportunity		$	428,066			$	749,932			$	374,987			$	1,552,985
2012 Realizable Value		$	308,208			$	211,529			$	0			$	519,737
2011 Opportunity		$	274,549			$	634,020			$	253,847			$	1,162,416
2011 Realizable Value		$	0			$	0			$	0			$	0

(1)	Opportunity Values for the EICP are disclosed at the NEOs’ target EICP award.

(2)	Opportunity Values for performance shares and stock options are disclosed at the grant date fair value of the respective awards.

(3)		compensation for officers in comparable positions in our market,The 2011 and 2012 Realizable Values shown above are measured as of December 31, 2012, with the exception of Messrs. Elders and Nesser;
	•	performance-based compensation accountingthe 2011 Realizable Value of EICP awards, which is shown as the value of the EICP award paid in 2012 for over 46%2011 performance. The value of performance share awards shown above is based on the estimated payout as a percent of target, total direct compensation, on average; and
	•	performance-based compensation accounting for 50% of target long-term incentive compensation.

The performance-based compensation that was paid out in 2010 reflected the Compensation Committee’s commitment to pay for performance.

Highlights of McDermott’s performance in 2010 include:

	•	Completionor 59% of the Spin-offperformance shares granted in 2012 and 0% of the performance shares granted in 2011, multiplied by the closing price of our common stock as reported on July 30, 2010;
	•	Consolidated operating incomethe New York Stock Exchange as of $314.9 million, which was the primary metric for annual incentive compensation for our Named Executives;
	•	Stock price appreciation from December 31, 20092012 ($11.02). The number of the performance shares granted in 2011 and 2012 that ultimately vest, if any, will be determined by reference to our total shareholder return over three-, four- and five-year periods. See “Long-term Incentive Compensation — Analysis of 2012 Equity Grants.” The vesting of any of these performance shares would impact the future Realizable Value of these performance share awards. In addition, an increase in our stock price compared to our stock price at December 31, 20102012 may impact the future Realizable Value of approximately 65%, excluding the value attributable to the distribution of B&W common stock option awards granted in the Spin-off.2011 and 2012.

For the reasons discussed above, the Board of Directors unanimously recommends that stockholders vote FOR the following resolution:

“RESOLVED, that the compensation paid to the Named Executives,NEOs, as disclosed pursuant to Item 402 ofRegulation S-K, including the Compensation Discussion

and Analysis, compensation tables and accompanying narrative discussion in McDermott’s proxy statement relating to its 20112013 annual meeting of stockholders is hereby APPROVED.”

While the resolution is non-binding, the Board of Directors plans to consider the outcome of the vote when making future compensation decisions.

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Advisory Vote on the Frequency of
Advisory Votes on Executive Compensation

(Item 3)

 

As required by Section 14A(a)(2) of the Exchange Act, we are providing our stockholders with an advisory vote to determine whether the stockholder vote on executive compensation should occur every one, two or three years.

We believe having an advisory vote on executive compensation every year, rather than every two or three years, should help our stockholders evaluate our executive compensation and communicate their approval or disapproval to us on a prompt basis as is practicable.

For the reasons discussed above, the Board of Directors recommends that stockholders vote to hold the advisory vote on executive compensation every

year. Stockholders are not voting, however, to approve or disapprove of this particular recommendation. The proxy card provides for four choices and stockholders are entitled to vote on whether the advisory vote on executive compensation should be held every one, two or three years, or to abstain from voting.

While the result of this advisory vote on the frequency of the vote on executive compensation is non-binding, the Board of Directors plans to consider the outcome of the vote when deciding how frequently to conduct the vote on executive compensation.

The Board of Directors unanimously recommends that you vote to hold the advisory vote on executive compensation EVERY YEAR.

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AUDIT COMMITTEE REPORT

Approval of the Company’s
Executive Incentive Compensation Plan

(Item 4)

Since 2001, we have utilized our Executive Incentive Compensation Plan, effective February 1, 2001. Effective February 28, 2006, our Board adopted the amended and restated Executive Incentive Compensation Plan (the “EICP”) to provide annual incentive compensation to various employees, including our executive officers. Our Board approved the most recent version of the EICP, which is described below, on February 28, 2011. Stockholder approval of the EICP is necessary at least once every five years in order for awards paid under the EICP to be considered “performance-based compensation” under Internal Revenue Code Section 162(m).

Summary of the EICP

The following summary of the EICP is qualified in its entirety by reference to the full text of the EICP, which is attached as Appendix A to this Proxy Statement.

The EICP is administered by the Compensation Committee of our Board of Directors, composed entirely of non-management, independent directors appointed by our Board of Directors. All of our employees are eligible to participate in the EICP. Our Chief Executive Officer automatically participates in the EICP, and the participants are selected by the Compensation Committee, in its sole discretion. During 2010, 20 employees participated in the EICP, not including those employees who participated in the EICP prior to the Spin-off.

Under the EICP, the Compensation Committee establishes, for each plan year, performance goals and award opportunities. The award opportunities correspond to various levels of achievement of the preestablished performance goals based on combinations of one or more corporate, group, divisional or individual goals. The award opportunity is typically based on the achievement of preestablished targeted performance goals, including company, group or division performance. The potential final award varies in relation to the various levels of achievement of the preestablished performance goals with a minimum or “threshold” performance achievement required before there is any payout and a limitation on the maximum payout. Performance goals and measures used to determine

award opportunities are based on one or more of the following criteria:

	•	revenue and income measures (which include revenue, gross margin, income from operations, net income, net sales and earnings per share);
	•	expense measures (which include costs of goods sold, sales, general and administrative expenses and overhead costs);
	•	operating measures (which include volume, margin, breakage and shrinkage, productivity and market share);
	•	cash flow measures (which include net cash flow from operating activities and working capital);
	•	liquidity measures (which include earnings before or after the effect of certain items such as interest, taxes, depreciation and amortization, cash flow and free cash flow);
	•	leverage measures (which include equity ratio and net debt);
	•	market measures (including those relating to market price, stock price, total shareholder return and market capitalization measures);
	•	return measures (which include return on equity, return on assets, cash flow return on assets, cash flow return on capital, cash flow return on equity, return on capital and return on invested capital);
	•	corporate value measures (which include compliance, safety, environmental and personnel matters);
	•	other measures such as those relating to acquisitions, dispositions or customer satisfaction; and
	•	other measures consistent with deductibility under Section 162(m).

Once established, performance goals normally are not changed during the plan year. However, the Compensation Committee may adjust performance goals to account for changes in accounting principles and the occurrence of external changes or other

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unanticipated business conditions that may materially affect the fairness of the goals or unduly influence our ability to meet them, to the extent permitted under Section 162(m). The Compensation Committee has the authority to reduce or eliminate final awards, based on any criteria it deems appropriate. In addition, the Compensation Committee may use such other performance goals and measures, including subjective measures, and make adjustments to performance goals and measures during the plan year, if the Compensation Committee determines that compliance with Section 162(m) is not desired.

