UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

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Watsco, Inc.

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Watsco, Inc.

2665 South Bayshore Drive, Suite 901

Miami, Florida 33133

NOTICE OF THE 20152018 ANNUAL MEETING OF SHAREHOLDERS

By order of the Board of Directors,

BARRY S. LOGAN

Senior Vice President and Secretary

April 16, 201527, 2018

This is an important meeting, and all shareholders of record as of March 30, 2015April 6, 2018 are invited to attend the meeting and vote in person. We respectfully urge those shareholders who are unable to attend the meeting in person to execute and return the enclosed proxy card as promptly as possible in the enclosed return envelope. No postage is required if mailed in the United States. Any shareholder who executes a proxy card may nevertheless attend the meeting, revoke his or her proxy and vote his or her shares in person.

NOTICE: Brokers are not permitted to vote on any of the proposals containedProposals 1 or 2 in this Proxy Statement without instructions from the beneficial owner of shares entitled to vote at the meeting. Therefore, if you hold your shares through a broker, bank or other nominee and you do not vote your shares in one of the ways described in this Proxy Statement, then your shares will not be voted in respect of any proposalProposals 1 or 2 contained in this Proxy Statement.

TABLE OF CONTENTS

WATSCO, INC.

2665 South Bayshore Drive, Suite 901

Miami, Florida 33133

PROXY STATEMENT

The Company’s 20142017 Annual Report and this Proxy Statement are available at:

www.watsco.com

You are receiving this Proxy Statement because you owned shares of Watsco, Inc. Common stock or Class B common stock as of March 30, 2015,April 6, 2018, which entitles you to vote those shares at our 20152018 annual meeting of shareholders. Our Board of Directors which we refer(referred to as the Board,Board), is soliciting proxies from shareholders who wish to vote their shares of common stock at the meeting. By using a proxy, you can vote even if you do not attend the meeting. This Proxy Statement describes and provides information about the matters on which you are being asked to vote and provides information on those matters so that you can make an informed decision. Watsco, Inc. is referred to in this document as Watsco, we, us, our and the Company.

This Proxy Statement and the enclosed form of proxy are first being mailed to holders of our Common stock and our Class B common stockshareholders on or about April 16, 2015.27, 2018. Shareholders should review the information contained in this Proxy Statement together with our 20142017 Annual Report, which accompanies this Proxy Statement.

In this Proxy Statement, we refer to Watsco, Inc. asWatsco,we,us,our and theCompany.

Our Internet website and the information contained therein or linked thereto are not incorporated by reference or otherwise made a part of this Proxy Statement.

INFORMATION ABOUT OUR ANNUAL MEETING

When and where is the annual meeting?

WeThe annual meeting will hold the annual shareholder meetingbe held on Monday, May 11, 2015,June 4, 2018, at 9:00 a.m., Eastern Daylight Time at the Watsco, Inc. Corporate Office, 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133.University Club, 1 West 54^th Street, New York, New York 10019.

Who canmay attend the annual meeting?

Only shareholdersShareholders of record as of March 30, 2015April 6, 2018 (which we refer to as the record date), or their duly appointed proxies, and our invited guests are permitted to attend the annual meeting. To gain admittance, you must bring valid photo identification to the meeting, and we will verify your name against our shareholder list. If a broker or other nominee holds your shares and you plan to attend the meeting, you must bring (1) a brokerage statement evidencing your share ownership as of the record date, (2) a legal proxy from the broker to vote the shares that are held for your benefit and (3) valid photo identification.

What is the purpose of the annual meeting?

Our 20152018 annual meeting will be held for the following purposes:

b.

for the holders of Class B common stock to elect (i) Brian E. Keeley to serve as a director until our 2019 annual meeting of shareholders, or until his successor is duly elected and qualified and (ii) Aaron J. Nahmad and Albert H. Nahmad to serve as directors until our 20182021 annual meeting of shareholders, or until their respective successors are duly elected and qualified.

In addition, senior management will discuss the performance of the Company and respond to your questions.

Who canmay vote?

The Board has set March 30, 2015April 6, 2018 as the record date for the annual meeting. Holders of Watsco Common stock or Class B common stock at the close of business on the record date are entitled to vote their shares at the annual meeting, or any postponement(s)postponements or adjournment(s)adjournments of the annual meeting. As of the record date, there

There were 30,214,07732,054,630 shares of our Common stock outstanding (representing 36,536,727 shares issued less 6,322,650 shares held in the Company’s treasury) and 4,987,360 shares5,313,683 of our Class B common stock issued and outstanding (representing 5,035,623 shares issued less 48,263 shares held inas of the Company’s treasury),record date, all of which are entitled to be voted.voted at the annual meeting.

A list of shareholders will be available at our corporate office at 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133 during the ten days immediately preceding the annual meeting, and this list will be available at the annual meeting itself for examination by any shareholder entitled to attend the annual meeting.

What are the voting rights of Watsco shareholders?

Holders of our Common stock are entitled to one (1) vote per share, and holders of our Class B common stock are entitled to ten (10) votes per share on each matter that is submitted to shareholders for approval.

Election of Directors

Holders of our Common stock vote separately to elect 25% of our directors (rounded up to the next whole number), which is presently three (3) directors. Holders of our Class B common stock vote separately to elect 75% of our directors (rounded down to the next whole number), which is presently six (6) directors.

Other Matters

Holders of our Common stock and our Class B common stock vote on a combined basis on all other matters or as required by applicable law.

How do I vote?

Shareholders of RecordRecord.

You are a shareholder of record if you are registered as a shareholder with our transfer agent, American Stock Transfer & Trust Company, LLC. To vote by mail, simply mark, sign and date your proxy card and return it in the enclosed envelope. To vote in person, you must attend our annual meeting, bring valid photo identification, and deliver your completed proxy card in person.

Beneficial ShareholdersShareholders.

You are a beneficial shareholder if a brokerage firm, bank, trustee or other agent, referred to as a “nominee,” holds your shares. This is often called ownership in “street name” because your name does not appear on the list of our registered shareholders maintained withby our transfer agent. If you hold shares in street name, you will receive voting instructions from your brokerage firm, bank, trustee or other nominee. If you

are a beneficial

shareholder and would like to vote in person, then you must attend our annual meeting, bring valid photo identification, bring a brokerage statement validating your share ownership as of the record date, and obtain a legal proxy from your broker, bank or other nominee to vote the shares that are held for your benefit, attach it to your completed proxy card and deliver it in person.

How do I revoke my proxy and change my vote?

A shareholder of record may revoke a proxy by giving written notice of revocation to our Secretary at our corporate office before the meeting, by delivering a duly executed proxy bearing a later date or by voting in person at the annual meeting. If you are a beneficial shareholder, you may revoke your proxy and change your vote by following your nominee’s procedures for revoking or changing your proxy.

What are the voting recommendations of the Board?

The Board recommends that you vote:

What happens if I submit or return my proxy card without voting?

When you properly submit your proxy, the shares it represents will be voted at the annual meeting in accordance with your directions. If you properly submit your proxy with no direction,directions, the proxy will be voted:

What constitutes a quorum?

The presence at the meeting, in person or by proxy, of the holders of Common stock and Class B common stock representing a majority of the combined voting power of the outstanding shares of common stock as of the record date will constitute a quorum, permitting the conduct of business at the annual meeting. As of the record date, there were 30,214,077 shares of Common stock outstanding and 4,987,360 shares of Class B common stock outstanding, all of which are entitled to be voted at the annual meeting.

As of the record date, our directors and executive officers and entities affiliated with these persons owned (i) Common stock representing 0.8% of the outstanding shares of Common stock and (ii) Class B common stock representing 91.1%89.7% of the outstanding shares of Class B common stock, which together representing 57.0%represent 56.2% of the aggregated combined votesvoting power of Common stock and Class Ball shares of common stock entitled to be castvote at the annual meeting. Such persons and entities represent a majority of the combined voting power of the outstanding shares of common stock on the record datemeeting and thus constitute a quorum, and wequorum. We believe that such persons and entities will vote all of their shares of Common stock and Class B common stock in favor of all proposals set forth in thethis Proxy Statement.

