Table of Contents

UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities

Exchange Act of 1934 (Amendment No. )

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Definitive Proxy Statement

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Soliciting Material Pursuant to§240.14a-12

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McDermott International, Inc.

(Name of Registrant as Specified In Its Charter)


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Table of Contents

















Notice of Annual Meeting
and
2018 Proxy Statement

 

 

 

(3)

Filing Party:

 

 

 



Table of Contents

Forward-Looking Statements

McDermott cautions that the statements in this proxy statement which are forward-looking, and provide other than historical information, involve risks, contingencies and uncertainties that may impact actual results of operations of McDermott. These forward-looking statements include, among other things, statements about backlog, to the extent backlog may be viewed as an indicator of future revenues, and about the expected benefits resulting from McDermott’s combination with Chicago Bridge & Iron Company N.V. and McDermott’s strategic objectives. Although we believe that the expectations reflected in those forward-looking statements are reasonable, we can give no assurance that those expectations will prove to have been correct. Those statements are made by using various underlying assumptions and are subject to numerous risks, contingencies and uncertainties which may cause actual results to differ materially from the forward-looking statements, including, among others: the possibility that the expected synergies from the combination will not be realized, or will not be realized within the expected time period; difficulties related to the integration of the two companies; the diversion of management time and attention on the post-combination integration efforts; adverse changes in the markets in which McDermott operates or credit markets; our credit ratings; the inability of McDermott to execute on contracts in backlog successfully; changes in project design or schedules; the availability of qualified personnel; changes in the terms, scope or timing of contracts; contract cancellations; change orders and other modifications and actions by customers and other business counterparties of McDermott; changes in industry norms; and adverse outcomes in legal proceedings, regulatory proceedings or enforcement matters. If one or more of these risks materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those expected. You should not place undue reliance on forward-looking statements. For a more complete discussion of these and other risk factors, please see McDermott’s annual and quarterly filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2017 and subsequent quarterly reports on Form 10-Q. Except to the extent required by applicable law, McDermott undertakes no obligation to update or revise any forward-looking statement.


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(4)  3

LETTER TO STOCKHOLDERS

To My Fellow Stockholders:

2017 was not only a year of continued financial success, but also a year of tremendous strategic and operational significance for McDermott. Most notably, in December 2017, we announced our agreement with Chicago Bridge & Iron Company N.V (“CB&I”) to combine to create a premier, fully integrated, onshore-offshore company, with a broad engineering, procurement, construction and installation (EPCI) service offering and market leading technology portfolio. Our combination with CB&I closed effective May 10, 2018, which marks a big step toward our goal of being a true global leader in our industry. That transaction, together with our notable 2017 financial results, demonstrates our unwavering dedication to the successful execution of our strategy of maintaining a sustainable, profitable and growth-oriented business with a focus on stockholders, customers and other stakeholders. With the completion of the combination, we have substantially diversified our capabilities and are well-positioned globally in attractive, high-growth markets.

We are pioneering a new kind of company that can work together with our customers to provide integrated, end-to-end solutions—from wellhead to storage tank—that deliver the quality, efficiency and certainty needed to keep their businesses growing. Our strategic objectives are to:

Growrevenue and earnings by leveraging our end-to-end onshore/offshore solutions offerings to global energy customers, steadily expanding our EPC portfolio in petrochemical and refining by capitalizing on pull-through opportunities provided by our technology business, and maximizing the benefit of revenue and cost synergies, with relentless focus on risk management and operating efficiency.
Expand our leadership position in served markets and technology.
Sustain our tier-one safety performance.
Maintain a disciplined capital allocation plan by reducing total debt and maintaining a competitive level of capital investment.

Our 2017 executive compensation programs were thoughtfully structured to align with and drive our operational performance and achieve financial targets. In making compensation decisions for 2017, the Compensation Committee considered our operating strategy, goals and significantly improved operational and financial performance, with appreciation of the prevailing macro oil and gas environment and comments received during stockholder outreach conducted over the past few years.

We also continued our thoughtful, forward-looking and stockholder informed approach to corporate governance in 2017. In line with our belief that an effective Board cannot remain static, Philippe Barril was appointed to the Board as a new independent director in September 2017. Then, with the closing of the combination, in May 2018, we welcomed five new, experienced and qualified members to our Board: Messrs. Forbes I.J. Alexander, L. Richard Flury, W. Craig Kissel and James H. Miller and Ms. Marsha C. Williams. Together, these new directors bring a valuable mix of diverse skill-sets to our Board that will help to support our long term strategy.

“McDermott’s remarkable transformation, which most recently included the strategic and operational milestones achieved in 2017 and the combination with CB&I in 2018, reflects the commitment of our Board, executive management and employees to carrying out our operating strategy in a difficult macro environment.”

Thanks to their efforts, we believe that, today, McDermott has the global reach, integrated technology, engineering expertise and construction experience to design and build the energy infrastructure of the future.

I am pleased to invite you to attend McDermott’s 2018 Annual Meeting of Stockholders. The accompanying Proxy Statement further highlights key activities and accomplishments of 2017 and contains information on the matters for which we are seeking your vote at this year’s Annual Meeting. On behalf of the Board, our executive management team, and the entire McDermott organization, thank you for your continued interest and support, as we seek to leverage the momentum of our recent strategic and operational accomplishments and look to the future.

Sincerely yours,

Gary P. Luquette
Independent Chair of the Board
August 10, 2018

Date Filed:YOUR VOTE IS IMPORTANT.

Whether or not you plan to attend the meeting, please take a few minutes now to vote your shares.



www.mcdermott.com


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4

McDERMOTT INTERNATIONAL, INC.
757 N. Eldridge Pkwy.
Houston, Texas 77079

NOTICE OF 2018 ANNUAL MEETINGOF STOCKHOLDERS

Time                                 

Location                      

LOGO

8:00 a.m., local time,
on Wednesday, September 26, 2018

McDermott International, Inc.

David Dickson

757 N. Eldridge Pkwy.

President and Chief Executive Officer

Houston, Texas 77079Claridge’s
Brook Street
Mayfair
London W1K 4HR
United Kingdom

March 27, 2015

Dear Stockholder:

Record Date and Voting
You are cordially invitedentitled to attend this year’s Annual Meetingvote if you were a stockholder of Stockholdersrecord at the close of McDermott International, Inc., which will be heldbusiness on Friday, May 8, 2015, at The Westin Houston Hotel, 945 Gessner Road, Houston, Texas 77024, commencing at 10:00 a.m., local time. The noticeJuly 30, 2018 (the “Record Date”). Each share of Annual Meetingcommon stock is entitled to one vote for each director nominee and proxy statement following this letter describeone vote for each of the mattersother proposals to be actedvoted on at the meeting.

McDermott is utilizing the Securities and Exchange Commission’s Notice and Access proxy rule, which allows companies to furnish proxy materials via the Internet as an alternative to the traditional approach of mailing a printed set to each stockholder. In accordance with these rules, we have sent a Notice of Internet Availability of Proxy Materials to all stockholders who have not previously elected to receive a printed set of proxy materials. The Notice contains instructions on how to access our 2015 Proxy Statement and Annual Report to Stockholders, as well as how to vote either online, by telephone or in person at the 2015 Annual Meeting.

It is very important that your There were 180,536,768 shares are represented and voted at the Annual Meeting. Please vote your shares by Internet or telephone, or, if you received a printed set of materials by mail, by returning the accompanying proxy card, as soon as possible to ensure that your shares are voted at the meeting. Further instructions on how to vote your shares can be found in our Proxy Statement.

Thank you for your support of our company.

Sincerely yours,

LOGO

DAVID DICKSON

YOUR VOTE IS IMPORTANT.

Whether or not you plan to attend the meeting, please take a few minutes now to vote your shares.


Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on May 8, 2015.

The proxy statement and annual report are availablecommon stock outstanding on the Internet at www.proxyvote.com.

The following information applicable to the Annual Meeting may be found in the proxy statement and accompanying proxy card:

The date, time and location of the meeting;

A list of the matters intended to be acted on and our recommendations regarding those matters;

Any control/identification numbers that you need to access your proxy card; and

Information about attending the meeting and voting in person.


McDERMOTT INTERNATIONAL, INC.

757 N. Eldridge Pkwy.

Houston, Texas 77079

NOTICE OF 2015 ANNUAL MEETING OF STOCKHOLDERS

Record Date.

Time and Location

10:00 a.m., local time, on Friday, May 8, 2015

The Westin Houston Hotel

945 Gessner Road

Houston, Texas 77024

Items of Business

11.

To elect eighteleven members to our Board of Directors, each for a term extending until our 2019 Annual Meeting of one year.

Stockholders.

22.

To conduct an advisory vote to approve named executive officer compensation.

33.

To ratify our Audit Committee’s appointment of DeloitteErnst & ToucheYoung LLP as our independent registered public accounting firm for the year ending December 31, 2015.

2018.

44.

To transact such other business that properly comes before the meeting or any adjournment thereof.

Notice and Access
Instead of mailing a printed copy of our proxy materials, including our Annual Report on Form 10-K, to each stockholder of record, we are providing access to these materials via the Internet. This reduces the amount of paper necessary to produce these materials, as well as the costs associated with mailing these materials to all stockholders. Accordingly, on August 10, 2018, we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to all stockholders of record as of the Record Date, and posted our proxy materials on the Web site referenced in the Notice (www.proxyvote.com). As more fully described in the Notice, all stockholders may choose to access our proxy materials on the Web site referred to in the Notice and/ or may request a printed set of our proxy materials. In addition, the Notice and Web site provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.

Record Date

You are entitled to vote if you were a stockholder of record at the close of business on March 12, 2015.

Attending the Annual Meeting
See page 71, “Questions and Answers About the Annual Meeting and Voting” for details.

Notice and Access

Instead of mailing a printed copy of our proxy materials, including our Annual Report, to each stockholder of record, we are providing access to these materials

By Order of the Board of Directors,

John M. Freeman
Corporate Secretary

August 10, 2018

Proxy Voting

Your vote is important. Please vote via the Internet. This reduces the amount of paper necessary to produce these materials, as well as the costs associated with mailing these materials to all stockholders. Accordingly, on March 27, 2015, we began mailing a Notice of Internet Availability of Proxy Materials (the “Notice”) to all stockholders of record as of March 12, 2015, and posted our proxy materials on the Web site referenced in the Notice (www.proxyvote.com). As more fully described in the Notice, all stockholders may choose to access our proxy materials on the Web site referred to in the Notice and/or may request a printed set of our proxy materials. In addition, the Notice and Web site provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.

Proxy Voting

Your vote is important. Please vote your proxy promptly so your shares can be represented, even if you plan to attend the Annual Meeting. You can vote by Internet, by telephone or by requesting a printed copy of the proxy materials and using the proxy card enclosed with the printed materials.

Meeting Admission

Attendance at the meeting is limited to stockholders and beneficial owners as of the record date or duly appointed proxies. No guests will be admitted, except for guests invited by McDermott. Registration will begin at 9:00 a.m., and the meeting will begin promptly at 10:00 a.m. If your shares are held in “street name” through a broker, bank, trustee or other nominee, you are a beneficial owner, and beneficial owners will need to show proof of beneficial ownership, such as a copy of a brokerage account statement, reflecting stock ownership as of the record date in order to be admitted to the meeting. If you are a proxy holder for a stockholder, you will need to bring a validly executed proxy naming you as the proxy holder, together with proof of record ownership of the stockholder naming you as proxy holder. Please note that you may be asked to present valid photo identification, such as a valid driver’s license or passport, when you check in for registration. No cameras, recording equipment or other electronic devices will be allowed to be brought into the meeting room by stockholders or beneficial owners.

BY INTERNET

By Order of the Board of Directors,

LOGO

LIANE K. HINRICHS

Secretary

March 27, 2015


PROXY STATEMENT FOR

2015 ANNUAL MEETING OF STOCKHOLDERS

TABLE OF CONTENTS

www.proxyvote.com
  
PageBY TELEPHONE
Toll-free 1-800-690-6903
 
BY MAIL
Follow instructions on your proxy card

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on September 26, 2018.

The proxy statement and Annual Report on Form 10-K are available on the Internet atwww.proxyvote.com.

The following information applicable to the Annual Meeting may be found in the proxy statement and accompanying proxy card:

The date, time and location of the meeting;
A list of the matters intended to be acted on and our recommendations regarding those matters;
Any control/identification numbers that you need to access your proxy card; and
Information about attending the meeting and voting in person.


2018 PROXY STATEMENT


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5

ABOUT MCDERMOTT

McDermott is a premier, fully-integrated provider of technology, engineering and construction solutions to the energy industry. For more than a century, customers have trusted McDermott to design and build end-to-end infrastructure and technology solutions—from the wellhead to the storage tank—to transport and transform oil and gas into the products the world needs today. Our proprietary technologies, integrated expertise and comprehensive solutions deliver certainty, innovation and added value to energy projects around the world.

Customers rely on McDermott to deliver certainty to the most complex projects, from concept to commissioning. We call it the “One McDermott Way.”

McDermott at a Glance

Learn more about our strategy and how we are building a new kind of company
at https://www.mcdermott.com/Who-We-Are

www.mcdermott.com


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6

CORPORATE RESPONSIBILITY

McDermott focuses its corporate responsibility efforts in three main areas:

1.

Conducting our global business to the highest ethical standards;

2.

Being a good neighbor around the world where our employees live and work through responsible environmental practices and community involvement; and

3.

Providing a safe, healthy and hospitable work environment that embraces diversity and offers career development opportunities.


ETHICAL BUSINESS PRACTICES

McDermott is strongly committed to conducting its worldwide business activities in accordance with high ethical standards that are derived from such fundamental values as honesty, integrity, reliability, fairness, mutual respect and trust. We believe this is the right way to operate our businesses. The Board of McDermott has adopted a Code of Ethics and Corporate Governance Guidelines that ensure compliance with applicable laws and regulations and encourage the highest standards of integrity in the conduct of our business.

Good Neighbor Practices

For McDermott, being a good neighbor means protecting the environment at our jobsites and facilities worldwide. It also means improving the quality of life in the communities where our employees live and work through community involvement, work force development initiatives, and using local suppliers when possible.

Proxy SummaryCommunity involvement.McDermott employees volunteer their time to health, educational and human service organizations in communities across the globe, and we support social, economic and cultural development initiatives in conjunction with many of our major projects. Local operations identify those with the greatest need and develop partnerships to support the health, safety and well-being of their neighbors. Employees are generous with their time and often volunteer after-hours or on weekends to support the greater good.

Responsible Workplace Practices

McDermott is committed to treating every employee with respect and dignity and providing a safe, hospitable and quality work environment. We recognize that a motivated, well-trained, diverse workforce is a significant competitive advantage.

Health and safety.Safety is a core value at McDermott. It is the responsibility of every employee, and zero incidents is our foremost goal. We implement rigorous controls through every phase of our projects, and our employees receive extensive training on how to perform their jobs safely, properly and in compliance with environmental regulations. We are committed to fostering a culture where open communication about safety by all personnel is considered normal, and accountability for safety performance is applied appropriately.

 i

QuestionsRespecting diversity.In the course of our more than 125-year history, McDermott has assembled a talented workforce from locations around the world, intermingling employees from all cultures and Answers abouttraditions to best leverage their talent and expose them to career development opportunities. On many of our larger jobs, the Annual Meetingproject team often comprises individuals of Stockholders and Voting25 or more different nationalities working together toward a common goal. Many employees who first joined McDermott in their home country subsequently move with us from project to project around the world.

 1

Item 1 — ElectionHospitable workplace.McDermott is firmly committed to a workplace free from discrimination, hostility or harassment. The company has a policy of Directorspromoting equal opportunity in employment without discrimination based upon race, color, religion, sex, gender, age, national origin, disability or any other status protected under applicable law. Discrimination or harassment based upon any of these characteristics is prohibited and will not be tolerated.

 6

Election Process

6

Director Qualifications

6

Director Nominations

6

2015 Nominees

7

Corporate GovernanceEmployee development.

11

Director Independence

11

Executive Sessions

12

Communications WithMcDermott is committed to providing our employees with a work environment that is conducive to development and career growth. We provide employees with numerous opportunities to improve their skills, further their education and advance within the Boardcompany.

12

Board of Directors and Its Committees

12

The Board’s Role in Risk Oversight

15

Compensation Policies and Practices and Risk

15

Compensation Committee Interlocks and Insider Participation

16

Compensation of Directors

17

Director Compensation Table

17

Executive Officer Profiles

19

Compensation Discussion and Analysis

26

Executive Summary

26

How We Make Compensation Decisions

32

Compensation Philosophy

32

Impact of 2014 Say-on-Pay Vote on Executive Compensation

32

Defining Market Range Compensation – Benchmarking

33

What We Pay and Why: Elements of Total Direct Compensation

34

2014 NEO Compensation

39

2014 Other Compensation Elements

42

Other Compensation Policies and Practices

45

Survey Peer Group

47

Compensation Committee Report

48

Compensation of Executive Officers

49

Summary Compensation Table

49

Grants of Plan-Based Awards

51

Outstanding Equity Awards at Fiscal Year End

52

Option Exercises and Stock Vested

54

Pension Benefits

55

Nonqualified Deferred Compensation

57

Potential Payments Upon Termination or Change in Control

58

Item 2 — Advisory Vote to Approve NEO Compensation

64

Audit Committee Report

66

Item  3 — Ratification of Appointment of Independent Registered Public Accounting Firm for Year Ending December 31, 2015

67

Security Ownership of Directors and Executive Officers

69

Security Ownership of Certain Beneficial Owners

70

Certain Relationships and Related Transactions

71

Section 16(a) Beneficial Ownership Compliance

71

Stockholders’ Proposals

72


2018 PROXY STATEMENT


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7

PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully. As used in this proxy statement, unless the context otherwise indicates or requires, references to “McDermott,” “we,” “us,” and “our” mean McDermott International, Inc. and its consolidated subsidiaries.

We first sent or provided this proxy statement and the form of proxy for our 2018 Annual Meeting of Stockholders

to our stockholders beginning on August 10, 2018.

•    Time and Date:

10:00 a.m., local time, May 8, 2015

•    Place:

The Westin Houston Hotel

945 Gessner Road

Houston, Texas 77024

•    Record Date:

March 12, 2015

•    Voting:

Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on.ITEM 1
ELECTION OF DIRECTORS

ItemsThe Board of BusinessDirectors has nominated eleven candidates, each for thea term extending until our 2019 Annual Meeting

of Stockholders, and recommends that stockholders vote for each nominee based on their specific background, experience, qualifications, attributes and skills.

    
Item of BusinessThe Board recommends a voteFOReach director nomineePage 13

Board and Corporate Governance Highlights

We are committed to maintaining the highest standards of corporate governance. The Board has built a strong and effective governance framework, which has been designed to promote the long-term interests of stockholders and support Board and management accountability.

DIRECTOR NOMINEES

Director
Since
CommitteesOther Current Public
Company Boards
Forbes I.J. Alexander,58Independent
Chief Financial Officer Jabil, Inc.
2018
Audit
None
Philippe Barril,53Independent
Chief Operating Officer SBM Offshore, N.V.
2017
Audit
Transition (Chair)
None
Board VoteJohn F. Bookout, III,64Independent
RecommendationPartner Apollo Global Management, LLC
2006
Governance
None
PageDavid Dickson,50
ReferencePresident, Chief Executive Officer McDermott
2013
Transition
None
L. Richard Flury,71Independent
Chief Executive Officer Gas Power and Renewables BP plc (retired)
2018
Compensation
Governance (Chair)
Callon Petroleum Corporation
W. Craig Kissel,67Independent
President, Commercial Systems Trane, Inc. (retired)
2018
Compensation (Chair)
Watts Water Technologies
Gary P. Luquette,62Independent
President, Chief Executive Officer Frank’s International N.V. (retired)
Non-Executive Chair of the Board McDermott
2013
Compensation
Transition
Southwestern Energy Company
Apergy Corporation
James H. Miller,69Independent
Chairman PPL Corporation (retired)
2018
Governance
AES Corporation
Crown Holdings, Inc.
William H. Schumann, III,68Independent
Executive Vice President FMC Technologies, Inc. (retired)
2012
Audit (Chair)
Avnet, Inc.
Andeavor
Mary L. Shafer-Malicki,57Independent
Senior Vice President, Chief Executive Officer BP Angola (retired)
2011
Compensation
Governance
Wood PLC
QEP Resources, Inc.
Marsha C. Williams,67Independent
Senior Vice President, Chief Financial Officer Orbitz Worldwide, Inc.
(retired)
2018
Audit
Fifth Third Bancorp
Modine Manufacturing Company, Inc.

www.mcdermott.com


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8PROXY SUMMARY

CURRENT BOARD SNAPSHOT

BOARD INDEPENDENCE

1. Election of directors

FOR Each
Director Nominee
610Independent Directors

2. Advisory vote to approve named executive officer compensation

FOR64

3. Ratification of Deloitte & Touche LLP as auditor for 2015

FOR67
           

Your vote is important. Please vote your proxy promptly so your shares can be represented, even if you plan to attend the Annual Meeting. Stockholders of record can vote by Internet, by telephone, or by requesting a printed copy of the proxy materials and using the proxy card enclosed with the printed materials.

Item 1 — Election of Directors

The Board of Directors has nominated eight candidates, each for a one-year term. Our Board of Directors recommends that stockholders vote “For” each of the nominees named below.

                     
NameAge Director
Since
 Independent Committee Memberships
AuditCompensationFinanceGovernance
                     

John F. Bookout, III

 61   2006   X  XX

Roger A. Brown

 70   2005   X  XX

David Dickson

 47   2013  

Stephen G. Hanks

 64   2009   X  XChairman

Gary P. Luquette

 59   2013   X  X

William H. Schumann, III

 64   2012   X  ChairmanX

Mary L. Shafer-Malicki

 54   2011   X  ChairmanX

David A. Trice

 67   2009   X  X Chairman 
                     

i


2014 Compensation Program and Realizable Value of Performance-Based Awards

As in prior years, the Compensation Committee continued to believe that a significant portion of a 2014 Named Executive Officer’s (“NEO’s”) compensation should be performance-based, designed for the purpose of aligning the interests of our NEOs with those of stockholders by rewarding performance that meets or exceeds established goals, with the ultimate objective of increasing stockholder value. Following an operating loss in 2013, a challenging outlook for 2014 and the anticipated need for significant strategic and operational actions to commence the turnaround of our business, the Compensation Committee implemented several changes to McDermott’s compensation programs for 2014. Those changes took into consideration our need for the 2014 compensation arrangements to attract, develop, retain and motivate the NEOs and other executive officers during our turnaround efforts, including challenges associated with stabilizing our company, delivering improved financial and operational performance and repositioning McDermott for long-term growth.

Reflecting the Compensation Committee’s philosophy and these considerations, compensation arrangements in 2014 provided for the continuing use of three elements of target total direct compensation:

annual base salary;

annual incentive, with performance metrics under our Executive Incentive Compensation Plan, or EICP, designed to align with near-term operational priorities, composed entirely of performance-based compensation; and

long-term incentive, or LTI, with emphasis on restricted stock units to provide stability and support the retention of key employees during the organizational and leadership transition.

McDermott’s financial performance resulted in revenues for the year ended December 31, 2014 of $2.3 billion, operating income of $8.6 million and year end backlog of $3.6 billion. Notwithstanding the significant improvement in performance over the financial results achieved for the year ended December 31, 2013, this performance, inIn accordance with our Compensation Committee’s philosophy and program, and based onCorporate Governance Guidelines,10of our11directors are independent,including the value of our common stock at year end, resulted in:

Financial performance under the EICP that (as per the EICP) would have resulted in bonus pool funding of 1.015x. This amount was, following the recommendation of executive management (with consideration of our non-attainmentChair of the threshold level for the order intake component of the financial performance goals), reduced by over 50% by the Compensation Committee, through the exercise of its discretion, to funding of 0.5x.

NEO performance shares granted in 2011, 2012, 2013 and 2014 having no realizable value as of December 31, 2014.

ii


The following table summarizes the 2014 performance-based compensation opportunities, as compared to the realizable values of such opportunities as of December 31, 2014, for each of our NEOs:

2014 Performance-Based Compensation Opportunity vs.

Realizable Value as of December 31, 2014

LOGO

Board.

(1)

Opportunity values for EICP are presented using the NEOs’ target EICP award levels.

TENURE BALANCE

(2)1
10 years
or more

Opportunity values for performance shares are presented using the grant date fair value of the respective awards.

3
1 to 5
years
(3)

The 2014 realizable values shown above are measured as of December 31, 2014. The realizable value of EICP awards shown above is based on each NEO’s actual earned EICP award. The realizable value of performance share awards shown above is based on the estimated payout as a percent of target based upon an extrapolation of 2014 operating income of $8.6 million over the three-year performance period, or 0% of the performance shares granted in 2014, multiplied by the closing price of our common stock as reported on the NYSE as of December 31, 2014 ($2.91). This value does not take into account our forecast or expectations for actual performance over the three-year performance period. The number of the performance shares granted in 2014 that ultimately vest, if any, will be determined by reference

2
5 to performance goals over a three-year period and may be more or 10
years
5
less than indicated in the table. The vesting of any of these performance shares would impact the future realizable value of these performance share awards.


1 year

CompensationOur Board is appropriately refreshed, and Corporate Governance Policiesour directors bring a balance of experience and Proceduresfresh perspectives.

RELEVANT SKILLS AND EXPERIENCE

11Executive Leadership
11Energy/Oilfield Services
9Public Company Board
6Experience with Core Customers
10International Operations
7Financial Oversight Responsibilities
10Corporate Governance

TheOur directors bring leadership experience in fields relevant to McDermott.


CORPORATE GOVERNANCE HIGHLIGHTS

McDermott’s Board has implemented several policies and structures that we believe are “best practices”among best practices in corporate governance. The Corporate Governance section of this proxy statement beginning on page 13 describes our governance including:

Separatingframework, which includes the Chairmanfollowing:

CURRENT BOARD AND GOVERNANCE INFORMATION

11
Size of Board
10
Number of
Independent Directors
15
Board Meetings
Held in 2017
72
Mandatory
Retirement Age
62
Average Age
of Directors

Separate Chair and CEO

Annual Board and Committee Evaluations

Independent Directors Meet in Executive Sessions

Board Orientation

Succession Planning Oversight

Board Risk Oversight

Code of Conduct for Directors, Officers and Employees

Stock Ownership Guidelines for Directors and Executive Committee, or EXCOM, Members

Anti-Hedging and Pledging Policies

Clawback Policy and Forfeiture Provisions

Stockholder Outreach Program



2018 PROXY STATEMENT


Table of the Board and Chief Executive Officer roles;Contents

PROXY SUMMARY9

ITEM 2
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

Holding Board meeting executive sessions with independent directors only present;

Maintaining minimum stock ownership guidelines applicable to directors and executive officers;

Approving a policy prohibiting all directors, officers and employees from engaging in “short sales” or trading in puts, calls or other options on McDermott’s common stock, and from engaging in hedging transactions and from holding McDermott shares in a margin account or pledging McDermott shares as collateral for a loan;

Eliminating excise tax gross-ups; and

The Compensation Committee of the Board of Directors engaging Pay Governance LLC, an independent executive compensation consultant.

iii


Item 2 — Advisory Vote to Approve Named Executive Officer Compensation

Our stockholders have the opportunity to cast a non-binding advisory vote on the compensation of our named executive officers. Last year, over 86% of the votes cast on this proposal were in favor of our executive compensation program. We recommend that you review our Compensation Discussion and Analysis beginning on page 26,35, which explains in greater detail the philosophy of the Compensation Committee and its actions and decisions during 2014in 2017 regarding our compensation programs. While the outcome of this proposal is non-binding, the Board and Compensation Committee will consider the outcome of the vote when making future compensation decisions.

The Board recommends a voteFORthis proposalPage 35

2017 OPERATING STRATEGY AND GOALS

Since David Dickson’s appointment as Chief Executive Officer in December 2013, McDermott has transformed as a company and positioned itself for the anticipated upturn in the oilfield services industry through a turnaround, stabilization of the business and optimization via cost-reduction initiatives. McDermott has also been focused on sustainability and growth, through strategic asset investment and the combination with Chicago Bridge & Iron Company N.V. (“CB&I”) announced in late 2017, which closed effective May 10, 2018.

1          2          3
StabilizationOptimizationLooking Ahead
New leadership took countermeasures to stop multi-year EBIT decline
Stronger relationships with key customers—signaled a transformation of McDermott
Undertook cost-reduction programs and business development efforts across existing business lines
Additional measures taken to improve process and asset refreshment
Maintain strong focus on strengthening customer relationships
Maintain strong focus on operational and cost effectiveness

In 2017 our operating strategy was to maintain a sustainable, profitable and growth-oriented business, with a focus on stockholders, customers and other stakeholders. In furtherance of this strategy, our 2017 goals were to:

increase operating income via improved project execution;
increase cash flow by prioritizing our liquidity needs;
increase backlog and bookings to support our future business;
promote pricing discipline on order intake operating margins; and
efficiently allocate capital to profitable investments to grow our business.

Solid, consistent operational performance driven by the One McDermott Way, consistent focus on liquidity and strong customer relationships drove the execution of McDermott’s strategy and goals in 2017.

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Table of Contents

10PROXY SUMMARY

2017 Executive Compensation Highlights

The Compensation Committee is committed to targeting reasonable and competitive total direct compensation for our Named Executive Officers, or NEOs, with a significant portion of that compensation being performance-based. Our Boardcompensation programs are designed to align with and drive achievement of Directors recommends thatour business strategies and provide competitive opportunities. Accordingly, achievement of most of those opportunities depends on the attainment of performance goals and/or stock price performance. McDermott’s compensation programs are designed to provide compensation that:

Attracts, motivates and retains high-performing executivesProvides performance-based incentives to reward achievement of short and long-term business goals and strategic objectives while recognizing individual contributionsAligns the interests of our executives with those of our stockholders

The Compensation Committee has designed and administered compensation programs aligned with this philosophy and is committed to continued outreach to stockholders vote “For”to understand and address comments on our compensation programs.

2017 COMPENSATION PROGRAM

Reflecting this philosophy, our NEO compensation arrangements in 2017 provided for the advisory votecontinuing use of three elements of target total direct compensation: annual base salary, annual incentive provided under our Executive Incentive Compensation Plan, or EICP, and long-term incentives, or LTI. In making compensation decisions for 2017, the Compensation Committee considered McDermott’s operating strategy and goals and significantly improved operational and financial performance, with appreciation of the “lower for longer” macro oil and gas environment and comments received during the 2017 stockholder outreach program.

With respect to approve named executive officerplan design, the Compensation Committee maintained consistency:

in the 2017 EICP performance metrics, with the continued use of operating income, free cash flow, order intake and order intake operating margin; and
in the 2017 LTI performance metric, with the continued use of relative Return on Average Invested Capital, or relative ROAIC, in consideration of McDermott’s transformation from turnaround and stabilization to optimization for future growth.

Performance metrics and performance levels used within elements of annual and long-term compensation are designed to support our strategic and financial goals and drive the creation of stockholder value

2018 PROXY STATEMENT


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PROXY SUMMARY11

2017 Executive Incentive Compensation Plan

   Goal                                    Performance Metric               
Drive profitability via improved project executionOperating Income
Prioritize liquidity needsFree Cash Flow
Support future businessOrder Intake
Promote pricing discipline on new workOrder Intake Operating Margin

2017 Long-Term Incentive Plan — Performance Units

   Goal                                    Performance Metric               
Efficiently allocate capital to profitable investmentsRelative Return on Average Invested Capital
Generate returns for stockholdersStock Price Increase

With respect to levels of compensation, the Compensation Committee generally sought to bring 2017 NEO compensation more in line with market range (generally, within 15% of market median as further described below). For 2017 NEO compensation, the Compensation Committee provided:

Average annual base salary increases of approximately 6.4% to further align the NEOs’ annual base salaries with market range and, in certain instances, for internal pay equity considerations.
Increases in annual target bonus awards, resulting in an increase in each NEO’s performance-based compensation.

Item 3 — Ratification As a result of AppointmentMcDermott’s 2017 financial performance, each NEO was eligible to earn 1.578x of Deloitte & Touche LLPhis target EICP award, subject to adjustment by the Compensation Committee based on his achievement of individual performance goals.

Increases to the value of long-term incentives awarded to Messrs. Dickson and Spence as Auditorscompared to 2016, based on their individual performance and to further align the value of their LTI with market range.

The mix of target total direct compensation for Mr. Dickson for 2017 is shown in the chart below.

CEO TARGET 2017 COMPENSATION

Item 3
RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS AUDITORS

Our Board of Directors has ratified our Audit Committee’s appointment of DeloitteErnst & ToucheYoung LLP as McDermott’s independent registered public accounting firm for the year ending December 31, 2015,2018, and, as a matter of good governance, we are seeking stockholder ratification of thisthat appointment.

The Board recommends a voteFORthis proposalPage 67

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Table of Contents

12

TABLE OF CONTENTS

3LETTER TO STOCKHOLDERS
4NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS
5ABOUT MCDERMOTT
6CORPORATE RESPONSIBILITY
7PROXY SUMMARY
13CORPORATE GOVERNANCE
13Introduction
13 Item 1  Election of Directors
13Election Process
142018 Nominees
20Summary of Director Nominees’ Qualifications and Experience
20Director Qualifications
21Director Independence
21Director Nominations
22The Board’s Role and Responsibilities
22Overview
22The Board’s Role in Risk Oversight
22Board and Committees Risk Oversight Responsibilities
23Stockholder Engagement
24Board Refreshment and Succession Planning
24Board and Committee Evaluations
25Sustainability and Corporate Social Responsibility
26Communications with the Board
26Board Leadership Structure
26Executive Sessions
26Board of Directors and its Committees
26Board Committees
29Compensation Committee Interlocks and Insider Participation
29Related Party Transactions
30Compensation of Directors
30Director Compensation Table
31Executive Officer Profiles
35EXECUTIVE COMPENSATION
35 Item 2  Advisory Vote to Approve Named Executive Officer Compensation
35Compensation Discussion & Analysis
35Introduction
36CD&A Executive Summary
36Our Business, the Macro Environment and our 2017 Operating Strategy
372017 Performance Highlights
38Compensation Philosophy and 2017 Compensation Program Design and Levels
39Impact of 2017 Say on Pay Vote on Executive Compensation and Stockholder Outreach
40Executive Compensation Policies and Practices
412017 Compensation Program
41What We Pay and Why: Elements of Total Direct Compensation
432017 NEO Compensation
472017 Other Compensation Elements
49Other Compensation Policies and Practices
49Sizing Long-Term Incentive Compensation and Timing of Equity Grants
49Stock Ownership Guidelines
50Derivatives Trading and Hedging
50Clawback Policy
50Forfeiture Provisions
50How We Make Compensation Decisions
51Proxy Peer Group
52Survey Peer Group
53Performance Unit Peer Group
53Pay Ratio Disclosure
53Compensation Committee Report
54EXECUTIVE COMPENSATION TABLES
54Summary Compensation Table
55All Other Compensation
56Grants of Plan-Based Awards
57Outstanding Equity Awards at Fiscal Year-End
59Option Exercises and Stock Vested
60Pension Benefits
60U.S. Retirement Plan
61U.S. Excess Plan
61Nonqualified Deferred Compensation
62Potential Payments Upon Termination or Change in Control
62Estimated Value of Benefits to Be Received Upon Termination Due to Death or Disability
63Estimated Value of Benefits to Be Received Upon Change in Control and Termination
67AUDITOR AND AUDIT COMMITTEE MATTERS
67 Item 3  Ratification of Appointment of Independent Registered Public Accounting Firm for Year Ending December 31, 2018
67Audit Committee Report
68Audit Firm Fees
69STOCK OWNERSHIP INFORMATION
69Security Ownership of Directors and Executive Officers
70Security Ownership of Certain Beneficial Owners
70Section 16(a) Beneficial Ownership Compliance
71OTHER INFORMATION
71Questions and Answers About the Annual Meeting of Stockholders and Voting
75Stockholders’ Proposals

2018 PROXY STATEMENT


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13

CORPORATE GOVERNANCE

Introduction

Our Board of Directors recommendsmaintains a strong commitment to corporate governance and has implemented policies and procedures that stockholders vote “For”we believe are among the ratification of Deloitte & Touche LLP as McDermott’s independent registered public accounting firm for the year ending December 31, 2015.best practices in corporate governance.

Communicating with the Board of Directors

Stockholders or other interested persons may send written communications to the independent membersWe maintain a corporate governance section on our Web site which contains copies of our principal governance documents. The corporate governance section may be found atwww.mcdermott.comunder “INVESTORS – Corporate Governance” and “WHO WE ARE – Leadership – Board addressed to Board of Directors (independent members), c/o McDermott International, Inc., Corporate Secretary’s Office, 757 N. Eldridge Pkwy., Houston, Texas 77079.

iv


QUESTIONS AND ANSWERS ABOUT THE

ANNUAL MEETING OF STOCKHOLDERS AND VOTING

What isCommittees.” The corporate governance section contains the purpose of these proxy materials?following documents:

Amended and Restated Articles of Incorporation (our “Articles of Incorporation”)
Amended and Restated By-Laws (our “By-Laws”)
Corporate Governance Guidelines
Code of Ethics for CEO and Senior Financial Officers
Board of Directors Conflicts of Interest Policies and Procedures
Audit Committee Charter
Compensation Committee Charter
Governance Committee Charter

As more fully described in the Notice, the Board of Directors of McDermott International, Inc. (“McDermott”) has made these materials available to you in connection with our 2015 Annual Meeting of Stockholders, which will take place on May 8, 2015 at 10:00 a.m., local time (the “Annual Meeting” or “Meeting”). We mailed the Notice to our stockholders beginning on March 27, 2015, and our proxy materials were posted on the Web site referenced in the Notice on that same date.

McDermott, on behalf of its Board of Directors, is soliciting your proxy to vote your shares at the 2015 Annual Meeting of Stockholders. We solicit proxies to give all stockholders of record an opportunity to vote on matters that will be presented at the Annual Meeting. In this proxy statement you will find information on these matters, which is provided to assist you in voting your shares.

Who will pay for the cost of this proxy solicitation?