Following the end of each plan year, awards are computed for each plan participant. The EICP places a $3 million limit on payouts to any one plan participant in respect of any one-year period. The Board of Directors may amend the EICP from time to time.

EICP Benefits

Future benefits that will be received under the EICP by particular individuals or groups cannot be determined at this time. For the year ended December 31, 2010, approximately $6,749,444 in cash bonuses were paid to our employees under the EICP, of which approximately $4,766,960 was paid to the Company’s executive officers as a group. The cash bonus paid to the Named Executives is described above under “Compensation Discussion and Analysis — Annual Incentive Compensation.” Performance goals and award opportunities were established for certain of our officers, including the Continuing Named Executives, in February 2011. The award

opportunities for certain of these officers, including the Continuing Named Executives, are subject to stockholder approval of the EICP.

Recommendation and Vote Required

Our Board of Directors unanimously recommends a vote “FOR” approval of the EICP. We believe strongly that the EICP has served as an essential component of compensation, allowing us to provide reasonable incentives to and reward the performance results achieved by executive officers and other key employees in a manner most favorable to our stockholders. Approval of this proposal requires the affirmative vote of a majority of the outstanding shares of common stock present in person or represented by proxy and entitled to vote and actually voting on this proposal at the Annual Meeting. Because abstentions are not actual votes with respect to this proposal, they will have no effect on the outcome of the vote on this proposal. In general, brokers do not have discretionary authority on proposals relating to executive compensation. Therefore, absent instructions from you, your broker may not vote your shares on this proposal. Broker non-votes will have no effect on the vote.

Stockholder approval of the EICP is only necessary for awards under the EICP to be considered “performance-based compensation” under Internal Revenue Code Section 162(m). In the event this proposal is not approved by stockholders, the Board of Directors may continue to make awards under the EICP.

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Audit Committee Report

The Board of Directors appoints an Audit Committee to review McDermott International, Inc.’s financial matters. Each member of the Audit Committee meets the independence requirements established by the New York Stock Exchange. The Audit Committee is responsible for the appointment, compensation, retention and oversight of McDermott’s independent registered public accounting firm. We are also responsible for recommending to the Board that McDermott’s audited financial statements be included in its Annual Report onForm 10-K for the fiscal year.

In making our recommendation that McDermott’s financial statements be included in its Annual Report onForm 10-K for the year ended December 31, 2010,2012, we have taken the following steps:

We discussed with Deloitte & Touche LLP (“D&T”), McDermott’s independent registered public accounting firm for the year ended December 31, 2012, those matters required to be discussed by Statements on Auditing Standards No. 61, as amended, issued by the Auditing Standards Board of the American Institute of Certified Public Accountants, including information regarding the scope and results of the audit. These communications and discussions are intended to assist us in overseeing the financial reporting and disclosure process.

We conducted periodic executive sessions with D&T, with no members of McDermott management present during those discussions. D&T did not identify any material audit issues, questions or discrepancies, other than those previously discussed with management, which were resolved to the satisfaction of all parties.

	•	We discussed with Deloitte & Touche LLP (“D&T”), McDermott’s independent registered public accounting firm for the year ended December 31, 2010, those matters required to be discussed by Statements on Auditing Standards No. 114, each as amended, issued by the Auditing Standards Board of the American Institute of Certified Public Accountants, including information regarding the scope and results of the audit. These communications and discussions are intended to assist us in overseeing the financial reporting and disclosure process.
	•	We conducted periodic executive sessions with D&T, with no members of McDermott management present during those discussions. D&T did not identify any material audit issues, questions or discrepancies, other than those previously discussed with management, which were resolved to the satisfaction of all parties.
	•	We conducted periodic executive sessions with McDermott’s internal audit department and regularly received reports regarding McDermott’s internal control procedures.
	•	We reviewed, and discussed with McDermott’s management and D&T, management’s report and D&T’s report and attestation on internal control over financial reporting, each of which was prepared in accordance with Section 404 of the Sarbanes-Oxley Act.
	•	We received and reviewed the written disclosures and the letter from D&T required by applicable requirements of the Public Company Accounting Oversight Board regarding D&T’s communications with the audit committee concerning D&T’s independence from McDermott, and have discussed with D&T their independence from McDermott. We also considered whether the provision of nonaudit services to McDermott is compatible with D&T’s independence.
	•	We determined that there were no former D&T employees, who previously participated in the McDermott audit, engaged in a financial reporting oversight role at McDermott.
	•	We reviewed, and discussed with McDermott’s management and D&T, McDermott’s audited consolidated balance sheet at December 31, 2010, and consolidated statements of income, comprehensive income, cash flows and shareholders’ equity for the year ended December 31, 2010.

We conducted periodic executive sessions with McDermott’s internal audit department and regularly received reports regarding McDermott’s internal control procedures.

We reviewed, and discussed with McDermott’s management and D&T, management’s report and D&T’s report and attestation on internal control over financial reporting, each of which was prepared in accordance with Section 404 of the Sarbanes-Oxley Act.

We received and reviewed the written disclosures and the letter from D&T required by applicable requirements of the Public Company Accounting Oversight Board regarding D&T’s communications with the Audit Committee concerning D&T’s independence from McDermott, and have discussed with D&T its independence from McDermott. We also considered whether the provision of non-audit services to McDermott is compatible with D&T’s independence.

We determined that there were no former D&T employees, who previously participated in the McDermott audit, engaged in a financial reporting oversight role at McDermott.

We reviewed, and discussed with McDermott’s management and D&T, McDermott’s audited consolidated balance sheet at December 31, 2012, and consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for the year ended December 31, 2012.

Based on the reviews and actions described above, we recommended to the Board that McDermott’s audited financial statements be included in its Annual Report onForm 10-K for the year ended December 31, 20102012 for filing with the Securities and Exchange Commission.

THE AUDIT COMMITTEE

David A. Trice, Chairman

Stephen G. Hanks

D. Bradley McWilliams

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William H. Schumann, III

RATIFICATIONOF APPOINTMENTOF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRMFOR YEAR ENDING DECEMBER 31, 2013

Ratification of Appointment of Independent Registered Public Accounting Firm for Year Ending December 31, 2011(ITEM 3)

(Item 5)

Our Board of Directors has ratified the decision of the Audit Committee to appoint Deloitte & Touche LLP (“D&T”) to serve as the independent registered public accounting firm to audit our financial statements for the year ending December 31, 2011.2013. Although we are not required to seek stockholder approval of this appointment, it has been our practice to do so. No determination has been made as to what action the Audit Committee and the Board of Directors would take if our stockholders fail to ratify the appointment. Even if the appointment is ratified, the Audit Committee retains discretion to appoint a new independent registered public accounting firm at any time if the Audit Committee concludes such a change would be in the best interests of McDermott. Representatives of Deloitte & Touche LLP are expected toD&T will be present at the Annual Meeting and will have an opportunity to make a statement if they desire to do so and to respond to appropriate questions.