If less than a majority of the combined voting power of the outstanding shares of Common stock and Class B common stock is represented at the annual meeting, a majority of the shares so represented may adjourn

the annual meeting to another date, time or place. Notice need not be given of the new date, time or place if announced at the annual meeting before an adjournment is taken, unless the Board, after adjournment, fixes a new record date for the annual meeting (in which case a notice of the adjourned meeting will be given to shareholders of record on such new record date, each of whom would be entitled to vote at the adjourned meeting).

How many votes are needed for the proposals to pass?

Election of Directors

IfUnder our Amended and RestatedBy-Laws, if a quorum is present, atto be elected as a director, a nominee must receive amajority of the annual meeting, the nominees receiving the greatest numbers of votes of Common stock and Class B common stock, voting as separate classes to the extent they are entitled to vote on a nominee, shall be elected as directors.cast in favor of such nominee’s election.

A properly executed proxy marked “WITHHOLD VOTE” with respect to the election of one or more directorsa director nominee will not be voted with respect tohave the director or directors indicated, but it will be counted as present ateffect of a vote AGAINST the annual meeting for purposeselection of determining whether there is a quorum.such nominee. Shareholders do not have the right to cumulate their votes for directors.

Approval of aNon-Binding Advisory Resolution Regarding the Compensation of our Named Executive Officers

If a quorum is present, approval requires that the number of votes cast at the annual meeting in favor of the resolution exceeds the number of votes cast opposing the resolution.

Ratification of KPMG as our independent auditor

Under our Amended and RestatedBy-Laws, if a quorum is present, ratification of the appointment of our independent registered public accounting firm requires that a majority of the votes cast at the annual meeting are cast “FOR” ratification.

What is the effect of abstentions?

Proxies received but marked “ABSTAIN” will be included in the calculation of the number of shares considered to be present at the meeting for purposes of determining a quorum, but abstentions will not have an effect on the outcome of any proposal. As noted above, however, a properly executed proxy marked “WITHHOLD VOTE” with respect to the election of a director nominee will have the effect of a vote AGAINST the election of such nominee.

What are “brokernon-votes” and what effect do they have on the proposals?

Brokernon-votes occur when a broker, bank, or other nominee holds shares in “street name” for a beneficial owner, and that nominee does not vote the shares because it (1)(i) has not received voting instructions from the beneficial owner and (2)(ii) lacks discretionary voting power to vote those shares with respect to a particular proposal.

BrokerA broker is entitled to vote shares held for a beneficial owner on “routine” matters without instructions from the beneficial owner of those shares. On the other hand, absent instructions from the beneficial owner of such shares,a broker is not entitled to vote shares held for a beneficial owner on “non-routine” matters, which include all of the proposals described in this Proxy Statement.non-votes

If you hold your shares in street name, it is critical that you cast your vote if you want it to count in the election of directors (Proposal 1) and in each other Proposal described in this Proxy Statement. If you hold your shares in street name, and you do not instruct your broker, bank, or other nominee how to vote, then no votes will be cast on your behalf.

If any “routine” matters are properly brought before the annual meeting, then brokers holding shares in street name may vote those shares in their discretion for any such routine matters.

Broker non-votes are counted for purposes of determining whether or not a quorum exists for the transaction of business, but will not be counted as votes cast “for” or “against” any proposal and will have no effect on the voting results for any proposal.

A broker is entitled to vote shares held for a beneficial owner on “routine” matters without instructions from the beneficial owner of those shares, which include the proposal to ratify KPMG as our independent public accounting firm for the 2018 fiscal year. On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on“non-routine” matters, which include Proposals 1 and 2 described in this Proxy Statement.

If you hold your shares in street name, it is critical that you provide your broker, bank, or other nominee with instructions on how to cast your vote if you want it to count in the election of directors (Proposal 1) and with respect to thenon-binding advisory resolution (Proposal 2) described in this Proxy Statement. If you hold your shares in street name, and you do not instruct your broker, bank, or other nominee how to vote, then it will not be voted for the election of directors or with respect to thenon-binding advisory resolutions.

If any other routine matters are properly brought before the annual meeting in addition to Proposal 3, then brokers holding shares in street name may vote those shares in their discretion for any such routine matters.

Who tabulates the votes?

Prior to the annual meeting, we will select one or more inspectors of election for the meeting. Such inspector(s) will determine the number of shares of Common stock and Class B common stock represented at the meeting, the existence of a quorum and the validity and effect of proxies, and shall receive, count and tabulate ballots and votes and determine the results thereof.

Who pays the cost of this proxy solicitation?

We pay the cost of soliciting your proxy, and we reimburse brokerage firms and others for forwarding proxy materials to you. In addition to solicitation by mail, we may also solicit proxies by letter, facsimile,e-mail, telephone or in person. Our directors, officers and employees may participate in the solicitation of proxies without additional consideration.

PROPOSAL NO. 1—ELECTION OF DIRECTORS, EXECUTIVE OFFICERS & CORPORATE GOVERNANCE

Directors & Executive Officers

Our Amended and Restated Articles of Incorporation and Amended and Restated BylawsBy-laws provide that our Board shall consist of no fewer than three nor more than nine members, and that it shall be divided, as nearly as possible into three equal divisions, each of which serves for a staggered three yearthree-year term.

The three We refer to directors whose terms expire at the 2015 annual meeting of shareholders are Cesar L. Alvarez, Aaron J. Nahmad and Albert H. Nahmad. Upon the recommendation of the Nominating & Strategy Committee, our Board has nominated Cesar L. Alvarez, Aaron J. Nahmad and Albert H. Nahmad for re-election at the 2015 annual meeting of shareholders, each of whom would serve for a three-year term expiring at the 2018 annual meeting of shareholders, and each has consented to serve if elected. Cesar L. Alvarez has been nominated as a director to be elected by the holders of Common stock, and Aaron J. Nahmad and Albert H. Nahmad have been nominated as directors to be elected by the holders of Class B common stock.

Holders of our Common stock have previouslyas Common Directors and we refer to directors elected David C. Darnell and Steven R. Fedrizzi to serve as directors for terms expiring at the 2016 and 2017 annual meetings of shareholders, respectively. Holdersby holders of our Class B common stock have previously elected Denise Dickins, Barry S. Logan, Paul F. Manleyas Class B Directors.

The names of our directors, executive officers and Bob L. Mossdirector nominees and their respective ages, positions (including designation as a Common Director or Class B Director), biographies and, in the case of directors, their qualifications to serve as directors, for terms expiring at the 2017, 2016, 2017 and 2016 annual meetings of shareholders, respectively.

We believe that each of our directors possesses the experience, skills and qualities to fully perform his or her duties as a director and contribute to our success. Our directors have been nominated because they possess the highest standards of personal integrity, interpersonal and communication skills, are highly accomplished in their fields, have an understanding of the interests and issues that are important to our shareholders and are able to dedicate sufficient time to fulfilling their obligations as directors. Our directors as a group complement each other and each of their respective experiences, skills and qualities. While our directors make up a diverse group in terms of age, gender, ethnic background and professional experience, they together comprise a cohesive body in terms of Board process and collaboration.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE DIRECTOR NOMINEES.

Biographies and Qualifications of Nominees and Other Directors

Each director’s principal occupation and other pertinent information about particular experience, qualifications, attributes and skills that led the Board to conclude that such person should serve as a director, appearset forth below.

Nominees

Albert H. Nahmad, 74, has served as our Chairman of the Board, President and Chief Executive Officer since December 1972. Mr. Nahmad is the Chair of the Nominating & Strategy Committee. He has more than 40 years of leadership experience as our President and Chief Executive Officer and has broad knowledge of our Company and long-standing experience with the HVAC/R industry.