We will bear all expenses incurred in connection with this proxy solicitation, which we expect to conduct primarily by mail. We have engaged The Proxy Advisory Group, LLC to assist in the solicitation for a fee that will not exceed $12,500, plus out-of-pocket expenses. In addition, our officers and regular employees may solicit your proxy by telephone, by facsimile transmission or in person, for which they will not be separately compensated. If your shares are held through a broker or other nominee (i.e., in “street name”) and you have requested printed versionsCode of these materials, we have requested that your broker or nominee forward this proxy statement to you and obtain your voting instructions, for which we will reimburse them for reasonable out-of-pocket expenses. If your shares are held through the McDermott Thrift Plan and you have requested printed versions of these materials, the trustee of that plan has sent you this proxy statement and you can instruct the trustee on how to vote your plan shares.

Who is entitled to vote at, and who may attend, the Annual Meeting?

Our Board of Directors selected March 12, 2015 as the record date (the “Record Date”) for determining stockholders entitled to vote at the Annual Meeting. This means that if you owned McDermott common stock on the Record Date, you may vote your shares on the matters to be considered by our stockholders at the Annual Meeting.

There were 238,476,018 shares of our common stock outstanding on the Record Date. Each outstanding share of common stock entitles its holder to one vote on each matter to be acted on at the meeting.

Attendance at the meeting is limited to stockholders and beneficial owners as of the Record Date or duly appointed proxies. No guests will be admitted, except for guests invited by McDermott. Registration will begin at 9:00 a.m., and the meeting will begin promptly at 10:00 a.m. If your shares are held in “street name” through a broker, bank, trustee or other nominee, you are a beneficial owner, and beneficial owners will need to show proof of beneficial ownership, such as a copy of a brokerage account statement, reflecting stock ownership as of the Record Date in order to be admitted to the meeting. If you are a proxy holder for a stockholder, you will need to bring a validly executed proxy naming you as the proxy holder, together with proof of record ownership of the stockholder naming you as proxy holder. Please note that youBusiness Conduct may be asked to present valid photo identification, such as a valid driver’s license or passport, when you check in for registration. No cameras, recording equipment or other electronic devices will be allowed to be brought into the meeting room by stockholders or beneficial owners.

What is the difference between holding shares as a stockholder of record and as a beneficial owner through a brokerage account or other arrangement with a holder of record?

If your shares are registered in your name with McDermott’s transfer agent and registrar, Computershare Trust Company, N.A., you are the “stockholder of record” of those shares. The Notice and the proxy materials have been provided or made available directly to you by McDermott.

If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” but not the holder of record of those shares, and the Notice and the proxy materials have been forwarded to you by your broker, bank or other holder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record how to vote your shares by using the voting instruction card or by following their instructions for voting by telephone orfound on the Internet.

How do I cast my vote?

Most stockholders can vote by proxy in three ways:

our Web site atwww.mcdermott.comat “WHO WE ARE — Ethics.”

by Internet atwww.proxyvote.com;

ITEM 1
ELECTION OF DIRECTORS

by telephone; or

by mail.

If you are a stockholder of record, you can vote your shares in person atUnless otherwise directed, the Annual Meeting or vote now by giving us your proxy via Internet, telephone or mail. You may give us your proxy by following the instructions included in the Notice or, if you received a printed version of these proxy materials, inpersons named as proxies on the enclosed proxy card. If you wantcard intend to vote by mail but have not received a printed version of these proxy materials, you may request a full packet of proxy materials by following the instructions in the Notice. If you vote using either the telephone or the Internet, you will save us mailing expense.

By giving us your proxy, you will be directing us how to vote your shares at the meeting. Even if you plan on attending the meeting, we urge you to vote now by giving us your proxy. This will ensure that your vote is represented at the meeting. If you do attend the meeting, you can change your vote at that time, if you then desire to do so.

If you are the beneficial owner of shares, but not the holder of record,you should refer to the instructions provided by your broker or nominee for further information. The broker or nominee that holds your shares has the authority to vote them, absent your approval, only as to matters for which they have discretionary authority under the applicable New York Stock Exchange (“NYSE”) rules. Neither“FOR” the election of directors nor the advisory vote to approve named executive officer compensation are considered routine matters. That means that brokers may not vote your shares with respect to those matters if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker.

If you received a printed version of these proxy materials, you should have received a voting instruction form from your broker or nominee that holds your shares. For shares of which you are the beneficial owner but not the holder of record, follow the instructions contained in the Notice or voting instruction form to vote by Internet, telephone or mail. If you want to vote by mail but have not received a printed version of these proxy materials, you may request a full packet of proxy materials as instructed by the Notice. If you want to vote your shares in person at the Annual Meeting, you must obtain a valid proxy from your broker or nominee. You should contact your broker or nominee or refer to the instructions provided by your broker or nominee for further information. Additionally, the availability of telephone or Internet voting depends on the voting process used by the broker or nominee that holds your shares.

Why did I receive more than one Notice or proxy statement and proxy card or voting instruction form?

You may receive more than one Notice, proxy statement, proxy card or voting instruction form if your shares are held through more than one account (e.g., through different brokers or nominees). Each proxy card or voting instruction form only covers those shares of common stock held in the applicable account. If you hold shares in more than one account, you will have to provide voting instructions as to each of your accounts in order to vote all your shares.

What can I do if I change my mind after I vote?

the nominees. If you are a stockholder of record, you may change your vote by written notice to our Corporate Secretary, by granting a new proxy beforeany nominee should become unavailable for election, the Annual Meeting or by voting in person at the Annual Meeting. Unless you attend the meeting and vote your shares in person, you should change your vote before the meeting using the same method (by Internet, telephone or mail) that you first used to vote your shares. That way, the inspectors of election for the meeting will be able to verify your latest vote.

If you are the beneficial owner, but not the holder of record, of shares, you should follow the instructions in the information provided by your broker or nominee to change your vote before the meeting. If you want to change your vote as to shares of which you are the beneficial owner by voting in person at the Annual Meeting, you must obtain a valid proxy from the broker or nominee that holds those shares for you.

What is a broker non-vote?

If you are a beneficial owner whose shares are held of record by a broker or other holder of record, you must instruct the broker or other holder of record how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” In these cases, the broker or other holder of record can include your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required under the rules of the NYSE.

For this Annual Meeting, if you are a beneficial owner whose shares are held by a broker or other holder of record, your broker or other holder of record has discretionary voting authority under NYSE rules to vote your shares on the ratification of Deloitte & Touche LLP (“Deloitte”), even if it has not received voting instructions from you. However, such holder does not have discretionary authority to vote on the election of directors or the advisory vote to approve named executive officer compensation without instructions from you, in which case a broker non-vote will result and your shares will not be voted on those matters.

What is the quorum for the Annual Meeting?

The Annual Meeting will be held only if a quorum exists. The presence at the meeting, in person or by proxy, of holders of a majority of our outstanding shares of common stock as of the Record Date will constitute a quorum. If you attend the meeting or vote your shares by Internet, telephone or mail, your shares will be counted toward a quorum, even if you abstain from voting on a particular matter. Broker non-votes willvoted for such substitute nominee as may be treated as present for the purpose of determining a quorum.

Which items will be voted on at the Annual Meeting?

At the Annual Meeting, we are asking you to vote on the following:

the election of John F. Bookout, III, Roger A. Brown, David Dickson, Stephen G. Hanks, Gary P. Luquette, William H. Schumann, III, Mary L. Shafer-Malicki and David A. Trice toproposed by our Board of Directors, each for a term of one year;

the advisory vote to approve named executive officer compensation; and

the ratification of our Audit Committee’s appointment of Deloitte as our independent registered public accounting firm for the year ending December 31, 2015.

WeDirectors. However, we are not aware of any other matterscircumstances that may be presented or acted on at the Annual Meeting. If you vote by signing and returning the enclosed proxy card or using the telephone or Internet voting procedures, the individuals named as proxies on the card may vote your shares, in their discretion, on any other matter requiring a stockholder vote that comes before the meeting.

What are the Board’s voting recommendations?

For the reasons set forth in more detail later in this proxy statement, our Board recommends a vote:

FOR the election of each director nominee;

FOR the advisory vote to approve named executive officer compensation; and

FOR the ratification of our Audit Committee’s appointment of Deloitte as our independent registered public accounting firm for the year ending December 31, 2015.

What are the voting requirements to elect the Directors and to approve each of the proposals discussed in this proxy statement?

Each proposal requires the affirmative vote of a majority of our outstanding shares present in person or represented by proxy at the meeting and entitled to vote and actually voting on the matter. Because votes withheld in the election of any director, abstentions and broker non-votes are not actual votes with respect to a proposal, they will have no effect on the outcome of the vote on any proposal.

Our Corporate Governance Guidelines provide that, in an uncontested election of directors, the Board expects any incumbent director nominee who does not receive “FOR” votes by a majority of shares present in person or by proxy and entitled to vote and either voting “FOR” or registering a decision to withhold a vote with respect to the election of such director to promptly tender his or her resignation to the Governance Committee, subject to acceptance by our Board. Any shares subject to broker non-votes shall not be considered in making any determination pursuant to the immediately preceding sentence. The Governance Committee will then make a recommendation to the Board with respect to the director nominee’s resignation and the Board will consider the recommendation and take appropriate action within 120 days from the date of the certification of the election results.

What happens if I do not specify a choice for a proposal when returning a proxy or do not cast my vote?

You should specify your choice for each proposal on your proxy card or voting instruction form. Shares represented by proxies will be voted in accordance with the instructions given by the stockholders.

If you are a stockholder of record and your proxy card is signed and returned without voting instructions, it will be voted according to the recommendations of our Board. If you do not return your proxy card or cast your vote, no votes will be cast on your behalf onwould prevent any of the items of business at the Annual Meeting.

If you are the beneficial owner, but not the holder of record, of shares and fail to provide voting instructions, your broker or other holder of record is permitted to vote your shares on the ratification of Deloitte as our independent registered public accounting firm. However, absent instructionsnominees from you, your broker or other holder of record may not vote on the election of directors or the advisory vote to approve named executive officer compensation, and no votes will be cast on your behalf for those matters.serving.

Our Board of Directors recommends that stockholders vote “FOR”each of the nominees named below.

ELECTION PROCESS

Is my vote confidential?

All voted proxies and ballots will be handled in a manner intended to protect your voting privacy as a stockholder. Your vote will not be disclosed except:

to meet any legal requirements;

in limited circumstances such as a proxy contest in opposition to our Board of Directors;

to permit independent inspectors of election to tabulate and certify your vote; or

to respond to your written comments on your proxy card.

ELECTION OF DIRECTORS

(ITEM 1)

Election Process.Our Articles of Incorporation provide that, at each annual meeting of stockholders, all directors shall be elected annually for a term expiring at the next succeeding annual meeting of stockholders or until their respective successors are duly elected and qualified. Accordingly, on the nomination of our Board, has nominated the following personsJohn F. Bookout, III, David Dickson, Gary P. Luquette, William H. Schumann, III and Mary L. Shafer-Malicki will stand for reelection as directors, and Forbes I.J. Alexander, Philippe Barril, L. Richard Flury, W. Craig Kissel, James H. Miller and Marsha C. Williams will stand for election as directors, at this year’s Annual Meeting, each for a term extending until our 2019 Annual Meeting of one year: John F. Bookout, III, Roger A. Brown, David Dickson, Stephen G. Hanks, Gary P. Luquette, William H. Schumann, III, Mary L. Shafer-Malicki and David A. Trice.Stockholders.

Our By-Laws provide that (1) a person shall not be nominated for election or reelection to our Board of Directors if such person shall have attained the age of 72 prior to the date of election or reelection, and (2) any director who attains the age of 72 during his or her term shall be deemed to have resigned and retired at the first Annual Meeting following his or her attainment of the age of 72. Accordingly, a director nominee may stand for election if he or she has not attained the age of 72 prior to the date of election or reelection.

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

14CORPORATE GOVERNANCE

2018 NOMINEES

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 sole judgment, interfere with or limit his or her ability to do so.

In addition, the Governance Committee also considers it desirable that candidates contribute positively to the collaborative culture among Board members and 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.

Director Nominations.Any stockholder may nominate one or more persons for election as one of our directors at the 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 “About Us — Leadership & Corporate Governance — Corporate Governance.”

The Governance Committee will consider candidates identified through the processes described above and will evaluate the candidates, 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.

2015 Nominees.In nominating individuals to become members of the Board of Directors, the Governance Committee considers the experience, qualifications, attributes and skills of each potential member. Each nominee brings a strong and unique background and set of skills to the Board, giving the Board, as a whole, competence and experience in a wide variety of areas. The Governance Committee and the Board of Directors considered the following information, including the specific experience, qualifications, attributes or skills of each individual, in concluding each individual was an appropriate nominee to serve as a member of our Board for the term commencing at this year’s Annual Meeting (ages are as of May 8, 2015)September 26, 2018).

Unless otherwise directed, the persons named as proxies on the enclosed proxy card intend to vote “FOR” the election of each of the nominees. If any nominee should become unavailable for election, the shares will be voted for such substitute nominee as may be proposed by our Board of Directors. However, we are not aware of any circumstances that would prevent any of the nominees from serving.

Our Board recommends that stockholders vote “FOR” each of the nominees named below.

FORBES I. J. ALEXANDER

Chief Financial Officer, Jabil, Inc.

Age
58
Director Since
2018
Committee Assignments
Audit Committee
Professional Highlights
Jabil, Inc., a product solutions company providing design, manufacturing, supply chain and product management services across various industries
Chief Financial Officer (September 2004 – Present)
Treasurer (November 1996 – August 2004)
Assistant Treasurer (April 1996 – November 1996)
Controller, Scotland operations (1993 – March 1996)
Former Public Company Directorships
Director, Chicago Bridge & Iron Company N.V. (May 2017 – May 2018)
The Board of Directors is nominating Mr. Alexander in consideration of his extensive executive leadership experience and financial knowledge, having worked as a financial officer within various types of companies over the course of his career.

PHILIPPE BARRIL

Chief Operating Officer, SBM Offshore N.V.

Age
53
Director Since
2017
Committee Assignments
Audit Committee
Transition Committee (Chair)

John F. Bookout, III

Professional Highlights
SMB Offshore N.V., a provider of floating production solutions to the offshore energy industry
Chief Operating Officer (March 2015 – Present)
Member of Management Board (April 2015 – Present)
Technip, S.A., a provider of project management, engineering and construction services for the energy industry
President and Chief Operating Officer (January 2014 – January 2015)
Executive Vice President and Chief Operating Officer, Onshore and Offshore (September 2011 – December 2013)
Senior Vice President, Offshore, Technip France (June 2010 – September 2011)
Senior Vice President, Offshore & Onshore Product Lines and Technologies, Technip France (November 2009 – May 2010)
Managing Director, Entrepose Contracting, EPC contractor for the energy industry (2007 – 2009)

Director Since 2006 

The Board of Directors is nominating Mr. Barril in consideration of his executive leadership and international operations experience within the oilfield engineering and construction industry.

2018 PROXY STATEMENT


Table of Contents

CORPORATE GOVERNANCE15

JOHN F. BOOKOUT, III

Finance Partner, Apollo Global Management, LLC

Age
64
Director Since
2006
Committee Member

Assignments

Governance Committee Member

Mr. Bookout, 61, has served as

Professional Highlights
Apollo Global Management, LLC, a Managing Director of global investment management firm
Partner (June 2016 – Present)
Senior Advisor (October 2015 – June 2016)
Kohlberg Kravis Roberts & Co., a private equity firm since March 2008. Previously, he served as Senior Advisor to First Reserve Corporation, a private equity firm specializing in the energy industry, from 2006 to March 2008. Until 2006, he was a director
Managing Director of Energy and Infrastructure (March 2008 – June 2015)
McKinsey & Company, a global management consulting firm which he joined in 1978. Mr. Bookout previously served as a director(1978 – 2008)
Managing Partner and Head of North American and European Energy Practices, responsible for McKinsey’s 17 global industry practices
Held various other senior leadership positions
Former Public Company Directorships
Director, Tesoro Corporation from 2006-2010. (2006 – 2010)
The Board of Directors is nominating Mr. Bookout in consideration of his:

•       globalhis broad executive leadership experience withwithin the oil and gas exploration and development industry and the petroleum refining and marketing industry and oil and gas exploration and development industry;

•       expertisehis experience in private equity and finance; and

•       experience as a board member of public companies.

finance.

Roger A. Brown

Director Since 2005 

Compensation Committee Member

Governance Committee Member

From 2005 until his retirement in 2007, Mr. Brown, 70, was Vice President, Strategic Initiatives of Smith International, Inc., a supplier of goods and services to the oil and gas exploration and production industry, the petrochemical industry and other industrial markets. Mr. Brown was President of Smith Technologies (a business unit of Smith International, Inc.) from 1998 until 2005. Mr. Brown has served as a director of Ultra Petroleum Corp. since 2007, and previously served as a director of Boart Longyear Limited from 2010-2014. The Board of Directors is nominating Mr. Brown in consideration of his:

•       executive leadership experience in the oil and gas exploration and production industry;

•       knowledge of corporate governance issues; and

•       experience as a board member of public companies.


DAVID DICKSON

David Dickson

Director Since 2013 

President and Chief Executive Officer

Mr. Dickson, 47, has served as a member of our Board of Directors and as

Age
50
Director Since
2013
Committee Assignments
Transition Committee
Professional Highlights
McDermott International, Inc.
President and Chief Executive Officer since December(December 2013 prior to which he served as our – Present)
Executive Vice President and Chief Operating Officer from October 2013. Mr. Dickson has over 24 years(October 2013 – December 2013)
Technip, S.A., a provider of offshore oilfieldproject management, engineering and construction business experience, including 11 years of experience with Technip S.A. and its subsidiaries. From September 2008 to October 2013, he served as services for the energy industry
President of Technip U.S.A. Inc., with oversight responsibilities for all of Technip’s North American operations. In addition to being the President of Technip U.S.A. Inc., Mr. Dickson also had responsibilityoperations and for certain operations in Latin America including Mexico, Venezuela, Colombia and the Caribbean. Mr. Dickson also supported the Technip organization by managing key customer accounts with international oil companies based in the United States. (September 2008 – October 2013)
The Board of Directors is nominating Mr. Dickson in consideration of his:

his position as our President and Chief Executive Officer;

Officer, his extensive executive leadership experience in and significant knowledge of the offshore oilfield engineering and construction business;business, and

his broad knowledgeunderstanding of the expectations of our core customers.


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16CORPORATE GOVERNANCE

L. RICHARD FLURY

Former Chief Executive Officer of Gas, Power & Renewables, BP p.l.c.

Age
71
Director Since
2018
Committee Assignments
Governance Committee (Chair)
Compensation Committee

Professional Highlights
BP p.l.c., an oil and natural gas exploration, production, refining and marketing company
Chief Executive Officer, Gas, Power & Renewables (1998 – retirement in 2001)
Executive Vice President, Exploration & Production Sector, Amoco Corp. (acquired by BP p.l.c. in 1998) (1996 – 1998)
Various other executive roles, Amoco Corp. (1988 – 1996)
Current Public Company Directorships
Director, Callon Petroleum Corporation, an independent oil and natural gas company focused on the acquisition, exploration and development of high-quality assets in the heart of the Permian Basin (2004 – Present)—Audit, Compensation and Strategic Planning & Reserves Committees
Former Public Company Directorships
Director, Chicago Bridge & Iron Company N.V. (2003 – May 2018)
Director, QEP Resources, Inc. (June 2010 – May 2015)

Stephen G. Hanks

Director Since 2009 

Governance Committee Chairman

Audit Committee Member

Mr. Hanks, 64, served in various roles over a 30-year career with Washington Group International, Inc. (and its predecessor, Morrison Knudsen Corporation), an integrated construction and management services company, and from 2000 through 2007 served as President, Chief Executive Officer and a member of its board of directors. Mr. Hanks has also served as a director of Lincoln Electric Holdings, Inc. since 2006 and as a director of The Babcock & Wilcox Company since 2010. The Board of Directors is nominating Mr. HanksFlury in consideration of his:

his extensive experience in serving in executive leadership, including his position asand director capacities at several public companies, knowledge of the Chief Executive Officerenergy industry, knowledge of Washington Group;

•       background and knowledge in the areas of accounting, auditinginternational business and financial reporting, having previously served as a Chief Financial Officer;adeptness.


W. CRAIG KISSEL

Former President of Commercial Systems, Trane, Inc.

•       experience

Age
67
Director Since
2018
Committee Assignments
Compensation Committee (Chair)
Professional Highlights
Trane, Inc. (a subsidiary of Ingersoll-Rand and successor to American Standard Companies), global manufacturer of heating, ventilating and air conditioning systems and building management systems and controls
President, Commercial Systems (2003 – retirement in 2008)
President, American Standard’s Vehicle Control Systems, Belgium (1998 – 2003)
Various other executive roles since 1980, including President of WABCO Vehicle Control Systems from (1998 – 2003), President, North American Unitary Products Group (1994 – 1997), Vice President, Marketing, North American Unitary Products Group (1992 – 1994)
Current Public Company Directorships
Director, Watts Water Technologies (since 2011)—Chairman of the engineering and construction industry; and

Board, Nominating & Corporate Governance Committee
Former Public Company Directorships
Director, Chicago Bridge & Iron Company N.V. (2009 – May 2018)

The Board of Directors is nominating Mr. Kissel in consideration of the breadth of his experience as a board memberdivision president of a public companies.company and as a public company director, his knowledge of international business and technological expertise.


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CORPORATE GOVERNANCE17

GaryGARY P. Luquette

LUQUETTE

Director Since 2013 

Non-Executive Chairman of the Board

Compensation Committee Member

Mr. Luquette, 59, has served as
Former President and Chief Executive Officer, of Frank’s International N.V.

Age
62
Director Since
2013
Committee Assignments
Compensation Committee
Transition Committee
Professional Highlights
Frank’s International N.V., a global provider of engineered tubular services to the oil and gas industry since January
President and Chief Executive Officer (January 2015 – November 2016), and has served as a memberSpecial Advisor (November 2016 – retirement in December 2016)
Member of itsSupervisory Board of Directors since November(November 2013 Previously, he served as – May 2017)
Chevron Corporation (1978 – September 2013)
President, Chevron North America Exploration and Production a unit of Chevron Corporation, from 2006 until(2006 – September 2013, and held2013)
Held several other key exploration and production senior leadership positions with Chevron in Europe, California, Indonesia and Louisiana. Louisiana, including Managing Director of Chevron Upstream Europe, Vice President, Profit Center Manager, Advisor and Engineer
Current Public Company Directorships
Director, Southwestern Energy Company, an independent energy company engaged in natural gas and oil exploration, development and production, natural gas gathering and marketing (since 2017)—Health, Safety, Environment and Corporate Responsibility Committee
Director, Apergy Corporation, a provider of highly engineered technologies that help companies drill for and produce oil and gas efficiently and safely around the world (since 2018)—Compensation Committee (Chair), Governance and Nominating Committee
Former Public Company Directorships
Director, Frank’s International N.V. (2013—2017)
The Board of Directors is nominating Mr. Luquette in consideration of his:

•       executive leadershiphis extensive senior management, operational and international experience in the global oil and gas exploration and production industry with significant international experience,and the oilfield services industry.


JAMES H. MILLER

Former Chairman, PPL Corporation

Age
69
Director Since
2018
Committee Assignments
Governance Committee
Professional Highlights
PPL Corporation, a provider of energy services across the United States and the United Kingdom
Chairman (2006 – retirement in 2012)
President and Chief Executive Officer (2006 – 2011)
Various other management roles, including Executive Vice President and Chief Operating Officer (2004 – 2005)
USEC, Inc. (renamed Centrus Energy Corp. in Europe2014), a global uranium fuel supplier for commercial nuclear power plants
Executive Vice President (1999 – 2001)
Vice President, Production (1995 – 1999)
Current Public Company Directorships
Director, AES Corporation, global power company (since 2013)— Compensation Committee (Chair), Financial Audit Committee Strategy and Asia Pacific;

•       experience in the upstream energyInvestment Committee

Director, Crown Holdings, Inc., a global supplier of packaging products to consumer marketing companies (since 2010)— Nominating and supporting infrastructure businesses;

•       knowledge of and experience with our core customers; and

•       experience as a board member of public companies.

Corporate Governance Committee
Former Public Company Directorships
Director, Chicago Bridge & Iron Company N.V. (2014 – May 2018)
Director, Rayonier Advanced Materials, Inc. (Rayonier, Inc. prior to 2014 spin-off) (2011 – 2015)

WilliamThe Board of Directors is nominating Mr. Miller in consideration of his vast experience in executive leadership and as a public company director and his broad knowledge of international operations and the energy industry.


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18CORPORATE GOVERNANCE

WILLIAM H. Schumann,SCHUMANN, III

Director Since 2012 

Audit Committee Chairman

Finance Committee Member

From February 2007 until August 2012, Mr. Schumann, 64, served asFormer Executive Vice President, of FMC Technologies, Inc. (“FMC”)

Age
68
Director Since
2012
Committee Assignments
Audit Committee (Chair)
Professional Highlights
FMC Technologies, Inc., a global provider of technology solutions for the energy industry. Mr. Schumann previously served in the following capacities at FMC Technologiesindustry, and its predecessor, FMC Corporation: Corporation (1981 – August 2012)
Executive Vice President (2005 – retirement in August 2012)
Chief Financial Officer from 1999 until his retirement from that position in December 2011; (2001 – 2011)
Chief Financial Officer, FMC Corporation (1999 – 2001)
Vice President, Corporate Development from 1998 to 1999;(1998 – 1999)
Various other management positions, including: Vice President and General Manager, Agricultural Products Group from 1995 to 1998;(1995 – 1998); Regional Director, North America Operations, Agricultural Products Group from 1993 to 1995;(1993 – 1995); Executive Director of Corporate Development from 1991 to 1993,(1991 – 1993)
Current Public Company Directorships
Director, Avnet, Inc., an industrial distributor of electronic components and other various management positions from the time he joined FMC in 1981. Mr. Schumann currently serves asproducts (since 2010) —Non-Executive Chairman of the Board (since 2012), Audit, Compensation and Corporate Governance Committees
Director, Andeavor (prior to August 2017, named Tesoro Corporation), an independent refiner and marketer of Avnet, Inc., a board on which he has served on since February 2010. He also previously served on the board of directors of Great Lakes Advisors, Inc. from 1991 to June 2011,petroleum products (since 2016)—Governance and Audit Committees
Former Public Company Directorships
Director, AMCOL International Corporation (2012-2014)
Director, URS Corporation (March 2014-October 2014)
Director, UAP Holding Corp. from 2005 to 2008, AMCOL International Corporation from September 2012 to May 2014 and URS Corporation from March 2014 to October 2014. (2005-2008)
The Board of Directors is nominating Mr. Schumann in consideration of his:

his valuable experience acquired from serving in several executive leadership experience inand board positions at public companies within the energy industry;

•       backgroundindustry and his broad knowledge in the areas of accounting, auditing and financial reporting, having served as a Chief Financial Officer of a public company; and

•       experience as a board member of public companies, including as a chairman of a public company.

reporting.

MaryMARY L. Shafer-Malicki

SHAFER-MALICKI

Director Since 2011 

Compensation Committee Chairman

Governance Committee Member

From July 2007 until her retirement in March 2009, Ms. Shafer-Malicki, 54, wasFormer Senior Vice President and Chief Executive Officer of BP Angola, a subsidiary of BP p.l.c.

Age
57
Director Since
2011
Committee Assignments
Compensation Committee
Governance Committee
Professional Highlights
BP p.l.c., an oil and natural gas exploration, production, refining and marketing company. Previously, Ms. Shafer-Malicki served as company
Senior Vice President and Chief Executive Officer, BP Angola (July 2007 – retirement in March 2009)
Chief Operating Officer, of BP Angola from January 2006 to(January 2005 – June 2007 and in various2007)
Held several other international engineering and managerialexecutive leadership positions with BP p.l.c. Ms. Shafer-Malicki has also served asand Amoco Corp. (acquired by BP p.l.c. in 1998), including, Director General of BP Vietnam, from 2003 to 2004
Current Public Company Directorships
Director, Wood PLC, a director ofleading independent services provider for the oil and gas and power generation markets (since 2012)—Nomination and Remuneration Committees, and Safety & Assurance Committee
Director, QEP Resources, Inc., an energy company specialized in natural gas and oil exploration (since 2017) —Audit and Governance Committees
Former Public Company Directorships
Director, Ausenco Limited since January 2011 and John Wood Group PLC since June 2012. (2011-2016)
The Board of Directors is nominating Ms. Shafer-Malicki in consideration of her:

her diverse experience in the upstream energy and supporting infrastructure businesses;

•       knowledge ofbusinesses and experience with our core customers;

•       executive experience and business leadership skills, including operations, strategy, commercial, safety and supply chain management;

her significant international operations experience, having served in executive or management experienceand director roles for public companies in Europe, the Asia Pacific region and Africa; and

•       experience as a board member of public companies.

Africa.

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CORPORATE GOVERNANCE19

MARSHA C. WILLIAMS

Former Senior Vice President and Chief Financial Officer, Orbitz Worldwide, Inc.

Age
67
Director Since
2018
Committee Assignments
Audit Committee

David A. Trice

Director Since 2009 

Finance Committee Chairman

Audit Committee Member

From February 2000 until his

Professional Highlights
Senior Vice President and Chief Financial Officer, Orbitz Worldwide, Inc. (acquired by Expedia, Inc. in 2015), a global online travel company (2007— retirement in May 2009, Mr. Trice, 67, was2010)
Executive Vice President and Chief ExecutiveFinancial Officer, of Newfield Exploration Company,Equity Office Properties Trust, publicly held office building owner and manager (2002 – 2007)
Chief Administrative Officer, Crate & Barrel, global home furnishings retailer (1998 – 2002)
Treasurer, Amoco Corp. (acquired by BP p.l.c. in 1998), an oil and natural gas exploration, production, refining and productionmarketing company (1993 – 1998)
Director, Davis Funds, an independent investment management firm (since 1999)
Current Public Company Directorships
Director, Modine Manufacturing Company, Inc., a global provider of thermal management systems and served as Chairman of its board from September 2004 tocomponents (since 1999)—Lead Director, Nominating and Governance Committee
Director, Fifth Third Bancorp, a diversified financial services company (since 2008)— Lead Director, Audit, Finance, Nominating and Corporate Governance and Risk & Compliance
Former Public Company Directorships
Director, Chicago Bridge and Iron Company N.V. (1997 – May 2010. Mr. Trice has served as a director of New Jersey Resources Corporation since 2004 and QEP Resources, Inc. since 2011. Mr. Trice previously served as a director of Grant PrideCo, Inc. from 2003 to 2008 and Hornbeck Offshore Services, Inc. from 2002 to 2011. 2018)
The Board of Directors is nominating Mr. TriceMs. Williams in consideration of his:

her significant experience gained from serving in executive experience as a Chief Executive Officer of aleadership and board positions at public company;

•       experience in the oilcompanies and gas exploration and production business;

•       background andher extensive knowledge in the areas of accounting, auditing and financial reporting.


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20CORPORATE GOVERNANCE

SUMMARY OF DIRECTOR NOMINEES’ QUALIFICATIONS AND EXPERIENCE

The following table illustrates the breadth and variety of business and other experience that each of our director nominees brings to McDermott.

Experience/Skill
EXECUTIVE LEADERSHIPNecessary for an understanding of management’s role and responsibilities and the challenges management must address so as to be able to evaluate management’s performance
ENERGY/OILFIELD SERVICESAn understanding of our industry is important so that the Board can independently assess our strategy, management’s progress in achieving the strategy and appropriate oversight of our business and operations
PUBLIC COMPANY BOARDImportant to an understanding of the Board’s role as it relates to that of management
EXPERIENCE WITH CORE CUSTOMERSKnowledge of and experience with our core customers is important for achieving our strategic goals and assessing project development and opportunities for growth
INTERNATIONAL OPERATIONSImportant to assessing risks and business strategy in countries in which we operate
FINANCIAL OVERSIGHT RESPONSIBILITIESImportant to understand the complexities of financial reporting, having served as a Chief Financial Officer;internal controls and

•       experience as a board member the regulatory environment applicable to publicly traded companies

CORPORATE GOVERNANCENecessary to understand directors’ duties and the system of public companies, including as a chairman ofgovernance checks and balances under which a public company.

company operates


DIRECTOR QUALIFICATIONS

CORPORATE GOVERNANCE

We maintainOur Governance Committee has determined that a corporate governance section oncandidate for election to our Web site which contains copies of our principal governance documents. The corporate governance section may be found atwww.mcdermott.comunder “About Us — Leadership & Corporate Governance — Corporate Governance” and “About Us — Leadership & Corporate Governance — Board Committees.” The corporate governance section contains the following documents:

By-Laws

Corporate Governance Guidelines

Code of Ethics for CEO and Senior Financial Officers

Board of Directors Conflictsmust 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 (in the case of a non-executive director) 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.


2018 PROXY STATEMENT


Table of Interest PoliciesContents

CORPORATE GOVERNANCE21

In 2016, the Board approved amendments to the Corporate Governance Guidelines which place limits on the number of boards on which McDermott directors may serve. Such limits provide that any director who is a chief executive officer or other senior executive of a public company should serve on no more than two public company boards, and Procedures

Audit Committee Charter

Compensation Committee Charter

Finance Committee Charter

Governance Committee Charterany other director should serve on no more than three public company boards, in both instances including the McDermott Board. Any proposed service in excess of these limits will be considered on a case by case basis.

In addition, the Governance Committee also considers it desirable that candidates contribute positively to the collaborative culture among Board members and possess professional and personal experiences and expertise relevant to our Codebusiness and industry. The Governance Committee solicits ideas for possible candidates from a number of Business Conduct may be found onsources, including independent director candidate search firms, members of the Board and our Web site atwww.mcdermott.com at “About Us — Leadership &senior level executives.

The Board recognizes the benefits of a diversified board and believes that any search for potential director candidates should consider diversity as to gender, race, ethnic background and personal and professional experiences. Additionally, our Corporate Governance.”Governance Guidelines provide that any independent director search firm retained to assist the Governance Committee in identifying director candidates shall seek to include diverse candidates in terms of race, ethnic background and gender.

DIRECTOR INDEPENDENCE

Director Independence

The New York Stock Exchange (“NYSE”) listing standards require our Board of Directors to be comprised of at least a majority of independent directors. In 2015, however, the Board amended our Corporate Governance Guidelines to require that, with the exception of the Chief Executive Officer, the Board be comprised entirely of independent directors. For a director to be considered independent, our Board must determine that the director does not have any direct or indirect material relationship with us. To assist it in determining director independence, and as permitted by NYSE rules then in effect, the Board previously established categorical standards which conform to, or are more exacting than, the independence requirements in the NYSE listing standards. These standards are contained in our Corporate Governance Guidelines, which can be found on our Web site atwww.mcdermott.comunder “About Us — Leadership & Corporate Governance —“INVESTORS – Corporate Governance.”

Based on these independence standards, our Board of Directors has affirmatively determined that the following directors are independent and meet our categorical independence standards:

Forbes I.J. Alexander

John F. Bookout, III

W. Craig KisselJames H. MillerMary L. Shafer-Malicki
Philippe Barril

L. Richard Flury

Gary P. LuquetteWilliam H. Schumann, III

Roger A. Brown

Mary L. Shafer-Malicki

Stephen G. Hanks

David A. Trice

Gary P. Luquette

Marsha C. Williams

In determining the independence of the directors, our Board considered ordinary course transactions between us and other entities with which the directors are associated, none of which were determined to constitute a material relationship with us. Messrs. Brown,Alexander, Barril, Bookout, Flury, Kissel, Luquette, Miller, and Schumann and TriceMs. Williams have no relationship with McDermott, except as a director and stockholder. Messrs. Bookout and Hanks and Ms. Shafer-Malicki are directors of entities with which we transact business in the ordinary course. Mr. Bookout is Managing Director for a private equity firm which has invested in entities with which we transact business in the ordinary course. Mr. Luquette is an executive and director of an entity with which we transact business in the ordinary course; however, the aggregate annual amount of such transactions for 2014 was substantially lower than the thresholds contained in the independence requirements in the NYSE listing standards.course. Our Board also considered contributions by us to charitable organizations with which the directors were associated. No director is related to any executive or significant stockholder of McDermott, nor is any director, with the exception of Mr. Dickson, a current or former employee of McDermott.

DIRECTOR NOMINATIONS

Any stockholder may nominate one or more persons for election as one of our directors at the 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 “INVESTORS – Corporate Governance.”

The Governance Committee will consider candidates identified through the processes described above and will evaluate the candidates, 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.

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22CORPORATE GOVERNANCE

Executive SessionsThe Board’s Role and Responsibilities

OVERVIEW

The Board’s Key Responsibilities include:

THE BOARD’S ROLE IN RISK OVERSIGHT

As part of its oversight function, the Board is actively involved in overseeing risk management through our Enterprise Risk Management (“ERM”) program, which includes periodic reporting through an area and corporate ERM structure. In connection with the ERM program, the Board exercises its oversight responsibility with respect to key external, strategic, operational and financial risks and discusses the effectiveness of current efforts to mitigate certain focus risks as identified by senior management and the Board through anonymous risk surveys.

BOARD AND COMMITTEES RISK OVERSIGHT RESPONSIBILITIES

FULL BOARD

Although the Board is ultimately responsible for risk oversight, the Board is assisted in discharging its risk oversight responsibility by the Audit, Compensation and Governance Committees. Each committee oversees management of risks, including, but not limited to, the areas of risk summarized below, and periodically reports to the Board on those areas of risk:


Audit CommitteeCompensation CommitteeGovernance Committee

Oversees management of risks related to our financial statements and the financial reporting process

Oversees management of risks related to our compensation policies and practices applicable to executives,employee benefit plans and the administration of equity plans

Oversees management of risks related to succession planning for the Chief Executive Officer and other members of executive management and our Ethics and Compliance Program (excluding responsibilities assigned to the Audit Committee)


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CORPORATE GOVERNANCE23

At their respective November 2017 meetings, each committee undertook an assessment of those areas of risk oversight that were delegated to it and provided a report to the Board. Also, at its November 2017 meeting, the Board received an ERM report and performed an assessment and review of the risks described in that report that were not delegated to the committees.