For the years ended December 31, 20102012 and 2009,2011, McDermott paid Deloitte & ToucheD&T fees, including expenses and taxes, totaling $5,888,537$3,888,337 and $8,649,858,$3,929,356, which can be categorized as follows:

		2010				2009
Audit
The Audit fees for the years ended December 31, 2010 and 2009 were for professional services rendered for the audits of the consolidated financial statements of McDermott, the audit of McDermott’s internal control over financial reporting, statutory and subsidiary audits, reviews of the quarterly consolidated financial statements of McDermott and assistance with review of documents filed with the SEC		$	3,992,500	(1)		$	7,195,103
Audit-Related
The Audit-Related fees for the years ended December 31, 2010 and 2009 were for assurance and related services, employee benefit plan audits and advisory services related to Sarbanes-Oxley Section 404 compliance		$	518,205	(2)		$	271,405
Tax
The Tax fees for the years ended December 31, 2010 and 2009 were for professional services rendered for consultations on various U.S. federal, state and international tax matters, international tax compliance and tax planning, and assistance with tax examinations		$	1,232,498	(3)		$	916,131
All Other
The fees for All Other services for the years ended December 31, 2010 and 2009 were for professional services rendered for translation services and other advisory or consultation services not related to audit or tax		$	145,334	(4)		$	267,219
Total		$	5,888,537			$	8,649,858

(1)		Audit fees for 2010 include $215,000 of fees paid by McDermott attributable to the audit of B&W.
(2)		Audit-Related fees for 2010 include $480,205 of fees paid by McDermott attributable to audit-related services for B&W.
(3)		Tax fees for 2010 include $91,800 of fees paid by McDermott attributable to tax services for B&W.
(4)		All Other fees for 2010 include $140,000 of fees paid by McDermott attributable to other services for B&W.

		2012				2011
Audit
The Audit fees for the years ended December 31, 2012 and 2011 were for professional services rendered for the audits of the consolidated financial statements of McDermott, the audit of McDermott’s internal control over financial reporting, statutory and subsidiary audits, reviews of the quarterly consolidated financial statements of McDermott and assistance with review of documents filed with the SEC.		$	3,487,789			$	3,528,477
Audit-Related
The Audit-Related fees for the years ended December 31, 2012 and 2011 were for assurance and related services, employee benefit plan audits and advisory services related to Sarbanes-Oxley Section 404 compliance.		$	144,280			$	114,367
Tax
The Tax fees for the years ended December 31, 2012 and 2011 were for professional services rendered for consultations on various U.S. federal, state and international tax matters, international tax compliance and tax planning, and assistance with tax examinations.		$	211,268			$	286,512
All Other
The fees for All Other services for the year ended December 31, 2012 were for professional services rendered for translation services and other advisory or consultation services not related to audit or tax.		$	45,000			$	0
Total		$	3,888,337			$	3,929,356

It is the policy of our Audit Committee to preapprove all audit, review or attest engagements and permissible non-audit services to be performed by our independent registered public accounting firm, subject to, and in compliance with, thede minimisexception for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934 and the applicable rules and regulations of the SEC. Our Audit Committee did not rely on thede minimisexception for any of the fees disclosed above.

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Recommendation and Vote Required

Our Board of Directors recommends that stockholders vote “FOR” the ratification of the decision of our Audit Committee to appoint Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2011.2013. The proxy holders will vote all proxies received for approval of this proposal unless instructed otherwise. Approval of this proposal requires the affirmative vote of a majority of the outstanding shares of common stock present in person or represented by proxy and entitled to vote and actually voting on this proposal at the Annual Meeting. Because abstentions are not actual votes with respect to this proposal, they have no effect on the outcome of the vote on this proposal.

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SECURITY OWNERSHIPOF DIRECTORSAND EXECUTIVE OFFICERS

Security Ownership of Directors and Executive Officers

The following table sets forth the number of shares of our common stock beneficially owned as of February 28, 20112013 by each director or nominee as a director, and each Named ExecutiveNEO and all our directors and executive officers as a group, including shares that those persons have the right to acquire within 60 days on the vesting of restricted stock units or the exercise of stock options.

Name		Shares Beneficially Owned
John F. Bookout, III(1)			201,227
		Shares
		Beneficially
Name		Owned
Brandon C. Bethards Roger A. Brown(2)			085,887
John F. Bookout III Gary L. Carlson(1)(3)			34,24480,124
Roger A. Brown Perry L. Elders(2)(4)			68,904105,066
Ronald C. Cambre Stephen G. Hanks			33,93327,741
Gary L. Carlson Liane K. Hinrichs(3)(5)			21,572256,778
Perry L. Elders Stephen M. Johnson(4)(6)			261,011,472
John A. Fees D. Bradley McWilliams(5)(7)			36,44491,792
Stephen G. Hanks John T. McCormack(8)			10,758115,871
Liane K. Hinrichs(6) William H. Schumann, III			228,9535,979
Stephen M. Johnson(7) Mary Shafer-Malicki			316,39817,911
D. Bradley McWilliams(8) David A. Trice			64,80927,286
John T. Nesser(9)			617,046
Thomas C. Schievelbein(10)			97,246
Mary Shafer-Malicki			0
Michael S. Taff(11)			90,537
David A. Trice			10,303
All directors and executive officers as a group (23(15 persons)(12)(9)			2,095,8442,396,660

(1)		Shares owned by Mr. Bookout include 6,105 shares of common stock that he may acquire on the exercise of stock options, as described above.

(2)		Shares owned by Mr. Brown include 38,085 shares of common stock that he may acquire on the exercise of stock options, as described above.

(3)		Shares owned by Mr. Carlson include 8,39640,723 shares of common stock that he may acquire on the exercise of stock options, as described above, 13,13618,982 shares of common stock that he will acquire on the vesting of restricted stock units, as described above, and 40 shares of common stock held in the McDermott Thrift Plan.

(4)		Shares owned by Mr. Elders include 26 shares of common stock held in the McDermott Thrift Plan. Not included are 12,886 shares of common stock that Mr. Elders will acquire on the vesting of restricted stock units on May 13, 2011 and 20,09772,736 shares of common stock that he may acquire on the exercise of stock options, at any time after they vestas described above, 11,040 shares of common stock that he will acquire on May 13, 2011.
(5)		Shares owned by Mr. Fees include 17,796the vesting of restricted stock units, as described above, and 26 shares of common stock held in the McDermott Thrift Plan. Not included in this amount are 142,445 restricted stock units in which Mr. Fees is 100% vested, but which have not settled pursuant to the terms of his retention agreement.

(6)	(5)	Shares owned by Ms. Hinrichs include 62,231 restricted shares of common stock as to which she has sole voting power but no dispositive power, 42,30699,226 shares of common stock that she may acquire on the exercise of stock options, as described above, 57,76019,295 shares of common stock that she will acquire on the vesting of restricted stock units, as described above, and 2,8572,853 shares of common stock held in the McDermott Thrift Plan.

(7)	(6)	Shares owned by Mr. Johnson include 113,412 restricted shares of common stock as to which he has sole voting power but no dispositive power, 132,447522,715 shares of common stock that he may acquire on the exercise of stock options, as described above, 31,83073,687 shares of common stock that he will acquire on the vesting of restricted stock units, as described above, and 611610 shares of common stock held in the McDermott Thrift Plan.