Name		Age				Position
Cesar L. Alvarez			70			Class B Director andCo-Vice Chairman of the Board
Denise Dickins			56			Class B Director
Jason Epstein			44			Common Director
Barry S. Logan			55			Senior Vice President & Secretary
Ana M. Menendez			53			Chief Financial Officer & Treasurer
Bob L. Moss			70			Class B Director andCo-Vice Chairman of the Board
Director Nominees (1)
Brian E. Keeley			73			Class B Director
Aaron J. Nahmad			36			President and Class B Director
Albert H. Nahmad			77			Chairman & Chief Executive Officer and Class B Director
Steven Rubin			39			Common Director
George P. Sape			73			Common Director

Cesar L. Alvarez, 67, has rejoined the Board in 2017 after having previously served as the Co-Chairmana Watsco director from 1997 to 2015. Mr. Alvarez is Senior Chairman of the international law firm of Greenberg Traurig, P.A. (“Greenberg”) since February 2012. Mr. Alvarez. He previously served as Greenberg’s Executive Chairman beginning in 2012, and as Greenberg’s Chief Executive Officer from 1997 until his election as Executive Chairman in 2010 andChairman. During his 15 year tenure as its Executive Chairman from 2010 until his election as Co-Chairman.

Mr. Alvarez was elected to the Board in 1997 and is a member of the Nominating & Strategy Committee. The Board nominated Mr. Alvarez as a director because of his management experience as the current

Co-Chairman and as former Executive Chairman and Chief Executive Officer ofand Executive Chairman, he led the firm to become one of the nation’s largesttop ten law firms with professionals providing services in multiplethe United States by leading its growth from 260 lawyers to approximately 1,850 lawyers in more than 36 locations acrossin the countryUnited States, Europe, Asia and abroad as well asLatin America. Mr. Alvarez brings significant entrepreneurial expertise, management experience and knowledge from his many years of corporate governance experience, both counseling and serving on the boards of directors of other publicly traded companies.

Mr. Alvarez also He serves on the boards of directorsMednax, Inc. (chairman of Mednax, Inc.the board and member of the executive committee), Fairholme Funds, Inc., Intrexon Corporation (chair of the nominating and governance committee) and the St. Joe Company Sears Holdings Corporation and Intrexon Corporation.

Aaron J. Nahmad, 33, has served as our Vice President of Strategy and Innovation since July 2010 and as Director of Global Business Development since 2005. Mr. Nahmad holds a B.A. from the University of Pennsylvania and a M.B.A. from New York University’s Leonard N. Stern School of Business. Aaron J. Nahmad is the son of Albert H. Nahmad.

Mr. Nahmad has served as a member(chair of the governance and nominating committee). Mr. Alvarez serves as ourCo-Vice Chairman of the Board since 2011 and is a member of the Nominating & Strategy Committee. The Board nominated Mr. Nahmad as a director because of his experience as Vice President of Strategy and Innovation, the Company’s development and execution of new technologies and his accomplished educational background in business.

Other Directors

David C. DarnellDr., 62, has served as the Vice Chairman of Bank of America Corporation (“Bank of America”) since August 2014. Mr. Darnell previously served as the President of Bank of America’s Global Commercial Banking team from 2005 until his election as Co-Chief Operating Officer in 2011 and as its Co-Chief Operating Officer from 2011 until his election as Vice Chairman. Mr. Darnell joined Bank of America in 1979 and is now responsible for the Global Wealth and Investment Management division, which represents one of the largest firms in the world with $2.5 trillion in total client balances and nearly 17,000 wealth advisors.

Mr. Darnell Denise Dickins has served as a Board member of the Board since 2012. The Board concluded that Mr. Darnell should serve as2007. Since 2006, she has been employed by East Carolina University where she is a director because of his years of executive oversight and senior management experience in the banking industry.

Dr. Denise Dickins, 53, is an Associate Professor of Accounting and Auditing at East Carolina University where she has been employed since 2006.teaches courses in Auditing and Corporate Governance. From 2002 to 2006, while earning her Ph.D., she was an instructor of various accounting courses at Florida Atlantic University. Prior to that, she was with Arthur Andersen LLP where she served in differentvarying capacities from 1983 to 2002, including Partner in Charge of the South Florida Audit Division. Dr. Dickins is a certified public accountant and certified internal auditor.

Dr. Dickins was elected to the Board in 2007 and is the Co-Chairperson of the Audit Committee. The Board concluded that Dr. Dickins should serve as a director because of her accomplished professional and academic experience in accounting and auditing as well as her other public company board experience, including experience with matters addressed by audit committees.

Dr. Dickins serveshas served on the board of

directors of twothree other publicly-tradedpublicly traded companies including, in the last five years, Steiner Leisure Ltd., where she is (chair of the audit committee and a member of the governance and nominating committee and is the Chairperson of the audit committee,committee) until its sale in December 2015, and Great Lakes Dredge & Dock where she is the Chairperson(chair of the audit committee.committee) until resigning in October 2015. Dr. Dickins brings auditing, accounting, and corporate governance skills to the Board. She alsois the Lead Independent Director and serves as chair of the Audit Committee, Compensation Committee, and Nominating & Governance Committee.

Jason Epsteinhas served as a Board member since 2017. He is a private investor and business executive who currently is the principal owner and Executive Chairman of Daybreak Game Company (formerly Sony Online Entertainment Inc.). Prior to launching his own investment company, Mr. Epstein was the Managing Partner of Columbus Nova, a private equity firm which manages a variety of growth equity, private equity and fixed income assets, where heco-led the investment activities until 2017. Before joining Columbus Nova in 2001, Mr. Epstein founded eLink Communications, a provider of broadband, networking and application services, and served as its Chief Executive Officer. He alsoco-founded Chloe’s Soft Serve Fruit, which is sold in more than 10,000 stores nationwide. Mr. Epstein received a B.A. from Tufts University where he currently serves on theits Board of Overseers. Mr. Epstein has served as a board member of directors and the audit, compensation and nominating committees of TradeStation Group,Cyalume Technologies Holdings, Inc., a publicly-traded technology company, from 2008 until its sale in June 2011.

Steven R. Fedrizzi, 60, is the Chief Executive Officer2017. He also served as a board member of the U.S. Green Building Council (“USGBC”)CIFC Corp., a non-profit organization dedicated to sustainable building design and construction, and the Chief Executive Officer of the Green Building Certification Institute. Mr. Fedrizzi was one of the original co-founders of the USGBCpublicly-traded debt manager specializing in 1993 and was appointed President and Chief Executive OfficerU.S. corporate debt strategies, from 2010 until its sale in April 2004. Prior to 2004,

Mr. Fedrizzi had a distinguished 25 year career at United Technologies Corporation (“UTC”),2016 where he served as an in-house environmental consultantchair of its nominating & corporate governance committee. Mr. Epstein brings entrepreneurial skills, investment expertise, management experience, and in various marketing positions.

technology insights to the Board. Mr. Fedrizzi has served asEpstein is a member of the Board since 2010. The Board concluded that Mr. Fedrizzi should serve as a director because he is a recognized leader in the global sustainability movementCompensation Committee and an early promoter of green building methods. His skills and experience strengthen our ongoing commitment of providing consumers with energy efficient and environmentally responsible products.

Mr. Fedrizzi serves on the boards of directors of a number of non-profit organizations.Nominating & Governance Committee.

Barry S. Logan, 52, has served as our Senior Vice President since November 2003 and previously served as Secretary since 1997.a Watsco director from 2011 to 2018. Mr. Logan served as Vice President of Finance and Chief Financial Officer from 1997 to October 2003, as Treasurer from 1996 to 1998 and in other capacities beginning in 1992. Mr. Logan is a certified public accountant. Mr. Logan was Watsco’s fourth corporate employee and is an integral participant in the Company’s business development initiatives, financial and other strategic activities during his25-year career. He is also the principal contact with the institutional shareholder community and, as such, is the principal contact for engagement with our shareholders.