Regarding risks relating to the design of our compensation programs, the Compensation Committee, with assistance from its independent compensation consultant, Meridian Compensation Partners, LLC, regularly reviews and assesses our compensation policies and practices to ensure that they are appropriate in terms of the level of risk-taking and in line with our business strategies and the interests of our stockholders. The Compensation Committee has designed our compensation programs to encourage performance focused on long-term stockholder value, promote company growth and allow for appropriate levels of risk-taking but to discourage excessive risk-taking. Based on the findings of the risk assessment performed at its November 2017 meeting, the Compensation Committee concluded that the risks arising from our compensation policies and practices are aligned with stockholders’ interests and not reasonably likely to have a materially adverse impact on us.

STOCKHOLDER ENGAGEMENT

The Board oversees and is committed to ongoing stockholder dialogue on governance and compensation matters and places considerable weight on stockholder feedback in making decisions impacting our governance processes and compensation programs.

STOCKHOLDER OUTREACH PROGRAM

Objective

Outreach

Discussion

Feedback

Results

Since 2015, our Board has engaged in an extensive stockholder outreach program to discuss our stockholders’ perspectives on our governance and compensation policies and practices.

Each year, we typically reach out to stockholders representing approximately 40% of our outstanding shares of common stock and other stakeholders to gain insight regarding their perspectives on corporate governance and compensation matters.

In 2015 and 2016, in person or telephonic meetings led by either our Governance Committee Chair or Compensation Committee Chair were held with stockholders representing approximately 30% of our outstanding shares of common stock. In 2017, based on our strong recent financial performance, enhancements to our compensation and governance programs and positive say-on-pay results in 2016 and 2017, limited meetings were requested by stockholders, which we believe is an indication of our stockholders’ support of our current compensation and governance framework.

This engagement process has provided us with constructive stockholder feedback on governance and compensation topics, such as board refreshment, board evaluations, annual and long-term incentive programs and disclosure around our executive compensation programs.

Each year, our Board considers the say on pay vote result and the matters discussed during the stockholder and stakeholder outreach efforts conducted during the year in considering any changes or enhancements to our compensation and governance programs.

The Board will continue to seek stockholder input to identify and proactively address important corporate governance and compensation issues.

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24CORPORATE GOVERNANCE

BOARD REFRESHMENT AND SUCCESSION PLANNING

We are committed to a strong board refreshment process. As part of our commitment to board refreshment we impose a mandatory director retirement age of 72, require Committee Chairs to rotate after five years of service and annually review committee composition and individual director skills and qualifications. Further, our Governance Committee, typically with the assistance of a third party search firm, identifies and considers new director candidates who have expertise that would complement and enhance the current Board’s skills and experience. Additionally, with the closing of McDermott’s combination with CB&I in May 2018, we welcomed five new, experienced and qualified members to our Board. Our commitment to board refreshment has resulted in a Board with a well-balanced tenure.

DIRECTOR SUCCESSION PLANNING PROCESS

Succession
Planning

Identification of
Candidates

Meeting
with Candidates

Decision and
Nomination

The Governance Committee implements an ongoing succession planning process, seeking out director candidates to join our Board in light of the emerging business needs of our business and our current Board’s composition.

To ensure a robust search process and access to a wide range of qualified candidates, the Governance Committee works closely with an independent search firm to identify and evaluate director candidates in light of our Board’s structure, tenure and qualifications.

Potential director candidates are interviewed by our Chair of the Board, CEO, the Governance Committee and other available directors.

The Governance Committee recommends to the full Board for nomination those director candidates with the skills and experience that would most benefit the current Board and best serve the interests of McDermott and its stockholders.


Voting

The Director Nominees stand for election or reelection to the Board by our stockholders at the Annual Meeting, each for a term extending until the next year’s Annual Meeting of Stockholders.

BOARD AND COMMITTEE EVALUATIONS

Our independentBoard recognizes the critical role of annual Board and committee evaluations in ensuring the Board and each committee are functioning effectively. The Governance Committee annually reviews the Board and committee evaluation process in consideration of recent best practices and input from the directors. To that end, and in response to stockholder input received through our stockholder outreach efforts, the Governance Committee enhanced the evaluation process by utilizing a third party to help conduct the annual Board and committee performance evaluations conducted in early 2017.

Based on stockholder input, the results of the 2017 evaluations and consistent with the practices of many other companies who retain third party facilitators to assist with their annual evaluations, the Governance Committee determined that it would be more beneficial to utilize a third party to help conduct the annual evaluations once every few years and as needed as opposed to every year. In 2018, in accordance with its charter, the Governance Committee oversaw the annual evaluation process, solicited feedback from all directors meetand reported to the Board with an assessment of the performance of the Board and its committees. This assessment was then discussed and taken into account by the full Board in executive session without managementin its consideration of any appropriate action or response that might strengthen director communications and the overall effectiveness of Board and committee meetings. Additionally, in connection with the annual evaluation conducted in early 2018, the Board considered how it was progressing against the recommendations made by the third party facilitator who assisted with the 2017 annual evaluation.

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CORPORATE GOVERNANCE25

SUSTAINABILITY AND CORPORATE SOCIAL RESPONSIBILITY

Sustainability and corporate social responsibility (“CSR”) are integral components of our business strategy. In 2015, we established “Taking the Lead,” an internally driven initiative focused on proactively developing and supporting the behaviors and attitudes that lead to a regular basis. Currently, Mr. Luquette,robust quality, health, safety, environment and security (“QHSES”) culture and excellence in QHSES performance. Our approach to corporate responsibility and sustainability revolves around maintaining our Chairmanbest in class safety performance, limiting our environmental footprint and supporting local community development. By supporting our people, environment and communities in these three areas, McDermott can make a positive impact while creating shared value for our company and aligning with our overall business strategy.

Unfortunately, 2017 presented unexpected challenges to many of our employees. Hurricane Harvey brought widespread flooding to the Houston area, and Mexico City was impacted by a major earthquake. As a part of our CSR efforts, we launched the McDermott Relief Fund, which helped more than 35 families recover from both incidents and has proven to be an outstanding avenue for employees’ interest in taking care of each other and the larger McDermott family.

In 2017, McDermott established a formal CSR  Corporate Steering Committee and a Global  Coordination Team to more closely align CSR activities to our business objectives, which will ensure shared value for the communities and organizations we serve. We are also working to align our CSR framework to the ISO 26000:10 standard, which provides guidance to assess and address social responsibilities that are relevant and significant to McDermott’s: mission and vision; operations and processes; customers, employees, communities and other stakeholders; and environmental impact.

Safety

McDermott has a deeply integrated safety culture that is “part of our DNA.” The safety of our employees, customers, subcontractors and vendors is of utmost importance and we strive to be an industry leader in safety. Our safety performance continues to be second to none, as exemplified by our Total Recordable Incident Rate (TRIR) for 2017 being significantly lower than our peers.

Environment

McDermott is focused on opportunities to reduce our environmental impact in areas in which we operate. Our approach to reducing our environmental impact is to consider how we can integrate new solutions in our operations and activities to create sustained change. In 2017, in particular, we were highly focused on eliminating and controlling paper, plastic and styrofoam waste.

Philanthropy & Volunteerism

We realize that the success of our business is linked to the success of the Boardcommunities where we operate. McDermott is committed to using its global reach to develop, strengthen and support the communities in which we operate.

A few of Directors, serves as the presiding director for those executive sessions.causes in which we participated to support our communities in 2017 were:

forming a strategic partnership with the Global Education & Leadership Foundation (“tGELF”). While deeply rooted in India, tGELF is a global organization focused on finding the world’s next great leaders. tGELF’s focus on education, ethics and altruism to develop the next generation of leaders across the globe embodies the spirit and good for which McDermott looks for in its CSR programs.

converting a storage container into a public library to promote reading culture among the local communities surrounding our fabrication yard in Batam, Indonesia. This is the fifth container-turned public library initiative from McDermott’s fabrication yard in Batam. The latest library, complete with 150 story books for the first round, was handed over to the community of Citra Pendawa Asri in Batu Aji.

participating in the American Heart Association’s 2017 Heart Walk, raising funds to save lives from heart disease and stroke, for which we were recognized as one of the top five contributors in the Houston area.

organizing a first blood drive campaign at our Altamira Fabrication Yard to benefit Hospital Carlos Canseco in Mexico, which allowed 115 employees to donate blood for children in the Oncology Center of the hospital.

promoting and participating in the charity campaign, Solidary Christmas, in Brazil. Through this campaign, McDermott worked with the Romão de Mattos Duarte orphanage which takes care of 33 children ranging from four-month-olds to nine-year-olds. Each participating McDermott employee selected at least one child and volunteered to be the child’s Santa Claus by giving the child a Christmas gift.


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26CORPORATE GOVERNANCE

COMMUNICATIONS WITH THE BOARD

Stockholders or other interested persons may send written communications to the independent members of our Board, addressed to Board of Directors (independent members)(Independent Directors), c/o McDermott International, Inc., Corporate Secretary’s Office,Secretary, 757 N. Eldridge Pkwy.,Parkway, Houston, TexasTX 77079. Information regarding this process is posted on our Web site atwww.mcdermott.comunder “About Us — Leadership & Corporate Governance — Independent Director Access Information.”

Board of Directors and Its CommitteesLeadership Structure

Our Board met 16 times during 2014. All directors attended 75% or more of the meetings of the Board and of the committees on which they served during 2014. In addition, as reflected in our Corporate Governance Guidelines, we have adopted a policy that each member of our Board must make reasonable efforts to attend our Annual Meeting. All directors then serving on the Board attended our 2014 Annual Meeting.

Board Leadership Structure.Mr. Luquette has served as ChairmanChair of the Board since Mr. D. Bradley McWilliams, our former Chairman of the Board, retired as a member of our Board of Directors on May 6, 2014. Our Board believes that it is appropriate for McDermott to have a ChairmanChair of the Board separate from the Chief Executive Officer, as this structure allows Mr. Dickson, McDermott’s President and Chief Executive Officer, to maintain his focus on our strategic direction and the management of our day-to-day operations and performance, while Mr. Luquette is able to set the Board’s agendas and lead the Board meetings.

Executive Sessions

Our independent directors meet in executive session without management on a regular basis. Currently, Mr. Luquette, our Chair of the Board Committees.of Directors, serves as the presiding director for those executive sessions.

Board of Directors and its Committees

Our Board met 15 times during 2017. All directors serving on the Board during 2017 attended 75% or more of the meetings of the Board and of the committees on which they served during 2017. Additionally, it is our policy that all of our directors attend our annual meeting of stockholders, and in accordance with that policy, all directors serving on the Board in 2017 attended our 2017 Annual Meeting.

BOARD COMMITTEES

Our Board currently has, and appoints the members of, standing Audit, Compensation Finance and Governance Committees. Each of those committeesstanding Board committee is comprised entirely of independent nonemployee directors and has a written charter approved by the Board. The current charter for each standing Board committee is posted on our Web site atwww.mcdermott.comunder “About Us —“WHO WE ARE – Leadership & Corporate Governance — Board Committees.” Attendance at committee meetings is open to every director, regardless of whether he or she is a member of the committee. Occasionally, our Board may convene joint meetings of certain committees and the Board. Each portion of the joint meeting is counted separately for purposes of the number of meetings of the Board and its committees disclosed in this proxy statement. Additionally, in 2018, in connection with McDermott’s combination with CB&I, the Board determined it necessary and appropriate to establish a Transition Committee to oversee and support efforts to effectively and efficiently integrate the two companies post-combination.

2018 PROXY STATEMENT


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CORPORATE GOVERNANCE27

The following table shows the current membership, the principal functions and the number of meetings held in 20142017 for each standing Board committee:

Audit Committee
CommitteeChairmanPrincipal Functions and Additional Information

AUDIT

Committee Members:

Mr. Schumann (Chair)

Mr. Hanks

Mr. Trice

4 Meetings Held in 2014

•    

Monitors our financial reporting process and internal control system.

•    

Oversees the integritypreparation of our financial statements.

•    

Monitors our compliance with legal and regulatory financial requirements, including our compliance with the applicable reporting requirements established by the U.S. Securities and Exchange Commission (the “SEC”).

•     and the requirements of Audit Committees as established by the NYSE.

Evaluates the independence, qualifications, performance and compensation of our independent registered public accounting firm.

•    

Oversees the performance of our internal audit function.

•    

Oversees certain aspects of our ComplianceEthics and EthicsCompliance Program relating to financial matters, books and records and accounting and as required by applicable statutes, rules and regulations.

•    

Provides an open avenue of communication among our independent registered public accounting firm, financial and senior management, the internal audit department and the Board.

Committee Members
Mr. Alexander
Mr. Barril
Ms. Williams
Meetings Held in 2017
7
Our Board has determined that all members of the Audit Committee are independent and financially literate under NYSE Listed Company Manual Sections 303A.02 and 303A.07, respectively, and that Messrs. Trice, HanksSchumann and SchumannAlexander and Ms. Williams each qualify as an “audit committee financial expert”expert,” within the definition established by the SEC. For more information on the backgrounds of those directors, see their biographical information under “Election of Directors” above.

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28CORPORATE GOVERNANCE

Compensation Committee
ChairmanPrincipal Functions and Additional Information

COMPENSATION

Committee Members:

Ms. Shafer-Malicki (Chair)

Mr. Brown

Mr. Luquette

7 Meetings Held in 2014

Kissel

•    Evaluates

Oversees the design of our officer and director compensation plans, policies and programs and ourprograms.
Evaluates employee benefit plans.

•    

Approves and/or recommends to the Board for approval such officer and director compensation plans, policies and programs.

•    

Annually reviews and approves goals and objectives relevant to CEO compensation, evaluates (in coordination with the Governance Committee) the CEO’s performance in light of those goals and objectives and sets the CEO’s compensation based on that evaluation.
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 ofHow We Make Compensation Committee, Compensation Consultant and Management”Decisions” below.

•    

For 2014,2017, 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 and key employees who participate in the EICP. All payments under the EICP are subject to Compensation Committee approval.

•    

Under the 2009 LTIP and 2014 LTIP,our long term incentive plans, the Compensation Committee may delegate some of its duties to our Chief Executive Officer or other senior officers. The Compensation Committee has delegated certain authority to our Chief Executive Officer and Senior Vice President, Human Resources, for the approval of long-term incentive awards under the 2014 LTIP to new-hire, non-officer employees.

•    

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.

Committee Members
Mr. Flury
Mr. Luquette
Ms. Shafer-Malicki
Meetings Held in 2017
6

FINANCE

 

Committee Members:

Mr. Trice (Chair)

Mr. Bookout

Mr. Schumann

 

6 Meetings Held in 2014

•    Reviews and oversees financial policies and strategies, including financings, capital structure, mergers and acquisitions and the investment performance of pension plans.

•    Recommends any change in dividend policies or stock repurchase programs.

•    Oversees capital expenditures and capital allocation strategies.

•    Oversees 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.

•    Additionally, a subcommittee of the Finance Committee consisting of Messrs. Trice, Schumann and Hanks (who was a member of the Finance Committee at the time), constituted a Pricing Committee in connection with McDermott’s refinancing activities in early 2014. The Pricing Committee held 2 meetings in 2014, in addition to the 6 Finance Committee meetings held in 2014.

 


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CORPORATE GOVERNANCE29

Governance Committee

GOVERNANCE

Committee Members:

Mr. Hanks (Chair)

Mr. Bookout

Mr. Brown

Ms. Shafer-Malicki

5 Meetings Held in 2014

Chairman

•    Principal Functions and Additional Information

Mr. Flury
Identifies individuals qualified to become Board members and recommends to the Board each year the director nominees for the next annual meeting of stockholders.

•    

Recommends to the Board the directors to serve on each Board committee.

•    

Leads the Board in its annual review of the performance of the Board and its committees.
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

Oversees the annual evaluation of our Chief Executive Officer.

•    Officer (in conjunction with the Compensation Committee).

Reviews and assesses the succession plan for the Chief Executive Officer and other members of executive management and reviews such plan with the Board periodically, and at least on an annual basis.

•    

Recommends to the Board the compensation of nonemployee directors.

•    

Serves as the primary committee overseeing our ComplianceEthics and EthicsCompliance Program, excluding certain oversight responsibilities assigned to the Audit Committee.

•    

Oversees our director and officer insurance program.

Committee Members

The Board’s Role in Risk Oversight

As part of its oversight function, the Board is actively involved in overseeing risk management through our Enterprise Risk Management (“ERM”) program, which includes periodic reporting through a regional and corporate ERM structure. In connection with the ERM program, the Board exercises its oversight responsibility with respect to key external, strategic, operational and financial risks and discusses the effectiveness of current efforts to mitigate certain focus risks as identified by senior management and the Board through anonymous risk surveys.

Although the Board is ultimately responsible for risk oversight, the Board is assisted in discharging its risk oversight responsibility by the Audit, Compensation, Finance and Governance Committees. Each committee oversees management of risks, including, but not limited to, the areas of risk summarized below, and periodically reports to the Board on those areas of risk:

Mr. Bookout
Mr. Miller
Ms. Shafer-Malicki
Meetings Held in 2017
5

 

CommitteeRisk Oversight

Audit

•    Oversees management of risks related to our financial statements and the financial reporting process



Compensation

•    Oversees management of risks related to our compensation policies and practices applicable to executives as well as employees generally, employee benefit plans and the administration of equity plans

Finance

•    Oversees management of risks with respect to our policies and processes regarding capital structure, capital expenditures, financing and mergers and acquisitions

Governance

•    Oversees management of risks related to succession planning for the Chief Executive Officer and other members of executive management, our Compliance and Ethics Program (excluding responsibilities assigned to the Audit Committee) and director and officer insurance coverage

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

At their respective November 2014 meetings, each committee undertook an assessment of those areas of risk oversight that were delegated to it and provided a report to the Board. Also, at its November 2014 meeting, the Board received an ERM report and performed an assessment and review of the risks described in that report that were not delegated to the committees.

Compensation Policies and Practices and Risk

The Compensation Committee has concluded that risks arising from McDermott’s compensation policies and practices for McDermott employees are not reasonably likely to have a materially adverse effect on McDermott. In reaching this conclusion, the Compensation Committee considered the policies and practices in the following paragraph.

The Compensation Committee regularly reviews the design of our significant compensation programs with the assistance of its compensation consultant. We believe our compensation programs assist us in attracting, developing, motivating and retaining our executive officers while allowing for appropriate levels of business risk through some of the following features:

Reasonable Compensation Programs — Using the elements of total direct compensation, the Compensation Committee seeks to provide compensation opportunities for employees targeted at or near the median compensation of comparable positions in our market. As a result, we believe the total direct compensation of executive officer employees provides a reasonable and appropriate mix of cash and equity, annual and longer-term incentives and performance metrics.

Emphasis on Long-Term Incentive Compensation Over Annual Incentive Compensation — Long-term incentive compensation typically makes up a larger percentage of an executive officer’s total direct compensation than annual incentive compensation. Incentive compensation helps drive performance and align the interests of our employees with those of stockholders. In addition, tying a significant portion of an 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 our company’s performance.

Clawback Policy — The Compensation Committee has adopted a policy that allows McDermott to recover, under certain circumstances, compensation paid to executive officers.

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; or (2) 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 our company.

Annual Incentive Compensation Subject to Linear and Capped Payouts — The Compensation Committee establishes financial performance goals which are generally 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% of target.

Use of Multiple Performance Metrics — Utilizing diversified performance measures helps prevent compensation opportunities from being overly weighted toward the performance result of a single measure. In 2014, McDermott utilized operating income as the performance metric for our long-term incentive plan, and operating income, free cash flow, order intake and order intake operating margin as the performance metrics for our annual incentive plan. These metrics are further diversified from metrics used in prior years, which we believe further reduces risks related to incentive compensation.

Stock Ownership Guidelines — Our executive officers and directors are subject to stock ownership guidelines, which also help promote longer-term perspectives and align the interests of our executive officers and directors with those of our stockholders. All directors and executive officers currently meet or exceed their ownership requirement or are within the five-year period allowed to achieve compliance.

Compensation Committee Interlocks and Insider Participation

All members of our Compensation Committee are independent in accordance with NYSE listing standards. No member of the Compensation Committee (1) was, during the year ended December 31, 2014,2017, 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, 20142017 between any member of the Board of Directors or the Compensation Committee and an executive officer of McDermott.

Related Party Transactions

We have adopted a written Related Person Transaction Policy applicable to any individual transaction or series of related transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which:

McDermott or any of its subsidiaries is, was or will be a participant;
any related person (as defined in the policy) has, had or will have a direct or indirect material interest; and
the amount involved exceeds $120,000.

This policy requires directors, director nominees and executive officers to provide written notice to the General Counsel (“GC”) of any potential Related Person Transaction involving, directly or indirectly, him or her or any of his or her immediate family members. Additionally, each director, director nominee and executive officer must complete an annual questionnaire designed in part to elicit and evaluate information about potential related person transactions and any related person relationships. All related person transactions requiring compliance with the policy as determined by the GC must be presented to the Governance Committee for review, approval, ratification or other action. The Governance Committee will approve or ratify a related person transaction only if it determines that, under all of the circumstances, the transaction is not inconsistent with the best interests of McDermott. There were no such transactions found to be directly or indirectly material to a related person required by SEC rules to be disclosed in this proxy statement.

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30CORPORATE GOVERNANCE

COMPENSATION OF DIRECTORSCompensation of Directors

Under our 20142017 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;

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

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

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

additional retainer for the non-executive Chairman of the Board: $150,000; 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 twelfth Board or Committee meeting per annual director term of service.

($)
Annual Board Member Retainer85,000
Audit Committee Chair Retainer20,000
Compensation Committee Chair Retainer20,000
Governance Committee Chair Retainer10,000
Additional Retainer for Lead Director (if applicable)20,000
Additional Retainer for Chair of the Board150,000
Meeting fees for each meeting of the Board or a Committee (of which the director is a member) attended in excess of the twelfth Board or Committee meeting per annual director term2,500

From 20112014 to 2013,2016, our nonemployee director compensation program was generally consistent with the above, with two exceptions. First, in 2014 we reinstated the additional retainer for the non-executive Chairman of the Board in connection with our return to a non-executive Chairman of the Board. Second, in 20142017, we increased the number of meetings requiredannual Board member retainer from $75,000 to be attended per$85,000. Second, we increased the annual term of service beforerestricted stock award from $120,000 to $135,000. These increases were made following a director received additional meeting fees from 8 to 12 meetings of the Board or a Committee (ofmarket analysis performed by Pay Governance, our third party compensation consultant at such time, which the nonemployee director is a member) attended. All directors who continued to serve as a member of the Board of Directors aftershowed that our 2014 Annual Meeting of Stockholders waived any additional meeting fees they would have been owed under our previous nonemployee director compensation program whenlevels were below our peer median. Accordingly, Pay Governance recommended adjustments totaling $45,000 to reduce the gap relative to our peers. Based on information provided by Pay Governance, our Governance Committee adopted the 2014approved of a $25,000 total increase to bring our nonemployee director compensation program. On average, each of these directors waived over $7,000 in meeting fees during 2014.levels closer to our peer median. Even with this increase, our nonemployee director compensation levels remain below the peer median.

The table below summarizes the compensation earned by or paid to our nonemployee directors during the year ended December 31, 2014. Mr. D. Bradley McWilliams served as our Chairman of the Board prior to his retirement in May 2014.2017.

DIRECTOR COMPENSATION TABLEDirector Compensation Table

 

NameFees Earned or Paid in CashStock Awards(1)Total

John F. Bookout, III

$75,000$119,997$194,997

Roger A. Brown

$78,333$119,997$198,330

Stephen G. Hanks

$81,932$119,997$201,929

Gary P. Luquette(2)

$172,727$119,997$292,724

D. Bradley McWilliams(2)

$91,894$91,894

William H. Schumann, III

$88,864$119,997$208,861

Mary L. Shafer-Malicki

$95,000$119,997$214,997

David A. Trice

$88,598$119,997$208,595

 

Name  Fees Earned or
Paid in Cash
($)(1)
  Stock
Awards
($)(2)
  Total
($)
Philippe Barril28,33388,393116,726
John F. Bookout, III84,166134,998219,164
Stephen G. Hanks100,727134,998235,725
Erich Kaeser84,166134,998219,164
Gary P. Luquette234,166134,998369,164
William H. Schumann, III104,166134,998239,164
Mary L. Shafer-Malicki91,106134,998226,104
David A. Trice90,711134,998225,709
(1)

The amounts reported in this column include the annual retainers paid to each director, additional retainers paid to the Chairman of the Board and Committee Chairs, and extra meeting fees, which were owed to all directors except for Mr. Barril as a result of their attending more than 12 meetings since May 5, 2017, the commencement of their annual terms.

(2)

Under our 20142017 director compensation program, equity compensation for nonemployee directors generally consisted ofincluded a discretionary annual stock grant. On May 12, 2014,5, 2017, each of the nonemployee directors then serving as a director received a grant of 17,04520,579 shares of restricted stock valued at $119,997,$134,998, which is the aggregate grant date fair value 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 ($7.04)6.56). Additionally, Mr. Barril received a grant of 14,234 shares of restricted stock valued at $88,393, which represented a prorated 2017 annual grant for his partial term of service upon joining the Board in September 2017. Under the terms of each award, the restricted stock vested immediately on the grant date and immediately became unrestricted shares of McDermott common stock. For a discussion of the valuation assumptions with respect to these awards, see Note 14 to our Consolidated Financial Statements included in our Annual Report of Form 10-K for the year ended December 31, 2017.


2018 PROXY STATEMENT


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As of December CORPORATE GOVERNANCE

31 2014, nonemployee directors had aggregate outstanding stock option awards as follows: Mr. Bookout – stock options to purchase 6,105 shares; and Mr. Brown – stock options to purchase 38,085 shares. All of such stock options were fully vested.

(2)

Mr. Luquette has served as non-executive Chairman of the Board since May 2014. Mr. McWilliams served as non-executive Chairman of the Board until his retirement in May 2014.

EXECUTIVE OFFICER PROFILESExecutive Officer Profiles

The following profiles belowprovide the relevant experience, age and on the following pages provide summary information regarding the experience and 2014 compensationtenure with McDermott as of September 26, 2018 of our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers who werecurrently employed by McDermott as of December 31, 2014, whom we refer to as our “Continuing Named Executives” or “Continuing NEOs”. The Continuing Named Executive profiles provide biographical information, including age and tenure with McDermott as of May 8, 2015, and summarize the compensation disclosures that are provided in the Compensation Discussion and Analysis (“CD&A”) and executive compensation tables. These profiles are supplemental, and are being provided in addition to, and not in substitution for, the detailed compensation tables required by the SEC that follow the CD&A. Please consult the more detailed compensation tables and the accompanying footnotes following the CD&A for an explanation of how the compensation information is calculated. See the following pages for profiles of:McDermott.

David Dickson, our President and Chief Executive Officer;

Stuart A. Spence, our Executive Vice President and Chief Financial Officer;

Scott V. Cummins, our Senior Vice President, Commercial;

Tony Duncan, our Senior Vice President, Project Support; and

Liane K. Hinrichs, our Senior Vice President, General Counsel and Corporate Secretary.

We have included below biographical information, including age as of May 8, 2015, for Messrs. Stephen L. Allen, our Senior Vice President, Human Resources, Hugh J. Cuthbertson, our Vice President, Asia, Thomas W. Mackie, our Vice President, Middle East, and Scott Munro, our Vice President, Americas, Europe & Africa, who are also executive officers but are not NEOs under applicable SEC rules.

The Continuing Named Executives and Mr. Perry L. Elders, our former Senior Vice President and Chief Financial Officer, who resigned in August 2014, are collectively referred to as our “Named Executives” or “NEOs.” Information relating to Mr. Elders is provided in the CD&A and the compensation-related tables included in this proxy statement.

Stephen L. Allen, 62, has served as our Senior Vice President, Human Resources since March 2014 and, previously, as our Senior Director, Human Resources from January 2014 to March 2014. Previously, he served as the Senior Vice President, Human Resources for Technip USA Inc., a subsidiary of Technip, S.A. (“Technip”), in Houston, Texas, from August 2005 until January 2014. Mr. Allen has over 25 years of human resources experience in the oil and gas, utility and engineering and construction industries. His human resources experience includes leadership roles in compensation, benefits, talent acquisition, talent management and real estate management. Prior to joining Technip in 2005, Mr. Allen held the position of General Manager, Human Resources for Duke Energy in Cincinnati, Ohio.

Hugh Cuthbertson, 57, has served as our Vice President, Asia, since January 2015. Previously, he served as our Vice President & General Manager Asia Pacific from April 2014 to January 2015; Senior Director, Operations, McDermott Australia Pty. Ltd. (“MAP”) from July 2013 to March 2014; Senior Director Business Development, MAP, from March 2012 to July 2013, and Managing Director, MAP, from May 2009 to March 2012. Mr. Cuthbertson joined McDermott in 1978, and has held positions of increasing responsibility in business development, project management and regional responsibility.

Thomas W. Mackie, 64, has served as our Vice President, Middle East, since January 2015. Mr. Mackie has held positions of increasing responsibility in project management, design, construction,

installation, hook-up and commissioning and operations since joining McDermott in 2005, including serving as our Vice President & General Manager Middle East from April 2014 to January 2015; Director of Projects, McDermott Middle East, Inc. (“MME”) from April 2013 to April 2014; Senior Project Director, MME, from August 2012 to April 2013; General Manager, Hook-up and Brownfield, MME, from 2011 to August 2012; Project Director, MME, from 2009 to 2011; and General Manager Engineering, MME, from 2005 to 2009.

Scott Munro, 40, has served as our Vice President, Americas, Europe & Africa, since January 2015. Previously, he served as our Vice President & General Manager North Sea and Africa from April 2014 to January 2015; and Vice President Projects & Operations Subsea, from the time he joined McDermott in January 2014 to March 2014. Prior to joining McDermott, Mr. Munro was Vice President, Commercial, for Technip U.S.A. Inc., a subsidiary of Technip, from 2010 to 2013; and Vice President Offshore Unit, Technip France, an operating unit of Technip, from 2013 to 2014. Mr. Munro has management experience in the oil and gas industry having worked in the United Kingdom, United States, Canada, Brazil and France in a variety of operational and project management roles in organizations such as Coflexip Stena Offshore Group S.A., Acergy, S.A., Chevron Corporation and Technip.

DAVID DICKSON

PRESIDENT AND CHIEF EXECUTIVE OFFICER

Age: 47

Tenure with McDermott: 19 months

DAVID DICKSONPresident and Chief Executive Officer
Age:50Tenure:4 years

Mr. Dickson 47, has served as a member of our Board of Directors and as President and Chief Executive Officer since December 2013, prior to which he served as our Executive Vice President and Chief Operating Officer from October 2013. Mr. Dickson has over 2425 years of offshore oilfield engineering and construction business experience, including 11 years of experience with Technip S.A. and its subsidiaries. From September 2008 to October 2013, he served as President of Technip U.S.A. Inc., with oversight responsibilities for all of Technip’s North American operations. In addition to being the President of Technip U.S.A. Inc., Mr. Dickson also had responsibility for certain operations in Latin America, including Mexico, Venezuela, Colombia and the Caribbean.America. Mr. Dickson also supported the Technip organization by managing key customer accounts with international oil companies based in the United States.

2014 COMPENSATION

Annual Base Salary

Base Salary Earned

$850,000  

Annual Incentive Compensation

Executive Incentive Compensation Plan Award(1)

$552,000  

Long-Term Incentive Compensation(2)

Restricted Stock Units

$2,399,981  

Performance Shares

$1,599,995  

Other Compensation

Deferred Compensation Plan Contribution

$42,500  

Thrift Match

$3,900  

Service-Based Thrift Contribution

$7,800  

Tax Payments

$0  

Perquisite Allowance

$20,000  

EQUITY AWARDED IN 2014

March 6, 2014

Restricted Stock Units

306,120units

March 6, 2014

Performance Shares

204,081sharesSTUART SPENCEExecutive Vice President, Chief Financial Officer

(1)Age:49

This amount represents Mr. Dickson’s annual incentive award earned in 2014 but paid in 2015 pursuant to the terms of the EICP.

Tenure:4 years

(2)

Each equity grant is disclosed at the grant date fair value of the award.

21


STUART A. SPENCE

EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

Age: 46

Tenure with McDermott: 9 months

Mr. Spence has served as McDermott’sour Executive Vice President and Chief Financial Officer since August 2014. Mr. Spence has approximately 19over 25 years of combined financial and operational management experience with companies in the oilfield products and services and engineering and construction businesses. Immediately prior to joining McDermott, Mr. Spence served as Vice President, Artificial Lift for Halliburton Company, where he had overall strategic and operational responsibility for Halliburton’s artificial lift product and service line. Previously, he served as Senior Director, Strategy and Marketing for Halliburton’s Completion and Production Division. Mr. Spence joined Halliburton following Halliburton’s acquisition of Global Oilfield Services Inc. in November 2011. He served as Executive Vice President and Chief Financial Officer of Global Oilfield Services from 2008 to May 2011 and as Executive Vice President, Strategy, in May 2011 in connection with the sale to Halliburton. His prior experience also includes positions of increasing financial and management responsibility at: Green Rock Energy, LLC; and Vetco International Ltd. (holding company for Aibel Ltd., an oilfield facilities maintenance and construction company, and Vetco Gray, Inc., a subsea production and drilling equipment company).

2014 COMPENSATION

Annual Base Salary(1)

Base Salary Earned

$168,229  

Annual Incentive Compensation

Executive Incentive Compensation Plan Award(2)

$70,656  

Long-Term Incentive Compensation(3)

Restricted Stock Units

$599,999  

Performance Shares

$400,000  

Restricted Stock Units(4)

$1,299,995  

Other Compensation

Deferred Compensation Plan Contribution

$0  

Thrift Match

$2,523  

Service-Based Thrift Contribution

$5,047  

Tax Payments

$0  

Perquisites(5)

$0  

EQUITY AWARDED IN 2014

JOHN M. FREEMANExecutive Vice President, Chief Legal Officer and Corporate Secretary
Age:56

August 25, 2014

Restricted Stock Units

81,081units

August 25, 2014

Performance Shares

54,054shares

August 25, 2014

Restricted Stock Units(4)

175,675unitsTenure:1 year

(1)

Base salary earned reflects partial year compensation for the period from August 25, 2014 through December 31, 2014.

(2)

This amount represents Mr. Spence’s annual incentive award earned in 2014 but paid in 2015 pursuant to the terms of the EICP. Mr. Spence’s annual incentive compensation award was computed based on his annual base salary earned from his date of hire through December 31, 2014.

(3)

Each equity grant is disclosed at the grant date fair value of the award.

(4)

This award represents a one-time award of restricted stock units to compensate Mr. Spence for the forfeiture of incentives from his prior employer.

(5)

Mr. Spence did not receive a perquisite allowance in 2014, since he did not join McDermott until August 25, 2014.

SCOTT V. CUMMINS

SENIOR VICE PRESIDENT, COMMERCIAL

Age: 52

Tenure with McDermott: 29 years

Mr. CumminsFreeman has served as our SeniorExecutive Vice President, Commercial,Chief Legal Officer and Corporate Secretary since January 2015.May 2018. Previously, he served as: our Executive Vice President Offshore from March 2014 to January 2015; our Senior Vice President and General Manager, Asia Pacific & Middle East from January 2014 to February 2014; our Senior Vice President and General Manager, Asia Pacific, from May 2013 to January 2014; Senior Vice President and General Manager, Asia Pacific, McDermott International Management, Inc. (“MIMI”) from February 2012 to May 2013; 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; and Vice President and General Manager, Asia Pacific, of our subsidiary J. Ray McDermott, S.A. (“JRM”) from April 2008 to July 2010. Mr. Cummins joined McDermott in June 1986, and his earlier positions with McDermott include positions in sales and marketing, business development, marine, fabrication and project operations roles.

2014 COMPENSATION

Annual Base Salary

Base Salary Earned(1)

$456,250  

Annual Incentive Compensation

Executive Incentive Compensation Plan Award(2)

$126,000  

Long-Term Incentive Compensation(3)

Restricted Stock Units

$599,995  

Performance Shares

$399,997  

Pension Plan(4)

Annual Change in Present Value of Pension Benefit

$80,900  

Other Compensation

Deferred Compensation Plan Contribution

$31,488  

Thrift Match

$N/A  

Service-Based Thrift Contribution

$N/A  

Tax Payments(5)

$121,963  

Expatriate Benefits(6)

$411,405  

Perquisites

$20,000  

Other(7)

$43,083  

EQUITY AWARDED IN 2014

March 6, 2014

Restricted Stock Units

76,530units

March 6, 2014

Performance Shares

51,020shares

(1)

The amount reported includes an additional $6,250 received as a result of the timing of monthly salary payments in connection with Mr. Cummins’ relocation from Singapore to the United Kingdom and the resulting change in payrolls.

(2)

This amount represents Mr. Cummins’ annual incentive award earned in 2014 but paid in 2015 pursuant to the terms of the EICP.

(3)

Each equity grant is disclosed at the grant date fair value of the award.

(4)

Mr. Cummins is no longer accruing benefits under the pension plan reflected above.

(5)

The amount reported includes $89,826 in Singapore taxes and $191,240 in United Kingdom taxes paid by McDermott on Mr. Cummins’ behalf, net of $159,103 McDermott withheld from Mr. Cummins’ compensation pursuant to McDermott’s tax equalization program.

(6)

Expatriate benefits for Mr. Cummins consist of an expatriate premium, commodities and service allowance, housing and utilities allowance, limited vacation airfare, education allowance for dependent children and a car lease.

(7)

The amount reported represents an amount paid to Mr. Cummins in connection with his relocation from Singapore to the United Kingdom.