(8)	(7)	Shares owned by Mr. McWilliams include 37,876900 shares of common stock that he may acquire on the exercise of stock options, as described above.

(9)	(8)	Shares owned by Mr. NesserMcCormack include 77,883 restricted shares of common stock as to which he has sole voting power but no dispositive power, 34,85971,403 shares of common stock that he may acquire on the exercise of stock options, as described above, 53,52615,912 shares of common stock that he will acquire on the vesting of restricted stock units, as described above, and 14,4801,249 shares of common stock held in the McDermott Thrift Plan.

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(10)		Shares owned by Mr. Schievelbein include 72,538 shares of common stock that he may acquire on the exercise of stock options, as described above.
(11)		Shares owned by Mr. Taff include 2,225 restricted shares of common stock as to which he has sole voting power but no dispositive power, 37,876 shares of common stock that he may acquire on the exercise of stock options, as described above, and 50,436 shares of common stock that he will acquire on the vesting of restricted stock units, as described above.
(12)	(9)	Shares owned by all directors and executive officers as a group include 261,151 shares of common stock as to which they have sole voting power but no dispositive power, 594,9141,012,528 shares of common stock that may be acquired on the exercise of stock options, as described above, 299,989159,685 shares of common stock that may be acquired on the vesting of restricted stock units, as described above, and 59,84122,183 shares of common stock held in the McDermott Thrift Plan.

Shares beneficially owned in all cases constituted less than one percent of the outstanding shares of common stock on February 28, 2011,2013, as determined in accordance withRule 13d-3(d)(1) under the Securities Exchange Act of 1934.

Security Ownership of Certain Beneficial OwnersSECURITY OWNERSHIPOF CERTAIN BENEFICIAL OWNERS

The following table furnishes information concerning all persons known by us to beneficially own 5% or more of our outstanding shares of common stock, which is our only class of voting stock outstanding:

Title of Class
				Amount and
				Nature of
				Beneficial				Percent of
Title of Class		Name and Address of Beneficial Owner		Amount and Nature of Beneficial Ownership				Percent of Class(1)
Common Stock		T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202			27,067,673	(2)			34,137,175(211.48	%
Common Stock		FMR LLC 82 Devonshire Street Boston, MA 02109		)	21,197,296	(3)			14.598.99	%
Common Stock		Artisan Partners Holdings LP 875 East Wisconsin Avenue, Suite 500 Milwaukee, WI 53202			14,650,762	(4)
Common Stock		BlackRock, Inc. 40 East 52nd Street New York, NY 10022			19,075,409(3	)			8.156.21	%
Common Stock		PRIMECAP Management Company 225 South Lake Ave., #400 Pasadena, CA 91101			13,123,360(4	)			5.61	%

(1)		Percent is based on outstanding shares of our common stock on February 28, 2011.2013.

(2)		As reported on a Schedule 13G/A filed with the SEC on February 10, 2011.6, 2013. TheSchedule 13G/A reports beneficial ownership of 34,137,17527,067,673 shares of our common stock by T. Rowe Price Associates, Inc. (“Price Associates”), which has sole voting power over 8,636,6096,777,407 shares and sole dispositive power over 34,137,17527,067,673 shares. These securities are owned by various individual and institutional investors, including T. Rowe Price Mid-Cap Growth Fund, which has sole voting power over 12,500,00012,507,800 shares, and sole dispositive power over no shares, for which T. Rowe Price Associates, Inc. serves as an investment adviser with power to direct investments and/or sole power to vote the securities. For the purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be the beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities.

(3)		As reported on Schedule 13G/A filed with the SEC on February 7, 2011. The Schedule 13G/A reports beneficial ownership of 19,075,409 shares of our common stock and sole voting power and sole dispositive power over 19,075,409 shares.
(4)		As reported ona Schedule 13G/A filed with the SEC on February 14, 2011.2013 by FMR LLC, Edward C. Johnson 3d and Fidelity Management & Research Company. According to the Schedule 13G, FMR LLC has sole voting power over 1,044,621 shares and sole dispositive power over 21,197,296 shares. Of the shares reported, 20,152,675 shares are beneficially owned by Fidelity Management & Research Company, an investment adviser and a wholly-owned subsidiary of FMR LLC, as a result of acting as investment advisor to various investment companies (collectively, the “Fidelity Funds”); and each of FMR LLC and Mr. Edward C. Johnson 3d exercise sole dispositive power and the Fidelity Funds’ Board of Trustees exercises sole voting power with respect to these shares. In addition, FMR LLC exercises sole voting power and sole dispositive power with respect to an additional 950,432 shares, and each of FMR LLC and Mr. Edward C. Johnson 3d exercises sole voting power and sole dispositive power with respect to an additional 94,189 shares.

(4)

As reported on a Schedule 13G/A filed with the SEC on February 6, 2013. The Schedule 13G/A reports beneficial ownership of 13,123,36014,650,762 shares of our common stock, soleshared voting power over 7,600,16014,082,788 shares and soleshared dispositive power over 13,123,36014,650,762 shares by Artisan Partners Holdings LP (“Artisan Holdings”). The Schedule 13G/A also reports that each of Artisan Investment Corporation (“Artisan Corp.”), Artisan Partners Limited Partnership (“Artisan Partners”), Artisan Investments GP LLC (“Artisan Investments”), ZFIC, Inc., Andrew A. Ziegler and Carlene M. Ziegler has shared voting power over 14,082,788 shares and shared dispositive power over 14,650,762 shares. Artisan Holdings, an investment adviser, is the sole limited partner of Artisan Partners; Artisan Investments is the general partner of Artisan Partners; Artisan Corp. is the general partner of Artisan Holdings; ZFIC is the sole stockholder of Artisan Corp.; and Mr. Ziegler and Ms. Ziegler are the principal stockholders of ZFIC.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Relationships and Related Transactions

Pursuant to our Code of Business Conduct, all employees (including our Named Executives)NEOs) who have, or whose immediate family members have, any direct or indirect financial or other participation in any business that competes with, supplies goods or services to, or is a customer, of McDermott, are required to disclose to us and receive written approval from our Corporate Ethics and Compliance department prior to transacting such business. Our employees are expected to make reasoned and impartial decisions in the workplace. As a result, approval of the business is denied if we believe that the employee’s interest in such business could influence decisions relative to our business, or have the potential to adversely affect our business or the objective performance of the employee’s work. Our Corporate Ethics and Compliance department implements our Code of Business Conduct and related policies and the Governance Committee of our Board is responsible for overseeing our Ethics and Compliance Program, including compliance with our Code of Business Conduct. Our Board members are also responsible for complying with our Code of Business Conduct. Additionally, our Governance Committee is responsible for reviewing the professional occupations and associations of our Board members and reviews transactions between McDermott and other companies with which our Board members are affiliated. To obtain a copy of our Code of Business Conduct, please see the “Corporate Governance” section above in this proxy statement.