Mr. LoganAna M. Menendez has served as our Chief Financial Officer and Treasurer since November 2003, as Treasurer since 1998, and as Assistant Secretary since 1999. Ms. Menendez is a membercertified public accountant. Ms. Menendez supervises all financial and accounting aspects of the Board since 2011. The Board concluded that Mr. Logan should serve as a director because his long tenure with Watsco makes his service onCompany, including taxes, risk management, benefits, treasury and cash management, the Board extremely valuable.

Paul F. Manley, 78, has been retired since serving as Executive DirectorCompany’s system of the law firm of Holland & Knight from 1987 to 1991. From 1982 to 1987, Mr. Manley served as Vice President of Planning at Sensormatic Electronics Corporation. Prior to 1982, Mr. Manley served as the Managing Partner of the Miami office of Arthur Young & Company.

Mr. Manley was elected to the Board in 1984internal control and other compliance activities. She also is the Co-Chairpersonleader and principal contact for the Company’s banking relationships and actively participates at a senior level in a variety of the Audit Committee and Chair of the Compensation Committee. Additionally, Mr. Manley serves as our lead independent director. The Board concluded that Mr. Manley should serve as a director because of his executive oversight and senior management experience as well as his financial expertise in accounting and auditing.strategic activities.

Bob L. Moss, 67, rejoined the Board in 2014 after having previously served as a director from 1992 to 2012. Mr. Moss is a dynamic leader and has built a successful career in the construction industry over the span of approximately 50 years. He is the Chairman and Chief Executive Officer of Moss & Associates LLC, founded in 2004, which ishas grown into one of the largest general contractors in the Southern United States.States with revenues of over $1 billion. Mr. Moss previously served as chairman of the board and Chief Executive Officer of Centex Construction Group, from 2000 to 2002,where he spent 23 years building Centex into the largest domestic general building contractor in the nation. Mr. Moss previously servedserves as ourCo-Vice Chairman of the Board and is a directormember of Watsco for 20 years from 1992the Nominating & Governance Committee. Mr. Moss brings entrepreneurial skills, business-building abilities, leadership development experience and a wealth of knowledge of the construction industry to 2012.our Board.

Mr. MossDirector Nominees

Brian E. Keeley was appointed to the Board in 2014March 2018. Mr. Keeley is the President and Chief Executive Officer of Baptist Health South Florida, Inc. (“Baptist Health”), the largestnot-for-profit healthcare organization in South Florida, with 10 hospitals, a network of more than 50 outpatient facilities spanning four

counties, and one of the largest international programs in the nation. Baptist Health is a $3 billion enterprise rated AA by Standard & Poors. Under his leadership, Baptist Health executed transformational technologies throughout its organization. Baptist Health has been rated among the “100 Best Companies to Work For” in America by Fortune magazine. Mr. Keeley is a former member and board chair of the Miami Branch of the Federal Reserve Board of Atlanta. He is a member of the Audit Committee Compensation Committee and Nominating & Strategy Committee. The Board concluded that Mr. Moss should serveKeeley brings significant management, operational, financial, and technology execution skills to our Board.

Aaron J. (A.J.) Nahmad has served as the President of the Company since January 2016 and as a director becausesince 2011. He served as Vice President of Strategy & Innovation from July 2010 until January 2016 and as Director of Global Business Development beginning in 2005. He holds a B.A. from the University of Pennsylvania and a M.B.A. from New York University’s Leonard N. Stern School of Business. He is the son of Albert H. Nahmad. A.J. Nahmad has led the transformation of Watsco into a technology-enabled business. His promotion to President in January 2016 recognized this leadership and acknowledged the importance of the successful execution and adoption of these innovations across the Watsco enterprise. He is a member of the Strategy Committee.

Albert H. Nahmad has been the visionary founder and leader of Watsco for over 40 years, having served as our Chairman and Chief Executive Officer since 1972. Among his years of executive oversight and senior management experiencemany contributions, Mr. Nahmad has been instrumental in the constructionscaling of our business through acquisitions, the cultivation of strategic vendor relationships, and the development of Watsco’s entrepreneurial culture. In 1988 Mr. Nahmad made the decision to pivot the Company’s strategic focus from manufacturing to distribution of HVAC/R products. Since that time, Watsco’s market capitalization has grown from $22 million to $6.3 billion, and its25-year compounded annual growth rate of total shareholder return has been 19.3%. With revenues exceeding $4 billion, Watsco has solidified its place as the industry leader and now has approximately 5,200 employees serving approximately 90,000 contractor customers through a branch network of 560 locations. He serves as chair of the Strategy Committee.

Steven Rubin was appointed to the Board in March 2018. Mr. Rubin is theCo-founder of Indiegogo, Inc., the global crowdfunding platform. Mr. Rubin is responsible for executing Indiegogo’s strategic growth initiatives, including its enterprise business, as well as blockchain and equity investing. Prior toco-founding Indiegogo in 2008, Mr. Rubin was a strategy consultant, working for nearly a decade on behalf of clients such as MasterCard and FedEx. He graduated with a B.S.E. from The Wharton School, University of Pennsylvania. Mr. Rubin is an innovative technologist who brings entrepreneurial, management, and strategic insights to the Board. He is a member of the Strategy Committee.

George P. Sape was appointed to the Board in 2015 and previously served as a Watsco director from 2003 to 2014. Mr. Sape retired in 2015 as the Managing Partner of Epstein Becker and Green, P.C., a New York-based law firm, after 29 years. Mr. Sape previously served as Vice President and General Counsel for Organizations Resources Counselors, Inc., a consulting services provider to a number of Fortune 500 companies and has served as counsel or as an advisor to various congressional committees related to labor, education and public welfare. Mr. Sape also serves on the board of the University of Colorado School of Business. Mr. Sape is a member of the Audit Committee and Compensation Committee. Mr. Sape brings core leadership skills from his experience as the managing partner of a large law firm and consulting for Fortune 500 companies as well as his prior experience as a director of the Company.

CORPORATE GOVERNANCEin governance matters and through private company directorships.

Corporate Governance Guidelines

The Board has adopted corporate governance guidelines forOverall Role of the purpose of defining responsibilities, setting high standards of professionalBoard.Our business and personal conduct and assuring compliance with such responsibilities and standards. We regularly monitor developments in the area of corporate governance. Our Corporate Governance Guidelinesaffairs are available on our website atwww.watsco.com,managed under the caption “Corporate Governance Guidelines” within the Corporate Governance section. These materials may also be requested in print by writing to our Investor Relations Department at Watsco, Inc., 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133.

Codes of Ethics and Conduct

The Board has adopted codes of ethics and conduct that are designed to ensure that directors, officers and employees of the Company are aware of their ethical responsibilities and avoid conduct that may pose risk to the

Company. We maintain an Employee Code of Business Ethics and Conduct that is applicable to all employees. Additionally, we maintain a Code of Conduct for Executives that is applicable to membersdirection of our Board, executive officers and senior operating and financial personnel, including provisions applicablewhich is the Company’s ultimate decision-making body, except with respect to those matters reserved to our senior financial officers consistentshareholders. The Board’s mission is to maximize long-term shareholder value. Our Board establishes our overall corporate policies, selects and evaluates our executive management team, which is charged with the Sarbanes-Oxley Act of 2002. These codes require continued observance of high ethical standards, such as honesty, integrity and compliance with the law in the conduct of our business. These codes are publicly available onbusiness, and acts as an advisor and counselor to executive management. Our Board also oversees our website atwww.watsco.com, underbusiness strategy and planning, as well as the caption “Codesperformance of Conduct” within the Corporate Governance section. We intend to post onmanagement in executing our website amendments to or waivers from our Code of Conduct for Executives (to the extent applicable to our chief executive officer, principal financial officer or principal accounting officer). There were no amendments or waivers from our Code of Conduct for Executives in 2014. Violations under either code of conduct must be reported to the Audit Committee. We will provide a copy of these materials to any person without charge, upon written request to our Investor Relations Department at Watsco, Inc., 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133.business strategy and assessing and managing risks.