TONY DUNCAN

SENIOR VICE PRESIDENT, PROJECT SUPPORT

Age: 54

Tenure with McDermott: 2 years

Mr. Duncan has served as our Senior Vice President, Project Support, since January 2015. Previously, he served as: our Executive Vice President Subsea from March 2014 to January 2015; our Vice President and General Manager, Subsea, from April 2013 to March 2014, with responsibility for the Atlantic segment of McDermott’s business from January 2014 to March 2014; Vice President, Supply Chain Management of Subsea 7, S.A., a global subsea engineering, construction and services company, from March 2011 to March 2013; Regional Vice President — Gulf of Mexico of Acergy, S.A., an international subsea engineering construction and services company, which merged with Subsea 7, Inc. in January 2011, from February 2006 to March 2011; and Vice President, SURF — Gulf of Mexico of Technip, S.A., from September 2001 to February 2006.

2014 COMPENSATION

Annual Base Salary

Base Salary Earned

$400,000  

Annual Incentive Compensation

Executive Incentive Compensation Plan Award(1)

$112,000  

Long-Term Incentive Compensation(2)

Restricted Stock Units

$599,995  

Performance Shares

$399,997  

Other Compensation

Deferred Compensation Plan Contribution

$16,250  

Thrift Match

$5,200  

Service-Based Thrift Contribution

$7,800  

Tax Payments(3)

$394,463  

Expatriate Benefits(4)

$335,028  

Perquisites

$20,000  

Other(5)

$3,448  

EQUITY AWARDED IN 2014

March 6, 2014

Restricted Stock Units

76,530units

March 6, 2014

Performance Shares

51,020shares

(1)

This amount represents Mr. Duncan’s annual incentive award earned in 2014 but paid in 2015 pursuant to the terms of the EICP.

(2)

Each equity grant is disclosed at the grant date fair value of the award.

(3)

The amount reported includes $502,384 in United Kingdom taxes paid by McDermott on Mr. Duncan’s behalf, net of (i) $148,721 that McDermott withheld from Mr. Duncan’s compensation in 2014 and (ii) $40,800 that McDermott paid to Mr. Duncan in 2014 as a tax equalization payment related to 2013 withholding, in each case pursuant to McDermott’s tax equalization program.

(4)

Expatriate benefits for Mr. Duncan consist of an expatriate premium, hardship premium, commodities and service allowance, housing and utilities allowance, limited vacation airfare and an education allowance for Mr. Duncan’s dependent children.

(5)

The amount reported represents an amount paid to Mr. Duncan in connection with his relocation from the United States to the United Kingdom.

LIANE K. HINRICHS

SENIOR VICE PRESIDENT,

GENERAL COUNSEL AND CORPORATE SECRETARY

Age: 57

Tenure with McDermott: 16 years

Ms. Hinrichs has been our Senior Vice President, General Counsel and Corporate Secretary from August 2017 to May 2018. He has more than 30 years of legal and compliance experience in both the private and public sectors. Prior to joining McDermott, Mr. Freeman served at TechnipFMC plc as Special Advisor to the Integration of Technip and FMC from January 2017 to August 2017, and, before the combination of those two companies, served in various executive roles at Technip, including: Global General Counsel, Technip Group (Paris, France) from November 2015 through January 2017; Executive Vice President, Technip Group Legal Business & Operations Counsel (Paris, France), from May 2015 through October 2015; and Vice President, General Counsel, Corporate Secretary & Regional Compliance Officer, Technip USA, Inc. (Houston, Texas), from April 2009 through April 2015. From 2004 to 2009, Mr. Freeman held various senior legal and compliance positions at Baker Hughes Incorporated, after having served in several roles of increasing responsibility for Pennzoil-Quaker State Company and as an attorney at a Washington, D.C. law firm. He began his legal career in 1989 as a prosecuting attorney for the U.S. federal government.

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32CORPORATE GOVERNANCE

SAMIK MUKHERJEEExecutive Vice President, Chief Operating Officer

Age:48Tenure:3 months

Mr. Mukherjee has served as our Executive Vice President, Chief Operating Officer since July 2018. He has more than 25 years of experience in sales, operations and strategy, serving in leadership and executive-level roles for the upstream and downstream oil and gas industry around the world. Prior to joining McDermott, Mr. Mukherjee was Executive Vice President of Corporate Development, Strategy, Mergers and Acquisitions, Digital and IT of TechnipFMC. Previously, he served as Senior Vice President, Region EMIA, Operating Centers Coordination & Region Change Management Officer of Technip France from May 2016 to October 2017. Prior to that position, he served as Group Senior Vice President, Strategy and Business Development of Technip Corporate from June 2015 to May 2016, as Country Head and Managing Director of Technip India from January 2012 to June 2015, and held a number of other senior corporate and operational positions during his career with Technip, which commenced in 1998.

DANIEL M. MCCARTHYExecutive Vice President, Lummus Technology

Age:67Tenure:5 months

McCarthy has served as our Executive Vice President, Lummus Technology since May 2018. Previously, he served as CB&I’s Executive Vice President, Technology from December 2011 to May 2018. He joined CB&I through the acquisition of the Lummus business from ABB, Asea Brown Boveri Ltd., in 2007 and served as President, Lummus Technology from November 2007 to December 2011. At Lummus he served as Executive Vice President, North America from April 2006 to November 2007 and was Executive Vice President of Lummus Technology from December 2003 to November 2007.

STEPHEN L. ALLENSenior Vice President, Chief Human Resources Officer

Age:66Tenure:3 years

Mr. Allen has served as our Senior Vice President, Chief Human Resources Officer since May 2018. He previously served as our Senior Vice President, Human Resources from March 2014 until his retirement in July 2016. From July 2016 until re-joining the Company in May 2018, he provided consulting services to McDermott. Previously, he served as Senior Vice President, Human Resources for Technip USA, Inc. (Houston, Texas) from August 2005 until January 2014. Mr. Allen has more than 25 years of human resources experience in the oil and gas, utility and engineering and construction industries, including leadership roles in compensation, benefits, talent acquisition, talent management and real estate management. Prior to joining Technip in 2005, Mr. Allen held the position of General Manager, Human Resources for Duke Energy in Cincinnati, Ohio.

LINH AUSTINSenior Vice President, Middle East and North Africa

Age:49Tenure:3 years

Mr. Austin has served as our Senior Vice President, Middle East and North Africa since May 2018. Previously, he served: as our Vice President, Middle East and Caspian, from January 2016 to May 2018; and as our Senior Director Operations, Middle East from January 2015 to January 2016. Mr. Austin has over 20 years of executive and operational experience in the oil and gas industry, including two years in the Middle East with Abu Dhabi Marine Operating Company (ADMA-OPCO). Prior to joining McDermott, he served as Senior Advisor for ADMA-OPCO from August 2013 until January 2015. Prior to his employment with ADMA-OPCO, Mr. Austin served with BP and Atlantic Richfield Company in various operational and project leadership roles in the upstream and the downstream sectors with increasing levels of responsibility since 1993.

2018 PROXY STATEMENT


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CORPORATE GOVERNANCE33

RICHARD W. HEOSenior Vice President, North, Central and South America

Age:48Tenure:5 months

Mr. Heo has served as our Senior Vice President, North, Central and South America since May 2018. Previously, he served as CB&I’s: Executive Vice President, Fabrication Services from October 2017 to May 2018; and various roles within Fabrication Services including President, Engineered Products Business Unit from June 2014 to October 2017. Prior to joining CB&I, he held a number of roles at KBR, Inc., including: Vice President of Global Sales, Technology from October 2013 to June 2014; Director, Global Operations, Proprietary Equipment from June 2010 to October 2013; and Director, North America Business Development from March 2009 to June 2010. From 1998 to 2009, he worked for Nalco Company (Ecolab).

TAREQ KAWASHSenior Vice President, Europe, Africa, Russia and Caspian

Age:50Tenure:5 months

Mr. Kawash has served as our Senior Vice President, Africa, Russia and Caspian since May 2018. Previously, he served as CB&I's: Group Vice President, Engineering and Construction International from December 2016 to May 2018; Vice President, Project Operations from March 2016 to December 2016; and Vice President, Business Development, Europe, Caspian, Middle East and Africa from August 2014 to March 2016, and has held several project management roles from 2000 to 2014. Prior to joining CB&I in 2000, he served in various roles of increasing responsibility at Consolidated Contractors Company from 1993 to 2000 and at KBR, Inc. from 1991 to 1993.

JONATHAN KENNEFICKSenior Vice President, Project Execution and Delivery

Age:50Tenure:26 years

Mr. Kennefick has served as our Senior Vice President, Project Execution and Delivery, since November 2015. Mr. Kennefick joined McDermott in 1992, and has served in various positions of increasing responsibility, including: Vice President of Quality, Health, Safety, Environment and Security, from March 2014 to November 2015; Vice President, Operations—Middle East and India, from May 2012 to March 2014; Director of Operations, from June 2010 to May 2012; and General Manager, Marine Operations, from March 2008 to June 2010.

BRIAN MCLAUGHLINSenior Vice President, Chief Commercial Officer

Age:47Tenure:12 years

Mr. McLaughlin has served as our Senior Vice President, Chief Commercial Officer, since May 2018. Previously, he served as our: Senior Vice President, Commercial, from September 2015 to May 2018; VP Commercial, Offshore, from 2014 to September 2015; General Manager, Business Development—Middle East and India, from 2010 to 2014; Senior Director, Business Development—Middle East and India, from 2008 to 2010; and, Proposals Manager, Middle East, from 2006 to 2008. Prior to joining McDermott, Mr. McLaughlin held roles of increasing responsibility at Al Faris, Abu Dhabi, ALE Middle East and Weir Pumps.

SCOTT MUNROSenior Vice President, Corporate Development Officer

Age:44Tenure:4 years

Mr. Munro has served as our Senior Vice President, Chief Development Officer since May 2018. Previously, shehe served as our: Vice President, General CounselAmericas, Europe and Corporate SecretaryAfrica 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 20012015 to May 2004;2018; Vice President and Senior CounselGeneral Manager, North Seas and Africa, from May 1999April 2014 to September 2001.January 2015; and Vice President, Projects and Operations Subsea, from the time he joined McDermott in January 2014 through March 2014. Prior to joining McDermott, Mr. Munro was Vice President, Commercial, for Technip U.S.A. Inc., a subsidiary of Technip, from 2010 to 2013; and Vice President Offshore Unit, Technip France, an operating unit of Technip, from 2013 to 2014. Mr. Munro has management experience in 1999, she was a partnerthe oil and gas industry, having worked in the United Kingdom, United States, Canada, Brazil and France in a New Orleans law firm.variety of operational and project management roles in organizations such as Coflexip Stena Offshore Group S.A., Acergy, S.A., Chevron Corporation and Technip.

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34CORPORATE GOVERNANCE

IAN PRESCOTTSenior Vice President, Asia Pacific

Age:55Tenure:9 months

Mr. Prescott has served as our Senior Vice President, Asia Pacific since May 2018. Previously he served as our Vice President, Asia from January 2018 to May 2018. Mr. Prescott has more than 28 years of extensive operational, marketing and business unit responsibilities for production and processing solutions businesses in the upstream oil and gas sector, including engineering and fabrication. Prior to joining McDermott, he served as: Senior Vice President for SNC-Lavalin Group, Inc., from August 2015 to December 2017; Chief Executive Officer for Global Process Systems from May 2010 to May 2015; and Director, Asia for Global Process Systems from January 2008 to May 2010. He has also held key leadership positions with PAE (Thailand) PLC and Aker Solutions ASA (prior to 2008, known as Aker Kvaerner).

CHRIS KRUMMELVice President, Finance and Chief Accounting Officer

Age:50Tenure:1 year 11 months

Mr. Krummel has served as our Vice President, Finance and Chief Accounting Officer since October 2016. Prior to joining McDermott, Mr. Krummel served as a consultant of American Industrial Partners, a firm engaging in private equity investments in industrial businesses in the United States and Canada, from November 2015 through July 2016; Chief Financial Officer and Vice President of EnTrans International, LLC, a global manufacturer of aluminum tank trailers, heavy lift trailers and oilfield pressure pumping equipment used in hydraulic fracturing and other well services, from September 2014 COMPENSATIONto October 2015; and Chief Accounting Officer, Vice President and Corporate Controller / Vice President of Finance of Cameron International, a worldwide provider of flow equipment products, systems and services to oil, gas and process industries from April 2008 until August 2014. Mr. Krummel has also served as a member of the Board of Directors of Eco-Stim Energy Solutions, Inc., an environmentally-focused well stimulation and completion company, since January 2014.

2018 PROXY STATEMENT


Annual Base Salary

Base Salary Earned

$477,750  

Discretionary Bonus(1)

Discretionary Bonus

$50,000  

Annual Incentive Compensation

Executive Incentive Compensation Plan Award(2)

$167,213  

Long-Term Incentive Compensation(3)

Restricted Stock Units

$599,995  

Performance Shares

$399,997  

Pension Plan(4)

Annual Change in Present Value of Pension Benefit

$104,829  

Other Compensation

Deferred Compensation Plan Contribution

$38,682  

Thrift Match

$6,992  

Service-Based Thrift Contribution

$7,800  

Tax Payments

$0  

Perquisites

$20,000  

EQUITY AWARDED IN 2014

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35

EXECUTIVE COMPENSATION

ITEM 2
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

We are asking our stockholders to vote on an advisory basis to approve the compensation of our NEOs (sometimes referred to as “say on pay”) in accordance with Section 14A(a)(1) of the Securities Exchange Act of 1934. The Board recommends a vote “FOR” this proposal because it believes that our compensation policies and practices are effective in achieving McDermott’s philosophy of providing compensation that:

attracts, motivates and retains well-qualified executives;

March 6, 2014

provides performance-based incentives to reward achievement of short and long term business goals and strategic objectives, while recognizing individual contributions; and

Restricted Stock Unitsaligns the interests of our executives with those of our stockholders.

For the reasons discussed in the “Compensation Discussion and Analysis,” accompanying compensation tables and related narrative disclosures in this proxy statement, the Board of Directors unanimously recommends that stockholders vote “FOR” the following resolution:

“RESOLVED, that the compensation paid to the NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and accompanying narrative discussion in McDermott’s proxy statement relating to its 2018 annual meeting of stockholders, is hereby APPROVED.”

Although the resolution is non-binding, the Board of Directors and Compensation Committee will consider the outcome of the vote when making future compensation decisions.

 76,530units 

March 6, 2014

Our Board of Directors recommends that stockholders vote“FOR” the advisory vote to approve named executive officer compensation.

Compensation Discussion & Analysis

Performance Shares

51,020sharesINTRODUCTION

(1)

This amount represents a discretionary bonus award Ms. Hinrichs received in recognition of her contributions to and results achieved in connection with McDermott’s refinancing transactions in the first half of 2014.

(2)

This amount represents Ms. Hinrichs’ annual incentive award earned in 2014 but paid in 2015 pursuant to the terms of the EICP.

(3)

Each equity grant is disclosed at the grant date fair value of the award.

(4)

Ms. Hinrichs is no longer accruing benefits under the pension plans reflected above.

COMPENSATION DISCUSSION AND ANALYSIS

The following Compensation Discussion and Analysis, or CD&A, provides information relevant to understanding the 20142017 compensation of our executive officers and former executive officers identified in the Summary Compensation Table, whom we refer to as our NEOs. “Continuing NEOs”,NEOs, with the exception of Ms. Liane Hinrichs, our former Senior Vice President, General Counsel and Corporate. NEOs, as used in the CD&A, includesinclude only the Named Executive Officersnamed executive officers who remained employed with McDermott through the date of this Proxy Statement. proxy statement. For 2017, our NEOs and their current respective titles were as follows:

David Dickson, our President and Chief Executive Officer;
Stuart Spence, our Executive Vice President and Chief Financial Officer;
Linh Austin, our Senior Vice President, Middle East and North Africa;
Brian McLaughlin, our Senior Vice President and Chief Commercial Officer; and
Scott Munro, our Senior Vice President and Corporate Development Officer.

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 in other contexts.

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36EXECUTIVE COMPENSATION

CD&A Executive Summary

OUR BUSINESS, THE MACRO ENVIRONMENT AND OUR 2017 OPERATING STRATEGY

McDermott’s compensation programs are designedMcDermott is a premier, fully integrated provider of technology, engineering and construction solutions to attract, develop, retainthe energy industry. We design and motivate qualifiedbuild end-to-end infrastructure and technology solutions—from the wellhead to the storage tank—to transport and transform oil and gas into the products the world needs today. Our proprietary technologies, integrated expertise and comprehensive solutions deliver certainty, innovation and added value to energy projects around the world. Operating in over 54 countries across the Americas, Europe, Africa, Asia and Australia, our locally focused and globally-integrated resources include approximately 40,000 employees to create, expand and execute sound business opportunitiesengineers, a diversified fleet of specialty marine construction vessels and fabrication facilities around the world. As an industry leader in the technology space, McDermott offers licensed process technologies, catalysts, specialized equipment and engineered products for use in petrochemical facilities, oil refineries and gas processing plants.

The demand for our company. EPCI services and our ability to book new work is dependent upon the capital expenditures of oil and gas companies for the construction of development projects. Since the start of the most recent substantial decline in the price of oil, many oil and gas companies made significant reductions in their capital expenditure budgets for 2015, 2016 and 2017. Though some of our customers have reduced their current levels of spending on offshore exploration, development and production programs, including by deferring or delaying certain capital projects, we have seen, and expect to continue to see, other capital projects continue, as they are economically viable or strategically necessary in a variety of oil and gas price environments. Notwithstanding this continued challenging macro environment, in 2017 McDermott remained focused on growing its leadership position in the Middle East, building upon strengthened customer alignment and relationships with a new technology focus, proactively seeking ways to improve its cost structure and managing its cost base, deepening integration to build efficiencies and further enhance capabilities and building backlog in markets where capital is available for investment.

Since David Dickson’s appointment as Chief Executive Officer in December 2013, McDermott has transformed as a company and positioned itself for the anticipated upturn in the oilfield services industry through a turnaround, stabilization of the business and optimization via cost-reduction initiatives. McDermott has also been focused on sustainability and growth, through strategic asset investment and the combination with Chicago Bridge & Iron Company N.V. (“CB&I”) announced in late 2017, which closed effective May 10, 2018.

123
Stabilization     Optimization     Sustainability and Growth
New leadership took countermeasures to stop multi-year EBIT decline
Stronger relationships with key customers—signaled a transformation of McDermott
Undertook cost-reduction programs and business development efforts across existing business lines
Additional measures taken to improve process and asset refreshment
Maintain strong focus on strengthening customer relationships
Maintain strong focus on operational and cost effectiveness

In 2017 our operating strategy was to maintain a sustainable, profitable and growth-oriented business, with a focus on stockholders, customers and other stakeholders. In furtherance of this strategy, our 2017 goals were to:

increase operating income via improved project execution;
increase cash flow by prioritizing our liquidity needs;
increase backlog and bookings to support our future business;
promote pricing discipline on order intake operating margins; and
efficiently allocate capital to profitable investments to grow our business.

2018 PROXY STATEMENT


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EXECUTIVE COMPENSATION37

2017 PERFORMANCE HIGHLIGHTS

Solid, consistent operational performance driven by the One McDermott Way, consistent focus on liquidity and strong customer relationships drove the execution of McDermott’s strategy and goals in 2017. The figures disclosed below represent the financial results of McDermott prior to its combination with CB&I effective May 10, 2018.

REVENUESOPERATING INCOME
ORDER INTAKEBACKLOG

McDermott’s 2017 financial performance was highlighted by operating income of $324.2 million, which represents a 128% increase year over year. This was the highest level of operating income achieved in over five years and resulted in the highest operating income margin since prior to 2010. Additionally, 2017 reported revenues were the second highest achieved since 2013. Strong order intake of $2.6 billion resulted in solid year-end backlog of $3.9 billion leading into 2018.

In addition to the significant financial performance highlights noted above, McDermott also achieved the following noteworthy strategic and operational highlights in 2017:

Entry into the Business Combination Agreement with CB&I and certain of its subsidiaries under which McDermott and CB&I agreed to combine their businesses, which combination closed effective May 10, 2018;
Entry into a new $810 million credit agreement, with a sublimit of up to $300 million available for revolving loans, representing an increase in letter of credit capacity from $450 million and extended maturity;
Entry into strategic Memoranda of Understanding (“MOUs”) with Saudi Aramco for (1) a land lease at the planned new maritime facility at Ras Al-Khair in Saudi Arabia and (2) the expansion and development of our physical and human capital within Saudi Arabia; and
The acquisition and subsequent sale-leaseback of the deepwater pipelay and construction vesselAmazon.

In evaluating the performance of David Dickson, our President and Chief Executive Officer, the Board has considered these financial, strategic and operational results, as well as other financial and leadership goals detailed further below, and believes that Mr. Dickson has succeeded in positioning McDermott as a stronger, more durable company, particularly during a difficult business cycle and extended challenging macro environment.

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38EXECUTIVE COMPENSATION

COMPENSATION PHILOSOPHY AND 2017 COMPENSATION PROGRAM DESIGN AND LEVELS

The Compensation Committee is committed to targeting reasonable and competitive total direct compensation for our NEOs, with a significant portion of that compensation being performance-based.

2014 Compensation Program.As in prior years, the Compensation Committee continued Our compensation programs are designed to believe that a significant portion of a NEO’s compensation should be performance-based, designed for the purpose of aligning the interests of our NEOsalign with those of stockholders by rewarding performance that meets or exceeds established goals, with the ultimate objective of increasing stockholder value. Following an operating loss in 2013, a challenging outlook for 2014 and the anticipated need for significant strategic and operational actions to commence the turnarounddrive achievement of our business strategies and provide competitive opportunities. Accordingly, achievement of most of those opportunities depends on the Compensation Committee implemented several changes toattainment of performance goals and/or stock price performance. McDermott’s compensation programs for 2014. Those changes took into consideration our need for the 2014are designed to provide compensation arrangements to attract, develop, retainthat:

Attracts, motivates and retains high-performing executivesProvides performance-based incentives to reward achievement of short and long-term business goals and strategic objectives while recognizing individual contributionsAligns the interests of our executives with those of our stockholders

The Compensation Committee has designed and motivate the NEOs and other executive officers during our turnaround efforts, including challenges associatedadministered compensation programs aligned with stabilizing our company, delivering improved financial and operational performance and repositioning the Company for long-term growth.

Overall Program.Reflecting the Compensation Committee’sthis philosophy and these considerations,is committed to continued outreach to stockholders to understand and address comments on our compensation programs.

Reflecting this philosophy, our NEO compensation arrangements in 20142017 provided for the continuing use of three elements of target total direct compensation:

annual base salary;

annual incentive, with performance metrics under our Executive Incentive Compensation Plan, or EICP, designed to align with near-term operational priorities, composed entirely of performance-based compensation; and

long-term incentive, or LTI, with emphasis on restricted stock units to provide stability and support the retention of key employees during the organizational and leadership transition.

Mix of Total Direct Compensation Elements

 

Compensation Element

Mr. DicksonContinuing NEOs as a Group (Average)(1)

Annual Base

15%21%

Annual Incentive

15%16%

Long-Term Incentive

70%63%

 

 (1)

References in this CD&A to percentages, where applicable, generally exclude the one-time award of restricted stock units made to Mr. Spence to compensate him for the forfeiture of incentives from his prior employer.

Performance-based Compensation. Performance-based compensation for 2014 reflected a balance between the goals of driving operational performance necessary for a business in turnaround, retaining key employees and rewarding exceptional individual performance. With these goals in mind, the metrics utilized annual base salary, annual incentive provided under our annual incentive planExecutive Incentive Compensation Plan, or EICP, and LTI plans in 2014 were modified from the performance metrics used in recent years.

For the 2014 annual incentivelong-term incentives, or LTI. In making compensation program,decisions for 2017, the Compensation Committee established target compensation with a target award opportunity comprised 50%considered McDermott’s operating strategy and goals and significantly improved operational and financial performance, goals, 25% corporate performance goals and 25% individual performance goals, as discussed in more detail in this CD&A. In recognitionwith appreciation of the Company’s ongoing turnaround efforts in 2014, when approving“lower for longer” macro oil and gas environment and comments received during the EICP program in March 2014,2017 stockholder outreach program.

With respect to plan design, the Compensation Committee established a minimummaintained consistency:

in the 2017 EICP bonus pool funding of 0.5x of aggregate participants’ target awards with consideration of the fact that certain of the financial performance goals were in excess of our forecast.

For 2014 long-term incentives, the Compensation Committee continued to utilize performance shares, but revised the performance metric to utilize aggregate consolidated operating income over a three-year performance period, rather than return on invested capital, which had been used in recent years. The Compensation Committee believes that the achievement of operating income is an appropriate reflection of project execution, which is a necessary element of improved operational performance. For LTI awards made in 2015, the Compensation Committee increased the proportion of performance shares awarded such that they represented 50% of the Continuing NEOs’ target LTI awards.

By using these performance metrics, forwith the 2014 compensation program, the Compensation Committee intended that our compensation practices would contribute to the creationcontinued use of stockholder value, without encouraging executives to take unnecessary and excessive risks to earn compensation.

Other Compensation.In addition to the performance-based compensation and in consideration of our ongoing turnaround, the Compensation Committee also provided annual base salaries that, on average, represented 21% of Continuing NEO target total direct compensation and awarded 60% of the NEO’s target long-term incentive award through restricted stock units. The restricted stock units are generally scheduled to vest in one-third increments on the first, second and third anniversary of the grant date. The Compensation Committee awarded a greater percentage of restricted stock units than in the recent past, as a result of the need to provide stability and support the retention of key employees during the ongoing turnaround.

2014 Significant Events. Following the operational and financial results in the second half of 2013, McDermott’s Board of Directors and management embarked upon significant strategic and operational actions to effect the turnaround of the business.

Board of Director Changes. In October 2013, Mr. Gary P. Luquette was appointed to McDermott’s Board of Directors, and was appointed as non-executive Chairman of the Board in May 2014. The Board also implemented changes to the composition of its Committees, including the Chairman of each of the Audit, Finance and Governance Committees.

Executive Changes.The following executive management changes occurred during late 2013 and 2014:

During the fourth quarter of 2013, Mr. David Dickson was appointed as McDermott’s President and Chief Executive Officer and became a member of the Board of Directors.

In January 2014, Mr. Stewart L. Mitchell, our former Senior Vice President and General Manager, Middle East & Atlantic, resigned.

In March 2014, Mr. Stephen L. Allen was appointed as McDermott’s Senior Vice President, Human Resources, following the resignation of Mr. Gary L. Carlson, McDermott’s prior Senior Vice President and Chief Administration Officer.

In April 2014, Messrs. Scott V. Cummins and Tony Duncan were appointed as Executive Vice President Offshore and Executive Vice President Subsea, respectively, and, in January 2015, were appointed as Senior Vice President, Commercial, and Senior Vice President, Project Support, respectively, in connection with further refinements to McDermott’s organizational structure.

In April 2014, new regional vice presidents were appointed in connection with changes to McDermott’s organizational structure.

In August 2014, Mr. Stuart A. Spence was appointed as McDermott’s Executive Vice President and Chief Financial Officer, following the resignation of Mr. Perry L. Elders, McDermott’s prior Senior Vice President and Chief Financial Officer.

Strategic and Operational Accomplishments.The following strategic and operational accomplishments were achieved in 2014:

Financings: In the second quarter of 2014, we completed new financing arrangements expected to provide the liquidity to support McDermott’s stabilization and the financial flexibility necessary to execute business improvement initiatives and long-term growth. These financing arrangements included a $400 million, three-year letter of credit facility, a $300 million five-year term loan, the issuance of $500 million of seven-year senior secured notes and the issuance of $287.5 million of tangible equity units.

New Organizational Structure: In April 2014, we implemented a new organization and regional management structure, focused on strengthening the balance sheet and instilling financial discipline, aligning with customers and building strong customer relationships, improving cost structure, increasing competitiveness and building a performance-oriented and highly accountable culture. McDermott has made, and expects to continue to make, further refinements to this organizational structure in 2015.

Improved Project Execution: During 2014, we completed certain legacy loss-making projects and returned certain ongoing legacy loss-making projects to profitability.

Enhanced Recruiting: We have increased recruitment of experienced industry veterans to augment our commercial/business development, bidding and project execution functions, as well as corporate support functions, including finance, legal and human resources.

Asset Rationalization: We have rationalized our assets, including through the sale of theKP1, DB16and Harbor Island facility and closure of the Morgan City fabrication yard.

Capital Expenditure Projects: We have delivered on budget and on schedule capital expenditure projects in 2014, including completion of theCSV 108and progress on the construction of theDLV 2000, which is expected to join McDermott’s fleet in 2016.

Positioning for Future Growth: We have positioned McDermott for future growth, including through:

exploration and evaluation of potential joint venture initiatives, including a venture between GE and McDermott — io oil & gas consulting — which was launched in early 2015;

entry into a lease agreement and option for lease agreement for property to develop spoolbases in Gulfport, Mississippi and Hartlepool, United Kingdom, respectively, to support the reeled pipelay capabilities of our vessels, theNO 102andNO 105;

exercise of the option to purchase our partner’s 50% ownership interest in the entities owning theNO 102; and

Commencement of the McDermott Profitability Initiative, designed to improve our profitability and flexibility, and implement changes to our overall cost structure and unabsorbed fixed costs, while maintaining our revenue and capacity potential.

2014 Financial Performance.Reflecting the ongoing turnaround, McDermott’s 2014 financial performance resulted in the following:

Consolidated revenue of $2.3 billion;

Consolidated operating income of $8.6 million, representing a significant improvement over the substantial 2013 operating loss;

Cash flows from operations of $7.0 million, an improvement over cash flows from operations of ($256.6) million in 2013;

Backlog of $3.6 billion at December 31, 2014; and

Achievement of above target performance on three of the four financial metrics under our annual incentive plan — operating income, free cash flow, order intake and order intake operating margin.

margin; and

Realizable Value

in the 2017 LTI performance metric, with the continued use of Performance-Based Awards.

In accordance with our Compensation Committee’s philosophy and program, performance-based awards resulted in:

Financial performance under the EICP that (as per the EICP) would have resultedrelative Return on Average Invested Capital, or relative ROAIC, in bonus pool funding of 1.015x. This amount was, following the recommendation of executive management (with consideration of our non-attainmentMcDermott’s transformation from turnaround and stabilization to optimization for future growth.


Performance metrics and performance levels used within elements of annual and long-term compensation are designed to support our strategic and financial goals and drive the creation of stockholder value

2017 Executive Incentive Compensation Plan

   Goal                                    Performance Metric               
Drive profitability via improved project executionOperating Income
Prioritize liquidity needsFree Cash Flow
Support future businessOrder Intake
Promote pricing discipline on new workOrder Intake Operating Margin

2017 Long-Term Incentive Plan — Performance Units

   Goal                                    Performance Metric               
Efficiently allocate capital to profitable investmentsRelative Return on Average Invested Capital
Generate returns for stockholdersStock Price Increase

2018 PROXY STATEMENT


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EXECUTIVE COMPENSATION39

With respect to levels of compensation, the threshold levelCompensation Committee generally sought to bring 2017 NEO compensation more in line with market range (generally, within 15% of market median as further described below). For 2017 NEO compensation, the Compensation Committee provided:

Average annual base salary increases of approximately 6.4% to further align the NEO’s annual base salaries with market range and, in certain instances, for the order intake componentinternal pay equity considerations.
Increases in annual target bonus awards, resulting in an increase in each NEO’s performance-based compensation. As a result of theMcDermott’s 2017 financial performance, goals), reduced by over 50%each NEO was eligible to earn 1.578x of his target EICP award, subject to adjustment by the Compensation Committee throughbased on his achievement of individual performance goals.
Increases to the exercisevalue of its discretion,long-term incentives awarded to funding of 0.5x, as discussed in further detail in this CD&A.

NEO performance shares granted in 2011, 2012, 2013Messrs. Dickson and 2014 having no realizable value as of December 31, 2014.

The following table summarizes the 2014 performance-based compensation opportunities,Spence as compared to 2016, based on their individual performance and to further align the realizable value of such opportunities astheir LTI with market range.

The mix of December 31, 2014,target total direct compensation for eachMr. Dickson for 2017 is shown in the chart below.

CEO TARGET 2017 COMPENSATION

IMPACT OF 2017 SAY ON PAY VOTE ON EXECUTIVE COMPENSATION AND STOCKHOLDER OUTREACH

2017 Stockholder Say on Pay Vote

In 2017, over 96% of our NEOs:

2014 Performance-Based Compensation Opportunity vs.

Realizable Value asstockholders voted in favor of December 31, 2014

LOGO

our executive compensation program. During both the Spring and Fall of 2017, we reached out to stockholders representing approximately 40% of our outstanding shares of common stock and other stakeholders to gain insight regarding their perspectives on corporate governance and compensation matters. Based on our strong recent financial performance, enhancements to our compensation and governance programs and positive say-on-pay results, limited meetings were requested by stockholders, which we believe is an indication of our stockholders’ support of our current compensation and governance framework. Our Board considered the 2017 say on pay vote and the matters discussed during our 2017 stockholder and stakeholder outreach efforts in considering any changes or enhancements to our compensation and governance programs.

(1)STOCKHOLDER OUTREACH CYCLE

   1  2  3  4   
   Say on Pay VoteStockholder OutreachStockholder FeedbackBoard Engagement   
             
         

www.mcdermott.com

Opportunity values for EICP are presented using the NEOs’ target EICP award levels.



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40EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION POLICIES AND PRACTICES

(2)

Opportunity values for performance shares are presented using the grant date fair value of the respective awards.

(3)

The 2014 realizable values shown above are measured as of December 31, 2014. The realizable value of EICP awards shown above is based on each NEO’s actual earned EICP award. The realizable value of performance share awards shown above is based on the estimated payout as a percent of target based upon an extrapolation of 2014 operating income of $8.6 million over the three-year performance period, or 0% of the performance shares granted in 2014, multiplied by the closing price of our common stock as reported on the NYSE as of December 31, 2014 ($2.91). This value does not take into account our forecast or expectations for actual performance over the three-year performance period. The number of the performance shares granted in 2014 that ultimately vest, if any, will be determined by reference to performance goals over a three- year period and may be more or less than indicated in the table. The vesting of any of these performance shares would impact the future realizable value of these performance share awards.

Executive Compensation Policies and Practices.Below we highlight certain of our executive compensation and governance policies and practices, including both those which we utilize to drive performance and those which we prohibit because we do not believe they would serve our stockholders’ long-term interests:

What we do
Our Policies and Practices IncludePay for PerformanceAnnual Advisory Vote on NEO Compensation

þ

Performance-Based Pay — We structure our compensation program to align the interests of officers, including our NEOs, with the interests of our stockholders, and therefore, aA significant portion of target total direct compensation is tied to performance. Performance-based compensation in 2014 consistedperformance, including 100% of annual incentive compensation and the portion50% of the NEOs’ target value long-term incentive compensation.

We value our stockholders’ input on our executive compensation that was attributableprograms, and our Board of Directors seeks an annual advisory vote from stockholders to performance shares.

approve NEO compensation.

þ

Tally SheetsMeaningful Stock Ownership Guidelines

Modest Directed Perquisite Program
We review tally sheets, reflecting historical compensation amounts,have stock ownership guidelines for our NEOs prior to making annual executive compensation decisions.

þ

Double Trigger Change-in-Control Agreements — Our change-in-control agreements contain 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.

þ

Meaningful Stock Ownership Guidelines — All of our NEOs and directors are subject to stock ownership guidelines thatgenerally require the retention of a dollar value of qualifying McDermott securities based on a multiple of their respective5x base salaries or annual retainers. Each ofsalary for our CEO, 3x base salary for the other NEOs and directors is5x annual retainer for directors.

The Compensation Committee provides reimbursement to members of McDermott’s executive committee, or EXCOM (which includes all of our NEOs), for financial planning and required executive physicals, in compliance with his or her respective stock ownership requirement, or is within the five-year period provideda combined amount not to attain compliance.

exceed $20,000.

þ

Modest Perquisite Allowance — In 2014, we provided a modest perquisite allowance to certain officers, including the NEOs (with the exception of Mr. Spence, who joined McDermottDouble Trigger Change in August 2014).

Control Agreements & Equity Agreements

þ

Annual Review of Share Utilization
We evaluate share utilization levels annually by reviewing overhang levels (the dilutive impact of equity compensation on our stockholders) and annual run rates (the aggregate stock awarded as a percentage of total outstanding shares).

þOur change in control agreements and, beginning in 2016, our equity award agreements provide benefits only upon an involuntary termination or constructive termination of the executive officer within one year following a change in control.

Risk Assessment — Our

Independent Compensation ConsultantClawback Policy
The Compensation Committee retains an independent compensation consultant assists the Compensation Committee in conducting an annual risk assessment of ourto advise on executive compensation programs.

program and practices.

þ

Clawback PolicyWe have a clawback policy that allows McDermott to recover, under certain circumstances, compensation paid to executive officers.

Annual Compensation Risk Assessment
Our compensation consultant assists the Compensation Committee in conducting an annual risk assessment of our compensation programs.
 

Our Policies and Practices ProhibitWhat we don’t do

xDerivatives Trading, Hedging or Pledging of McDermott Stock
  Repricing of Underwater Stock Options
Our equity incentive plans do not permit repricing or exchange of underwater stock options.

options without stockholder approval.

xMembers of the Board of Directors and employees are prohibited from engaging in derivatives trading, hedging or pledging of our common stock.
Excise Tax Gross-UpsEmployment Contracts
We do not provide excise tax gross-ups underin our change-in-controlchange in control agreements.

x       Derivatives trading or hedging transactions.

None of our current NEOs has an employment contract with McDermott providing for ongoing employment.

How We Make Compensation Decisions

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 as well as from our human resources department and management to assist in compensation determinations.

Compensation Consultant.Pay Governance LLC, or “Pay Governance,” has been engaged by our Compensation Committee to serve as its consultant on executive compensation and benefits 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. Pay Governance reports directly to the Compensation Committee, and the Compensation Committee reviews, on an annual basis, Pay Governance’s performance and provides Pay Governance with direct feedback on its performance. When requested by the Governance Committee, Pay Governance attends meetings of the Governance Committee with respect to nonemployee director compensation.

During 2014, Pay Governance did not perform any services for McDermott other than as described above. In January 2015, our Compensation Committee assessed whether the work performed by Pay Governance during 2014 raised any conflict of interest, and determined that Pay Governance’s work performed for the Compensation Committee raised no conflict of interest.