During 2011, the Investment Committee of the McDermott Master Trust (the “Trust”), the funding

Certain

vehicle underlying the Retirement Plan, entered into an agreement with BlackRock Institutional Trust Company, N.A. (“BlackRock”), pursuant to which BlackRock agreed to manage the investment of our grant agreements for restricted stock and restricted stock units awarded under various long-term incentive plans provide that the withholding obligation of any applicable federal, state or other taxes that may be due on the vesting in the year ending December 31, 2011 of those awards be satisfied by the grantee returning to us the number of such vested shares having a fair market value equal to the amount of such taxes. Additionally, each of Messrs. Johnson,

Houser, McCormack, Mitchell, Nesser and Roll and Ms. Hinrichs has irrevocably elected to satisfy withholding obligations relating to all or a portion of any applicable federal, state orthe Trust assets. BlackRock is a subsidiary of BlackRock, Inc. and, collectively with certain other taxes that may be duesubsidiaries of BlackRock, Inc., owned approximately 6.36% of McDermott common stock on the vesting in the year ending December 31, 20112012 as reported on BlackRock, Inc.’s Schedule 13G/A filed with the SEC on February 5, 2013. The amount of certain sharesTrust assets under management with BlackRock may vary from time to time. As of restricted stock and restricted stock units awarded under various long-term incentive plans that do not provide for a withholding method inDecember 31, 2012, the same manner. These elections are subject to approvalvalue of the CompensationTrust assets under management with BlackRock was approximately $88.5 million. BlackRock receives a fee for investment management services for the portion of the Trust assets allocated to BlackRock. These fees are calculated quarterly in arrears by averaging the account’s prior three month-end market values and applying 25% of the annual fee schedule (6.0 basis points), or 1.5 basis points quarterly.

The Investment Committee of our Board, which approval was granted. Accordingly, this withholding method will applythe Trust is a fiduciary of the Retirement Plan appointed by McDermott’s subsidiary that maintains the Retirement Plan. The Investment Committee is responsible for the management and control of the Trust assets and is authorized to appoint fund managers under the terms of the Retirement Plan and the Trust. Selection of fund managers is performed with the assistance of a third-party investment consulting firm, in accordance with an aggregate of 205,316 shares held by Mr. Johnson, 142,445 shares held by Mr. Fees, 12,886 shares held by Mr. Elders, 13,136 shares held by Mr. Carlson, 12,964 shares held by Mr. Cummins, 119,901 shares held by Ms. Hinrichs, 19,452 shares held by Mr. Houser, 29,822 shares held by Mr. McCormack, 14,021 shares held by Mr. Mitchell, 120,469 shares held by Mr. Nesser,investment policy statement approved and 21,479 shares held by Mr. Roll. In the year ended December 31, 2010, a similar withholding method applied, including with respect to the exercise price and tax withholding on the exercise and hold of stock options prior to the Spin-off, to an aggregate of 30,995 shares held by Mr. Johnson, 566,507 shares held by Mr. Fees, 59,019 shares held by Mr. Taff, 93,810 shares held by Mr. Bethards, 11,805 shares held by Mr. Cummins, 66,862 shares held by Ms. Hinrichs, 19,613 shares held by Mr. Houser, 27,992 shares held by Mr. McCormack, 22,031 shares held by Mr. Mitchell, 162,684 shares held by Mr. Nesser and 20,342 shares held by Mr. Roll, that vested in the year ended December 31, 2010. Those elections were also approvedadopted by the CompensationInvestment Committee. We expect any transfers reflecting shares of restricted stock returned to us will be reported in the SEC filings made by those transferring holders who are obligated to report transactions in our securities under Section 16 of the Securities Exchange Act of 1934.

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Section 16(a) Beneficial Ownership Compliance

 

SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own 10% or more of our voting stock, to file reports of ownership and changes in ownership of our equity securities with the SEC and the New York Stock Exchange. Directors, executive officers and 10% or more holders are required by SEC regulations to furnish us with copies of all SectionSec-

tion 16(a) forms they file. Based solely on a review of the copies of those forms furnished to us, or written representations that no forms were required, we believe that our directors, executive officers and 10% or more beneficial owners complied with all Section 16(a) filing requirements during the year ended December 31, 2010, with

2012.

the exception of the following: (1) Mr. Stephen G. Hanks, Director, filed one late Form 4 to report open market purchases occurring in two broker-directed transactions; (2) Mr. Michael S. Taff, Former Senior Vice President and Chief Financial Officer, filed one late Form 4 reporting the settlement of cash-based deferred stock units; and (3) Mr. John T. Nesser, Executive Vice President and Chief Operating Officer, filed two late Forms 4, one of which reported tax withholding on the vesting of restricted stock, and the other of which reported the vesting of restricted stock units and tax withholding on such vesting.

 

Stockholders’ ProposalsSTOCKHOLDERS’ PROPOSALS

Any stockholder who wishes to have a qualified proposal considered for inclusion in our proxy statement for our 20122014 Annual Meeting must send notice of the proposal to our Corporate Secretary at our principal executive office no later than November 26, 2011.28, 2013. If you make such a proposal, you must provide your name, address, the number of shares of common stock you hold of record or beneficially, the date or dates on which such common stock was acquired and documentary support for any claim of beneficial ownership.

In addition, any stockholder who intends to submit a proposal for consideration at our 20122014 Annual Meeting, but not for inclusion in our proxy materials, or who intends to submit nominees for election as directors at the meeting must notify our Corporate Secretary. Under our By-Laws, such notice must (1) be received at our executive offices no earlier than November 8, 20112013 or later than January 7, 20122014, and (2) satisfy specified requirements. A copy of the pertinent By-Law provisions can be found on our Web site atwww.mcdermott.comat “Corporate“About Us — Leadership & Corporate Governance — Governance Policies.Corporate Governance.”

By Order of the Board of Directors,

LIANE K. HINRICHS

Secretary

 

Dated: March 25, 2011

28, 2013

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Appendix A

Mcdermott International, Inc.
Executive Incentive Compensation Plan

(As Amended and Restated March 1, 2011)

1. Plan.  This McDermott International, Inc. Executive Incentive Compensation Plan (this “Plan”) was adopted by McDermott International, Inc., a Panamanian corporation (the “Company”), to incentivize certain employees of the Company, its Subsidiaries or Affiliated Companies by enabling them to receive performance-based cash compensation.

2. Objectives.  This Plan is designed to attract and retain employees of the Company, its Subsidiaries and its Affiliated Companies and to stimulate the active interest of such persons in the development and financial success of the Company, its Subsidiaries and its Affiliated Companies. These objectives are to be accomplished by making cash awards under this Plan based on the achievement of certain performance goals. All awards payable under this Plan to Executive Officers are intended to be deductible by the Company under Section 162(m) (as such terms are defined below).

3. Definitions.  As used herein, the terms set forth below shall have the following respective meanings:

“Affiliated Company” means any corporation, joint venture, or other legal entity in which the Company, directly or indirectly, through one or more Subsidiaries, owns less than fifty percent but at least twenty percent of its voting control.