BOARD OF DIRECTORS

Board Leadership Structure

Role of Chairman & CEO. Our Board regularly reviews its structure and composition taking into consideration the Company’s performance and expectations for the future. Under the leadership of Albert H. Nahmad our Chief Executive Officer (“CEO”)over the last 25, 10, and President, also serves asfive years, annual total shareholder returns (the measurement of stock appreciation, including the reinvestment of dividends) on a compounded basis were 19.3%, 21.0%, and 20.6%, respectively, compared to average returns of the S&P 500 over these same periods of 3.6%, 3.7%, and 5.3%, respectively. The Board believes the Company’s track record of success reflects Mr. Nahmad’s effective leadership and creativity in devising and executing the Company’s strategic initiatives and in confronting its challenges. As Chairman and CEO, he facilitates a strong collaboration between management and the independent members of the Board. The Board believes that this leadership model is appropriate for the following reasons:Company and its shareholders are best served by having Mr. Nahmad continue to serve as Chairman and CEO.

In order to mitigate any potential disadvantages of one person serving as both CEO and Chairman of the Board,uphold effective governance standards, the Board has developed the role of a strong lead independent director to facilitate and strengthen the Board’s independent oversight of our performance, strategy and succession planning and to uphold effective governance standards.director. The position of lead independent director is currently held by Paul F. Manley, who also serves as Co-Chairman of the Audit Committee and Chairman of the Compensation Committee.

The lead independent directorDr. Dickins. As Lead Independent Director, Dr. Dickins has the following duties and responsibilities:

In determiningRisk Oversight.As part of regular Board and committee meetings, our directors consider important external and internal risks that may impact the appropriate leadership structure,Company. The full Board regularly reviews reports from management on various aspects of our business, including related risks, and strategies and tactics to address identified risks. At least annually, the Board considered a number of factors, includingreviews our CEO succession planning as described in our Corporate Governance Guidelines. While the candorfull Board has overall responsibility for risk oversight, the Board has delegated responsibility related to certain risks to the Audit Committee and dynamics of discussion amongCompensation Committee. The Audit Committee is responsible for overseeing the directorsCompany’s financial reporting risks and between directors and management, in addition tomonitors the effectiveness of the rolecontrol and risk management processes established to manage these risks. The Compensation Committee has overall responsibility for overseeing the Company’s management of risks related to compensation for our named executive officers (referred to as NEOs), including our equity-based compensation plans.

Corporate Governance Guidelines. Watsco’s Board strongly supports effective corporate governance and has consistently, over many years, developed and followed a program of strong corporate governance. Watsco’s Nominating & Governance Committee is responsible for reviewing and updating the Company’s Corporate Governance Guidelines on an annual basis. Our Corporate Governance Guidelines are published on our website atwww.watsco.com and are available in print to any shareholder who requests them from our Secretary.

Controlled Status. Watsco is a “controlled company” as defined by the New York Stock Exchange (referred to as the NYSE) because of our Chairman & CEO’s effective voting control of 52.3% of the leadcombined voting power of our shares of common stock outstanding as of April 6, 2018; therefore, the Company is not required to comply with certain corporate governance policies required of other publicly-traded companies that are not controlled companies. For example, the Board is not required to be composed of a majority of independent directordirectors, and the combined role of CEO and Chairman of the Board.Company need not have a Compensation Committee or Nominating & Governance Committee.

Our businessHowever, the Board strives to establish policies and affairsprocedures that it believes are managed under the direction of our Board, which is the Company’s ultimate decision-making body, except with respect to those matters reserved to our shareholders. Our Board’s mission is to maximize long-term shareholder value. Our Board establishes our overall corporate policies, selects and evaluates our executive management team, which is charged with the conduct of our business, and acts as an advisor and counselor to executive management. Our Board also oversees our business strategy and planning, as well as the performance of management in executing our business strategy and assessing and managing risks.

Board Role in Risk Oversight

The Board carries out its role in the oversight of risk directly and through its committees. The Board’s direct role includes the consideration and understanding of risk in the strategic and operating plans that are presented to the Board by management. Additionally, the Board’s committees carry out the Board’s oversight of risk as follows:

While our Board oversees our management of risk as outlined above, management is responsible for identifying and managing risks and, as appropriate, bringing them to the attention of the Board.NYSE.

Director Independence

.The Board has adopted independence guidelines for non-managementindependent directors towho serve on the Board that comply with applicable rules of the New York Stock Exchange, referredNYSE. Board member independence is reviewed at least annually to as the “NYSE”. Each ensure that eachnon-management director and director nominee satisfies suchthe NYSE’s independence guidelines. Based on its independencethis review, the Board affirmatively determined that each of the following directors and director nominees is independent:independent under the NYSE guidelines: Cesar L. Alvarez; David C. Darnell;Alvarez, Dr. Denise Dickins; Steven R. Fedrizzi; Paul F. Manley; andDickins, Jason Epstein, Brian E. Keeley, Bob L. Moss. In determiningMoss, Steven Rubin and George P. Sape.

Codes of Ethics and Conduct.The Board has adopted codes of ethics and conduct that Mr. Alvarez was independent,are designed to ensure that directors, officers, and employees of the Company are aware of their ethical responsibilities and avoid conduct that may pose risk to the Company. We maintain (i) an Employee Code of Business Ethics and Conduct that is applicable to all employees, and (ii) a Code of Conduct for Executives that is applicable to members of our Board, consideredour NEOs, and other senior operating and financial personnel. There were no amendments or waivers from either code of conduct in 2017. Oversight of investigations of known or potential violations under either code of conduct is the legal services provided to us by Greenberg, a law firm for which Mr. Alvarez serves as Co-Chairman,responsibility of the Audit Committee. To obtain copies of our Codes of Ethics and in determining that Mr. Darnell was independent, the Board considered the bank-related services provided to us by Bank of America, a bank for which Mr. Darnell serves as Vice Chairman. Following such consideration, the Board determined that the services provided by Greenberg and Bank of America did not affect the independence of Mr. Alvarez or Mr. Darnell, respectively. See “Certain Relationships and Related Person Transactions.” Our independence guidelines are included in the Conduct, please see “Corporate Governance Guidelines, which are available on our website atwww.watsco.comDocuments”, under the caption “Corporate Governance Guidelines” within the Corporate Governance section.below.

Board Meetings

.The Board meets regularly during the year and holds special meetings and acts by unanimous written consent whenever circumstances require. During 2017, the Board took action by unanimous written consent fourfive times and held five meetings during 2014. Each of thesix meetings. In 2017, all directors attended 80% or more100% of the aggregate number of meetings of the Board and the respective committees on which the director served in 2014. Our non-managementdirectors served. Independent directors meet at regularly scheduled executive sessions without management present.

Our Corporate Governance Guidelines provide that all All of our directors should make every effortare encouraged to attend our shareholder meetings. Eight of our directors attended the 2014 annual meeting of shareholders.shareholders and all attended in 2017.

Board Committees

Committees.During 2017,the Board maintained an Audit Committee, a Compensation Committee, and a Nominating & Governance Committee. Each committee is composed entirely of directors meeting the independence guidelines of the NYSE. In March 2018, the Board formed a Strategy Committee. The Committees keep the Board has established three separately designated standing committeesinformed of their respective actions and provide assistance to assist the Board in dischargingfulfilling its responsibilities: (1) theoversight responsibility to shareholders.

The Audit, Committee; (2) the Compensation, Committee; and (3) the Nominating & Strategy Committee. Only independent directors may serveGovernance Committees operate under formal charters that governs their duties and conduct, which are reviewed and evaluated annually by the applicable committee. Any recommended changes to the charters are submitted to the Board for its approval. Copies of the current charters are available on our website at www.investors.watsco.com, under the Auditcaption “Committees of the Board of Directors” within the Governance section. The charters are also available in print to any shareholder who requests them in writing to our Investor Relations department at Watsco, Inc., Investor Relations, 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133.