Role of CEO and Management. While the Compensation Committee has the responsibility to approve and monitor all compensation for our executive officers, management plays an important role in determining executive compensation. Management, at the request of the 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 our CEO. Our CEO 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, based on individual performance.

Compensation Philosophy

McDermott’s compensation programs are designed to attract, develop, retain and motivate qualified employees to achieve business needs and create, expand and execute sound business opportunities for our company. The Compensation Committee is committed to targeting reasonable and competitive total direct compensation for our NEOs, with a significant portion of that compensation being performance-based. Our compensation programs are designed to address business needs, and provide competitive opportunities, but achievement of most of those opportunities depends on the attainment of performance goals and/or stock price performance. The Compensation Committee (assisted by Pay Governance and with the participation of management) has designed and administered compensation programs aligned with this philosophy. These programs generally seek to provide compensation that:


2018 PROXY STATEMENT


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

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

ImpactTable of 2014 Say-on-Pay Vote on Executive CompensationContents

At our 2014 Annual Meeting of Stockholders, over 86% of the votes cast were voted in favor of the advisory vote to approve NEO compensation. The Compensation Committee considered this result,

and believes this affirms our stockholders’ support of the Compensation Committee’s decisions and our existing executive compensation programs. The Compensation Committee will continue to consider the outcome of our 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.

Defining Market Range Compensation — Benchmarking

To identify median compensation for each element of total direct compensation, the Compensation Committee relies on “benchmarking.” This involves reviewing the compensation of our NEOs 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 LTI compensation 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 for the principal purpose of supporting our strategic and financial goals and driving the creation of stockholder value, and, as a result, are not generally benchmarked.

Proxy Peer Group. It is the Compensation Committee’s practice to periodically review and consider the individual companies used for benchmarking purposes. 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 companies for benchmarking purposes. Therefore, the Compensation Committee considers the revenues and market capitalization of the component companies. Based upon this framework and with the assistance of Pay Governance, in November 2013, the Compensation Committee removed certain of the largest and smallest component companies from the prior peer group used for executive compensation decisions and added two additional companies that are similar in operations and size to McDermott and the remaining companies in the peer group. We refer to this revised peer group as the “Proxy Peer Group.” The Compensation Committee intends to continue to periodically review and consider the individual companies used for benchmarking purposes. The component companies of the Proxy Peer Group are as follows:

EXECUTIVE COMPENSATION

Cameron International Corporation

Jacobs Engineering Group, Inc.

Chicago Bridge & Iron Company N.V.

KBR, Inc.

Dresser-Rand Group, Inc.

Noble Corporation plc

Exterran Holdings, Inc.

Oceaneering International, Inc.

FMC Technologies, Inc.

Oil States International, Inc.

Foster Wheeler AG

Superior Energy Services, Inc.

Helix Energy Solutions Group, Inc.

Tidewater Inc.

41

Market data from the Proxy Peer Group was reflective of 2012 compensation, as reported in the 2013 proxy statements of the companies in the Proxy Peer Group, and was not size-adjusted, although the2017 Compensation Committee was aware of these differences when making individual pay decisions.Program

In this CD&A, references to “market” or “our market” are references to the compensation of similarly situated executives at companies within the Proxy Peer Group with respect to each NEO and the applicable element of compensation.

WHAT WE PAY AND WHY: ELEMENTS OF TOTAL DIRECT COMPENSATION

Survey Peer Group. Pay Governance also utilized market data based on a set of 96 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, and

is used as a secondary reference for the NEOs and a primary reference for other officers. 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 listed on page 47 of this CD&A. Market data from the Survey Peer Group represents 2013 compensation as reported to the survey and, when possible, was size adjusted. Corporate positions were evaluated based on average revenues of $3.6 billion, and business unit positions were evaluated based on their respective revenue levels.

What We Pay and Why: Elements ofTarget Total Direct Compensation

Target Total Direct Compensation.The Compensation Committee seeks to provide reasonable and competitive compensation. As a result, it targets the elements of total direct compensation, or “TDC,” for our NEOs 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 TDC or individual elements of total direct compensationTDC above or below the market range to account for a NEO’s performance, and experience, tenure in the role, internal pay equity and other factors or situations that are not typically captured by looking at standard market data and practices and which the Compensation Committee deems relevant to the appropriateness and/or competitiveness of a NEO’s compensation.

When making decisions regarding individual compensation elements, the Compensation Committee also considers the effect on the NEO’s target total direct compensationTDC and target total cash-based compensation (annual base salary and annual incentives)incentives at target level), as applicable. The Compensation Committee’s goal is to establish target compensation for each element that, when combined, createcreates a target total direct compensationTDC award for each NEO that is reasonable and competitive and supports our compensation philosophy and objectives. The chart below shows the target total

Elements of Total Direct Compensation

Total direct compensation by element for each Continuing NEO.

 

Continuing NEOAnnual Base
Salary

Annual Incentive(1)

(% of Salary)

Long-Term
Incentive(2)

Target Total Direct

Compensation as

Percent of Market(3)

D. Dickson

$850,000100%$4,000,00097%

S. Spence

$475,00070%$1,000,00080%

S. Cummins

$450,00070%$1,000,00091%

T. Duncan

$425,00070%$1,000,00088%

L. Hinrichs

$477,75070%$1,000,00094%

 

Average Mix of
Compensation Elements

21%16%63%N/A

 

(1)

When making decisions as to the elements of a NEO’s total direct compensation, the Compensation Committee considers the dollar value of annual incentive compensation but typically awards this element as a percentage of annual base salary.

(2)

The values provided in this column are the target values of LTI approved by the Compensation Committee.

(3)

Market is defined as median target for each compensation element based on the Proxy Peer Group. 100% represents median compensation.

The average allocationis comprised of the elements of total direct compensation for our Continuing NEOs in 2014 was as follows:

LOGOthree elements: annual base salary, annual incentive and long-term incentives.

Annual Base Salary.Salary

We pay base salaries to provide a fixed level of compensation that helps attract and retain executives. Base salary levels recognize 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 pay equity considerations.

Annual Incentive.Incentive

The Compensation Committee administers our annual incentive compensation program under our Executive Incentive Compensation Plan.Plan, or EICP. The EICP is a cash incentive plan designed to motivate and reward our NEOs and other key employees for their contributions to strategic business goals and other factors that we believe drive our earnings and promote creation of stockholder value. In consideration of our company’s recent financial performance, in 2014 the EICP was redesigned with a focus on multi-dimensional metrics that the Compensation Committee believes drive behaviors and reward results that are necessary for a sustainable and growth-oriented business. In 2014, the EICP program reflected award opportunities that were generally 50% based on attainment of financial performance goals, 25% based on attainment of corporate performance goals and 25% based on attainment of individual performance goals, as discussed below. In recognition of our ongoing turnaround efforts to stabilize the business and reposition McDermott for long-term growth, when approving the EICP program in March 2014, the Compensation Committee established minimum2017, EICP bonus pool funding of 0.5x of aggregate participants’ target awardswas entirely based on our financial performance, with considerationeach participant’s actual bonus award determined by achievement of the fact that certainparticipant’s individual performance goals.

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Table of the financial performance goals were in excess of our forecast.Contents

42EXECUTIVE COMPENSATION

Financial Performance Goals. The financial performance goals generally represented 50% of a participant’s total award opportunity. TheGoals.For 2017 EICP awards, the Compensation Committee established the 2014approved financial metric performance goals based on management’s internal projections of 2014 financial results. These goals included four components: consolidated operating income, consolidated free cash flow (defined as consolidated cash from operations less consolidated capital expenditures), order intake (including change orders) and operating margins on order intake. Each of these four components represented 25% ofintake, weighted as set forth below. McDermott established the total portion of a participant’s award attributable to2017 financial performance goals and determinedwith consideration of management’s internal forecast of 2017 financial results, with the threshold (50%), target (100%) and maximum (200%) payment a participant would have been eligible to earn under the financial performance componentexception of the EICP in 2014; provided, however, that, fororder intake operating margin goals, which were established at an increase over the 25% of the financial performance goals pertaining to operating income, the Compensation Committee determined that no payments would be made for performance below the target performance level.forecast 2017 results.

Weight

Weight

Financial

Metric
Performance Goal

Reason Metric SelectedPerformance LevelPerformance
Level
Business
Result Goal
($/%)
Funding
Multiple

25%

Operating Income

Reflects

execution performance

Threshold170M0.5x
Target227M1.0x
MaximumMaximum284M2.0x

25%

Free Cash Flow

Prioritizes liquidity needs

of the Company

Threshold(62)M0.5x
TargetTarget(50)M1.0x
MaximumMaximum(37)M2.0x

25%

Order IntakeForward-looking leading indicator to drive future performanceThreshold2,417M0.5x
TargetTarget3,222M1.0x
MaximumMaximum4,028M2.0x

25%

Order Intake

OperatingIntakeOperating Margin

EnsuresPromotes pricing discipline on order intakeThreshold*0.5x
TargetTarget*1.0x
MaximumMaximum*2.0x

*

Due to the nature of our business, Order Intake Operating Margin Threshold, Target and Maximum business goals are competitively sensitive and therefore are not disclosed.

Based on 2014McDermott’s actual performance against the stated goals determines the funding for each financial performance specificallygoal, with the attainmentweighted sum of operating income, free cash flow and order intake margineach funding multiple determining the financial metric result.

2017 Financial Performance Results Under the EICP.McDermott’s actual 2017 financial performance results against the stated performance goals above target, McDermott achieved performance under the EICP that would have resulted in 1.015x bonus pool funding with respectwere as follows:

Financial Metric Performance GoalActual Result
($/%)
Funding
Multiple
WeightWeighted Funding
Multiple
Operating Income324.2M2.000x25%0.500x
Free Cash Flow16.9M2.000x25%0.500x
Order Intake2,564.4M0.592x30%0.178x
Order Intake Operating Margin*2.000x20%0.400x
Total EICP Bonus Pool Funding Multiple1.578x

*

Due to the nature of our business, Order Intake Operating Margin results are competitively sensitive and therefore are not disclosed.

Accordingly, each NEO was eligible to the financial performance goals. However, following the recommendationearn 1.578x of executive management (with consideration of our non-attainment of the threshold level for the order intake component of the financial performance goals), the Compensation Committee determined, through the exercise of its discretion, that thehis target EICP funding should be reduced by over 50%award, subject to 0.5x.

Corporate Performance Goals. The corporate performance goals, which represented 25% of a participant’s total award, were generally based 40% on the participant’s support of and cooperation with other organizational entities, 20% on the participant’s achievement of health, safety and environmental metrics, 20% on an ethics and compliance component and 20% on the participant’s employee development and succession planning, as determinedmodification by the Compensation Committee, for Mr. Dickson, and by Mr. Dickson for each other participant, including the NEOs, subject to approval by the Compensation Committee.based on his achievement of individual performance goals.

Individual Performance Goals. The remaining 25%Goals.Following the determination of athe EICP bonus pool funding multiple, an individual participant’s total award was determined with reference tobased on the achievement of the participant’s individual performance goals, established by the Compensation Committee for Mr. Dickson, and established by Mr. Dickson for each other participant, including the Continuing NEOs, subject to approval by the Compensation Committee. The individual goals considered in connection with the Continuing NEO’s 2014 EICP compensation are set forth in the table below:

David Dickson

•    Complete financing arrangements, develop further capital opportunities, deliver 2014 financial performance consistent with forecast and augment business reporting processes

•    Development and implementation of new organization and regional management structure; introduce and enhance processes and systems for Talent Management and Succession Planning; introduce a mobility policy that facilitates talent development and supports operations

•    Evaluate and set McDermott’s strategy and vision for both near-term and long-term objectives

•    Develop a more strategic approach for communications addressing employees, customers, vendors and investors

•    Introduce a key account management process that better positions and develops stronger relationships with customers

•    Develop increased focus on health, safety and environmental function, with focus placed on behavioral leading indicators

Stuart Spence

•    Reduction of costs on capital projects, fixed operating costs and tax

•    Improve business reporting in coordination with operational leadership and increase forecast visibility with respect to financial results

•    Enhance human resources of the finance department, including attracting, developing and retaining top talent and developing a CFO succession plan

Scott Cummins

•    Complete talent development of regional vice president

•    Achieve specified 2014 Offshore business results

•    Establish and enhance relationships with key customers

•    Establish value added and effective approach for newly created Project Assurance function

•    Reduce overall direct operating expenses

•    Develop achievement plans for certain projects and deliver results in accordance with such plans

Tony Duncan

•    Ensure that the Offshore Resources function is established and fully functional

•    Implement and support the initiative for a new front-end conceptual engineering group

•    Reduce overall direct operating expenses

•    Achieve specified 2014 Subsea business results, including forecast order intake

•    Support project discussions to increase project returns

•    Support achievement of meetings with key customers worldwide

•    Increase exposure to corporate functions, including investor relations

•    Deliver Inpex Ichthys project as per forecast for 2014

Liane Hinrichs

•    Restructure and provide talent and succession planning for the legal, compliance and risk management departments

•    Provide legal support for McDermott’s financing arrangements

•    Development of training materials for new geographies addressing country specific risk and oversight of training of targeted audiences

•    Update McDermott’s contract / bid tender guidelines

Once a participant’s 2014 annual bonus was preliminarily determined, it was then (1) for Mr. Dickson, subject to adjustment by the Compensation Committee, and (2) for the remaining participants in the EICP, including the other Continuing NEOs, subject to adjustment by Mr. Dickson, with any such adjustment subject to the approval of the Compensation Committee.goals. In no event could any Continuing NEO’s annual bonus exceed two times his or her target EICP award opportunity. The Compensation Committee had the discretion to reduce the amount of payout to any payout,participant, even if performance goals were achieved.

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EXECUTIVE COMPENSATION43

Long-Term Incentives

Long-Term Incentives.The Compensation Committee believes that the interests of our stockholders are best served when a significant percentage of executive compensation is comprised of equity that appreciates in value contingent on increases in the value of our common stock and other performance measures that reflect improvements in McDermott’s business fundamentals. Therefore, LTI compensation represents the single largest element of our NEOs’ total direct compensation. In 2014,The Compensation Committee maintained the Compensation Committeeperformance-based component of LTI at 50% in 2017, and allocated LTI compensation to executive officers, including the NEOs, as follows:

Performance Units  Restricted Stock Units
50%50%

 

Performance SharesRestricted Stock Units

40%

60%

 

The Compensation Committee determined that weighting LTI compensation composed of 60% restricted stock units in 2014 was appropriate to further incentivize retention of key employees, including the NEOs, during our turnaround. Additionally, in recent years, the Compensation Committee has awarded stock options as a component of long-term incentives. In 2014, however, the Compensation Committee eliminated the use of stock options, in consideration of the existing executive long-term incentive portfolio holdings and the declining use of stock options in the market.

Performance Shares. Units.Performance sharesunits are intended to align the NEOs’ interests with those of our stockholders, with a focus on long-term results. The performance sharesunits awarded in 20142017 are structured to be paid out, if at all, in shares of McDermott common stock, cash equal to the fair market value of the shares otherwise deliverable, or any combination thereof, at the sole discretion of the Compensation Committee, at the end of a three-year performance period, to the extent the applicable performance goals are met. Relative return on average invested capital, or ROAIC, was used as the performance metric for the performance units granted in 2017, as the Compensation Committee believed that this metric tied specifically to our strategy of appropriately investing capital to grow the business. The number of performance sharesunits earned is determined based on both (1) our aggregate consolidated operating incomeaverage ROAIC, and (2) our relative ROAIC improvement as compared to a competitor peer group comprised of both domestic and international peers, in each case over the three-year performance period. Based on this performance, up to 150%200% of a participant’s target award may be earned. Aggregate consolidated operating income was used asearned, with earned awards between the amounts shown calculated by linear interpolation. We compute McDermott’s ROAIC improvement by subtracting McDermott’s 2016 ROAIC from the three-year performance metricperiod average ROAIC. Similar calculations are done for each member of the performance shares granted in 2014, ascompetitor peer group, following which the Compensation Committee believed that this metric measuredmedian competitor peer group ROAIC improvement is calculated. The amount by which McDermott’s ROAIC improvement exceeds the performance necessary to drive long-term results during our turnaround.competitor peer group median ROAIC improvement determines whether the threshold, target or maximum earned award is achieved.

  MDR 3-Year Average ROAIC  < 6%  > 6% and
< 10%
  > 10%
Performance LevelAmount by which MDR ROAIC Improvement Exceeds
Competitor Peer Group Median ROAIC Improvement
Earned
Award
Earned
Award
Earned
Award
Maximum> 6%50%200%200%
Target2%50%100%100%
Threshold0%50%50%50%
< 0%0%0%50%

Restricted Stock Units. Units.Restricted stock units, or “RSUs,”RSUs, are intended to promote the retention of employees, including the NEOs. The RSUs granted in 20142017 generally vest in one-third increments on the first, second and third anniversaries of the grant date. The RSUs may be paid out in shares of McDermott common stock, cash equal to the fair market value of the shares otherwise deliverable, or any combination thereof, at the sole discretion of the Compensation Committee.

2017 NEO COMPENSATION

2014 NEO Compensation

For 20142017 NEO compensation, the Compensation Committee provided, for NEO’s other than Mr. Duncan and Mr. Spence, who joined McDermott in August 2014:provided:

Average annual base salary increases of approximately 6.4% to further align the NEOs’ annual base salaries with market range and, in certain instances, for internal pay equity considerations.
Increases in annual target bonus awards, resulting in an increase in each NEO’s performance-based compensation. As a result of McDermott’s 2017 financial performance, each NEO was eligible to earn 1.578x of his target EICP award, subject to adjustment by the Compensation Committee based on his achievement of individual performance goals.
Increases to the value of long-term incentives awarded to Messrs. Dickson and Spence, as compared to 2016, based on their individual performance and to further align the value of their LTI with market range.

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No increases in annual base salaries.

No increases in annual target bonus.

Modifications to the valueTable of long-term incentives awarded, as compared to 2013, based on internal pay equity considerations.Contents

Mr. Duncan received an increase in annual base salary, annual target bonus and long-term incentives to further align his compensation with market range and in recognition of his appointment as Executive Vice President Subsea and as a member of our executive leadership team.

44EXECUTIVE COMPENSATION

The compensation of each NEO is discussed in more detail below.on the following pages.

David DicksonPresident and Chief Executive Officer

McDermott Tenure:
4 years

2017 TARGET TOTAL DIRECT COMPENSATION

David Dickson.Annual Base Salary– In 2017, Mr. Dickson has servedreceived an increase in his annual base salary of approximately 6% to more closely align his annual base salary with market range.

Annual Incentive– In February 2017, the Compensation Committee approved the following individual performance goals as a component of Mr. Dickson’s 2017 EICP award:

Financial– Deliver financial performance in line with forecast, with a focus on continuing to build backlog, maintain capital discipline and implement a new capital structure
Strategic– Position McDermott for long-term stability and growth during a period of difficult macro-environment through exploration and evaluation of both organic and inorganic strategic opportunities, including strategic asset acquisitions
QHSES– Continue focus on quality, health, safety, environment and security, or QHSES, statistics, with increased focus on the cost of non-quality and further development of McDermott’s Taking the Lead initiative
Relationships– Continue development of relationships with customers, potential partners, the investment community, governments and banks
Internal Organization– Continue development of effectiveness and efficiency of internal organization, and continued enhancement of processes for talent management and succession planning

The Governance Committee’s assessment of these individual performance goals considered McDermott’s continued financial and operational performance improvements during 2017. Notably, McDermott’s 2017 financial results reflected revenues of $3.0 billion, operating income of $324.2 million and order intake (including change orders) of $2.6 billion, which resulted in year-end backlog of $3.9 billion. These results reflect continued, significant improvements since Mr. Dickson was elected as President and Chief Executive Officer since December 2013. In determiningin 2013, and were achieved despite the difficult, “lower for longer” oil and gas market. Additionally, Mr. Dickson’s compensationDickson positioned McDermott for 2014,significant growth through: the Compensation Committee considered market data fromproposed combination with CB&I, which was announced in late 2017; the Proxy Peer Group asentry into MOUs with Saudi Aramco for (1) a land lease at the primary referenceplanned new maritime facility at Ras Al-Khair in Saudi Arabia and from(2) the Survey Peer Group as a secondary reference. Mr. Dickson’s total target direct compensation for 2014 is summarized below:

 

  Annual Base Salary

Annual Incentive

(% of Salary)

Long-Term Incentive

Approved Compensation

$850,000100%$4,000,000

Percentage of Market(1)

93%83%104%

Percentage of Target TDC

15%15%70%

 

(1)

Market is defined as median target for each compensation element based on the Proxy Peer Group. 100% represents median compensation.

Mr. Dickson’s annual base salary remained unchanged in 2014. Pursuant toexpansion and development of our physical and human capital within Saudi Arabia; and the termsacquisition and subsequent sale-leaseback of the letter agreement entered into bydeepwater pipelay and between McDermottconstruction vesselAmazon. Under his oversight, McDermott’s QHSES performance has continued on a positive trend with peer leading safety statistics, increased focus on the cost of non-quality and the deployment of McDermott’s Taking the Lead initiative, designed to promote consistency in quality, safety and performance across the globe as well as operating in an environmentally conscious and socially responsible manner. During 2017, Mr. Dickson also continued improving relationships with customers, potential joint venture or consortium counterparties, the investment community, governments and banks. Finally, following significant executive management changes in connection withprior years, in 2017 Mr. Dickson remained focused on building and optimizing the executive management team as required for achievement of McDermott’s operating strategy, while improving talent management and succession planning for key roles.

In 2017, Mr. Dickson received an increase in his hiring in 2013, the Compensation Committee approved Mr. Dickson’s 2014 participation in thetarget EICP with a target bonus equalaward from 100% to 110% of his annual base salary and long-term incentives with a target valueearned. In consideration of $4,000,000.

As a result of McDermott’s 2014 financial performance and the reduction of EICP pool funding as recommended by executive management and approved in the discretion of the Compensation Committee, Mr. Dickson was eligible to earn 0.5x of his target EICP award subject to adjustment by the Compensation Committee, based on his achievement of corporate and individual performance goals. Based on the Governance Committee’s assessment of Mr. Dickson’s achievement of corporate andhis individual performance goals as discussed above, the Compensation Committee adjustedawarded Mr. Dickson’s 2014 EICP award, resulting inDickson a final EICP award of $552,000.$1,694,575.

Stuart Spence.Long-Term Incentive– Mr. Dickson received an increase in his 2017 target long-term incentive award, based on his individual performance and to bring his target long-term incentive award closer to the market median.



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Stuart Spence 

McDermott Tenure:
4 years

Executive Vice President and
Chief Financial Officer
2017 TARGET TOTAL DIRECT COMPENSATION

Annual Base Salary– In 2017, Mr. Spence has served as McDermott’s Executive Vice President and Chief Financial Officer since August 2014. In determining the compensation to be provided to Mr. Spencereceived an increase in 2014, the Compensation Committee considered input from Pay Governance based on updated market data for his position from the Proxy Peer Group reflecting proxy filings made in 2014, as well as the value of Mr. Spence’s unvested compensation from his former employer that he forfeited at the time of joining McDermott. Mr. Spence’s total target direct compensation for 2014 is summarized below:

 

  Annual Base Salary

Annual Incentive

(% of Salary)

Long-Term Incentive(1)

Approved Compensation

$475,00070%$1,000,000

Percentage of Market(2)

97%76%76%

Percentage of Target TDC

26%19%55%

 

(1)

The value provided does not include the one-time award of restricted stock units made to compensate Mr. Spence for the forfeiture of incentives from his prior employer.

(2)

Market is defined as median target for each compensation element based on the Proxy Peer Group. 100% represents median compensation.

For 2014, the Compensation Committee approved an annual base salary forof approximately 7% to more closely align his annual base salary with market range.

Annual Incentive– In 2017, Mr. Spence of $475,000, andreceived an annual incentive with aincrease in his target EICP award offrom 70% to 75% of his annual base salary earned in 2014. The Compensation Committee approved a long-term incentive award with a target value of $1,000,000, comprised of 40% performance shares and 60% RSUs, as well as a one-time award of RSUs with a grant date value of $1.3 million, which was intended to compensate Mr. Spence for the forfeiture of incentives from his former employer. This one-time award of RSUs will generally vest in one-third incrementsearned. Based on the first, secondCompensation Committee’s and third anniversaries of the grant date. The RSUs may be paid out in shares of McDermott common stock, cash equal to the fair market value of the shares otherwise deliverable, or any combination thereof, in the sole discretion of the Compensation Committee.

As a result of McDermott’s 2014 financial performance and the reduction of EICP pool funding as recommended by executive management and approved in the discretion of the Compensation Committee, Mr. Spence was eligible to earn 0.5x of his target EICP award subject to adjustment by the Compensation Committee, based on his achievement of corporate and individual performance goals. Based on Mr. Dickson’s assessment of Mr. Spence’s achievement of corporate andhis individual performance goals, Mr. Dickson recommended an adjustment to Mr. Spence’s 2014 EICP award, which the Compensation Committee approved, resulting inawarded Mr. Spence a final EICP award of $70,656.$652,552.

Long-Term Incentive Mr. Spence’s 2014 EICPSpence received an increase in his 2017 target long-term incentive award, was computed based on his individual performance and to bring his target long-term incentive award closer to the market median.



Linh Austin Senior Vice President, Middle East
and North Africa
2017 TARGET TOTAL DIRECT COMPENSATION
McDermott Tenure:
3 years

Annual Base Salary– In 2017, Mr. Austin received an increase in his annual base salary earned fromof approximately 8% to more closely align his August 25, 2014 date of hire through December 31, 2014.annual base salary with market range and for internal pay equity considerations.

Scott V. Cummins.Annual Incentive– In 2017, Mr. Cummins served as our Executive Vice President Offshore from March 2014 to January 2015, and currently serves as our Senior Vice President, Commercial. In determining Mr. Cummins’ compensation for 2014, the Compensation Committee considered market data from the Proxy Peer Group as the primary reference and from the Survey Peer Group as a secondary reference. Each element of Mr. Cummins’ total target direct compensation remained unchangedAustin received an increase in 2014. Mr. Cummins’ total target direct compensation for 2014 is summarized below:

 

  Annual Base Salary

Annual Incentive

(% of Salary)

Long-Term Incentive

Approved Compensation

$450,00070%$1,000,000

Percentage of Market(1)

100%76%92%

Percentage of Target TDC

25%18%57%

 

(1)

Market is defined as median target for each compensation element based on the Proxy Peer Group. 100% represents median compensation.

As a result of McDermott’s 2014 financial performance and the reduction of EICP pool funding as recommended by executive management and approved in the discretion of the Compensation Committee, Mr. Cummins was eligible to earn 0.5x of his target EICP award subjectfrom 50% to adjustment by60% of his annual base salary earned. Based on the Compensation Committee, based on his achievement of corporateCommittee’s and individual performance

goals. Based on Mr. Dickson’s assessment of Mr. Cummins’Austin’s achievement of corporate andhis individual performance goals, Mr. Dickson recommended an adjustment to Mr. Cummins’ 2014 EICP award, which the Compensation Committee approved, resulting inawarded Mr. Austin a final EICP award of $126,000.$335,226.

Tony Duncan.Long-Term Incentive Mr. Duncan served as our Executive Vice President Subsea from March 2014 to January 2015, and currently serves as our Senior Vice President, Project Support. In determining Mr. Duncan’s compensation for 2014, the– The Compensation Committee considered market data from the Proxy Peer Groupmaintained consistency in Mr. Austin’s 2017 target long-term incentive award as the primary reference and from the Survey Peer Group as a secondary reference.compared to 2016.



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46EXECUTIVE COMPENSATION

Brian McLaughlin Senior Vice President and
Chief Commercial Officer
2017 TARGET TOTAL DIRECT COMPENSATION
McDermott Tenure:
12 years

Annual Base Salary In 2014,2017, Mr. DuncanMcLaughlin received increasesan increase in each elementhis annual base salary of approximately 7% to more closely align his total direct compensation to bring each element of total direct compensation closer toannual base salary with market range and to reflect his appointment as McDermott’s Executive Vice President Subsea and to the Executive Leadership Teamfor internal pay equity considerations.

Annual Incentive– In 2017, Mr. McLaughlin received an increase in March 2014. Mr. Duncan’s total target direct compensation for 2014 is summarized below:

 

  Annual Base Salary

Annual Incentive

(% of Salary)

Long-Term Incentive

Approved Compensation

$425,00070%$1,000,000

Percentage of Market(1)

95%76%92%

Percentage of Target TDC

25%16%59%

 

(1)

Market is defined as median target for each compensation element based on the Proxy Peer Group. 100% represents median compensation.

As a result of McDermott’s 2014 financial performance and the reduction of EICP pool funding as recommended by executive management and approved in the discretion of the Compensation Committee, Mr. Duncan was eligible to earn 0.5x of his target EICP award subjectfrom 50% to adjustment by60% of his annual base salary earned. Based on the Compensation Committee, based on his achievement of corporateCommittee’s and individual performance goals. Based on Mr. Dickson’s assessment of Mr. Duncan’sMcLaughlin’s achievement of corporate andhis individual performance goals, Mr. Dickson recommended an adjustment to Mr. Duncan’s 2014 EICP award, which the Compensation Committee approved, resulting inawarded Mr. McLaughlin a final EICP award of $112,000.$342,150.

Long-Term Incentive– The Compensation Committee maintained consistency in Mr. McLaughlin’s 2017 target long-term incentive award as compared to 2016.



Scott Munro Senior Vice President and
Corporate Development Officer
2017 TARGET TOTAL DIRECT COMPENSATION
McDermott Tenure:
4 years

Annual Base Salary– In 2017, Mr. Munro received an increase in his annual base salary of approximately 8% to more closely align his annual base salary with market range and for internal pay equity considerations.

Annual Incentive– In 2017, Mr. Munro received an increase in his target EICP award from 50% to 60% of his annual base salary earned. Based on the Compensation Committee’s and Mr. Dickson’s assessment of Mr. Munro’s achievement of his individual performance goals, the Compensation Committee awarded Mr. Munro a final EICP award of $315,699.

Long-Term Incentive– The Compensation Committee maintained consistency in Mr. Munro’s 2017 target long-term incentive award as compared to 2016.


Liane K. Hinrichs.Hinrichs

Ms. Hinrichs has served as McDermott’s Senior Vice President, General Counsel and Corporate Secretary since October 2008. In determininguntil August 13, 2017, following which she served as Vice President, Legal, until her retirement in December 2017. Ms. Hinrichs’ 2017 target direct compensation for 2014, the Compensation Committee considered market data from the Proxy Peer Group as the primary reference and from the Survey Peer Group as a secondary reference. Ms. Hinrichs’was comprised of an annual base salary andof $490,000, annual incentive target award remained unchangedof 70% of annual base salary earned in 2014. The Compensation Committee approved2017 and long-term incentives for Ms. Hinrichsincentive awards with a target value of $1,000,000, which represented a decrease of 9% from the target value of long-term incentives awarded to Ms. Hinrichs in 2013, due to internal pay equity considerations. Ms. Hinrichs’ total target direct compensation for 2014 is summarized below:$1,000,000.

 

  Annual Base Salary

Annual Incentive

(% of Salary)

Long-Term Incentive

Approved Compensation

$477,75070%$1,000,000

Percentage of Market(1)

115%101%82%

Percentage of Target TDC

26%19%55%

 

(1)

Market is defined as median target for each compensation element based on the 2014 Proxy Peer Group. 100% represents median compensation.

As a result of McDermott’s 2014 financial performance and the reduction of EICP pool funding as recommended by executive management and approved in the discretion of the Compensation Committee, Ms. Hinrichs was eligible to earn 0.5x of her target EICP award subject to adjustment by

the Compensation Committee, based on her achievement of corporate and individual performance goals. Based on Mr. Dickson’s assessment of Ms. Hinrichs’ achievement of corporate and individual performance goals, and Mr. Dickson’s recommendation for Ms. Hinrichs’ EICP award, which the Compensation Committee approved, Ms. Hinrichs was provided a final EICP award of $167,213.

Perry L. Elders. Mr. Elders served as McDermott’s Senior Vice President and Chief Financial Officer from July 2010 to August 2014. In determining Mr. Elders’ compensation for 2014, the Compensation Committee considered market data from the Proxy Peer Group as the primary reference and from the Survey Peer Group as a secondary reference. Mr. Elders’ annual base salary and annual incentive target award remained unchanged in 2014. The Compensation Committee approved long-term incentives for Mr. Elders with a target value of $1,000,000, which represented a decrease of 9% from the target value of long-term incentives awarded to Mr. Elders in 2013, due to internal pay equity considerations. Mr. Elders’ total target direct compensation for 2014 is summarized below:

 

  Annual Base Salary

Annual Incentive

(% of Salary)

Long-Term Incentive

Approved Compensation

$515,00070%$1,000,000

Percentage of Market(1)

105%76%76%

Percentage of Target TDC

28%19%53%

 

(1)

Market is defined as median target for each compensation element based on the Proxy Peer Group. 100% represents median compensation.

In connection with Mr. Elders’ resignation in August 2014,Ms. Hinrichs’ retirement, we entered into a separation agreement with Mr. EldersMs. Hinrichs providing for various compensation-related benefits in exchange for, among other things, hisher agreement to comply with several restrictive covenants. Under that separation agreement, Mr. EldersMs. Hinrichs received: (1) a lump-sum cash severance payment in the amount of $640,000;$1,666,000; (2) an amount of 2017 bonus under the EICP based on the higher of (i) Ms. Hinrichs’ target EICP award for 2017 and (ii) the EICP bonus pool funding multiple times Ms. Hinrichs’ target EICP award for 2017; (3) contribution to the McDermott International, Inc. Director and Executive Deferred Compensation Plan in respect of 2017 in the amount of $44,412; (4) payment of an amount to fund twelve months of continuing health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act; (5) payment in an amount equal to $15,000, which represented the cost of executive-level financial planning; (6) accrued but unutilized vacation pay; and (7) payment of Ms. Hinrichs’ reasonable legal fees incurred in connection with the negotiation and execution of the separation agreement.

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EXECUTIVE COMPENSATION47

Additionally, Ms. Hinrichs received the following relating to her outstanding equity awards under the 2014 LTIP and the 2016 LTIP: (1) each then outstanding restricted stock unitportion of her March 5, 2015 RSU award, granted to him pursuant to the 2009 LTIPFebruary 26, 2016 RSU award and February 28, 2017 RSU award which would, absent his resignation from employment,her retirement, have remained outstanding and continued to vest through March 15, 2016 would, subject to certain conditions, continue to vest and be settled on the first to occur of (a)(i) the date such award would otherwise be settled in accordance with the terms of the 2014 LTIP or 2016 LTIP, as applicable, and the applicable grant agreement as if hisMs. Hinrichs’ employment had continued and (b)through March 15, 2015; (3) payment2020, and (ii) March 15, 2018; (2) each then outstanding portion of an amounther March 5, 2015 performance units award, February 26, 2016 performance units award and February 28, 2017 performance units award, which would, absent her retirement, have remained outstanding and continued to fund three months of continuing health insurance coverage under the Consolidated Omnibus Reconciliation Act;vest would, subject to certain conditions, vest and (4) reimbursement of certain expenses. All other outstanding unvested equity and performance-based awards previously granted to Mr. Elders were forfeited at the time of his resignation. Vested stock options held by Mr. Elders continue to be exercisable for the remainder of their respective terms. Mr. Elders’ benefits under our Director and Executive Deferred Compensation Plan were fully vested as of the date of his resignation, and those benefits are to be paidsettled in accordance with the terms of the 2014 LTIP or 2016 LTIP, as applicable, and the applicable grant agreement (including the corporate performance conditions that plan.

2014 Other Compensation Elements

Discretionary Bonus Awards. The Compensation Committee approved discretionary bonus awards for Mr. Eldersdetermine the amount, if any, of such award that will become vested and payable) as if her employment had continued through March 15, 2020. Any vested stock options awarded to Ms. Hinrichs under the McDermott International, Inc. 2009 Long-Term Incentive Plan will remain exercisable until the stated maximum expiration date in the amountapplicable grant agreement, notwithstanding any provision providing for earlier termination in the event of $50,000 each, in recognitiontermination of their respective contributions to and results achieved in connection with our refinancing transactions during the first half of 2014.employment.

2017 OTHER COMPENSATION ELEMENTS

Perquisites.Perquisites

In 2014,2017 our Compensation Committee adoptedcontinued its approach with respect to perquisites started in 2016, and provided for financial planning services and an executive physical to be reimbursed to the participant or paid directly to the participant’s provider of choice, in a perquisitecombined amount not to exceed $20,000, rather than providing an allowance for certain officers, including our NEOs, in the amount of $20,000, consistent with recent years. Mr. Spence did not receive a perquisite allowance in 2014, since he did not join McDermott until in August 2014. Theperquisite allowance was provided in cash and mayto be used for a company-required physical and any other purpose determined by the

recipient, including participant, as in prior years. No other perquisites were available to cover company-required physicals, and isthe participants in lieu of any reimbursements made by McDermott to those executive officers receiving the perquisite allowance for any individual perquisite,program, with the exception of any company-required spousal travel for (1) the Chief Executive Officer, and (2) the remaining participants, including our NEOs, as approved by the Chief Executive Officer. There were no reimbursements to any NEOperquisite program participants for company-required spousal travel in 2014.2017.

Additionally, and consistent with our past practice, we may provide a gross-up for any imputed income related to such company-required spousal travel, but only when the presence of the spouse is related to the underlying business purpose of the trip. We also may provide our NEOs with a tax gross-up on any relocation-related expense reimbursements that may be subject to tax.tax, but no such reimbursements were made in 2017.

Expatriate Benefits.Benefits

McDermott provides benefits to our expatriate employees, which benefits are designed to relocate and support employees who are sent on an assignment outside of their home country. Expatriate benefits generally include an expatriate premium equal to 15%10% of the employee’s base salary, a hardship premium in certain countries, a housing allowance (or company provided housing in certain locations), transportation allowance (or company provided transportation in certain cash allowances recognizing differences inlocations), a cost of living conditions in the host location,differential, where applicable, a vacation allowance based on the cost of an economy plane ticket to the employee’s home location, company paid education for approved dependents in locations where public education is not an education allowance for the employee’s dependent childrenoption and a tax equalizationassistance program.