“Award Agreement” means (i) any written agreement (including in electronic form) between the Company and a Participant or (ii) any resolution of the Committee, in either case setting forth the terms, conditions and limitations applicable to a Performance Cash Award.

“Board” means the board of directors of the Company.

“Code” means the Internal Revenue Code of 1986, as amended.

“Committee” means the Compensation Committee of the Board, any successor committee thereto, such other committee of the Board as may be designated by the Board to administer this Plan including any subcommittee of the Board as designated by the Board.

“Disability” means permanent and total disability as determined under the Company’s long-term disability plan applicable to the Participant, or if there is no such plan applicable to the Participant, “Disability” means a determination of total disability by the Social Security Administration; provided that, in either case, the Participant’s condition also qualifies as a “disability” for purposes of Section 409A with respect to an Award subject to Section 409A.

“Employee” means an employee of the Company or any of its Subsidiaries or Affiliated Companies.

“Executive Officer” means a “covered employee” within the meaning of Section 162(m)(3) or any other executive officer designated by the Committee for purposes of exempting compensation payable under this Plan from the deduction limitations of Section 162(m).

“Participant” means an Employee to whom a Performance Cash Award has been made under this Plan.

“Performance Cash Award” or “Award” means the grant of any award to a Participant pursuant to such applicable terms, conditions and limitations as the Committee may establish in accordance with the objectives of this Plan, which award is subject to the attainment of one or more Performance Goals.

“Performance Goal” means a standard established by the Committee, to determine in whole or in part whether a Performance Cash Award shall be earned.

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“Section 162(m)” means Section 162(m) of the Code and any Treasury Regulations and guidance promulgated thereunder.

“Section 409A” means Section 409A of the Code and any Treasury Regulations and guidance promulgated thereunder.

“Separation from Service,” with respect to Awards that are subject to Section 409A, means a Participant’s Termination of Employment with the Company and any of its Subsidiaries or Affiliated Companies, other than by reason of death or Disability, that qualifies as a ‘separation from service’ for purposes of Section 409A. A Separation from Service will be deemed to occur where the Participant and the Company, its Subsidiary or its Affiliated Company reasonably anticipate that the bona fide level of services the Participant will perform (whether as an employee or as an independent contractor) will be permanently reduced to a level that is 49% or less of the average level of bona fide services the Participant performed during the immediately preceding 36 months (or the entire period the Participant has provided services if the Participant has been providing services to the Company and any of its Subsidiaries or Affiliated Companies for less than 36 months).

“Subsidiary” means any corporation, joint venture or other legal entity in which the Company, directly or indirectly, owns more than fifty percent (50%) of its voting control.

“Termination of Employment” means the termination of a Participant’s employment with, or performance of services for, the Company and any of its Subsidiaries or Affiliated Companies. Unless otherwise determined by the Committee, if a Participant’s employment with the Company, its Subsidiaries or its Affiliated Companies terminates but such Participant continues to provide services to the Company, its Subsidiaries or its Affiliated Companies in a non-employee capacity, such change in status shall not be deemed a Termination of Employment. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Company, its Subsidiaries and its Affiliated Companies do not constitute a Termination of Employment. If an Award is subject to Section 409A, however, Termination of Employment for purposes of that Award shall mean the Participant’s Separation from Service.

4. Eligibility.  All Employees are eligible for Performance Cash Awards under this Plan in the sole discretion of the Committee.

5. Administration.

(a) Authority of the Committee.  This Plan shall be administered by the Committee, which shall have the powers vested in it by the terms of this Plan, such powers to include the authority (within the limitations described in this Plan):

MCDERMOTT INTERNATIONAL, INC. 757 N. ELDRIDGE PKWY HOUSTON, TX 77079	•	to select the Employees to be granted Performance Cash Awards under this Plan;
	•	to determine the terms of Performance Cash Awards to be made to each Participant;
	•	to determine the time when Performance Cash Awards are to be granted and any conditions that must be satisfied before a Performance Cash Award is granted;
	•	to establish objectives and conditions for earning Performance Cash Awards;
	•	to determine the terms and conditions of Award Agreements (which shall not be inconsistent with this Plan) and, if required, who must sign each Award Agreement;
	•	to determine whether the conditions for earning a Performance Cash Award have been met and whether a Performance Cash Award will be paid at the end of an applicable performance period;
	•	except as otherwise provided in paragraph 10, to modify the terms of Performance Cash Awards made under this Plan;
	•	to determine if, when and under what conditions payment of all or any part of a Performance Cash Award may be deferred;
	•	to determine whether the amount or payment of a Performance Cash Award should be reduced or eliminated;

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	•	to determine the guidelinesand/or procedures for the payment of Performance Cash Awards;
	•	to determine whether a Performance Cash Award should qualify, regardless of its amount, as deductible in its entirety for federal income tax purposes, including whether a Performance Cash Award granted to an Executive Officer should qualify as performance-based compensation;
	•	to interpret and administer this Plan any instrument or agreement relating to, or Award made under this Plan;
	•	to establish, amend, suspend, or waive such rules and guidelines;
	•	to appoint such agents as it shall deem appropriate for the proper administration of this Plan; and
	•	to make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan.

The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Performance Cash Award in the manner and to the extent the Committee deems necessary or desirable to further Plan purposes. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole discretion and shall be final, conclusive and binding on all parties concerned.

(b) Limitation of Liability.  No member of the Committee or officer of the Company to whom the Committee has delegated authority in accordance with the provisions of paragraph 6 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by any officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute.

6. Delegation of Authority.  Except with respect to matters under Section 162(m) that are required to be determined or established by the Committee to qualify Performance Cash Awards to Executive Officers as qualified “performance-based compensation” the Committee may delegate to the Chief Executive Officer and to other senior officers of the Company or to such other committee of the Board its duties under this Plan pursuant to such conditions or limitations as the Committee may establish.

7. Performance Cash Awards.

(a) The Committee shall determine the type or types of Performance Cash Awards to be made under this Plan and shall designate from time to time the Participants who are to be the recipients of such Performance Cash Awards. Each Performance Cash Award shall be embodied in an Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion. All or part of a Performance Cash Award may be subject to conditions established by the Committee, which may include, but are not limited to, continuous service with the Company and its Subsidiaries. Except as otherwise provided in paragraph 13, upon the termination of employment by a Participant, any deferred, unvested or unpaid Performance Cash Awards shall be treated as set forth in the applicable Award Agreement.

The terms, conditions and limitations applicable to any Performance Cash Awards granted to Participants pursuant to this Plan shall be determined by the Committee, subject to the limitations specified below. The Committee shall set Performance Goals in its sole discretion which, depending on the extent to which they are met, will determine the amount of Performance Cash Awards that will be paid out to the Participant.

(i) Nonqualified Performance Cash Awards.  Performance Cash Awards granted to Employees that are not intended to qualify as qualified performance-based compensation under Section 162(m) shall be based on achievement of such Performance Goals and be subject to such terms, conditions and restrictions as the Committee or its delegate shall determine.