The table below provides current committee membership information and Compensation Committees.the number of meetings held in 2017:

Audit Committee

During 2014, Messrs. Manley and Sape and Dr. Dickins were the members of the Audit Committee. Following Mr. Sape’s resignation from the Board in March 2014, the Board appointed Mr. Moss to serve on the Audit Committee. All Audit Committee members are independent, as independence for audit committee members is defined in the applicable NYSE listing standards and rules of the Securities and Exchange Commission, referred to as the “SEC.” The Audit Committee held five meetings during 2014. All Audit Committee members possess the required level of financial literacy as defined in our Audit Committee charter, and Mr. Manley and Dr. Dickins, Co-Chairpersons of the Audit Committee, qualify as “audit committee financial experts” as defined by applicable SEC rules and regulations and meet the current standard of requisite financial management expertise as required by the NYSE and applicable SEC rules and regulations.

.The Audit Committee’s functions include overseeing the integrity of our financial statements and internal control over financial reporting, our compliance with legal and regulatory requirements, the qualifications of our independent registered public accounting firm and the performance of our internal audit function and controls regarding finance, accounting, legal compliance and ethics that management and our Board have established. In this oversight capacity,The Audit Committee’s responsibilities include, but are not limited to:

All Audit Committee members possess the required level of financial literacy as defined in our Audit Committee charter, and all Audit Committee members qualify as “audit committee financial experts” as defined by applicable Securities & Exchange Commission (referred to as the Audit Committee. See “CodesSEC) rules and regulations and meet the current standard of Conduct” for additional information.requisite financial management expertise as required by the NYSE and applicable SEC rules and regulations.

Please refer to theThe Report of the Audit Committee, which is set forth in this Proxy Statement, for a further description of ourdescribes the Audit Committee’s responsibilities and its recommendation with respect to our audited consolidated financial statements for the year ended December 31, 2014.2017.

Compensation Committee

During 2014, Messrs. Manley and Sape were the members of the Compensation Committee. Following Mr. Sape’s resignation in March 2014, the Board appointed Mr. Moss to serve on the Compensation Committee. All Compensation Committee members are independent as required by applicable listing standards of the NYSE

and applicable SEC rules.. The Compensation Committee held six meetings during 2014.oversees our compensation programs, including equity-based compensation plans. The Compensation Committee determinesCommittee’s responsibilities, which may not be delegated, include, but are not limited to:

Nominating & Governance Committee.Our Nominating & Governance Committee’s purpose is to assist the Board in identifying individuals qualified to become members of our executive officersBoard consistent with the Watsco, Inc. 2014 Incentive Compensation Plan (the “2014 Plan”) and our Fourth Amended and Restated 1996 Qualified Employee Stock Purchase Plan. Please refer to the Report of the Compensation Committee and Compensation Discussion and Analysis, which iscriteria set forth in this Proxy Statement, for a further descriptionour Corporate Governance Guidelines, to help in the evaluation of the effectiveness of our Compensation Committee’s responsibilitiesBoard and its compensation philosophyindividual members, and to review and update our corporate governance principles. The Board may assume, change or add additional activities fromtime-to-time to assure the effective operation of the Board. The Nominating & Governance Committee’s activities include, but are not limited to:

Strategy Committee.The newly-formed Strategy Committee is responsible for the oversight of Watsco’s strategic initiatives and confers with the Board regarding major opportunities, threats and other policy matters. The Strategy Committee focuses primarily on long-term matters rather thanday-to-day operations.

Director Nominations.The Board considers candidates for director who are recommended by the Nominating & Governance Committee, by other Board members, and by management. The Nominating & Governance Committee annually reviews the performance and contributions of individual Board members. To the extent they are candidates forre-election, the Nominating & Governance Committee considers all aspects of each componentcandidate’s qualifications and skills in the context of compensation paidthe Company’s needs at that point in time, their diversity of experience, and individual perspectives. When considering candidates as potential Board members, the Board and the Nominating & Governance Committee evaluate a candidate’s ability to contribute to such diversity. While not an exclusive list, the Nominating & Governance Committee considers the following important qualifications when evaluating a director candidate:

When evaluatingre-nomination of existing directors, the Nominating & Governance Committee also considers the nominees’ past and ongoing effectiveness on the Board and, with the exception of the employee directors, their independence.

The CompensationNominating & Governance Committee operates under a formal charter that governs its duties and conduct. The charter is reviewed annuallywill consider candidates recommended by the Compensation Committee, and any recommended changesWatsco’s shareholders pursuant to the charter arewritten applications submitted to the Board for its approval. A copy of the current charter is available on our website atwww.watsco.com, under the caption “Committees” within the CorporateNominating & Governance section. The charter is also available in print to any shareholder who requests it in writing to our Investor Relations department atCommittee, c/o Watsco, Inc., Investor Relations, 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133.

Nominating & Strategy Committee

During 2014, Cesar L. Alvarez, Aaron J. Nahmad, Albert H. Nahmad and George P. Sape were the members of the Nominating & Strategy Committee. Following Mr. Sape’s resignation in March 2014, the Board appointed Mr. Moss to serve on the Nominating & Strategy Committee. We have elected to apply the exemption related to a controlled company provided by the NYSE that allows a company that has more than 50% of the voting power held by an individual (Albert H. Nahmad controls common stock having combined voting power of 53.5% of our outstanding common stock as of the record date) The information required to be exempted from complying with rules requiring that only independent directors comprise our Nominating & Strategy Committee or adopt a charter. The Nominating & Strategy Committeeincluded in any such recommendation is responsible for (a) establishing procedures for the selection and retention of members of the Board, (b) evaluating Board nominees and members and (c) recommending nominees. The Nominating & Strategy Committee is responsible for reviewing at least annually the qualifications of directors and nominees, as well as the composition of the Board as a whole, in accordance with the Company’s corporate governance guidelines. While the Nominating & Strategy Committee has no specific minimum qualifications for director candidates, the Committee takes into account each individual’s independence from management, background and considerations including diversity, age, skills and experience in the context of the needs of the Board. The Nominating & Strategy Committee also considers whether, by significant accomplishment in his or her field, the director or nominee has demonstrated an ability to make a meaningful contribution to the Board’s oversight of the business and affairs of the Company, as well as his or her reputation for honesty and ethical conduct in his or her personal and professional activities. While the Company’s corporate governance guidelines do not prescribe specific diversity standards, as a matter of practice, the Nominating & Strategy Committee considers diversity in the context of the Board as a whole and takes into account considerations relating to ethnicity, gender, cultural diversity and the range of perspectives that the directors bring to their work.

Shareholders may recommend director nominees by sending a letter to the Nominating & Strategy Committee, or may make a nomination by complying with the notice procedures set forth in our Second Amended and Restated Bylaws, and in accordance with the procedures outlined under “Shareholder Communications” provided in this Proxy Statement. When identifying, evaluatinggeneral qualification and considering potential candidatesspecific qualities and skills established by the committee for membershipdirectors are described above.

Director Election – Majority Vote. Director nominees are elected by our shareholders based on oura majority vote, voting as separate classes.

Director Compensation.We have a Director Compensation Policy intended to attract, retain, and reward board members who are not employees of the Company, the terms of which are as follows:

We do not provide any taxgross-ups to ournon-management directors, does not differ based on whether any such nominee is recommended by a shareholder. Further information related to the Nominating & Strategy Committee is included in our Corporate Governance Guidelines.

The Nominating & Strategy Committee met one time during 2014.