Under McDermott’s tax equalizationassistance program, we ensure that expatriatesexpatriate employees are subject to substantiallyessentially the same income tax liability on employment compensation as they would have paid had they lived and worked in the United States. Each expatriate employee is responsible for a theoreticalhypothetical U.S. income tax liability based on an estimate of the executive officer’sexpatriate’s anticipated U.S. income tax liability andon his or her stay-at-home employment income. Under the program, McDermott is responsible for any homethe host country tax (if applicable) and assignment country taxes (if applicable) and any additional United States income taxes attributed to the international assignment in excess of that amount. We deductthe hypothetical income taxes from the expatriate’s compensation during the tax year and pay any assignment country taxes on their behalf. Messrs. Cummins and Duncan each participated inliability. Mr. Austin received expatriate benefits in 2014,during 2017, as Mr. Cummins is an Australian citizen and was based both in Singapore and London during 2014, and Mr. DuncanAustin is a dual United States and United Kingdom citizen and was based in London during 2014.Dubai.

Defined Contribution Plans.Plans

We provide retirement benefits for most of our U.S. based employees, including our U.S. based NEOs, through sponsorship of the McDermott Thrift Plan, a qualified defined contribution 401(k) plan, which we refer to as our “Thrift Plan.” We provide retirement benefits for our non-U.S. expatriate employees including Mr. Cummins, through sponsorship of a global defined contribution plan, which we refer to as the “McDermott Global Defined Contribution Plan.”

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48EXECUTIVE COMPENSATION

Retirement and Excess Plans.Plans

We do not provide defined benefit pension plans to any of our NEOs, with the exception of Mr. Cummins andNEOs. Ms. Hinrichs, who were participantshowever, was a participant in our now closed and frozen retirement and excess plans. Mr. Cummins was eligible for participation under the J. Ray McDermott, S.A. Third Country National Employees Pension Plan (the “TCN Plan”), which provides retirement benefits for certain of our current and former foreign employees. The TCN Plan was closed to new participants in 2011, and benefit accruals under the TCN Plan were frozen effective December 31, 2011.plan. Ms. Hinrichs was eligible for participation under the McDermott (U.S.) Retirement Plan (the “U.S. Retirement Plan”) before it was closed to new participants in 2006. Benefit accruals under the U.S. Retirement Plan were frozen altogether in 2010. Ms. Hinrichs iswas also a participant in our unfunded, nonqualified excess retirement plan (the “U.S. Excess Plan”), under which benefits have been frozen since 2010. This plan covers a small group of highly compensated employees whose ultimate benefits under the U.S. 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. As is the case with the U.S. Retirement Plan, benefits under the U.S. Excess Plan have been frozen since 2010.

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

Deferred Compensation Plan.

The McDermott International, Inc. Director and Executive 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 2014,2017, each of theour NEOs with the exception of Mr. Spence,and Ms. Hinrichs were participants in the DCP and their respective accounts in the DCP received a Company Contribution in an amount equal to 5% of the sum of their respective prior-year base salaries paid in the prior year. Additionally, Messrs. Dickson2016 and Duncan each received a discretionary company contribution under the DCP equal2015 bonus paid in value to 5% of his respective prior-year target base salary he would have earned for the period January 1, 2013 through his respective date of hire. Mr. Spence was not a participant in the DCP in 2014.2016.

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 Agreements.

Except for change-in-controlchange in control agreements described below, we do not currently have any employment agreements with any of our Continuing NEOs relating to ongoing employment, with the exception of Messrs. Cummins and Duncan. Each ofemployment. Mr. Cummins and Mr. DuncanAustin has an employment agreement related to his status as an expatriate employee, which sets forth the expatriate benefits as discussed above under “Expatriate Benefits.” TheseThis employment agreements doagreement does not provide for any specified term of employment, and the terms of the agreementsagreement are generally consistent with those of employment agreements entered into with various other McDermott expatriate employees.

Change-in-ControlChange in Control Agreements.

We believe change-in-controlchange in control agreements for executive officers are common within our industry, and our Board and the 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-controlchange in control agreements to key senior executives since 2005. Our change-in-controlchange 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-controlchange in control agreements for our Continuing NEOs generally provide a cash severance payment of two (or 2.5 for Mr. Dickson) timesa multiple of the sum of the NEO’s annual base salary and target EICP, as set forth below, and a pro-rated bonus payment under the EICP.

2018 PROXY STATEMENT


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EXECUTIVE COMPENSATION49

NEOMultiple of Base Salary + Target EICP
Mr. Dickson2.5x
Mr. Spence2.0x
Mr. Austin1.0x
Mr. McLaughlin2.0x
Mr. Munro1.0x

In addition, upon an involuntary termination or constructive termination within one year following 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-controlchange 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. Additionally, the

change-in-control change in control agreements with Messrs. CumminsAustin, McLaughlin and DuncanMunro are scheduled to expire on March 15, 2016.2019. 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-controlchange in control agreements with our Continuing NEOs, as well as other plans and arrangements that have different trigger mechanisms that relate to a change in control.

Other Compensation Policies and Practices

SIZING LONG-TERM INCENTIVE COMPENSATION AND TIMING OF EQUITY GRANTS

Sizing Long-Term Incentive Compensation and Timing of Equity Grants.The Compensation Committee generally determines the size of equity-based grants as a dollar value, rather than granting a targeted number of shares or units, with each target value generally set within market range. To determine the number of restricted stock units and performance shares or units granted, the target value of long-term incentive compensation is divided by the fair market value of the applicable component of equity.

The fair market values of one performance share and one restricted stock unit were computed based on the full fair market value of McDermott’s common stock by reference to the closing price of our common stock on the New York Stock Exchangeequity on the date of grant.

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 iswindow period generally opens on 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 2014, with the exception of the performance share and restricted stock unit awards granted to Mr. Spence on the date he commenced employment with McDermott.

STOCK OWNERSHIP GUIDELINES

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 levelemployees who are members of vice president or aboveMcDermott’s EXCOM maintain a minimum ownership interest in McDermott. The EXCOM includes all of the NEOs. The ownership requirements are as follows:

Level

LevelBase Salary or Annual
Retainer Multiple

CEO

5x

Executive Officer directly reporting to CEO

Members of McDermott’s EXCOM
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. Shares of McDermott common stock, restricted shares of McDermott common stock, restricted stock units (whether or not McDermott can settle them in cash and whether or not vested), performance shares and units (whether or not McDermott can settle them in cash and whether or not vested, but to the extent not vested, at target performance level), shares of McDermott common stock

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50EXECUTIVE COMPENSATION

held in an employee’s Thrift Plan account and shares of McDermott common stock held in any trust in which an employee has a pecuniary interest (to the extent the employee has investment control over such shares) are all counted towards compliance with the stock ownership guidelines. Further, each director and officer subject to the stock ownership guidelines has the ability to certify his or her ownership at any time after reaching compliance with the required ownership level, following which such director or officer is not required to accumulate any additional McDermott securities, so long as he or she retains the number of

securities held on the certification date, regardless of any subsequent changes in the market price of shares of McDermott common stock. All directors and NEOs currently meet or exceed their ownership requirement or are within the five-year period to achieve compliance.

DERIVATIVES TRADING AND HEDGING

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

Clawback Policy.

Our Compensation Committee has adopted a clawback policy, which provides that, if the consolidated financial statements of McDermott are materially restated within three years of their initial filing, and the Compensation Committee determines, in its reasonable discretion, that any current or former executive officer has engaged in intentional misconduct, and such misconduct caused or partially caused the need for such restatement, the Compensation Committee may, within 12 months after such a material restatement, require that the executive forfeit and/or return to McDermott all or a portion of the compensation vested, awarded or received under any bonus award, equity award or other award during the period subject to restatement and the 12-month period following the initial filing of the financial statements that were restated. The forfeiture and/or return of compensation under the policy would be limited to any portion that the executive officer would not have received if the consolidated financial statements had been reported properly at the time of their initial filing. The clawback policy would not apply to restatements occurring as a result of a change in control, as defined in the DCP, and the policy does not limit the ability of McDermott to pursue forfeiture or reclamation of amounts under applicable law.

FORFEITURE PROVISIONS

Forfeiture Provisions.

Additionally, consistent with our recent practice, our grant agreements for awards made in 20142017 contain a forfeiture provision. In 2014,2017, 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 a 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 our company,McDermott, then all rights and benefits awarded under the respective agreements are immediately forfeited, terminated and withdrawn.

HOW WE MAKE COMPENSATION DECISIONS

SURVEY PEER GROUPCompensation 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 evaluates, in coordination with the Governance Committee, the CEO’s performance in light of goals and objectives relevant to CEO compensation, and sets the CEO’s compensation based on that evaluation. The Compensation Committee receives information and advice from its compensation consultant as well as from our human resources department and management to assist in compensation determinations.

2018 PROXY STATEMENT


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EXECUTIVE COMPENSATION51

Compensation Consultant

After completion of a selection process, in August 2017 our Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) to serve as its consultant on executive compensation matters. Previously, our Compensation Committee had engaged Pay Governance LLC, or “Pay Governance,” as its consultant, including during the period from January to August 2017. The compensation consultants have provided 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, attended meetings of the Compensation Committee and participated in executive sessions without members of management present. Meridian and Pay Governance have reported directly to the Compensation Committee. The Compensation Committee will review, on an annual basis, Meridian’s performance and provide Meridian with direct feedback on its performance. When requested by the Governance Committee, Meridian will attend meetings of the Governance Committee with respect to nonemployee director compensation.

During 2017, neither Meridian nor Pay Governance performed any services for McDermott other than as described above. In January 2018, our Compensation Committee assessed whether the work performed by Meridian during 2017 raised any conflict of interest and determined that Meridian’s work performed for the Compensation Committee raised no conflict of interest.

Role of CEO and Management

While the Compensation Committee has the responsibility to approve and monitor all compensation for our executive officers, management plays an important role in determining executive compensation. Management, at the request of the Compensation Committee, recommends financial goals that drive the business and works with Meridian to analyze competitive market data and to recommend compensation levels for our executive officers other than our CEO. Our CEO likewise assists the Compensation Committee by providing his evaluation of the performance of our other executive officers and recommending compensation for those officers, including adjustments to their annual incentive compensation, based on individual performance.

Defining Market Range Compensation – 2017 Benchmarking and Peer Groups

To identify median compensation for each element of total direct compensation, the Compensation Committee relies on “benchmarking.” This involves reviewing the compensation of our NEOs 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 LTI compensation 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 for the principal purpose of supporting our strategic and financial goals and driving the creation of stockholder value, and, as a result, generally are not benchmarked.

PROXY PEER GROUP

It is the Compensation Committee’s practice to periodically review and consider the individual companies used for benchmarking purposes. 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 companies for benchmarking purposes. Therefore, the Compensation Committee considers the revenues and market capitalization of the component companies. In this CD&A, we refer to the peer group as the “Proxy Peer Group.” For Messrs. Dickson and Spence and Ms. Hinrichs, market data from the Proxy Peer Group was reflective of 2015 compensation as reported in the 2016 proxy statements of the companies in the Proxy Peer Group, and was not size adjusted. Market data from the Proxy Peer Group was not utilized in making compensation decisions for Messrs. Austin, McLaughlin or Munro due to the limited proxy statement disclosures and corresponding compensation information available relating to their respective positions. The component companies of the Proxy Peer Group are as follows:

Archrock, Inc.Noble Corporation plc
Chicago Bridge & Iron Company N.V.Oceaneering International, Inc.
Helix Energy Solutions Group, Inc.Oil States International, Inc.
Jacobs Engineering Group, Inc.Superior Energy Services, Inc.
KBR, Inc.Tidewater Inc.

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52EXECUTIVE COMPENSATION

These Proxy Peer Group companies are the same as the Proxy Peer Group utilized in 2016, except that the Proxy Peer Group for 2017 did not include Cameron International Corporation, which merged with Schlumberger N.V. (Schlumberger Limited) in 2016, Dresser-Rand Group, Inc., which was acquired by Siemens AG in 2015, and FMC Technologies, Inc., which merged with Technip in 2017.

SURVEY PEER GROUP

The Compensation Committee also utilized market data based on a set of 78 companies in similar industries which participate in Towers Watson surveys (the “Survey Peer Group”). 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 Survey Peer Group is intended to provide a reference point for pay levels within similar industries, and was used as a secondary reference for Messrs. Dickson and Spence and Ms. Hinrichs, and a primary reference for Messrs. Austin, McLaughlin and Munro. The component companies of the Survey Peer Group are as follows:

Anadarko Petroleum Corporation

Hess CorporationPolymer Group, Inc.

ApacheAndeavor

HNTB Corporation

PolyOne Corporation

Apache Corporation

Holly Frontier CorporationPulteGroup, Inc.
A.O. Smith Corporation

Hunt Consolidated, Inc.Rockwell Automation, Inc.

Ball Corporation

Archrock, Inc.
Husky Injection Molding Systems Ltd.Rowan Companies plc

Barnes Group, Inc.

Ball Corporation
ION Geophysical CorporationSaudi Arabian Oil Co.

Beam, Inc.

Irving Oil Commercial G.P.Schlumberger Limited

Bemis Company, Inc.

ITT CorporationSealed Air Corporation

BG US Services

Jacobs Engineering Group, Inc.ShawCor Ltd.

BP p.l.c.

KBR, Inc.Shell Oil Company

Brady Corporation

Caterpillar Inc.
Koch Industries, Inc.Snap-On Incorporated

BuildingCH2M Hill

Lehigh Hanson Materials Corporation of America (dba GAF Materials)

Limited
Sonoco Products Co.

CastleChevron Corporation

Magellan Midstream Partners, L.P.Spectra Energy Corp
ConocoPhillipsMarathon Oil Corporation

SPX Corporation

Caterpillar Inc.

Chevron Corporation

CH2M Hill Companies, Ltd.

Connell Limited Partnership

ConocoPhillips

Deere & Company

Marathon Petroleum CorporationStatoil ASA

Devon Energy Corporation

Matthews International CorporationTerex Corporation

Donaldson Company, Inc.

MDU Resources Group, Inc.Textron Inc.

Eaton Corporation

MeadWestvaco Corporation3M Company

EnCana Oil & Gas USA

EQT Corporation
Milacron Holdings Corp.The Timken Company

EQT Corporation

Exterran Holdings, Inc.

Exxon Mobil Corporation

Noble Energy, Inc.The Toro Company

GAF Materials

Occidental Petroleum CorporationTransocean Ltd.
The Goodyear Tire & Rubber Company

Owens CorningTrinity Industries, Inc.

Graco Inc.

Pall CorporationURS Corporation

Greif, Inc.

HD Supply, Inc.

Parker Hannifin CorporationUSG Corporation

Hercules Offshore, Inc.

Parsons CorporationValero Energy Corporation

Hess Corporation

Herman Miller, Inc.

HNTB Corporation

Holly Frontier Corporation

Hunt Consolidated, Inc.

Husky Injection Molding Systems Ltd.

Illinois Tool Works Inc.

Ingersoll Rand plc

ION Geophysical Corporation

Irving Oil Commercial G.P.

ITT Corporation

Jacobs Engineering Group, Inc.

KBR, Inc.

Koch Industries, Inc.

Lafarge North America Inc.

L.B. Foster Company

Lehigh Hanson Materials Limited

Lend Lease Corporation Limited

Magellan Midstream Partners, L.P.

The Manitowoc Company, Inc.

Marathon Oil Corporation

Matthews International Corporation

MDU Resources Group, Inc.

MeadWestvaco Corporation

Milacron LLC

Mine Safety Appliances Company

Noble Energy, Inc.

Occidental Petroleum Corporation

Oiltanking North America

Owens Corning

Owens-Illinois, Inc.

Pall Corporation

Parker Hannifin Corporation

Parsons Corporation

PCL Constructors Inc.

Phillips 66 Company

Xylem Inc.

2018 PROXY STATEMENT


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EXECUTIVE COMPENSATION53

PERFORMANCE UNIT PEER GROUP

In consideration of comments received from the stockholder outreach efforts undertaken during 2015 and 2016 regarding the composition of the peer group, the Compensation Committee established the following peer group comprised of domestic and international competitors for purposes of the 2016 and 2017 Performance Unit awards:

Archrock, Inc.Saipem SpA

PolymerHelix Energy Solutions Group, Inc.

Subsea7 SA

PolyOne Corporation

Oceaneering International, Inc.
TechnipFMC plc

PulteGroup,Superior Energy Services, Inc.

Swiber Holdings Limited

Rockwell Automation,Tidewater Inc.

Rowan Companies plc

Saudi Arabian Oil Co.

Schlumberger Limited

Sealed Air Corporation

ShawCor Ltd.

Shell Oil Company

Snap-On Incorporated

Sonoco Products Co.

Spectra Energy Corp

SPX Corporation

Statoil ASA

Suburban Propane

Terex Corporation

Tesoro Corporation

Tetra Tech, Inc.

Textron Inc.

Thermadyne Industries, Inc.

Thomas & Betts Corporation

3M Company

The Timken Company

The Toro Company

Transocean Ltd.

Trinity Industries, Inc.

URS Corporation

USG Corporation

Valero Energy Corporation

Xylem Inc.

SapuraKencana Petroleum Berhad

Pay Ratio Disclosure

The table below sets forth comparative information regarding: (1) the annual total compensation of our Chief Executive Officer, Mr. David Dickson, for the year ended December 31, 2017, determined on the basis described below; (2) the median of the annual total compensation of all employees of McDermott and its consolidated subsidiaries, excluding our Chief Executive Officer, for the year ended December 31, 2017, determined on the basis described below; and (3) a ratio comparison of those two amounts. These amounts were determined in accordance with rules prescribed by the SEC.

The applicable SEC rules require us to identify the median employee, by using either annual total compensation for all such employees or another consistently applied compensation measure. For these purposes, we used total earnings, as determined from McDermott’s payroll records for the period from January 1, 2017 through December 31, 2017 (with December 31, 2017 being the “Measurement Date”), as our consistently applied compensation measure. We included all employees of McDermott and its consolidated subsidiaries as of the Measurement Date, whether employed on a full-time, part-time or seasonal basis and whether employed in the U.S. or a non-U.S. jurisdiction. We did not use statistical sampling or include cost of living adjustments for purposes of this determination. We converted all amounts paid in foreign currencies into U.S. Dollars.

After identifying the median employee, based on the process described above, we calculated annual total compensation for that employee using the same methodology we used for determining total compensation for 2017 for our named executive officers as set forth in the Summary Compensation Table. The median employee is an Indian national employed as a Structural Fitter at our fabrication yard in Dubai, paid on an hourly basis in United Arab Emirates Dirham. The median employee’s hourly pay was determined based on a review of market data for companies with individuals in similar positions and location, and such pay is within market range compensation. The median employee’s total compensation is inclusive of holiday pay, vacation pay, religious holiday pay and McDermott provided housing accommodations.

Chief Executive Officer annual total compensation (A)  $7,530,841
Median annual total compensation of all employees (excluding Chief Executive Officer) (B)$12,455
Ratio of (A) to (B)605 to 1

The Compensation Committee reviewed the ratio set forth in the table above and determined that the differential in compensation reflected above is appropriate for the Company, given the wide range of responsibilities and level of accountability of our Chief Executive Officer, as compared to our median employee.

COMPENSATION COMMITTEE REPORTCompensation 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.proxy statement.

THE COMPENSATION COMMITTEE


W. Craig Kissel, Chair
L. Richard Flury
Gary P. Luquette
Mary L. Shafer-Malicki Chairman

Roger A. Brown

Gary P. Luquette

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54

EXECUTIVE COMPENSATION OF EXECUTIVE OFFICERSTABLES

The following table summarizes the prior three years’ compensation of our Chief Executive Officer, our Chief Financial Officer, our three highest paid executive officers who did not serve as our CEO and CFO during 20142017 and were employed by McDermott as of December 31, 2014,2017, and our former Senior Vice President, General Counsel and Chief Financial OfficerCorporate Secretary, Ms. Hinrichs (who served in this capacity until August 25, 2014)13, 2017 and then served as Vice President, Legal (and a non-executive officer) until December 31, 2017). No compensation information is provided for Messrs. DicksonMcLaughlin or CumminsMunro for 2012,2015 and 2016, as they were not previously included as “named executive officers” in our proxy statement for our annual meeting of stockholders in 2013.2016 or 2017. No compensation information is provided for Messrs. Spence or DuncanMr. Austin for 2012 and 2013,2015, as they werehe was not previously included as a “named executive officers”officer” in our proxy statement for our annual meeting of stockholders in 2013 or 2014.2016.

SUMMARY COMPENSATION TABLESummary Compensation Table

 

 
Name and Principal PositionYear Salary(1) Bonus(2) 

Stock

Awards(3)

 

Option

Awards(3)

 

Non-Equity

Incentive Plan

Compensation(4)

 

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings(5)

 

All Other

Compensation(6)

 Total 

Mr. Dickson

President and Chief
Executive Officer

 2014  $850,000  $0  $3,999,976  $0  $552,000   N/A  $74,200  $5,476,176  
 2013  $144,618  $480,000  $3,799,998  $0  $0   N/A  $4,339  $4,428,955  

Mr. Spence

Executive Vice
President and Chief
Financial Officer

 2014  $168,229  $0  $2,299,994  $0  $70,656   N/A  $7,570  $2,546,449  

Mr. Elders

Former Senior Vice
President and Chief
Financial Officer

 2014  $332,604  $50,000  $999,992  $0  $0   N/A  $746,304  $2,128,900  
 2013  $511,250  $0  $824,966  $274,995  $0   N/A  $59,987  $1,671,198  
 2012  $493,750  $0  $1,012,436  $337,499  $207,383   N/A  $78,970  $2,130,038  

Mr. Cummins(7)

Senior Vice President,
Commercial

 2014  $456,250  $0  $999,992  $0  $126,000  $80,900  $627,939  $2,210,181  
 2013  $440,000  $0  $1,249,980  $249,998  $0  $0  $516,034  $2,456,012  

Mr. Duncan

Senior Vice President,
Project Support

 2014  $400,000  $0  $999,992  $0  $112,000   N/A  $782,189  $2,294,181  

Ms. Hinrichs

Senior Vice President,
General Counsel and Corporate Secretary

 2014  $477,750  $50,000  $999,992  $0  $167,213  $104,829  $73,474  $1,768,429  
 2013  $472,063  $0  $1,324,966  $274,995  $0  $0  $56,998  $2,129,022  
 2012  $448,750  $0  $749,955  $249,992  $301,573  $103,766  $71,995  $1,926,031  

 

 

Name and
Principal Position
  Year  Salary
($)
  Bonus
($)(1)
  Stock
Awards
($)(2)
  Non-Equity
Incentive Plan
Compensation
($)(3)
  Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
  All Other
Compensation
($)(5)
  Total
($)
Mr. Dickson2017887,50004,799,9791,694,575N/A148,7877,530,841
President and Chief2016850,00003,774,4691,190,000N/A101,6915,916,160
Executive Officer2015850,00004,999,9981,445,340N/A75,7507,371,088
Mr. Spence2017501,25001,499,990652,552N/A86,8692,740,661
Executive Vice President and2016475,00001,321,064478,800N/A60,5332,335,397
Chief Financial Officer2015475,00001,199,996565,383N/A55,6752,296,054
Mr. Austin2017343,7500399,972335,226N/A406,4571,485,405
Senior Vice President,2016325,00070,000377,444214,500N/A397,7501,383,694
Middle East and North Africa
Mr. McLaughlin2017368,7500399,972342,150N/A57,4841,168,356
Senior Vice President and
Chief Commercial Officer
Mr. Munro2017343,7500399,972315,699N/A42,6761,102,096
Senior Vice President and
Corporate Development Officer
Ms. Hinrichs2017486,9380999,974537,87174,5671,847,0783,946,428
Former Senior Vice President,2016477,7500943,608401,31030,70463,9821,917,354
General Counsel and2015477,7500999,987473,88014,66358,9722,025,252
Corporate Secretary
(1)

The amounts reported in this column for 2014 for Messrs. Spence and Elders represent partial-year service. The amount reported for Mr. Cummins includes an additional $6,250 in base salary received as a result of the timing of monthly salary payments in connection with his relocation from Singapore to the United Kingdom and the resulting change in payrolls.

(2)

The amounts reported in this column for 2014 represent discretionary bonus awards for Mr. Elders and Ms. Hinrichs in recognition of their respective contributions to and results achieved in connection with McDermott’s refinancing transactions in the first half of 2014. The amount reported in this column for 2013Mr. Austin for 2016 represents payment of the remaining portion of a cash signingsign-on bonus for Mr. Dickson, which was intended to compensate him for benefits fromAustin received upon joining McDermott in 2015. Mr. Austin received $70,000 on his former employer that he would have received if he had not changed employment.date of hire in 2015 and the remaining $70,000 in 2016, 12 months after his date of hire.

(3)(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 we granted in 2014.2017. For a discussion of the valuation assumptions with respect to these awards, see Note 16 to the Consolidated Financial Statements included in our Form 10-K for the year ended December 31, 2017.

(4)(3)

The amounts reported in this column for 2017, 2016 and 2015, respectively, are attributable to the annual incentive awards earned in fiscal year 20142017, but paid in 2015,2018, earned in 2016, but paid in 2017, and earned in 20122015 but paid in 2013.2016.

(5)(4)

The 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. No value is reported for 2013 for each


of Mr. Cummins and Ms. Hinrichs, as the change in actuarial present value of their accumulated benefits from fiscal year end 2012 to fiscal year end 2013 was ($80,000) and ($53,630), respectively. The actuarial present values decreased in that period as a result of a change in assumptions used in computing the present values in each year, namely an increase in the discount rate from 4% to 4.8%.

2018 PROXY STATEMENT


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(6)EXECUTIVE COMPENSATION TABLES55

(5)

The amounts reported in this column for 20142017 are attributable to the following:

All Other Compensation

 

 
  

Deferred

Compensation
Plan

Contribution(A)

 Thrift
Match(B)
 Service-Based
Thrift
Contribution(B)
 Perquisite
Allowance(C)
 Expatriate
Benefits(D)
 Other(E) Tax
Payments(F)
 

Mr. Dickson

 $42,500   $3,900   $7,800   $20,000   N/A   $0   $0  

Mr. Spence

 —     $2,523   $5,047   —     N/A   $0   $0  

Mr. Elders

 $35,932   $7,800   $7,800   $20,000   N/A   $674,772   $0  

Mr. Cummins

 $31,488   N/A   N/A   $20,000   $411,405   $43,083   $121,963  

Mr. Duncan

 $16,250   $5,200   $7,800   $20,000   $335,028   $3,448   $394,463  

Ms. Hinrichs

 $38,682   $6,992   $7,800   $20,000   N/A   $0   $0  

 

 


      ALL OTHER COMPENSATION

        Deferred
Compensation
Plan
Contribution
($)
(A)
  Employer
Match
($)(B)
  Safe Harbor
Non-Elective
Contribution
($)(B)
  Perquisite
Program
($)(C)
  Expatriate
Benefits
($)(D)
  Other
($)(E)
  Tax
Payments
($)(F)
 Mr. Dickson114,7678,1008,10017,820000
 Mr. Spence52,0196,7508,10020,000000
 Mr. Austin22,4557,7518,1004,020255,8920108,239
 Mr. McLaughlin26,3325,4008,10017,652000
 Mr. Munro27,7636,8138,1000000
 Ms. Hinrichs91,9947,2078,10015,59601,724,1820
(A)

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

(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. Mr. Cummins is not a participant in the Thrift Plan.

(C)

The amounts reported in this column are attributable to a lump-sumpayments made pursuant to McDermott’s 2017 perquisite allowance in the amount of $20,000 received by certain officers of McDermott in 2014, including each of the NEOs with the exception ofprogram. For Mr. Spence. With the exception of an executive physicalDickson, $15,738 related to financial planning and $2,082 related to his required by McDermott, thephysical. For Mr. Spence, $18,510 related to financial planning and $1,490 related to his required physical. For Mr. McLaughlin, $16,492 related to financial planning and $1,160 related to his required physical. For Mr. Austin, $4,020 related to financial planning. For Ms. Hinrichs, $15,596 related to financial planning. For more information on McDermott’s 2017 perquisite allowance was permitted to be used for any purpose determined by the recipient.program, see “Compensation Discussion and Analysis — 2017 Other Compensation Elements — Perquisites.”

(D)

The amounts reported in this column for 20142017 are attributable to the following:

 

 
  Expatriate
Premium
 Commodities
& Service
Allowance
 Housing
& Utilities
Allowance
 Vacation
Airfare
 Education
Allowance
 Car
Lease
 

Mr. Cummins

 $68,438   $90,684   $184,642   $12,162   $38,960   $16,519  

Mr. Duncan

 $60,000   $48,636   $197,040   $5,116   $24,236   $0  

 

 


   Expatriate
Premium
($)
  Commodities
& Service
Allowance
($)
  Housing &
Utilities
Allowance
($)
  Vacation
Airfare
($)
  Education
Allowance
($)
  Relocation
($)
  Company
Provided
Automobile
($)
            Mr. Austin34,37545,90990,94623,57561,08700
      

Any amounts for Mr. Cummins paid in Singapore dollars (“SGD”) were converted to U.S. dollars (“USD”) using either (i) an average exchange rate for January — June 2014 of 1.26372 SGD per USD or (ii) an exchange rate for July 2014 when the payment was made of $1.2580 SGD per USD, in each case depending on when the amounts were paid. Any amounts for Mr. Cummins paid in Pounds Sterling (“GBP”) were converted to USD using an average exchange rate for July — December 2014 of 0.6103 GBP per USD. All amounts for Mr. Duncan were paid in USD.

(E)

The amount reported in this column for Mr. Elders representedMs. Hinrichs represents a lump-sum cash severance payment of $640,000,pursuant to her Separation Agreement ($1,681,000), payment for vacation earned but not taken by Mr. EldersMs. Hinrichs in 20142017 ($10,365), payment of reasonable legal fees incurred in connection with the negotiation and execution of her Separation Agreement ($30,000) and the payment of an amount to fund three months of continuing health insurance coverage under the Consolidated Omnibus Reconciliation Act. Act ($2,817).

(F)

The amountsamount reported in this column for Messrs. Cummins and Duncan representMr. Austin represents amounts paid to Messrs. Cummins and DuncanMr. Austin in connection with their respective relocations to the United Kingdom.

(F)

The amounts reported in this column represent tax payments made by McDermott on behalf of each of Messrs. Cummins and Duncan, net of amounts McDermott withheld from each of Messrs. Cummins and Duncan in 2014 pursuant to McDermott’s tax equalization program for expatriate employees. For Mr. Cummins, the amount includes $89,827 in Singapore taxes and $191,240 in United Kingdom taxes paid by McDermott on Mr. Cummins’ behalf, net of $159,103 McDermott withheld from Mr. Cummins’ compensation2017 pursuant to McDermott’s tax equalization program. The amount of Singapore tax paid was converted from SGD to USD using the July 2014 monthly exchange rate of 1.2580 SGD per USD, and the amount of United Kingdom taxes paid was converted from GBP to USD using the average July — December 2014 exchange rate of 0.6103 GPB per USD. For Mr. Duncan, the amount includes $502,384 in United Kingdom taxes paid by McDermottmore information on Mr. Duncan’s behalf, net of (i) $148,721 that McDermott withheld from Mr. Duncan’s compensation in 2014 and (ii) $40,800 that McDermott paid to Mr. Duncan in 2014 as a tax equalization payment related to 2013 withholding, in each case pursuant to McDermott’s tax equalization program. The amount of United Kingdom taxes paid was converted from GBP to USD on a monthly basis using the average exchange rate for the month in which such amounts was paid.

(7)

The amounts reported for Mr. Cummins with respect to 2013 compensation have been revised for consistency with disclosures of the 2014 amounts under the “Salary,” “Perquisite Allowance” and “Tax Payments” columns above. The revised amounts reflect alternative disclosure of withholding and tax payments made pursuant to McDermott’s tax equalization program, for expatriate employees. In 2013, the amounts withheld from Mr. Cummins pursuant to McDermott’s tax equalization program exceeded the amount of taxes paid by McDermott on Mr. Cummins’ behalf. Seesee “Compensation Discussion and Analysis — 20142017 Other Compensation Elements — Expatriate Benefits” for a discussion of that program.Benefits.”


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Table of Contents

56EXECUTIVE COMPENSATION TABLES

GRANTS OF PLAN-BASED AWARDSGrants 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 NEOs during the year ended December 31, 2014.2017.

 

 
     

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
 Exercise
or Base
Price of
Option
Awards
 

Grant Date
Fair

Value of
Stock and
Option
Awards
(4)

 

Name /

Award Type

 Grant
Date
  Committee
Action
Date
  Threshold  Target  Maximum  Threshold
(#)
  

Target

(#)

  Maximum
(#)
     

Mr. Dickson

            

EICP

  03/05/14    03/05/14   $425,000   $850,000   $1,700,000    —      —      —      —      —      —      —    

PShares

  03/06/14    03/05/14    —      —      —      102,041    204,081    306,122    —      —      —     $1,599,995  

RSUs

  03/06/14    03/05/14    —      —      —      —      —      —      306,120    —      —     $2,399,981  

Mr. Spence

            

EICP

  08/25/14    08/21/14   $58,301   $116,603   $233,205    —      —      —      —      —      —      —    

PShares

  08/25/14    08/21/14    —      —      —      27,027    54,054    81,081    —      —      —     $400,000  

RSUs

  08/25/14    08/21/14    —      —      —      —      —      —      81,081    —      —     $599,999  

RSUs(5)

  08/25/14    08/21/14    —      —      —      —      —      —      175,675    —      —     $1,299,995  

Mr. Elders

            

EICP

  03/05/14    03/05/14   $180,250   $360,500   $721,000    —      —      —      —      —      —      —    

PShares

  03/06/14    03/05/14    —      —      —      25,510    51,020    76,530    —      —      —     $399,997  

RSUs

  03/06/14    03/05/14    —      —      —      —      —      —      76,530    —      —     $599,995  

Mr. Cummins

            

EICP

  03/05/14    03/05/14   $157,500   $315,000   $630,000    —      —      —      —      —      —      —    

PShares

  03/06/14    03/05/14    —      —      —      25,510    51,020    76,530    —      —      —     $399,997  

RSUs

  03/06/14    03/05/14    —      —      —      —      —      —      76,530    —      —     $599,995  

Mr. Duncan

            

EICP

  03/05/14    03/05/14   $140,120   $280,240   $560,479    —      —      —      —      —      —      —    

PShares

  03/06/14    03/05/14    —      —      —      25,510    51,020    76,530    —      —      —     $399,997  

RSUs

  03/06/14    03/05/14    —      —      —      —      —      —      76,530    —      —     $599,995  

Ms. Hinrichs

            

EICP

  03/05/14    03/05/14   $167,213   $334,425   $668,850    —      —      —      —      —      —      —    

PShares

  03/06/14    03/05/14    —      —      —      25,510    51,020    76,530    —      —      —     $399,997  

RSUs

  03/06/14    03/05/14    —      —      —      —      —      —      76,530    —      —     $599,995  

 

 

Name/
Award Type
 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)
 Grant Date
Fair Value
of Stock

and Option
Awards
($)(4)
Threshold
($)
 Target
($)
 Maximum
($)
 Threshold
(#)
 Target
(#)
 Maximum
(#)
 
Mr. Dickson
EICP02/28/1702/28/17488,125976,2501,952,500
PUnits02/28/1702/28/17163,043326,086652,1722,399,993
RSUs02/28/1702/28/17326,0852,399,986
Mr. Spence
EICP02/28/1702/28/17187,969375,938751,87680
PUnits02/28/1702/28/1750,951101,902203,804749,999
RSUs02/28/1702/28/17101,901749,991
Mr. Austin
EICP02/28/1702/28/17103,125206,250412,500
PUnits02/28/1702/28/1713,58627,17354,346199,993
RSUs02/28/1702/28/1727,171199,979
Mr. McLaughlin
EICP02/28/1702/28/17110,625221,250442,500
PUnits02/28/1702/28/1713,58627,17354,346199,993
RSUs02/28/1702/28/1727,171199,979
Mr. Munro
EICP02/28/1702/28/17103,125206,250412,500
PUnits02/28/1702/28/1713,58627,17354,346199,993
RSUs02/28/1702/28/1727,171199,979
Ms. Hinrichs
EICP02/28/1702/28/17170,428340,856681,712
PUnits02/28/1702/28/1733,96767,934135,868499,994
RSUs02/28/1702/28/1767,932499,979

(1)

This column reflectsThese columns reflect the threshold, target and maximum payout opportunities under the Executive Incentive Compensation Plan, or EICP. On February 28, 2017, our Compensation Committee established target EICP awards expressed as a percentage of the NEO’s 2017 annual base salary earned, as follows: Mr. Dickson – 110%, Mr. Spence – 75%, Mr. Austin – 60%, Mr. McLaughlin – 60%, Mr. Munro – 60%, and Ms. Hinrichs – 70%. The target amounts shown for Messrs. Dickson, Spence, Austin, McLaughlin and Munro and Ms. Hinrichs were computed by multiplying their annual base earned during 2017 by their target award percentage. For all of the NEOs, the threshold amounts are equal to 50% of the respective target amounts and the maximum amounts are equal to 200% of the respective target amounts. See “Compensation Discussion and Analysis – What We Pay and Why: Elements of Total Direct Compensation – Annual Incentive” and “Compensation Discussion and Analysis – 2017 NEO Compensation” for a detailed description of the EICP and discussions regarding the determinations made with respect to the 2017 EICP awards. Actual payouts under the EICP in respect of 2017 are included above in the Summary Compensation Table under the column “Non-Equity Incentive Plan Compensation.”