(ii) Qualified Performance Cash Awards.  Performance Cash Awards granted to Executive Officers under this Plan that are intended to qualify as qualified performance-based compensation under Section 162(m) shall be paid on account of the attainment of one or more pre-established, objective Performance Goals established and administered by the Committee in accordance with Section 162(m) prior to the earlier to occur of (x) 90 days after the commencement of the period of service to which the Performance Goal relates and (y) the lapse of 25% of the

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period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A Performance Goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a Performance Goal may be based on one or more business criteria that apply to an Executive Officer, one or more business units, divisions or sectors of the Company, or the Company as a whole, and if so desired by the Committee, by comparison with a peer group of companies. A Performance Goal may include one or more of the following and need not be the same for each Executive Officer:

	•	revenue and income measures (which include revenue, gross margin, income from operations, net income, net sales and earnings per share);
	•	expense measures (which include costs of goods sold, sales, general and administrative expenses and overhead costs);
	•	operating measures (which include volume, margin, breakage and shrinkage, productivity and market share);
	•	cash flow measures (which include net cash flow from operating activities and working capital);
	•	liquidity measures (which include earnings before or after the effect of certain items such as interest, taxes, depreciation and amortization, cash flow and free cash flow);
	•	leverage measures (which include equity ratio and net debt);
	•	market measures (including those relating to market price, stock price, total shareholder return and market capitalization measures);
	•	return measures (which include return on equity, return on assets, cash flow return on assets, cash flow return on capital, cash flow return on equity, return on capital and return on invested capital);
	•	corporate value measures (which include compliance, safety, environmental and personnel matters); and
	•	other measures such as those relating to acquisitions, dispositions or customer satisfaction.

Unless otherwise stated, such a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo, performance relative to a peer group determined by the Committee or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to Performance Goals and qualified Performance Cash Awards, it is the intent of this Plan to comply with Section 162(m), including, without limitation, Treasury Regulation § 1.162-27(e)(2)(i), as to grants to Executive Officers and the Committee in establishing such goals and interpreting this Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of Performance Goals applicable to qualified Performance Cash Awards, the Committee must certify in writing that applicable Performance Goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any qualified Performance Cash Awards made pursuant to this Plan shall be determined by the Committee to the extent permitted under Section 162(m). Unless an Award Agreement provides to contrary, the Committee reserves the right in its sole discretion to reduce the amount payable pursuant to a Performance Cash Award to any lesser amount, including zero.

(b) The Committee shall adjust the Performance Goals (either up or down) and the level of the Performance Cash Award that a Participant may earn under this Plan, to the extent permitted pursuant to Section 162(m), if it determines that the occurrence of external changes or other unanticipated business conditions have materially affected the fairness of the goals and have unduly influenced the Company’s ability to meet them, including without limitation, events such as material acquisitions, changes in the capital structure of the Company, and extraordinary accounting changes. In addition, Performance Goals and Performance Cash Awards shall be calculated without regard to any changes in accounting standards that may be required by the Financial Accounting Standards Board after such Performance Goals are established. Further, in the event a period of service to which a Performance Goal relates is less than 12 months, the Committee shall have the right, in its sole discretion, to adjust the Performance Goals and the level of Performance Cash Award opportunity.

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(c) Notwithstanding anything to the contrary contained in this Plan, the amount payable to a Participant under this Plan in respect of any one-year period shall not exceed $3,000,000.

8. Performance Cash Award Payment.

(a) General.  With the approval of the Committee and subject to paragraph 8(b), payment of Performance Cash Awards shall be made in the form of cash and shall be paid on or before March 15th of the year following the year in which Performance Goals are achieved. The payment of a Performance Cash Award may include such restrictions as the Committee shall determine.

(b) Deferral.  If permitted by the Committee, amounts payable in respect of Performance Cash Awards may be deferred and paid in accordance with the terms of the Company’s Director and Executive Deferred Compensation Plan (or any successor or similar plan), subject to the terms and conditions of such plan as it may be amended from time to time.

9. Taxes.  The Company shall have the right to deduct applicable taxes from any Performance Cash Award payment and withhold, at the time of delivery or vesting of cash under this Plan, an appropriate amount of cash for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes.

10. Amendment, Modification, Suspension or Termination.  The Board or the Committee may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would materially adversely affect the rights of any Participant under any Performance Cash Award previously granted to such Participant shall be made without the consent of such Participant and (ii) no amendment or alteration shall be effective prior to its approval by the shareholders of the Company to the extent shareholder approval is otherwise required by applicable legal requirements.

11. Assignability.  Unless otherwise determined by the Committee in the Award Agreement, no Performance Cash Award or any other benefit under this Plan shall be assignable or otherwise transferable. Any attempted assignment of a Performance Cash Award or any other benefit under this Plan in violation of this paragraph 11 shall be null and void.

12. Adjustments.  In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board may make such adjustments to Performance Cash Awards or other provisions for the disposition of Awards as it deems equitable, and shall be authorized, in its sole discretion, (i) to provide for the substitution of a new Performance Cash Award or other arrangement (which, if applicable, may be exercisable for such property or stock as the Board determines) for a Performance Cash Award or the assumption of the Performance Cash Award, (ii) to provide, prior to the transaction, for the acceleration of the vesting of the Performance Cash Award or (iii) to cancel any such Performance Cash Awards and to deliver to the Participants cash in an amount that the Board shall determine in its sole discretion.

13. Forfeiture.  An Award Agreement may provide that any or all Awards, including vested Awards, shall be forfeited, and a Participant shall be obligated to repay gains previously realized from Awards upon any event or condition established by the Committee. The Committee shall have the right to suspend any and all rights or benefits a Participant may have under an Award Agreement pending its investigation and final determination with regard to possible forfeiture or repayment events.

14. Unfunded Plan.  This Plan is unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash or rights thereto, nor shall this Plan be construed as providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash or rights thereto to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to a Performance Cash Award of cash or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge

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or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.

15. Section 409A of the Code.  It is intended that the payment of Performance Cash Awards under this Plan shall satisfy the short-term deferral exclusion from Section 409A, unless deferred in accordance with paragraph 8(b) in which case the Performance Cash Award shall be subject to the terms of the applicable of the Company’s Director and Executive Deferred Compensation Plan or other deferral plan, which is designed to be in compliance with Section 409A.

16. Governing Law.  Except to the extent preempted by U.S. federal law, the terms and provisions of this Plan shall be construed in accordance with the laws of the State of Texas, other than any conflicts of laws provisions thereof which would result in the application of the laws of any other jurisdiction.

17. No Right to Employment.  Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, a Subsidiary or an Affiliated Company to terminate any Participant’s employment or other service relationship at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company, any Subsidiary or any Affiliated Company.