Director Compensation

We pay each director, who is not a Company employee, a $1,000 fee for each meetingall of the Board attended in person by such director, and we reimburse directorswhom are solely responsible for their respective tax obligations as a result of their equity and cash compensation for Board service. Directors are reimbursed for reasonable expenses incurred in connection with their activities as directors. We do not pay a fee for directordirectors, including attendance at telephonic meetings. Directors who are also employeesdirector-education seminars and conferences. Employee directors do not receive any additional compensation for their service on the Board. The Nominating & StrategyGovernance Committee reviews directors’director remuneration along with the Compensation Committee and recommends to the Board any proposed changes to director remuneration. In connection with his role as lead director, Audit Committee Co-Chairperson and Chairman of the Compensation Committee, Mr. Manley received annual fees of $55,000 in 2014 (in addition to fees for meeting attendance) and was reimbursed for expenses associated with the performance of his duties. Dr. Dickins received an annual fee of $45,000 (in addition to fees for meeting attendance) for her role as Co-Chairperson of the Audit Committee in 2014 and was reimbursed for expenses associated with the performance of her duties. Our directors are eligible to receive stock options under our 2014 Plan at the discretion of our Compensation Committee. On May 19, 2014, Mr. Moss was granted 10,000 non-qualified stock options for his re-appointment to the Board. We generally grant 20,000 non-qualified stock options to each of our non-management directors upon appointment to the Board.compensation.

The following table sets forth the total compensation received by our non-employeenon-management directors for 2014.in 2017:

The following summarizes stock option awards outstanding for eachnon-management director as of December 31, 2017:

Management Succession. As reflected in our Corporate Governance Guidelines, one of the Board’s primary responsibilities includes planning for CEO succession and monitoring and advising on management’s succession planning for other NEOs, with the goal of establishing an effective succession plan. The Board routinely discusses management succession during the course of its meetings, including during sessions held by the Company’snon-management directors.

Minimum Stock Ownership Requirement for Directors and Officers.In an effort to align the interests of our directors and NEOs with those of our shareholders, each director and NEO is required to meet the following minimum stock ownership requirements:

Our directors and NEOs have two years from the date they became directors or NEOs to comply with these ownership requirements. Compliance with the minimum stock ownership level will be determined on the date when the grace period set forth above expires, and annually on each December 31 thereafter, by multiplying the number of shares held by each director and officer and the average closing price of those shares during the preceding month. As of December 31, 2017, all of our directors and NEOs satisfied these minimum requirements. The number of shares (or other equity instruments) held by our directors and NEOs as of December 31, 2017 is summarized in the Stock Ownership Table below.

Director Tenure & Refreshment. Directors may bere-elected at the end of each term. The Board has not established term limits as we believe that directors who have developed insight into Watsco and its operations over time provide an increasing contribution to the Board as a whole. To ensure the Board continues to generate new ideas and operate effectively, the Nominating & Governance Committee evaluates individual Board member performance and takes steps as necessary regarding continuing director tenure. With respect to ournon-management directors and director nominees, as of the date of this Proxy Statement, four have served on the Board for more than five years (Mr. Alvarez, Dr. Dickins, Mr. Moss and Mr. Sape), and three have served on the Board for less than five years.

Shareholder Proposals.Shareholders interested in submitting a proposal for inclusion in our proxy materials for our 2019 annual meeting of shareholders may do so by following the procedures set forth in Rule14a-8 promulgated by the SEC under the Exchange Act. To be eligible for inclusion in such proxy materials, our Corporate Secretary must receive shareholder proposals no later than December 28, 2018. Any shareholder proposal submitted other than for inclusion in the proxy materials for that meeting must be delivered to us no later than March 6, 2019, or such proposal will be considered untimely. Such proposal must contain all of the information required by our Amended and Restated Bylaws. If a shareholder proposal is received after March 6, 2019, we may vote in our discretion as to the proposal all of the shares for which we have received proxies for the 2019 annual meeting of the shareholders.

Shareholder Engagement.The Board and management consider institutional shareholders as partners in our business and actively engage and communicate with them throughout the year. This engagement is accomplished through a combination of events, including an annual investor day (during which directors, officers, and a variety of leaders attend and participate), investor meetings, analyst conferences,non-deal road shows, telephone conferences, headquarter visits and field-trips to our business units. Our overall philosophy is to provide consistent access and build relationships with a long-term time horizon in mind. This engagement is not just held with investment decision-makers, but also with institutional shareholders’ corporate governance leaders. In 2017, we met with a majority of the institutions with investments in our Company and also communicated with the primary proxy advisory services to discuss the Company’s track record, cultural foundations, and our unique use of restricted shares with long-term cliff-vesting as part of our compensation philosophy. More information can be found atwww.watsco.com in the Investor Relations section.

Communications with the Company and the Board.Interested parties may communicate with the Company by letter addressed to Investor Relations, Watsco, Inc., 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133, or bye-mail to Investor Relations,info@watsco.com.

Interested parties may also communicate with our Board by calling (800) 4WATSCO in the United States and leaving a message for the Lead Independent Director, or bye-mailing our Lead Independent Director at presidingdirector@watsco.com (which can also be accessed via our website atwww.investors.watsco.com, under the caption “Lead Director” within the Governance section). Regardless of the method used, the Lead Independent Director will be able to view your unedited message and determine whether to relay your message to other members of the Board.

Corporate Governance Documents.Our website is atwww.watsco.com. Please visit our investor relations website atwww.investors.watsco.com under the section captioned “Governance” for the following:

These materials may also be requested in print by writing to our Investor Relations Department at Watsco, Inc., 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133.

Certain Relationships and Related Person Transactions

We review, atAt least annually we review all relationships and transactions in which the Company and our directors or executive officersNEOs or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. We may use outside legal counsel to assist in such determination. As required

under SEC rules, transactions in which we are a participant and that are determined to be directly or indirectly material to the Company or ainvolve an amount in excess of $120,000, and in which any related person had or will have a direct or indirect material interest, are disclosed in this Proxy Statement. In addition, as set forth in the Audit Committee Charter,charter, the Audit Committee reviewshas established a formal process by which related party transactions are subject to its review and approves or ratifies anyapproval.

The Audit Committee considers the following factors, among others, in determining whether to approve transactions:

Pursuant to us in a comparableits related-party transaction in arms-length dealings with an unrelated third party. We believe that all agreements and transactions described below met that standard atpolicy, the time they were effectedAudit Committee reviewed and approved the following transactions using the criteria set forth above:

Moss & Associates LLC served as general contractor for the remodeling of our Miami headquarters, which was completed in 2018. Moss & Associates LLC has revenues in excess of $1 billion. Mr. Moss has served as its Chairman and Chief Executive Officer since its founding in 2004. He rejoined the Board as a director of the Company in 2014 and previously served as a director from 1992 to 2012. During 2017, payments made to Moss & Associates LLC for construction services totaled approximately $951,000, which Mr. Moss has indicated were not material to Moss & Associates LLC, nor did Mr. Moss have a direct or ratified by the Audit Committee.indirect material interest in such payments.

Greenberg Traurig, P.A. serves as our principal outside counsel for compliance and acquisition-related legal services. Greenberg Traurig, P.A. has revenues in excess of $1 billion. Mr. Alvarez, a director, is the Co-ChairmanSenior Chairman of Greenberg which receives customary fees for legal services.Traurig, P.A. During 2014,2017, we paid Greenberg Traurig approximately $120,000$475,000 for services performed. We currentlyperformed, and we anticipate that this arrangement will continue.

Mr. Darnell,Alvarez has indicated this amount was not material to Greenberg Traurig, P.A., nor did Mr. Alvarez have a director, is the Vice Chairman of Bank of America, which provides services to us, including as one of the lenders under our syndicated revolving credit agreement, the lessor for our corporate aircraft, cash management services and other bank-related services. During 2014, we paid Bank of America approximately $3,300,000 for banking services and lease payments. We currently anticipate that these arrangements will continue. For additional information on our revolving credit agreement, please refer to Note 6 to our consolidated financial statements, which are contained in our Annual Report to Shareholders, filed with the SEC as Exhibit 13 to our Annual Report on Form 10-K for the year ended December 31, 2014.

Aaron J. Nahmad, a director and our Vice President of Strategy and Innovation, is the son of Albert H. Nahmad, our Chairman of the Board, President and CEO. Aaron J. Nahmad receives annual compensation and benefits that are consistent with the compensation and benefits provided to other executive officers with equivalent qualifications, experience and responsibilities. For further information, see the Compensation Discussion and Analysis, compensation tables and narrative discussion thereof contained in this Proxy Statement.