On March 5, 2014, our Compensation Committee established target EICP awards expressed as a percentage of the NEO’s 2014 annual base salary earned, as follows: Mr. Dickson — 100%, Mr. Elders — 70%, Mr. Cummins — 70%, Mr. Duncan — 70% and Ms. Hinrichs — 70%. On August 21, 2014, our Compensation Committee established the target EICP award for Mr. Spence, expressed as a percentage of Mr. Spence’s 2014 annual base salary earned, of 70%. The target amounts shown for Messrs. Dickson, Elders and Cummins and Ms. Hinrichs were computed by multiplying their annual base salaries by their target award percentage. The target amount shown for Mr. Spence was computed according to the following formula: Target % * (2014 base salary * 128/365), to reflect his partial year base salary earned after joining McDermott on August 25, 2014. The target amount shown for Mr. Duncan was computed according to the following formula: Target % * [(2013 base salary * 90/365) + (2014 base salary * 275/365)], to reflect his increase in annual base salary effective April 1, 2014. For all of the NEOs, the threshold amounts are equal to 50% of the respective target amounts and the maximum amounts are equal to 200% of the respective target amounts. See “Compensation Discussion and Analysis — What We Pay and Why: Elements of Total Direct Compensation — Annual Incentive” and “Compensation Discussion and Analysis — 2014 NEO Compensation” for a detailed description of the EICP and discussions regarding the determinations made with respect to the 2014 EICP awards.

(2)

This column reflectsThese columns reflect the target, threshold and maximum payout opportunities of 2017 grants of performance sharesunits under the applicable LTI plan.2016 LTIP. Each grant represents the right to receive the value of one share of McDermott common stock for each vested performance share.unit, paid in shares of McDermott common stock, cash equal to the fair market value of the shares otherwise deliverable, or any combination thereof, in the sole discretion of the Compensation Committee. The amount of performance sharesunits that vest, if any, will be based on McDermott’s aggregate consolidated operating income forrelative ROAIC improvement as compared to a competitor peer group over a three-year measurement


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Table of Contents

EXECUTIVE COMPENSATION TABLES57

period (January 1, 2014 —2017 – December 31, 2016)2019). If the threshold performance goal is achieved, a number of performance sharesunits between 50% and 150%200% of the target award may be earned, depending on the three-year aggregate operating income achieved.relative ROAIC performance. See “Compensation Discussion and Analysis – What We Pay and Why: Elements of Total Direct Compensation – Long-Term Incentives” and “2017 NEO Compensation” for a detailed description of the performance units awarded in 2017.

(3)

This column reflects grants of restricted stock units under the applicable LTI plan.2016 LTIP. The restricted stock units are generally scheduled to vest in one-third increments on the first, second and third anniversaries of the date of grant. Each restricted stock unit represents the right to receive one share of McDermott common stock, cash equal to the fair market value of the share otherwise deliverable, or any combination thereof, in the sole discretion of the Compensation Committee.

(4)

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 and performance shares.as reported on the NYSE. For more information regarding the compensation expense related to 20142017 awards, and a discussion of valuation assumptions utilized in performance share and option pricing, see Note 816 to our consolidated financial statementsthe Consolidated Financial Statement included in our annual report on Form 10-K for the year ended December 31, 2014.2017.

(5)

This grant of restricted stock units represents a one-time award of restricted stock units made to Mr. Spence to compensate him for the forfeiture of incentives from his prior employer. The restricted stock units are generally scheduled to vest in one-third increments on the first, second and third anniversaries of the date of grant. Each restricted stock unit represents the right to receive one share of McDermott common stock, cash equal to the fair market value of the share otherwise deliverable, or any combination thereof, in the sole discretion of the Compensation Committee.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-ENDOutstanding 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 NEOs which were outstanding as of December 31, 2014.2017.

 

 

 
     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

  

Market
Value of

Shares or
Units of
Stock That
Have Not
Vested(2)

  Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested(3)
  

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of

Unearned

Shares,
Units or

Other Rights

That Have

Not Vested(2)

 

Mr. Dickson

            

RSA(4)

  10/31/13          325,318   $946,675    —      —    

RSUs(5)

  03/06/14          306,120   $890,809    —      —    

PShares

  03/06/14          —      —      102,041   $296,938  

Mr. Spence

            

RSUs(5)

  08/25/14          81,081   $235,946    —      —    

RSUs(6)

  08/25/14          175,675   $511,214    —      —    

PShares

  08/25/14          —      —      27,027   $78,649  

Mr. Elders

            

NQSO

  05/13/10    60,292    —      —     $13.37    05/13/17       

NQSO

  03/04/11    24,531    —      —     $25.64    03/04/18       

NQSO

  03/05/12    32,374    —      —     $14.44    03/05/19       

NQSO

  03/05/13    18,900    —      —     $10.50    03/05/20       

RSUs(5)

  03/05/12          7,546   $21,959    —      —    

RSUs(7)

  03/05/13          12,685   $36,913    —      —    

RSUs(5)

  03/06/14          49,423   $143,821    —      —    

Mr. Cummins

            

NQSO

  05/12/05    11,629    —      —     $3.47    05/12/15       

NQSO

  03/05/09    10,658    —      —     $5.64    03/05/16       

NQSO

  03/04/10    14,781    —      —     $13.09    03/04/17       

NQSO

  03/04/11    8,586    —      —     $25.64    03/04/18       

NQSO

  03/05/12    11,990    5,995    —     $14.44    03/05/19       

NQSO

  03/05/13    17,182    34,364    —     $10.50    03/05/20       

RSU(5)

  03/05/12          2,885   $8,395    —      —    

RSU(7)

  03/05/13          17,856   $51,961    —      —    

RSU(8)

  03/05/13          47,619   $138,571    —      —    

RSU(5)

  03/06/14          76,530   $222,702    —      —    

PShares

  03/04/11          —      —      2,472   $7,194  

PShares

  03/05/12          —      —      5,423   $15,779  

PShares

  03/05/13          —      —      15,817   $46,027  

PShares

  03/06/14          —      —      25,510   $74,234  

Mr. Duncan

            

NQSO

  05/13/13    6,157    12,314    —     $9.23    05/13/20       

RSU(7)

  05/13/13          6,093   $17,731    —      —    

RSU(5)

  05/13/13          50,558   $147,124    —      —    

RSU(9)

  08/08/13          43,604   $126,888    —      —    

RSU(5)

  03/06/14          76,530   $222,702    —      —    

PShares

  05/13/13          —      —      6,076   $17,681  

PShares

  03/06/14          —      —      25,510   $74,234  

Ms. Hinrichs

            

NQSO

  03/05/09    27,203    —      —     $5.64    03/05/16       

NQSO

  03/04/10    45,313    —      —     $13.09    03/04/17       

NQSO

  03/04/11    22,080    —      —     $25.64    03/04/18       

NQSO

  03/05/12    23,980    11,990    —     $14.44    03/05/19       

NQSO

  03/05/13    18,900    37,800    —     $10.50    03/05/20       

RSU(5)

  03/05/12          5,771   $16,794    —      —    

RSU(7)

  03/05/13          19,641   $57,155    —      —    

RSU(8)

  03/05/13          47,619   $138,571    —      —    

RSU(5)

  03/06/14          76,530   $222,702    —      —    

PShares

  03/04/11          —      —      6,359   $18,503  

PShares

  03/05/12          —      —      10,845   $31,559  

PShares

  03/05/13          —      —      17,398   $50,629  

PShares

  03/06/14          —      —      25,510   $74,234  

 

 

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
($)
  Option
Expiration
Date
  Number
of Shares
or Units
of Stock
That
Have Not
Vested
  Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($)(2)
  Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(3)
  Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(2)
Mr. Dickson
RSUs(4)03/05/15247,279 1,627,096
RSUs(4)02/26/16395,646 2,603,351
RSUs(4)02/28/17326,085 2,145,639
PUnits03/05/15370,919 2,440,650
PUnits02/26/16296,735 1,952,520
PUnits02/28/17163,043 1,072,823
Mr. Spence
RSUs(4)03/05/1559,347390,503
RSUs(4)02/26/16138,476911,172
RSUs(4)02/28/17101,901670,509
PUnits03/05/1589,020585,755
PUnits02/26/16103,857683,382
PUnits02/28/1750,951335,258
Mr. Austin
RSUs(4)03/05/1524,727162,704
RSUs(5)03/05/1512,36381,349
RSUs(4)02/26/1639,564260,331
RSUs(4)02/28/1727,171178,785
PUnits02/26/1629,673195,252
PUnits02/28/1713,58689,399

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58EXECUTIVE COMPENSATION TABLES

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
($)
  Option
Expiration
Date
  Number
of Shares
or Units
of Stock
That
Have Not
Vested
  Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($)(2)
  Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(3)
  Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(2)
Mr. McLaughlin
NQSO03/05/123,23714.4403/05/19
NQSO03/05/137,00810.5003/05/20
RSUs(4)03/05/1513,84791,113
RSUs(4)02/26/1639,564260,331
RSUs(4)02/28/1727,171178,785
PUnits03/05/158,90258,575
PUnits02/26/1629,673195,252
PUnits02/28/1713,58689,399
Mr. Munro
RSUs(5)03/06/149,56662,944
RSUs(4)03/05/1519,782130,166
RSUs(4)02/26/1639,564260,331
RSUs(4)02/28/1727,171178,785
PUnits03/05/1529,673195,252
PUnits02/26/1629,673195,252
PUnits02/28/1713,58689,399
Ms. Hinrichs
NQSO03/04/1122,08025.6403/04/18
NQSO03/05/1235,97014.4403/05/19
NQSO03/05/1356,70010.5003/05/20
RSUs(4)03/05/1547,532312,761
RSUs(4)02/26/1695,064625,521
RSUs(4)02/28/1765,292429,621
PUnits03/05/1574,183488,127
PUnits02/26/1674,183488,127
PUnits02/28/1733,967223,503
(1)

The awards in this column represent grants of stock options, which generally becomebecame exercisable in accordance withone-third increments on each of the following vesting schedule: 1/3 per year on first, second and third anniversaries of the grant date.

(2)

Market values in these columns are based on the closing price of our common stock as reported on the New York Stock ExchangeNYSE as of December 31, 201429, 2017 ($2.91)6.58).

(3)

The awards in this column represent grants of performance shares which, for the awards made in 2011, 2012 and 2013, generally may vest on the third, fourth and/or fifth anniversaries of the grant date, and for the awards made in 2014,performance units, which generally may vest on the third anniversary of the grant date, based on the attainment of stated performance levels. The number and value of the 2015, 2016 and 2017 performance sharesunits listed with a grant date in 2011 isare based on achieving threshold performance as of the December 31, 2014nearest year-end measurement date. The number and value of performance shares reported with adate under the applicable grant date in 2012 is based on achieving threshold performance as of the December 31, 2014 measurement date. The number and value of performance shares reported with a grant date in 2013 is based on achieving threshold performance as of the December 31, 2015 measurement date. The number and value of performance shares reported with a grant date in 2014 is based on achieving threshold performance as of the December 31, 2016 measurement date.agreement.


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(4)

The award to Mr. Dickson represents a grant of restricted stock, the outstanding portion of which generally vests as follows: 108,439 shares on June 15, 2015, 108,440 shares on June 15, 2016 and 108,439 shares on June 15, 2017.

EXECUTIVE COMPENSATION TABLES
59


(5)(4)

These awards represent grants of restricted stock units, which generally vest 1/3 per yearin one-third increments on the first, second and third anniversarieseach of grant date.

(6)

This award represents a one-time award of restricted stock units made to Mr. Spence to compensate him for the forfeiture of incentives from his prior employer. The restricted stock units generally vest 1/3 per year on the first, second and third anniversaries of the grant date.

(7)(5)

These awards represent grantsone-time awards of restricted stock units whichmade to Messrs. Austin and Munro to compensate them for the forfeiture of incentives from their prior employer. The restricted stock units awarded to Mr. Austin generally vest 1/4 per yearin one-third increments on each of the first, second and third anniversaries of the grant date. The restricted stock units awarded to Mr. Munro generally vest in one-fourth increments on each of the first, second, third and fourth anniversaries of the grant date.

(8)

These awards represent grants of retention restricted stock units, which generally vest 100% on the second anniversary of the date of grant.

(9)

This award represents a grant of retention restricted stock units, which generally vests 100% on the third anniversary of the date of grant.

OPTION EXERCISES AND STOCK VESTEDOption Exercises and Stock Vested

The following Option Exercises and Stock Vested table provides information about the value realized by our NEOs and Ms. Hinrichs on exercises of option awards and vesting of stock awards during the year ended December 31, 2014.2017.

 

 Option AwardsStock Awards(1)
  

 

Name

Shares

Acquired

on Exercise(#)

Value Realized

on Exercise

Shares

Acquired

on Vesting(#)

Value Realized

on Vesting

 

Mr. Dickson

0N/A212,164$1,690,947.08

Mr. Spence

0N/A0N/A

Mr. Elders

0N/A19,837$ 146,043.69

Mr. Cummins

0N/A9,974$ 73,587.97

Mr. Duncan

0N/A27,310$ 196,358.90

Ms. Hinrichs

0N/A15,656$ 115,618.38

 

Option AwardsStock Awards(1)
Name  Shares
Acquired
on Exercise
(#)
  Value
Realized
on Exercise
  Shares
Acquired
on Vesting
(#)
  Value
Realized
on Vesting
($)
Mr. Dickson0N/A961,7036,637,542
Mr. Spence0N/A295,2521,980,951
Mr. Austin0N/A56,872398,896
Mr. McLaughlin0N/A43,834311,609
Mr. Munro0N/A78,041545,846
Ms. Hinrichs0N/A218,3421,522,298
(1)

The number of shares acquired on vesting reflected in this table represents the aggregate number of shares that vested during 20142017 in connection with awards of restricted stock, restricted stock units (“RSUs”) and for Mr. Dickson, in connection with an award of restricted stock.performance shares (“PShares”). The value realized on vesting was calculated based on the fair market value of the underlying shares on the vesting date. The final installment of the RSUs awarded in 2014, which vested on March 6, 2017, were settled entirely in cash, as determined in the sole discretion of the Compensation Committee. The PShares awarded in 2014, which vested on March 6, 2017, were settled one-half in shares and one-half in cash, as determined in the sole discretion of the Compensation Committee. As a result, no shares of stock were actually acquired upon the vesting of: 102,040 RSUs and 153,062 PShares for Mr. Dickson; 8,503 RSUs for Mr. McLaughlin; 13,605 RSUs and 7,653 PShares for Mr. Munro; 85,586 RSUs and 40,540 PShares for Mr. Spence; and 25,510 RSUs and 38,265 PShares for Ms. Hinrichs. Mr. Austin was not awarded any RSUs or PShares in 2014 as he was not employed by the Company at that time. The following table sets forth the numberamount of shares withheld by McDermottattributable to satisfy the minimum statutory withholding tax due upon vesting of such restricted stock unitsor RSUS and restricted stock:PShares, for each NEO:


Performance SharesRestricted
Stock Units/
Restricted Stock
Name  Shares
Acquired
on Exercise
(#)
  Value
Realized
on Exercise
  Shares
 Acquired
on Vesting
(#)
  Value
Realized
on Vesting
($)
Mr. Dickson306,1222,099,997655,5814,537,545
Mr. Spence81,081556,216214,1711,424,736
Mr. Austin0N/A56,872398,896
Mr. McLaughlin0N/A43,834311,609
Mr. Munro15,306104,99962,735440,847
Ms. Hinrichs87,375598,308130,967923,990

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60EXECUTIVE COMPENSATION TABLES

The following table sets forth the number of shares withheld by McDermott to satisfy withholding taxes upon vesting of the restricted stock, RSUs and PShares noted in the table above:

NameShares Withheld by
McDermott on
Vesting of Stock Awards
(#)

Mr. Dickson
449,479

Mr. Dickson

Spence
71,050170,321

Mr. Spence

Austin
N/A19,904

Mr. Elders

McLaughlin
4,93315,232

Mr. Cummins

Munro
3,48931,902

Mr. Duncan

Ms. Hinrichs
10,199

Ms. Hinrichs

4,452

103,352

PENSION BENEFITSPension Benefits

The following Pension Benefits table shows the present value of accumulated benefits payable to eachMs. Hinrichs under the U.S. Retirement Plan and the U.S. Excess Plan. None of ourthe NEOs underare participants in the U.S. Retirement, the U.S. Excess Plan or any other defined benefit pension plansplan that we sponsor. All benefits under the defined benefit pension plans that we sponsor are frozen.

 

NamePlan NameNumber
of Years
Credited
Service
Present Value of
Accumulated Benefit
Payments
During
2014

Mr. Dickson

N/AN/AN/AN/A

Mr. Spence

N/AN/AN/AN/A

Mr. Elders

N/AN/AN/AN/A

Mr. Cummins

TCN Plan(1)23.92$645,900$0

Mr. Duncan

N/AN/AN/AN/A

Ms. Hinrichs

U.S. Retirement Plan(2)11.167$474,366$0
U.S. Excess Plan(2)11.167$198,579$0

 

Name  Plan Name  Number of
Years
Credited
Service
  Present Value of
Accumulated
Benefit
($)
  Payments
During
2017
($)
Mr. DicksonN/AN/AN/AN/A
Mr. SpenceN/AN/AN/AN/A
Mr. AustinN/AN/AN/AN/A
Mr. McLaughlinN/AN/AN/AN/A
Mr. MunroN/AN/AN/AN/A
Ms. HinrichsU.S. Retirement Plan(1)11.167558,9090
U.S. Excess Plan(1)11.167233,9700
(1)

The present value of accumulated benefits reflected above for the TCN Plan is based on a 3.8% discount rate and the SAPS “All lives” base mortality table with improvements in the near future in line with the CMI_2011 model with a long term rate of future mortality improvements for both men and women of 1%.

(2)

The present value of accumulated benefits reflected above for the U.S. Retirement Plan and the U.S. Excess Plan is based on a 4.0%3.60% discount rate and the RP2000RP2014 mortality table for annuitants projected with generational mortality improvement scale.scale MP2017.


U.S. RETIREMENT PLAN

U.S. Retirement Plan. We refer to our qualified defined benefit pension plan as the U.S. Retirement Plan. Ms. Hinrichs is the only NEO who participatesparticipated in the U.S. Retirement Plan, which plan has been frozen since 2006 and under which she is accruingaccrued no additional benefits.benefits after such time. The U.S. Retirement Plan is funded by a trust, and includes provisions related to eligibility, participation and benefit formulas for applicable employees.

Under the U.S. Retirement Plan, normal retirement is the later of (1) age 65 or (2) the fifth anniversary of the date an employee becomes a participant. 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 the Retirement Plan depend on the employee’s date of hire and age. For employees hired on or after April 1, 1998 (including Ms. Hinrichs), an employee is eligible for early retirement afterupon the latter of completing at least 15 years of creditedcontinuous service and attaining the age of 55. 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. Ms. Hinrichs iswas eligible for early retirement under the U.S. Retirement Plan.

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EXECUTIVE COMPENSATION TABLES61

Ms. Hinrichs’ benefits under the U.S. Retirement Plan are calculated as follows: 1.2% of final 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 Social Security limit times credited service up to 35 years. Final average monthly compensation excludes bonuses and commissions.

U.S. EXCESS PLAN

U.S. Excess Plan.We refer to our nonqualified pension plan as the U.S. Excess Plan. Ms. Hinrichs is the only NEO who participatesalso participated in the U.S. Excess Plan, which plan has been frozen since 2006 and under which she is accruingaccrued no additional benefits.benefits after such time. To the extent benefits payable under the U.S. Retirement Plan are limited by Section 415(b) or 401(a)(17) of the U.S. Internal Revenue Code, pension benefits will be paid under the terms of the U.S. Excess Plan. Because

benefits entitlement under the U.S. Excess Plan and the U.S. Retirement Plan are linked, benefits under the U.S. Excess Plan have been frozen since 2006, when benefit accruals under the U.S. Retirement Plan were frozen.

TCN Pension Plan. We refer to our defined benefit pension plan for certain non-U.S. employees as the TCN Pension Plan. Mr. Cummins is the only NEO who participates in the TCN Pension Plan, which is now frozen. Mr. Cummins no longer accrues additional benefits under the plan. The TCN Pension Plan is funded by a trust, and includes provisions related to eligibility, participation and benefit formulas for employees who were employed by certain of our non-U.S. subsidiaries.

Under the TCN Pension Plan, normal retirement age is 65. The normal form of payment is a single-life annuity or a 66% joint and survivor annuity, depending on the employee’s marital status when the payments are scheduled to begin. Early retirement eligibility and benefits under the TCN Pension Plan are generally available for employees who have completed at least 10 years of service and attained the age of 55. Early retirement benefits are based on the same formula as normal retirement, but the pension benefit is generally reduced 0.5% for each month that benefits commence before age 60.

Normal retirement benefits under the TCN Pension Plan are calculated as follows: Number of years of credit service times 1/100th of the average of the highest three successive annual base salaries during the last 10 years of credited service preceding December 31, 2011, the normal retirement date, date of death or severance from service date, whichever occurs first.

For more information on our retirement plans, see “Compensation Discussion and Analysis - 2017 Other Compensation Elements - Retirement and Excess Plans.”

NONQUALIFIED DEFERRED COMPENSATIONNonqualified Deferred Compensation

The following Nonqualified Deferred Compensation table summarizes our NEOs’ compensation under the McDermott International, Inc. Director and Executive Deferred Compensation Plan (the “Deferred Compensation Plan”).Plan. The compensation shown in this table is entirely attributable to the Deferred Compensation Plan.

The 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 Compensation 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.contributions by us. 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 of service by McDermott without cause or termination within 24 months followingthe occurrence of a change in control. Mr. Spence was not a participant in the Deferred Compensation Plan in 2014.

 

Name  Executive
Contributions
in 2014(1)
  Company
Contributions
in 2014(2)
  Aggregate
Earnings
in 2014(3)
  

Aggregate
Withdrawals/

Distributions

  Aggregate
Balance at
12/31/14(4)
  

Percentage
Vested at

12/31/14(5)

Mr. Dickson

  $0  $42,500  $1,358  $0  $43,858  0%

Mr. Spence

  —    —    —    —    —    —  

Mr. Elders

  $0  $35,932  $867  $0  $166,330  100%

Mr. Cummins

  $0  $31,488  $10,445  $0  $96,789  60%

Mr. Duncan

  $0  $16,250  $990  $0  $17,240  0%

Ms. Hinrichs

  $0  $38,682  $0  $0  $233,351  100%

 

Name  Executive
Contributions
in 2017
($)(1)
  Company
Contributions
in 2017
($)(2)
  Aggregate
Earnings
in 2017
($)(3)
  Aggregate
Withdrawals/
Distributions
($)
  Aggregate
Balance at
12/31/17
($)(4)
  Percentage
Vested at
12/31/17
($)
Mr. Dickson0114,76751,9760337,67560%
Mr. Spence052,01922,4310129,59940%
Mr. Austin022,4553,875026,3310%
Mr. McLaughlin026,3324,757049,57120%
Mr. Munro027,7634,038031,8010%
Ms. Hinrichs091,99452,2870435,177100%
(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. With the exception of Messrs. Dickson and Duncan, for 2014, ourOur contributions on behalf of NEOs who were participants equaled 5% of their respective Compensation (as defined in the Deferred Compensation Plan) received in 2013. Messrs. Dickson and Duncan each received a contribution from us in an amount equal to 5% of his respective prior-year base salary earned. In addition, Messrs. Dickson and Duncan each received a discretionary contribution from us equal in value to 5% of the respective 2013 base salary he would have earned from the period January 1, 2013 through his respective hire dates.2016. All of our 20142017 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 20142017 on each NEO’sindicated participant’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 amount of the earnings shown is reported as compensation in the Summary Compensation Table.


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62EXECUTIVE COMPENSATION TABLES

(4)

The amounts reported in this column consist of contributions made by McDermott and notional accrued gains or losses as of December 31, 2014.2017. 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: we made contributions to Mr. Elders receivedDickson’s account of $70,100 in 2016, $42,500 in 2015 and $42,500 in 2014; we made contributions from McDermottto Mr. Spence’s account of $24,687$27,283 in 2013, $43,9702016 and $23,750 in 20122015; and $39,950we made contributions to Ms. Hinrichs’ account of $32,248 in 2011; Mr. Cummins received a contribution from McDermott of $18,7502016, $23,888 in 2013;2015, and Ms. Hinrichs received contributions from McDermott of $22,437$38,682 in 2013, $37,662 in 2012 and $43,511 in 2011.

(5)

Under the terms of his separation agreement, Mr. Elders was 100% vested in his Deferred Compensation Plan balance at December 31, 2014.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROLPotential Payments Upon Termination or Change in Control

The following tables show potential payments to certain of our NEOs 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 NEOs, assuming a December 31, 20142017 termination date and, where applicable, using the closing price of our common stock of $2.91$6.58 as of December 31, 201429, 2017 (as reported on the NYSE). These tables do not reflect amounts that would be payable to the NEOs pursuant to benefits or awards that are already vested.

The amounts reported in the tables below tables for stock options, restricted stock, restricted stock units and performance shares or performance units 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 $6.58 (the closing price of our common stock on December 29, 2017, as reported on the NYSE); and

for restricted stock, restricted stock units and performance shares or performance units: multiplying the number of accelerated shares or units by $6.58 (the closing price of our common stock on December 29, 2017, as reported on the NYSE).

for stock options: multiplying the number of accelerated options by the difference between the exercise price and $2.91 (the closing price of our common stock on December 31, 2014, as reported on the NYSE); and

for restricted stock, restricted stock units and performance shares: multiplying the number of accelerated shares or units by $2.91 (the closing price of our common stock on December 31, 2014, as reported on the NYSE).

Mr. EldersMs. Hinrichs resigned from hisher position as Senior Vice President, General Counsel and Chief Financial Officer inCorporate Secretary effective August 2014.13, 2017 and retired from McDermott effective December 31, 2017. In connection with hisMs. Hinrichs’ resignation, we entered into a separation agreement with Mr. EldersMs. Hinrichs providing for various compensation-related benefits in exchange for, among other things, hisher agreement to comply with several restrictive covenants. UnderSee page 46 of this proxy statement for information on compensation received by Ms. Hinrichs under that separation agreement, Mr. Elders received: (1) a lump-sum cash severance payment in the amount of $640,000; (2) each then outstanding restricted stock unit award granted to him pursuant to the 2009 LTIP which would, absent his resignation from employment, have remained outstanding and continued to vest through March 15, 2016 would, subject to certain conditions, continue to vest and be settled on the first to occur of (a) the date such award would otherwise be settled in accordance with the terms of the LTIP and the applicable grant agreement, as if his employment had continued, and (b) March 15, 2015; (3) payment of an amount to fund three months of continuing health insurance coverage under the Consolidated Omnibus Reconciliation Act; and (4) reimbursement of certain expenses. All other outstanding unvested equity and performance-based awards previously granted to Mr. Elders were forfeited at the time of his resignation. Vested stock options held by Mr. Elders continue to be exercisable for the remainder of their respective terms. Mr. Elders’ benefits under our Director and Executive Deferred Compensation Plan were fully vested as of the date of his resignation, and those benefits are to be paid in accordance with the terms of that plan.agreement.

Estimated Value of Benefits to Be Received Upon Termination Due to Death or Disability

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 listed NEOs, assuming their death or disability as of December 31, 2014.2017.

 

  Mr. DicksonMr. SpenceMr. CumminsMr. DuncanMs. Hinrichs

Severance Payments

—  —  —  —  —  

EICP

—  —  —  —  —  

Deferred Compensation Plan(1)

$ 43,858—  $38,716$17,240$ 0

Stock Options(2)

(unvested and accelerated)

—  —  $ 0$ 0$ 0

Restricted Stock Awards(3)

$946,675—  —  —  —  

Restricted Stock Units(4)

(unvested and accelerated)

$890,809$747,160$421,630$514,444$435,223

Performance Shares(5) (unvested)

$593,876$157,297$331,807$201,247$399,723
                

Total

$2,475,218$904,457$792,153$732,931$834,946

 

  Dickson
($)
  Spence
($)
  Austin
($)
  McLaughlin
($)
  Munro
($)
Severance Payments
EICP
Deferred Compensation Plan(1)135,07077,75926,33139,65731,801

Stock Options(2)
(unvested and accelerated)

Restricted Stock Units(3)
(unvested and accelerated)

6,376,0861,972,184683,169530,230632,226

Performance Units(4)
(unvested)

10,931,9863,208,790569,302686,452959,805
Total17,443,1425,258,7331,278,8021,256,3381,623,832
(1)

The amounts reported represent 40% of Mr. Dickson’s, 60% of Mr. Spence’s, 80% of Mr. McLaughlin’s and 100% of Messrs. Dickson’sAustin’s and Duncan’s, and 40% of Mr. Cummins’, respectiveMunro’s DCP balance as of December 31, 20142017 that would become vested on death or disability. Mr. Spence was not a participant in the DCP as of December 31, 2014. Because Ms. Hinrichs is 100% vested in her DCP balance, no additional amount would become vested on her death or disability.


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EXECUTIVE COMPENSATION TABLES63

(2)

Under the terms of the outstanding stock option awards held by each of the listed NEOs as of December 31, 2014,2017, all unvested option awards would become vested and exercisable on death or disability. Due to the exercise price of theAll outstanding stock options outstanding and the closing pricewere fully vested as of our common stock on December 31, 2014, the aggregate value of stock options that would become vested and exercisable on death or disability for each applicable NEO would be $0.2017.

(3)

Under the terms of the restricted stock award agreement between McDermott and Mr. Dickson, all unvested restricted stock would become vested upon Mr. Dickson’s death or disability.

(4)

Under the terms of the outstanding restricted stock unit awards held by each of the listed NEOs as of December 31, 2014,2017, all unvested restricted stock unit awards would become vested and exercisable on his or her death or disability.

(5)(4)

Under the terms of the outstanding 20112015, 2016 and 20122017 performance shareunit awards held by each of the listed NEOs as of December 31, 2014,2017, 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. Under the terms of the outstanding 2013 and 2014 performance share awards held by each of the listed NEOs as of December 31, 2014, 100% of the initial performance sharesunits granted would vest on the third anniversary of the grant date on his or her death or disability. The number of performance sharesunits that would vest is the number of performance sharesunits that would have vested based on actual performance had the NEO remained employed with McDermott until the third anniversary of the grant date. Accordingly, each applicable listed NEO may vest in a number of performance sharesunits ranging from 0% - 200% of the initial performance sharesunits granted, depending on McDermott’s performance during the applicable measurement periods.

The amounts reported assume that a total of 100% of the initial performance units granted for the 2015, 2016 and 2017 awards will vest during the applicable measurement periods, all valued at the closing price of McDermott stock as reported on the NYSE on December 29, 2017. The actual value of performance units granted for the 2015, 2016 and 2017 awards that may vest could be $0 for each NEO and up to $21,863,971 for Mr. Dickson, $6,417,579 for Mr. Spence, $1,138,603 for Mr. Austin, $1,372,904 for Mr. McLaughlin and $1,919,610 for Mr. Munro, in each case, as applicable, representing a total of 200% of the initial performance units granted for the 2015, 2016 and 2017 awards. Additionally, the value of McDermott common stock could be greater or less than the amount used to value the performance shares or performance units for this table.

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, 2014, although the actual value of such performance shares that may vest could be $0 for each NEO and up to $890,814 for Mr. Dickson, $235,946 for Mr. Spence, $589,380 for Mr. Cummins, $328,260 for Mr. Duncan and $725,213 for Ms. Hinrichs, in each case, as applicable, representing a total of 200% of the initial performance shares granted for the 2011, 2012 and 2013 awards, and a total of 150% of the initial performance shares granted for the 2014 awards. Additionally, the value of McDermott common 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


ESTIMATED VALUE OF BENEFITS TO BE RECEIVED UPON CHANGE IN CONTROL AND TERMINATION

We have change-in-controlchange in control agreements with various officers, including each of our NEOs. Generally, under these agreements, if a NEO is terminated within one year following a change in control either: (1) by our company for any reason other than cause or death or disability; or (2) by the NEO for good reason, McDermott is required to pay the NEO a severance payment based on the NEO’s salary and a severance payment based on the NEO’s target EICP percentage. In addition to these payments, the NEO 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 McDermott of consideration to another entity or its 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 our 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 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 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 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 our 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 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.


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64EXECUTIVE COMPENSATION TABLES

The change in control.

The change-in-controlcontrol 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 completion of the proposed business combination transaction with CB&I is expected to constitute a “change in control” for purposes of the change in control agreements described above. However, no payment to an NEO will be triggered under any change in control agreement with an NEO unless that NEO’s employment with us terminated under any of the circumstances described above within one year of the completion of that transaction.

The following table shows the estimated value of payments and other benefits due the listed NEOs, assuming a change in control and termination as of December 31, 2014.2017.

 

  Mr. DicksonMr. SpenceMr. CumminsMr. DuncanMs. Hinrichs

Salary-Based Severance Payment(1)

$4,250,000$1,183,206$1,530,000$1,445,000$1,624,350

EICP-Based Severance Payment(2)

$ 850,000$ 332,500$ 315,000$ 297,500$ 334,425

Deferred Compensation Plan(3)

$ 43,858—  $ 38,716$ 17,240$ 0

Stock Options(4)
(unvested and accelerated)

—  —  $ 0$ 0$ 0

Restricted Stock Awards(4)
(unvested and accelerated)

$ 946,675—  —  —  —  

Restricted Stock Units(4)
(unvested and accelerated)

$ 890,809$ 747,160$ 421,630$ 514,444$ 435,223

Performance Shares(4)
(unvested and accelerated)

$ 593,876$ 157,297$ 331,807$ 201,247$ 399,723

 

Total

$7,575,218$2,420,163$2,637,153$2,475,431$2,793,721

 

  Dickson
($)
  Spence
($)
  Austin
($)
  McLaughlin
($)
  Munro
($)
Salary-Based Severance Payment(1)4,690,6251,771,875556,2501,192,500556,250
EICP-Based Severance Payment(2)990,000382,500210,000225,000210,000
Deferred Compensation Plan(3)135,07077,75926,33139,65731,801
Stock Options(4)(unvested and accelerated) —
Restricted Stock Units(4)(unvested and accelerated)6,376,0861,972,184683,169530,230632,226
Performance Shares or Units(4)(unvested and accelerated)10,931,9863,208,790569,302686,452959,805
Total23,123,7677,413,1082,045,0522,673,8392,390,082
(1)

The salary-based severance payment made to each listed NEO, with the exception of Mr. Dickson, 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. Dickson in connection with a change in control would be a cash payment equal to 250% 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 Messrs. Spence and McLaughlin in connection with a change in control would be a cash payment equal to 200% 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 Messrs. Austin and Munro in connection with a change in control would be a cash payment equal to 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, 2017, the salary-based severance payment under a change in control would have been calculated based on the following base salary and target EICP awards. See “Grants of Plan-Based Awards” above for more information on the calculation of target EICP awards.

For a hypothetical termination as of December 31, 2014, the salary-based severance payment under a change in control would have been calculated based on the following base salary and target EICP awards. The amount reported for Mr. Spence reflects his partial year base salary earned after joining McDermott on August 25, 2014. See “Grants of Plan-Based Awards” above for more information on the calculation of target EICP awards.

 

NEOAnnual Base SalaryTarget EICP Award

Mr. Dickson

$850,000$850,000

Mr. Spence

$475,000$116,603

Mr. Cummins

$450,000$315,000

Mr. Duncan

$425,000$297,500

Ms. Hinrichs

$477,750$334,425

 


     NEO  Annual
Base Salary
($)
  Target EICP
Award
($)
 Mr. Dickson900,000     976,250
 Mr. Spence510,000375,938
 Mr. Austin350,000206,250
 Mr. McLaughlin375,000221,250
 Mr. Munro350,000206,250
(2)

Each listed 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 award for the year prior 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, 2017 termination, because the 2016 EICP awards had already been paid.


2018 PROXY STATEMENT


Table 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, 2014 termination, because the 2013 EICP awards had already been paid.

The NEO would be entitled to a prorated EICP payment based upon the NEO’s target EICP percentage for the year in which the termination occurs and the number of days in which the NEO was employed with us during that year. Based on a hypothetical December 31, 2014 termination, each NEO would have been entitled to an EICP payment equal to 100% of his or her 2014 target EICP percentage times annual base salary, calculated based on the following base salary and target EICP percentage:

 

NEO

Annual Base SalaryTarget EICP Percentage

Mr. Dickson

$850,000100%

Mr. Spence

$475,00070%

Mr. Cummins

$450,00070%

Mr. Duncan

$425,00070%

Ms. Hinrichs

$477,75070%

 

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EXECUTIVE COMPENSATION TABLES65

The NEO would be entitled to a prorated EICP payment based upon the NEO’s target EICP percentage for the year in which thetermination occurs and the number of days in which the NEO was employed with us during that year. Based on a hypotheticalDecember 31, 2017 termination, each NEO would have been entitled to an EICP payment equal to 100% of his or her 2017 targetEICP percentage times annual base salary, calculated based on the following base salary and target EICP percentage:


 NEOAnnual
Base Salary
($)
  Target EICP
Percentage
($)
     Mr. Dickson900,000110%
 Mr. Spence510,00075%
 Mr. Austin350,00060%
 Mr. McLaughlin375,00060%
 Mr. Munro350,00060%
(3)

The amounts reported represent 40% of Mr. Dickson’s, 60% of Mr. Spence’s, 80% of Mr. McLaughlin’s and 100% of Messrs. Dickson’sAustin’s and Duncan’s and 40% of Mr. Cummins’ respective Deferred Compensation PlanMunro’s DCP balance as of December 31, 20142017 that would become vested in connection withon a qualifying termination of employmentwithin one year following a change in control. Mr. Spence was not a participantcontrol (as defined in the change in control agreements) pursuant to the executive’s change in control agreements. Under the Deferred Compensation Plan, as of December 31, 2014. 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 followingvesting will also occur upon a change in control. Under the Deferred Compensation Plan,control, and for purposes of this 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 combined 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 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; or

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 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.