18. Tax Consequences.  Nothing in this Plan or an Award Agreement shall constitute a representation by the Company to an Employee regarding the tax consequences of any Performance Cash Award received by an Employee under this Plan. Although the Company may endeavor to (i) qualify a Performance Cash Award for favorable U.S. or foreign tax treatment or (ii) avoid adverse tax treatment (e.g. under Section 409A), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or unavoidable tax treatment. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on holders of Performance Cash Awards under this Plan.

19. Successors.  All obligations of the Company under this Plan with respect to Performance Cash Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the businessand/or assets of the Company.

20. Effectiveness.  This Plan was previously amended and restated effective February 28, 2006. This Plan is effective March 1, 2011.

IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officer on the date first written above.

MCDERMOTT INTERNATIONAL, INC.

	By:	/s/  S.M. Johnson

	Title:	President and Chief Executive Officer

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VOTE BY INTERNET — -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m.P.M., Eastern Time, on May 5, 20116, 2013 (May 3, 20112, 2013 for participants in McDermott’s Thrift Plan). Have your proxy card in hand when you access the webWeb site and follow the instructions to obtain your records and to create an electronic voting instruction form. MCDERMOTT INTERNATIONAL, INC. VOTE BY PHONE —- 1-800-690-6903 757 N. ELDRIDGE PKWY Use any touch-tone telephone to transmit your voting instructions up until HOUSTON, TX 77079 11:59 p.m.P.M., Eastern Time, on May 5, 20116, 2013 (May 3, 20112, 2013 for participants in McDermott’s Thrift Plan). Have.Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, Using a blue or black ink pen, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: M32514-P06575 KEEP THIS PORTION FOR YOUR RECORDS

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

M55936-P34527                         KEEP THIS PORTION FOR YOUR RECORDS

DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY WHEN SIGNED AND DATED.

MCDERMOTT INTERNATIONAL, INC.

For All

Withhold All

For All Except

To withhold authority to vote for any individual All All Except nominee(s), mark “For All Except” and write the The Board of Directors recommends you vote FOR number(s) of the nominee(s) for whom authority is withheld on the line below. the following: 1. Election of Directors 0 0 0 Nominees: 01) John F. Bookout, III 05) D. Bradley McWilliams 02) Roger A. Brown 06) Thomas C. Schievelbein 03) Stephen G. Hanks 07) Mary Shafer-Malicki 04) Stephen M. Johnson 08) David A. Trice For Against Abstain

The Board of Directors recommends you vote FOR the following proposal: 2. Advisory vote on executive compensation. 0 0 0 1 Year 2 Years 3 Years Abstain The Boardfollowing:

1.

Election of Directors recommends you vote 1 YEAR on the following proposal: 3. Advisory vote to determine the frequency with which to hold advisory votes on executive compensation. 0 0 0 0 For Against Abstain

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Nominees:

01)  John F. Bookout, III

05)  D. Bradley McWilliams

02)  Roger A. Brown

06)  William H. Schumann, III

03)  Stephen G. Hanks

07)  Mary L. Shafer-Malicki

04)  Stephen M. Johnson

08)  David A. Trice

The Board of Directors recommends you vote FOR the following proposals: 4. Approval of our Executive Incentive Compensation Plan for tax deductibility reasons. 0 0 0 5.

For

Against

Abstain

2.

Advisory vote to approve named executive officer compensation.

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3.

Ratification of the appointment of Deloitte & Touche LLP as McDermott’s independent registered public accounting firm for the year ending December 31, 2011. 0 0 0 2013.

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The shares represented by this proxy when properly executed will be voted in the manner directed herein by the undersigned Stockholder(s).If no direction is made, this proxy will be voted FOR ALL for item 1, and FOR items 2 4 and 5, and 1 Year for item 3. If any other matters properly come before the meeting, including procedural matters and matters relating to the conduct of the meeting, the persons named in this proxy willare authorized to vote in their discretion.

For address changes and/or comments, please check this box and write them 0 on the back where indicated.

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Please indicate if you plan to attend this meeting. 0 0

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Yes

No

Please sign your name exactly as it appears hereon. When signing as attorney, executor, administrator, trustee, guardian or other fiduciary, please give full title as such. When signing as joint tenants, all parties in the joint tenancy must sign. If a signer is a corporation or partnership, please sign in full corporate or partnership name by duly authorized officer.

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date

 

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		McDermott International, Inc. Annual Meeting Friday, Tuesday, May 6, 20117, 2013 at 3:10:00 p.m. Intercontinental Miramara.m. The Westin Houston Hotel, Miramar Plaza, Balboa Avenue Panama City, Panama Birch Room 945 Gessner Road Houston, Texas 77024

		Dear Stockholder: McDermott International, Inc. encourages you to vote the shares electronically through the Internet or the telephone, which are available 24 hours a day, 7 days a week. This eliminates the need to return the proxy card. Your electronic vote authorizes the named proxies in the same manner as if you marked, signed, dated and returned the proxy card. If you choose to vote the shares electronically, there is no need for you to mail back the proxy card. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE M32515-P06575 www.proxyvote.com

IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG PERFORATION,

DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE

				M55937-P34527

McDERMOTT INTERNATIONAL, INC. This proxy is solicited on behalf of the Board of Directors Annual Meeting of Stockholders — Friday,- Tuesday, May 6, 2011 3:7, 2013 at 10:00 p.m. a.m. The undersigned hereby appoints Stephen M. Johnson and Liane K. Hinrichs, and each of them individually, as proxies, each with the power to appoint his or her substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stockcommon stock of MCDERMOTT INTERNATIONAL, INC. (“McDermott”) that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 3:10:00 p.m.a.m., local time, on Friday,Tuesday, May 6, 20117, 2013 at Intercontinental MiramarThe Westin Houston Hotel, Miramar Plaza, Balboa Avenue, Panama City, Panama,Birch Room, 945 Gessner Road, Houston, Texas 77024, and any adjournment or postponement thereof. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL OF THE NOMINEES LISTED UNDER ITEM 1 ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS, AND FOR EACH OF ITEMS 2 4 AND 5 AND FOR 1 YEAR FOR ITEM 3. THE PROXY HOLDERS NAMED ABOVE ALSO WILL VOTE IN THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF MCDERMOTT’S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 20102012 AND ITS NOTICE OF 20112013 ANNUAL MEETING AND RELATED PROXY STATEMENT. ATTENTION PARTICIPANTS IN MCDERMOTT’S THRIFT PLAN: If you hold shares of McDermott common stock through the McDermott Thrift Plan (the “Thrift Plan”), this proxy covers all shares for which the undersigned has the right to give voting instructions to Vanguard Fiduciary Trust Company (“Vanguard”), Trustee of the McDermott Thrift Plan. Your proxy must be received no later than 11:59 p.m. Eastern Time on May 3, 2011.2, 2013. Any shares of McDermott common stock held in the Thrift Plan that are not voted or for which Vanguard does not receive timely voting instructions, will be voted in the same proportion as the shares for which Vanguard receives timely voting instructions from other participants in the Thrift Plan. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE REPLY CARD ENVELOPE

Address Changes/Comments: ___________________________ ________________________ (If

(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) CONTINUED AND TO BE SIGNED ON REVERSE SIDE