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 combined 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 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; or

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 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)

Under the terms of the stock option, restricted stock and2015 restricted stock unit awards outstanding, all unvested stock options would become vested and exercisable and 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. Due toUnder the exercise priceterms of the 2016 and 2017 restricted stock optionsunit awards outstanding, for our NEOs and the closing price of our commonall unvested restricted stock on the NYSE on December 31, 2014, the aggregate value of stock options thatunits would become vested and exercisable on a change in control, regardless of whether there is a subsequent termination of employment, would be $0.only if the awards are not assumed in the transaction. Under the terms of the 2015 performance shareunit awards outstanding, the greater of (1) 100% of the initial performance shares or performance units granted, or (2) the vested percentage of initial

performance shares or performance units 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 the 2009 LTIP, a “change in control” generally occurs under the same circumstances described above with respect to our Deferred Compensation Plan. Under the 2014 LTIP, a “change in control” generally occurs under the same circumstances described in the first three bullets in note (3) above with respect to our Deferred Compensation Plan, as well as on the occurrenceterms of the below circumstances:2016 and 2017 performance unit awards outstanding, the greater of (1) target level, or (2) the actual performance level measured through the date the change in control becomes effective as determined in accordance with


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66EXECUTIVE COMPENSATION TABLES

McDermott’s stockholders approvethe grant agreement would become vested on a planchange in control, regardless of complete liquidationwhether there is a subsequent termination of McDermott;

employment, only if the consummationawards are not assumed in the transaction. If the 2016 and 2017 performance unit awards are assumed in a change in control, such awards would only vest on a subsequent termination of employment by the employer without cause or by the executive for good reason. Under the 2014 LTIP, a sale or disposition by McDermott of all or substantially all of McDermott’s assets other than“change in control” generally occurs under the same circumstances described in the first three bullets in note (3) above with respect to an entity that is under common control with McDermott or to an entity for which at least fifty percent (50%)our Deferred Compensation Plan, as well as on the occurrence of the combined voting power of its voting securities outstanding immediately after such sale or disposition are owned or controlled by the stockholders of McDermott immediately prior to such sale or disposition; or

below circumstances:

McDermott’s stockholders approve a plan of complete liquidation of McDermott;

the consummation of a sale or disposition by McDermott of all or substantially all of McDermott’s assets other than to an entity that is under common control with McDermott or to an entity for which at least fifty percent (50%) of the combined voting power of its voting securities outstanding immediately after such sale or disposition are owned or controlled by the stockholders of McDermott immediately prior to such sale or disposition; or

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 relating to such transaction constituted the Board, cease for any reason (excluding death, disability or voluntary resignation) to constitute a majority of the Board; or (2) the individual, who at the first execution and delivery of definitive agreements relating to the transaction, served as Chief Executive Officer does not, for any reason (excluding death, disability or voluntary resignation), serve as the Chief Executive Officer 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 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 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.

Under the 2016 LTIP, a “change in control” generally occurs under the same circumstances described in the first three bullets in note (3) above with respect to our Deferred Compensation Plan, and under the same circumstances described in the first two bullets above with respect to our 2014 LTIP, as well as on the occurrence of the below circumstance:

within one year following the consummation of a merger or consolidation transaction involving the Company (whether as a constituent corporation, the acquiror, the direct or indirect parent entity of the acquiror, the entity being acquired, or the direct or indirect parent entity of the entity being acquired), as a result of which the voting securities of the Company outstanding immediately prior thereto continue to represent more than fifty percent (50%) but less than fifty-five percent (55%) of the combined voting power of the voting securities of the Company or the surviving entity outstanding immediately after such merger or consolidation (a “Merger of Equals”): (i) individuals who, at the time of the execution and delivery of the definitive agreement pursuant to which such transaction has been consummated by the parties thereto (a “Definitive Transaction Agreement”) (or, if there are multiple such agreements relating to such Merger of Equals, the first time of execution and delivery by the parties to any such agreement) (the “Execution Time”), constituted the Board cease, for any reason (excluding death, disability or voluntary resignation but including any such voluntary resignation effected in accordance with any Definitive Transaction Agreement), to constitute a majority of the Board; or (ii) the individual who, at the Execution Time, served as the Chief Executive Officer of the Company does not, for any reason (excluding as a result of death, disability or voluntary termination but including any such voluntary termination effected in accordance with any Definitive Transaction Agreement), serve as the Chief Executive Officer of the Company or, if the Company does not continue as a registrant with a class of equity securities registered pursuant to Section 12(b) of the Exchange Act, as the Chief Executive Officer 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 Exchange Act and (B) the surviving entity in such Merger of Equals or a direct or indirect parent entity of the surviving entity or the Company following the consummation of such Merger of Equals.

The amounts reported in the chart above represent a total of 100% of the initial performance units granted for the 2015, 2016 and 2017 awards.

2018 PROXY STATEMENT


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67

AUDITOR AND AUDIT COMMITTEE MATTERS

ITEM 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR YEAR ENDING DECEMBER 31, 2018

Our Board of Directors has ratified the decision of the Audit Committee to appoint Ernst & Young LLP (“EY”) to serve as the independent registered public accounting firm to audit our financial statements for the year ending December 31, 2018. EY was appointed following a competitive request for proposal process, replacing Deloitte & Touche LLP (“D&T”) as our principal outside auditor. 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 or 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 EY 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.

Our Board of Directors recommends that stockholders vote “FOR” the ratification of the decision of our Audit Committee to appoint Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2018. 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 Board;outstanding shares of common stock present in person or (2) the individual, whorepresented by proxy and entitled to vote and actually voting on this proposal at the first execution and delivery of definitive agreements relating to the transaction, served as Chief Executive Officer doesAnnual Meeting. Because abstentions are not for any reason (excluding death, disability or voluntary resignation), serve as the Chief Executive Officer 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 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 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.

ADVISORY VOTE TO APPROVE NEO COMPENSATION

(ITEM 2)

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

The Compensation Committee has overall responsibility for our compensation plans, policies and programsactual votes with respect to the 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 basedthis proposal, they have no effect on our belief that our ability to attract, develop, 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.

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

Reasonable Compensation Programs — Using the elements of total direct compensation, the Compensation Committee seeks to provide compensation opportunities for employees targeted at or near the median compensation of comparable positions in our market. As a result, we believe the total direct compensation of executive officer employees provides a reasonable and appropriate mix of cash and equity, annual and longer-term incentives and performance metrics.

Emphasis on Long-Term Incentive Compensation Over Annual Incentive Compensation — Long-term incentive compensation typically makes up a larger percentage of an executive officer’s total direct compensation than annual incentive compensation. Incentive compensation helps drive performance and align the interests of our employees with those of stockholders. In addition, tying a significant portion of an 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 our company’s performance.

Clawback Policy — The Compensation Committee has adopted a policy that allows McDermott to recover, under certain circumstances, compensation paid to executive officers.

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; or (2) 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 our company.

Annual Incentive Compensation Subject to Linear and Capped Payouts — The Compensation Committee establishes financial performance goals which are generally 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% of target.

Use of Multiple Performance Metrics — Utilizing diversified performance measures helps prevent compensation opportunities from being overly weighted toward the performance result of a single measure. In 2014, McDermott utilized operating income as the performance metric for our long-term incentive plan, and operating income, free cash flow, order intake and order intake operating margin as the performance metrics for our annual incentive plan. These metrics are further diversified from metrics used in prior years, which we believe further reduces risks related to incentive compensation.

Stock Ownership Guidelines — Our executive officers and directors are subject to stock ownership guidelines, which also help promote longer-term perspectives and align the interests of our executive officers and directors with those of our stockholders. All directors and executive officers currently meet or exceed their ownership requirement or are within the five-year period allowed to achieve compliance.

Reflecting these compensation objectives, compensation arrangements in 2014 provided for the continuing use of three elements of target total direct compensation:

annual base salary;

annual incentive, with performance metrics under our EICP designed to align with near-term operational priorities, composed entirely of performance-based compensation; and

long-term incentive, with emphasis on restricted stock units to provide stability and support the retention of key employees during the organizational and leadership transition.

Realizable Value of Performance-Based Awards.

In accordance with our Compensation Committee’s philosophy and program, performance based awards resulted in:

Financial performance under the EICP that (as per the EICP) would have resulted in bonus pool funding of 1.015x. This amount was, following the recommendation of executive management (with consideration of our non-attainment of the threshold level for the order intake component of the financial performance goals), reduced by over 50% by the Compensation Committee, through the exercise of its discretion, to funding of 0.5x.

NEO performance shares granted in 2011, 2012, 2013 and 2014 having no realizable value as of December 31, 2014.

For the reasons discussed in the “Compensation Discussion and Analysis” above, the Board of Directors unanimously recommends that stockholders vote FOR the following resolution:

“RESOLVED, that the compensation paid to the NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and accompanying narrative discussion in McDermott’s proxy statement relating to its 2015 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.on this proposal.

Our Board of Directors recommends that stockholders vote “FOR” the ratification of appointment of Ernst & Young LLP

AUDIT COMMITTEE REPORTAudit 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.NYSE. 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 on Form 10-K for the fiscal year.

In making our recommendation that McDermott’s financial statements be included in its Annual Report on Form 10-K for the year ended December 31, 2014,2017, we have taken the following steps:

We reviewed, and discussed with McDermott’s management and Deloitte & Touche LLP (“D&T”), McDermott’s audited consolidated balance sheet at December 31, 2014,
We reviewed, and discussed with McDermott’s management and Deloitte & Touche LLP (“D&T”), McDermott’s independent registered public accounting firm for the year ended December 31, 2017, McDermott’s audited consolidated balance sheet at December 31, 2017, and consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for the year ended December 31, 2017.
We discussed with D&T those matters required to be discussed under the applicable standards of the Public Company Accounting Oversight Board, 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 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.

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Table of income, comprehensive income, cash flows and stockholders’ equity for the year ended December 31, 2014.Contents

We discussed with D&T, McDermott’s independent registered public accounting firm for the year ended December 31, 2014, those matters required to be discussed under the standards of the Public Company Accounting Oversight Board, 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 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 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 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.

68AUDITOR AND AUDIT COMMITTEE MATTERS

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 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.

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 on Form 10-K for the year ended December 31, 20142017 for filing with the Securities and Exchange Commission.

THE AUDIT COMMITTEE

William H. Schumann, III, ChairmanChair
Forbes I.J. Alexander
Philippe Barril
Marsha C. Williams

Stephen G. Hanks

David A. Trice

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR YEAR ENDING DECEMBER 31, 2015

(ITEM 3)

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, 2015. 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 D&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.

AUDIT FIRM FEES

For the years ended December 31, 20142017 and 2013,2016, the aggregate fees billed to McDermott paid D&T fees,by Deloitte & Touche, LLP, including expenses and taxes, totaling $4,456,426$4,424,962 and $3,564,326,$4,213,047, which can be categorized as follows:

   2017
($)
  2016
($)

Audit Fees
The Audit fees for the years ended December 31, 2017 and 2016 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.

3,256,4463,520,809

Audit-Related Fees
The Audit-Related fees for the years ended December 31, 2017 and 2016 were for assurance and related services, employee benefit plan audits and advisory services related to Sarbanes-Oxley Section 404 compliance.

149,21534,722

Tax Fees
The Tax fees for the years ended December 31, 2017 and 2016 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.

1,019,301657,516

All Other Fees
During the years ended December 31, 2017 and December 31, 2016, there were no other services.

00
Total4,424,9624,213,047

 

   2014 2013

Audit

  

The Audit fees for the years ended December 31, 2014 and 2013 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.

 $4,159,041 $3,482,866

Audit-Related

  

The Audit-Related fees for the years ended December 31, 2014 and 2013 were for assurance and related services, employee benefit plan audits and advisory services related to Sarbanes-Oxley Section 404 compliance.

 $143,800 $16,330

Tax

  

The Tax fees for the years ended December 31, 2014 and 2013 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.

 $153,585 $65,130

All Other

  

During the years ended December 31, 2014 and December 31, 2013, there were no other services.

 $0 $0

Total

 $4,456,426 $3,564,326

 

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.

2018 PROXY STATEMENT


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69

STOCK OWNERSHIP INFORMATION

Recommendation and Vote Required

Our BoardSecurity Ownership 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, 2015. 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.

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERSExecutive Officers

The following table sets forth the number of shares of our common stock beneficially owned as of March 12, 2015July 30, 2018 by each director or nominee as a director, and each NEO, Ms. Hinrichs and all of our directors and executive officers as a group, including shares that those persons have the right to acquire within 60 days on the exercise of stock options.options and the vesting of restricted stock units. The share amounts set forth in the following table reflect the three-to-one reverse stock split of our common stock effected on May 9, 2018.

 

Name  Shares that
may be
Acquired
on Stock
Option
Exercise(1)
  Shares held
in Thrift
Plan(2)
  

Total
Shares

Beneficially

Owned(3)

John F. Bookout, III

  6,105  —    281,273

Roger A. Brown

  37,794  —    115,642

Scott V. Cummins

  98,003  —    222,212

David Dickson

  —    —    470,725

Tony Duncan

  6,157  —    49,110

Perry L. Elders(4)

  136,097  —    187,318

Stephen G. Hanks

  —    —    57,787

Liane K. Hinrichs

  168,366  2,845  393,401

Gary P. Luquette

  —    —    25,728

William H. Schumann, III

  —    —    56,025

Mary Shafer-Malicki

  —    —    47,957

Stuart A. Spence

  —    —    —  

David A. Trice

  —    —    77,332
          

All directors and executive officers as a group (17 persons)

500,6332,8452,181,467

 

Name  Shares that
may be
Acquired on
Stock Option
Exercise(1)
  Shares that
may be
Acquired on
the Vesting of
RSUs(2)
  Shares held in
401(K) Plan(3)
  Total Shares
Beneficially
Owned(4)
Forbes I. J. Alexander11,345
Linh Austin34,644
Philippe Barril8,277
John F. Bookout, III122,897
David Dickson420,089
L. Richard Flury57,279
W. Craig Kissel35,315
Gary P. Luquette39,750
Brian McLaughlin24,714
James H. Miller17,503
Scott Munro35,270
William H. Schumann, III49,849
Mary Shafer-Malicki47,160
Stuart A. Spence116,961
Marsha C. Williams60,395
Liane K. Hinrichs(5)38,250946162,713
All directors and executive officers as a group (24 persons)73,8997,4311,2751,450,660
(1)

This column includes shares of common stock that the director or NEOexecutive officer has the right to acquire within 60 days on the exercise of stock options. As of March 12, 2015,July 30, 2018, the share price of our common stock ($3.18)18.08) did not exceed the strike price of any of the stock option awards in this column.

(2)

This column includes shares of common stock that the executive officer has the right to acquire within 60 days on the vesting of restricted stock units. This column does not take into account shares to be withheld for taxes on the vesting of the restricted stock units.

(3)

This column includes shares of common stock held in the NEO’sexecutive officer’s McDermott Thrift Plan account.account or CB&I Savings Plan account (if the executive officer was a former CB&I employee).

(3)(4)

Shares beneficially owned by each individual in all cases constituted less than one percent of the outstanding shares of common stock on March 12, 2015,July 30, 2018, as determined in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934. Shares beneficially owned by all directors and executive officers as a group constituted approximately 0.89%0.80% of the outstanding shares of common stock on March 12, 2015.July 30, 2018.

(4)(5)

The number of shares reported as beneficially owned by Mr. EldersMs. Hinrichs is as of hisher August 23, 201413, 2017 resignation date.from her position as Senior Vice President, General Counsel and Corporate Secretary and reflect the three-to-one reverse stock split of our common stock effected on May 9, 2018.


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70STOCK OWNERSHIP INFORMATION

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSSecurity Ownership of 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 as of July 30, 2018, which is our only class of voting stock outstanding:

Title of Class  Name and Address of Beneficial Owner  

Amount and

Nature of


Beneficial

Ownership

(1)
  

Percent of


Class(1)(2)

Common Stock

Common Stock

Fairpointe Capital LLC

One N. Franklin, Suite 3300

Chicago, IL 60606

23,779,754(2)9.97%

Common Stock

Artisan Partners Holdings LP

875BlackRock, Inc.
55 East Wisconsin Avenue, Suite 800

Milwaukee, WI 53202

17,825,110(3)7.47%

Common Stock

BlackRock, Inc.

40 East 52nd52nd Street


New York, NY 10022

10055
12,247,547(3)16,615,931(4)6.97%6.78%
Common Stock

Common Stock

The Vanguard Group


100 Vanguard Blvd.


Malvern, PA 19355

10,507,295(4)14,798,2865.82%
(5)(1)6.21%

Amounts have been adjusted to reflect the three-to-one reverse stock split of our common stock effected on May 9, 2018.

(1)(2)

Percent is based on outstanding shares of our common stock on March 12, 2015.July 30, 2018.

(2)(3)

As reported on the Schedule 13G/A filed with the SEC on January 23, 2018. The Schedule 13G/A reports beneficial ownership of 12,247,547 shares, sole voting power over 12,010,084 shares and sole dispositive power over 12,247,547 shares. The Schedule 13G/A further reports that various subsidiaries of BlackRock, Inc. beneficially own shares reported on by the filing and lists those subsidiaries. Given the Schedule 13G/A was filed with the SEC prior to the closing date for the combination, the amounts reported do not include any shares that the beneficial owner may have received pursuant to the combination or as a result of the beneficial owner’s ownership of shares of CB&I common stock prior to such closing.

(4)

As reported on the Schedule 13G/A filed with the SEC on February 4, 2015.8, 2018. The Schedule 13G/A reports beneficial ownership of 23,779,75410,507,295 shares, sole voting power over 23,062,988105,197 shares, shared voting power over 9,734 shares, sole dispositive power over 23,344,45410,400,688 shares and shared dispositive power over 435,300106,608 shares.

(3)

As reported on a Given the Schedule 13G/A was filed with the SEC on January 30, 2015. The Schedule 13G/A reportsprior to the closing date for the combination, the amounts reported do not include any shares that the beneficial owner may have received pursuant to the combination or as a result of the beneficial owner’s ownership of 17,825,110 shares of ourCB&I common stock shared voting power over 17,340,648 shares and shared dispositive power over 17,825,110 shares by Artisan Partners Limited Partnership (“APLP”). The Schedule 13G/A also reports that each of Artisan Investments GP LLC (“Artisan Investments”), Artisan Partners Holdings LP (“Artisan Holdings”) and Artisan Partners Asset Management Inc. (“APAM”) has shared voting power over 17,340,648 shares and shared dispositive power over 17,825,110 shares. The Schedule 13G/A also reports that Artisan Partners Funds, Inc. (“Artisan Funds”) has shared voting power and shared dispositive power over 13,103,302 shares. Artisan Funds is an Investment Company. APLP is an investment adviser. Artisan Holdings is the sole limited partner of APLP and the sole member of Artisan Investments; Artisan Investments is the general partner of APLP; and APAM is the general partner of Artisan Holdings.prior to such closing.

(4)

As reported on a Schedule 13G/A filed with the SEC on February 2, 2015. The Schedule 13G/A reports beneficial ownership of 16,615,931 shares, sole voting power over 15,998,582 shares and sole dispositive power over 16,615,931 shares.

(5)

As reported on a Schedule 13G/A filed with the SEC on February 11, 2015. The Schedule 13G/A reports beneficial ownership of 14,798,286 shares, sole voting power over 350,844 shares, sole dispositive power over 14,465,142 shares and shared dispositive power over 333,144 shares.

Certain Relationships and Related Transactions

Pursuant to our Code of Business Conduct, all employees (including our 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 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 a portion of the Trust assets. BlackRock is a subsidiary of BlackRock, Inc. and, collectively with certain other subsidiaries of BlackRock, Inc., owned approximately 7.0% of McDermott common stock on December 31, 2014 as reported on BlackRock, Inc.’s Schedule 13G/A filed with the SEC on February 2, 2015. The amount of Trust assets under management with BlackRock may vary from time to time. As of December 31, 2014, the value of the Trust assets under management with BlackRock was approximately $79.5 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 the 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 investment policy statement approved and adopted by the Investment Committee.

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.NYSE. Directors, executive officers and 10% or more holders are required by SEC regulations to furnish us with copies of all Section 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, 2014.2017.

2018 PROXY STATEMENT


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71

OTHER INFORMATION

Questions and Answers About the Annual Meeting of Stockholders and Voting

What is the purpose of these proxy materials?

As more fully described in the Notice, the Board of Directors of McDermott has made these materials available to you in connection with our 2018 Annual Meeting of Stockholders, which will take place on September 26, 2018 at 8:00 a.m., local time (the “Annual Meeting” or “Meeting”). We mailed the Notice to our stockholders beginning on August 10, 2018, and our proxy materials were posted on the Web site referenced in the Notice on that same date.

McDermott, on behalf of its Board of Directors, is soliciting your proxy to vote your shares at the 2018 Annual Meeting of Stockholders. We solicit proxies to give all stockholders of record an opportunity to vote on matters that will be presented at the Annual Meeting. In this proxy statement you will find information on these matters, which is provided to assist you in voting your shares.

Who will pay for the cost of this proxy solicitation?

We will bear all expenses incurred in connection with this proxy solicitation, which we expect to conduct primarily by mail. We have engaged Georgeson to assist in the solicitation for a fee that will not exceed $13,500, plus out-of-pocket expenses. In addition, our officers and regular employees may solicit your proxy by telephone, by facsimile transmission or in person, for which they will not be separately compensated. If your shares are held through a broker or other nominee (i.e., in “street name”) and you have requested printed versions of these materials, we have requested that your broker or nominee forward this proxy statement to you and obtain your voting instructions, for which we will reimburse them for reasonable out-of-pocket expenses.

Who is entitled to vote at the Annual Meeting?

Our Board of Directors selected July 30, 2018 as the record date for determining stockholders entitled to vote at the Annual Meeting. This means that if you owned McDermott common stock on the Record Date, you may vote your shares on the matters to be considered by our stockholders at the Annual Meeting.

There were 180,536,768 shares of our common stock outstanding on the Record Date. Each outstanding share of common stock entitles its holder to one vote on each matter to be acted on at the meeting.

Who may attend the Annual Meeting?

Attendance at the meeting is limited to stockholders and beneficial owners as of the record date or duly appointed proxies. No guests will be admitted, except for guests invited by McDermott. Registration will begin at 7:30 a.m., and the meeting will begin promptly at 8:00 a.m. If your shares are held in “street name” through a broker, bank, trustee or other nominee, you are a beneficial owner, and beneficial owners will need to show proof of beneficial ownership, such as a copy of a brokerage account statement, reflecting stock ownership as of the Record Date in order to be admitted to the meeting. If you are a proxy holder for a stockholder, you will need to bring a validly executed proxy naming you as the proxy holder, together with proof of record ownership of the stockholder naming you as proxy holder. Please note that you may be asked to present valid photo identification, such as a valid driver’s license or passport, when you check in for registration. No cameras, recording equipment or other electronic devices will be allowed to be brought into the meeting room by stockholders or beneficial owners.

What is the difference between holding shares as a stockholder of record and as a beneficial owner through a brokerage account or other arrangement with a holder of record?

If your shares are registered in your name with McDermott’s transfer agent and registrar, Computershare Trust Company, N.A., you are the “stockholder of record” of those shares. The Notice and the proxy materials have been provided or made available directly to you by McDermott.

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72OTHER INFORMATION

If your shares are held in a stock brokerage account or by a bank or other holder of record, you are considered the “beneficial owner” but not the holder of record of those shares, and the Notice and the proxy materials have been forwarded to you by your broker, bank or other holder of record. As the beneficial owner, you have the right to direct your broker, bank or other holder of record how to vote your shares by using the voting instruction card or by following their instructions for voting by telephone or on the Internet.

How do I cast my vote?

Most stockholders can vote by proxy in three ways:

by Internet at www.proxyvote.com;

by telephone; or

by mail.

If you are a stockholder of record, you can vote your shares in person at the Annual Meeting or vote now by giving us your proxy via Internet, telephone or mail. You may give us your proxy by following the instructions included in the Notice or, if you received a printed version of these proxy materials, in the enclosed proxy card. If you want to vote by mail but have not received a printed version of these proxy materials, you may request a full packet of proxy materials by following the instructions in the Notice. If you vote using either the telephone or the Internet, you will save us mailing expenses.

By giving us your proxy, you will be directing us how to vote your shares at the meeting. Even if you plan on attending the meeting, we urge you to vote now by giving us your proxy. This will ensure that your vote is represented at the meeting. If you do attend the meeting, you can change your vote at that time, if you then desire to do so.

If you are the beneficial owner of shares, but not the holder of record, you should refer to the instructions provided by your broker or nominee for further information. The broker or nominee that holds your shares has the authority to vote them, absent your approval, only as to matters for which they have discretionary authority under the applicable NYSE rules. Neither the election of directors nor the advisory vote to approve named executive officer compensation are considered routine matters. That means that brokers may not vote your shares with respect to those matters if you have not given your broker specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker.

If you received a printed version of these proxy materials, you should have received a voting instruction form from your broker or nominee that holds your shares. For shares of which you are the beneficial owner but not the holder of record, follow the instructions contained in the Notice or voting instruction form to vote by Internet, telephone or mail. If you want to vote by mail but have not received a printed version of these proxy materials, you may request a full packet of proxy materials as instructed by the Notice. If you want to vote your shares in person at the Annual Meeting, you must obtain a valid proxy from your broker or nominee. You should contact your broker or nominee or refer to the instructions provided by your broker or nominee for further information. Additionally, the availability of telephone or Internet voting depends on the voting process used by the broker or nominee that holds your shares.

Why did I receive more than one Notice or proxy statement and proxy card or voting instruction form?

You may receive more than one Notice, proxy statement, proxy card or voting instruction form if your shares are held through more than one account (e.g., through different brokers or nominees). Each proxy card or voting instruction form only covers those shares of common stock held in the applicable account. If you hold shares in more than one account, you will have to provide voting instructions as to each of your accounts in order to vote all your shares.

What is “householding”?

SEC rules regarding the delivery of the Notice of Internet Availability of Proxy Materials, proxy statements and annual reports permit us, in specified circumstances, to deliver a single set of these materials to any address at which two or more stockholders reside. This method of delivery, often referred to as “householding,” will reduce the amount of duplicative information that stockholders receive and lower printing and mailing costs for us. Each stockholder will continue to receive a separate proxy card.

2018 PROXY STATEMENT


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OTHER INFORMATION73

We have delivered only one Notice of Internet Availability of Proxy Materials to eligible stockholders who are the beneficial owner of shares who share an address, unless contrary instructions were received from any such stockholder prior to the mailing date. We will deliver promptly, upon written or oral request, a separate copy of the Notice of Internet Availability of Proxy Materials to a stockholder at a shared address to which a single copy of such document was delivered. Any stockholder who would like to receive a separate copy of the Notice of Internet Availability of Proxy Materials should submit this request to McDermott’s Corporate Secretary (1) at the following address: McDermott International, Inc., 757 N. Eldridge Pkwy., Houston, Texas 77079, Attn: Corporate Secretary; or (2) by calling (281)810-5000. Beneficial owners sharing an address who receive multiple copies of the Notice of Internet Availability of Proxy Materials and who would like to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of such document be mailed to all stockholders at the shared address in the future.

What can I do if I change my mind after I vote?

If you are a stockholder of record, you may change your vote by written notice to our Corporate Secretary, by granting a new proxy before the Annual Meeting or by voting in person at the Annual Meeting. Unless you attend the meeting and vote your shares in person, you should change your vote before the meeting using the same method (by Internet, telephone or mail) that you first used to vote your shares. That way, the inspector of election for the meeting will be able to verify your latest vote.

If you are the beneficial owner, but not the holder of record, of shares, you should follow the instructions in the information provided by your broker or nominee to change your vote before the meeting. If you want to change your vote as to shares of which you are the beneficial owner by voting in person at the Annual Meeting, you must obtain a valid proxy from the broker or nominee that holds those shares for you.

What is a broker non-vote?

If you are a beneficial owner whose shares are held of record by a broker or other holder of record, you must instruct the broker or other holder of record how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” In these cases, the broker or other holder of record can include your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required under the rules of the NYSE.

For this Annual Meeting, if you are a beneficial owner whose shares are held by a broker or other holder of record, your broker or other holder of record has discretionary voting authority under NYSE rules to vote your shares on the ratification of the appointment of Ernst & Young LLP, even if it has not received voting instructions from you. However, such holder does not have discretionary authority to vote on the election of directors or the advisory vote to approve named executive officer compensation without instructions from you, in which case a broker non-vote will result and your shares will not be voted on those matters.

What is the quorum for the Annual Meeting?

The Annual Meeting will be held only if a quorum exists. The presence at the meeting, in person or by proxy, of holders of a majority of our outstanding shares of common stock as of the Record Date will constitute a quorum. If you attend the meeting or vote your shares by Internet, telephone or mail, your shares will be counted toward a quorum, even if you abstain from voting on a particular matter. Broker non-votes will be treated as present for the purpose of determining a quorum.

Which items will be voted on at the Annual Meeting?

At the Annual Meeting, we are asking you to vote on the following:

the election of Forbes I.J. Alexander, Philippe Barril, John F. Bookout, III, David Dickson, L. Richard Flury, W. Craig Kissel, Gary P. Luquette, James H. Miller, William H. Schumann, III, Mary L. Shafer-Malicki and Marsha C. Williams to our Board of Directors, each for a term extending until our 2019 Annual Meeting of Stockholders;

the advisory vote to approve named executive officer compensation; and

the ratification of our Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2018.


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74OTHER INFORMATION

We are not aware of any other matters that may be presented or acted on at the Annual Meeting. If you vote by signing and returning the enclosed proxy card or using the telephone or Internet voting procedures, the individuals named as proxies on the card may vote your shares, in their discretion, on any other matter requiring a stockholder vote that comes before the meeting.

What are the Board’s voting recommendations?

For the reasons set forth in more detail previously in this proxy statement, our Board recommends a vote:

FOR the election of each director nominee;

FOR the advisory vote to approve named executive officer compensation; and

FOR the ratification of our Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2018.

What are the voting requirements to elect the Directors and to approve each of the proposals discussed in this proxy statement?

Each proposal requires the affirmative vote of a majority of our outstanding shares present in person or represented by proxy at the meeting and entitled to vote and actually voting on the matter. Because votes withheld in the election of any director, abstentions and broker non-votes are not actual votes with respect to a proposal, they will have no effect on the outcome of the vote on any proposal.

Our Corporate Governance Guidelines provide that, in an uncontested election of directors, the Board expects any incumbent director nominee who does not receive “FOR” votes by a majority of shares present in person or by proxy and entitled to vote and either voting “FOR” or registering a decision to withhold a vote with respect to the election of such director to promptly tender his or her resignation to the Governance Committee, subject to acceptance by our Board. Any shares subject to broker non-votes shall not be considered in making any determination pursuant to the immediately preceding sentence. The Governance Committee will then make a recommendation to the Board with respect to the director nominee’s resignation and the Board will consider the recommendation and take appropriate action within 120 days from the date of the certification of the election results.

What happens if I do not specify a choice for a proposal when returning a proxy or do not cast my vote?

You should specify your choice for each proposal on your proxy card or voting instruction form. Shares represented by proxies will be voted in accordance with the instructions given by the stockholders.

If you are a stockholder of recordand your proxy card is signed and returned without voting instructions, it will be voted according to the recommendations of our Board. If you do not return your proxy card or cast your vote, no votes will be cast on your behalf on any of the items of business at the Annual Meeting.

If you are the beneficial owner, but not the holder of record, of sharesand fail to provide voting instructions, your broker or other holder of record is permitted to vote your shares on the ratification of EY as our independent registered public accounting firm. However, absent instructions from you, your broker or other holder of record may not vote on the election of directors or the advisory vote to approve named executive officer compensation, and no votes will be cast on your behalf for those matters.

Is my vote confidential?

All voted proxies and ballots will be handled in a manner intended to protect your voting privacy as a stockholder. Your vote will not be disclosed except:

to meet any legal requirements;

in limited circumstances such as a proxy contest in opposition to our Board of Directors;

to permit independent inspectors of election to tabulate and certify your vote; or

to respond to your written comments on your proxy card.


2018 PROXY STATEMENT


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OTHER INFORMATION75

Stockholders’ Proposals

Any stockholder who wishes to have a qualified proposal considered for inclusion in our proxy statement for our 20162019 Annual Meeting must send notice of the proposal to our Corporate Secretary at our principal executive office no later than November 28, 2015.within a reasonable time before we begin to print and mail our proxy material. 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 2016 Annual Meeting, but not for inclusion in our proxy materials, or who intends to submit nominees for election as directors or a proposal for consideration at the meetingour 2019 Annual Meeting, in each case not for inclusion in our proxy materials, must notify our Corporate Secretary. Under our By-Laws, such notice must (1) be received at our executive offices no earlier than November 10, 2015 orthe 180thday prior to the date of the 2019 Annual Meeting and not later than January 9, 2016,the close of business on the 120thday prior to the date of the 2019 Annual Meeting or the 10thday following the day on which we first publicly announce the date of the 2019 Annual Meeting, and (2) satisfy specified requirements. A copy of the pertinent By-Law provisions can be found on our Web site atwww.mcdermott.comat “About Us — Leadership & Corporate Governance“INVESTORS — Corporate Governance.”

By Order of the Board of Directors,

LOGO

LIANE K. HINRICHS

Secretary

Dated: March 27, 2015

LOGO


LOGOJohn M. Freeman

MCDERMOTT INTERNATIONAL, INC.

757 N. ELDRIDGE PKWY

HOUSTON, TX 77079

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., Eastern Time, on May 7, 2015 (May 5, 2015 for participants in McDermott’s Thrift Plan). Have your proxy card in hand when you access the Web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

VOTE BY PHONE - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M., Eastern Time, on May 7, 2015 (May 5, 2015 for participants in McDermott’s Thrift Plan). Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL

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:

M86589-P61681                         KEEP THIS PORTION FOR YOUR RECORDS

DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

Corporate Secretary

Dated: August 10, 2018

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MCDERMOTT INTERNATIONAL, INC.
757 N. ELDRIDGE PKWY
HOUSTON, TX 77079

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., Eastern Time, on September 24, 2018. Have your proxy card in hand when you access the Web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M., Eastern Time, on September 24, 2018. Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL
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 the future.





TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
E50402-P11991               KEEP THIS PORTION FOR YOUR RECORDS

DETACH AND RETURN THIS PORTION ONLY

For
All
THIS PROXY CARDISVALIDONLYWHENSIGNEDANDDATED.

Withhold All

For All  
Except  

MCDERMOTT INTERNATIONAL, INC.      
       
The Board of Directors recommends you vote FOR the following:      For
All
Withhold
All
For All
Except
       
1.    To elect eleven members to our Board of Directors, each for a term extending until our 2019 Annual Meeting of Stockholders.
 
Nominees
        
01)   Forbes I.J. Alexander    07)   Gary P. Luquette
02)Philippe Barril08)James H. Miller
03)John F. Bookout, III09)William H. Schumann, III
04)David Dickson10)Mary L. Shafer-Malicki
05)L. Richard Flury11)Marsha C. Williams
06)W. Craig Kissel
   To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.

The Board of Directors recommends you vote FOR the following:


 

1.

To elect eight members to our Board of Directors, each for a term of one year.

¨¨¨


             

Nominees:


           



01)  John F. Bookout, III

05)  Gary P. Luquette
02)  Roger A. Brown06)  William H. Schumann, III
03)  David Dickson07)  Mary L. Shafer-Malicki
04)  Stephen G. Hanks

08)  David A. Trice

The Board of Directors recommends you vote FOR the following proposals:

ForAgainstAbstain

2.

AdvisoryTo conduct an advisory vote to approve named executive officer compensation.

 

¨

 

¨

¨

3.

Ratification of the

3.To ratify our Audit Committee's appointment of DeloitteErnst & ToucheYoung LLP as our independent registered public accounting firm for the year ending December 31, 2015.

2018.

¨

¨

¨

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, the shares represented by this proxy will be voted FOR ALL for item 1 and FOR items 2 and 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 are authorized to vote in their discretion.

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

¨

Please indicate if you plan to attend this meeting.

¨¨

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 

Date        

Signature (Joint Owners)

Date




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LOGO         

McDermott International, Inc.

Annual Meeting

Friday, May 8, 2015Wednesday, September 26, 2018 at 10:8:00 a.m.

Claridge's
Brook Street
Mayfair
London W1K 4HR
United Kingdom

The Westin Houston Hotel

945 Gessner Road

Houston, Texas 77024

Dear Stockholder:

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

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

M86590-P61681E50403-P11991

McDERMOTT INTERNATIONAL, INC.
This proxy is solicited on behalf of the Board of Directors
Annual Meeting of Stockholders - Wednesday, September 26, 2018 at 8:00 a.m.

The undersigned hereby appoints David Dickson and John M. Freeman, and each of them individually as proxies, each with the power to appoint his 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 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 8:00 a.m. local time, on Wednesday, September 26, 2018 at Claridge's, Brook Street, Mayfair, London W1K 4HR, United Kingdom, and any adjournment or postponement thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER(S) SIGNATORY(IES). IF NO DIRECTION IS MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR ALL FOR ITEM 1 AND FOR ITEMS 2 AND 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 ARE AUTHORIZED TO VOTE IN THEIR DISCRETION.

THE STOCKHOLDER(S) SIGNATORY(IES) HERETO ACKNOWLEDGE(S) RECEIPT OF MCDERMOTT'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2017 AND ITS NOTICE OF 2018 ANNUAL MEETING AND RELATED PROXY STATEMENT.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE REPLY CARD ENVELOPE

McDERMOTT INTERNATIONAL, INC.

This proxy is solicited on behalf of the Board of Directors

Annual Meeting of Stockholders - Friday, May 8, 2015 at 10:00 a.m.

The undersigned hereby appoints David Dickson 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 proxy card, all of the shares of Common 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 10:00 a.m., local time, on Friday, May 8, 2015 at The Westin Houston Hotel, 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 THE NOMINEES FOR THE BOARD OF DIRECTORS LISTED ON THE REVERSE SIDE AND FOR EACH OF ITEMS 2 AND 3.

THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF MCDERMOTT’S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2014

AND ITS NOTICE OF 2015 ANNUAL MEETING AND RELATED PROXY STATEMENT.

ATTENTION PARTICIPANTS IN MCDERMOTT’S THRIFT PLAN:If these shares of McDermott Common Stock are held through the McDermott 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 5, 2015. Any shares of McDermott Common Stock held in the McDermott 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 McDermott Thrift Plan.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE REPLY CARD ENVELOPE

Address Changes/Comments:

  
 Address Changes/Comments:                                                     
  

(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

CONTINUED AND TO BE SIGNED ON REVERSE SIDE