Shareholder Agreement

In 2009, we formed a joint venture with Carrier Corporation, which we refer to as Carrier, and issued 2,985,685 shares of Common stock and 94,784 shares of Class B common stock to Carrier as consideration. Watsco and Carrier entered into a shareholder agreement, referred to as the Shareholder Agreement. In 2012, we formed another joint venture with UTC Canada Corporation, which we refer to as UTC Canada, an affiliate of Carrier, and issued 1,250,000 shares of Common stock as consideration. At that time, we amended and restated the Shareholder Agreement. The Shareholder Agreement defines Carrier, its parent corporation, UTC, and all of UTC’s subsidiaries, including Carrier and UTC Canada as the “Shareholder Group Members”. The Shareholder Agreement applies to all shares beneficially owned by them.

Among other things, the standstill and restrictions section of the Shareholder Agreement provides that, for as long as Carrier’s and UTC Canada’s aggregate ownership of our Common stock and Class B common stock exceeds five percent (5%) of the total number of outstanding shares of Common stock and Class B common stock:

The Shareholder Agreement also provides, among other things, that Shareholder Group Members may not, directly or indirectly, acquire, offer to acquire, or agree to acquire, by purchase or otherwise, unless specifically requested by us in writing:

In addition, the Shareholder Agreement provides, among other things, that Shareholder Group Members shall not:

Communications with the Company and the Board

All interested parties may communicate with the Company by writing to our Investor Relations Department at Watsco, Inc., 2665 South Bayshore Drive, Suite 901, Miami, Florida 33133. You may also contact the Company by e-mail at info@watsco.com.

All interested parties may communicate with our Board by calling (800) 4WATSCO in the United States and leave a message for the lead independent director. You may also contact the lead independent director by e-mail at presidingdirector@watsco.com or by going to our website atwww.watsco.com, under the caption “Lead Director” within the Corporate Governance section. Regardless of the method you use, the lead independent director will be able to view your unedited message. The lead independent director will determine whether to relay your message to other members of the Board.

Shareholder Proposals

Shareholders interested in submitting a proposal for inclusion in our proxy materials for our 2016 annual meeting of shareholders may do so by following the procedures set forth in Rule 14a-8 promulgated by the SEC under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. To be eligible for inclusioninterest in such proxy materials, shareholder proposals must be received by our Corporate Secretary no later than December 12, 2015. Any shareholder proposal submitted other than for inclusion in the proxy materials for that meeting must be delivered to us no later than February 26, 2016, or such proposal will be considered untimely. If a shareholder proposal is received after February 26, 2016, we may vote in our discretion as to the proposal all of the shares for which we have received proxies for the 2016 annual meeting of the shareholders.payments.

STOCK OWNERSHIP

The following table sets forth information regarding the beneficial ownership of our Common stock and Class B common stock by:

The table also contains, in the final column, the combined voting power of the voting securities on all matters presented to the shareholders for their approval, except for the election of directors and for such separate class votes as are required by Florida law. Holders of our Common stock are entitled to one (1) vote per share on each matter that is submitted to shareholders for approval and holders of our Class B common stock are entitled to ten (10) votes per share on each matter that is submitted to shareholders for approval. All information is as of the record date, March 30, 2015.April 6, 2018. As of the record date, we had 30,214,07732,054,630 shares of Common stock and 4,987,3605,313,683 shares of Class B common stock issued and outstanding.

number and percentage of shares beneficially owned is determined in accordance with the rules and regulations promulgated under the Exchange Act and the information is not necessarily indicative of beneficial ownership for any other purpose. Under applicable rules of the SEC, although each named person and all directors and named executive officers as a group are deemed to be the beneficial owners of

securities that may be acquired within 60 days through the exercise of, exchange, or conversion of options or other rights, the number of shares set forth opposite each shareholder’s name does not include shares of Common stock issuable upon conversion of our Class B common stock notwithstanding that the Class B common stock is immediately convertible into Common stock on aone-for-one basis.

(3)

Based on Schedule 13G/A filed on May 7, 2012. United Technologies Corporation (“UTC”) is deemed to be the beneficial owner of 4,330,469 shares of common stock, 3,080,469 of which are owned directly by Carrier Corporation, which is a wholly owned subsidiary of UTC, and 1,250,000 shares of which are owned directly by UTC Canada Corporation, which is a wholly owned subsidiary of UTC. UTC has shared voting power and shared dispositive power over 4,330,469 of such shares. Carrier Corporation has shared voting power and shared dispositive power over 3,080,469 of such shares. The address of UTC is One Financial Plaza, Hartford, Connecticut 06101. The address of Carrier Corporation is One Carrier Place, Farmington, Connecticut 06034.

(4)	Based on Schedule 13G filed on February 13, 2015. FMR LLC, a parent holding company, has sole dispositive power over 2,933,652 of such shares and sole voting power over 72,151 of such shares. The address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210.

(5)

Based on Schedule 13G/A filed on January 23, 2015.April 6, 2018. BlackRock, Inc., a parent holding company, has sole dispositive power over 2,435,1213,628,080 of such shares and sole voting power over 2,330,0763,485,561 of such shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10022.10055.

(6)(4)

Based on Schedule 13G/A filed on February 10, 2015.9, 2018. The Vanguard Group, an investment advisor, has sole dispositive power over 1,565,1192,560,551 of such shares, shared dispositive power over 33,13517,879 of such shares, sole voting power over 16,816 of such shares and soleshared voting power over 35,5353,324 of such shares. The address of The Vanguard Group is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.

(7)(5)

Based on Schedule 13G filed on February 14, 2018. T. Rowe Price Associates, Inc., an investment advisor, has sole dispositive power over 2,072,770 of such shares and sole voting power over 413,845 of such shares. The address of T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202.

(6)

The number of shares of Common stock indicated are owned pursuant to the Watsco, Inc. Amended and Restated Profit Sharing Retirement Plan & Trust, (“referred to as the 401(k) Plan”).Plan. The number of shares of Class B common stock indicated consists of (i) 330,572266,467 shares directly owned, (ii) 498,845 shares owned by various family-related trusts, (iii) 1,330,000 shares owned by Albert Capital LP, a limited partnership over which Mr. Nahmad maintains effective control, (iv) 25,00026,030 shares owned by custodial accounts over which Mr. Nahmad is the custodian, (v) 1,415,622 shares issued under Restricted Stock Agreements held by Albert Henry Capital L.P., a limited partnership over which Mr. Nahmad maintains effective control, (vi) 629,814756,560 shares issued under Restricted Stock Agreements held by the Albert H. Nahmad Revocable Trust, a trust over which Mr. Nahmad maintains effective control, (vii) 42,871 additional shares issued under Restricted Stock Agreements and (vii) 57,000(viii) 120,075 shares owned by the Albert H. and Jane D. Nahmad Foundation, Inc., a charitable organization over which Mr. Nahmad shares voting power as a member of its board with other family members.

(8)

The number of shares of Common stock indicated consists of (i) 4,000 shares directly owned, (ii) 2,325 shares owned pursuant to the 401(k) Plan, (iii) 450 shares owned in an Individual Retirement Account and (iv) 108,750 shares issued pursuant to Restricted Stock Agreements. The number of shares of Class B common stock indicated consists of (i) 23,046 shares directly owned and (ii) 103,200 shares issued under Restricted Stock Agreements.

(9)(7)

The number of shares of Common stock indicated consists of (i) 1,408 shares directly owned, (ii) 1,150 shares owned by Mr. Nahmad’s spouse and (iii) 234316 shares owned pursuant to the 401(k) Plan. Mr. Nahmad disclaims beneficial ownership of the shares held by his spouse, except to the extent of his pecuniary interest therein. The number of shares of Class B common stock indicated consists of (i) 51,60563,605 shares directly owned and (ii) 40,70092,090 shares issued under Restricted Stock Agreements and (iii) 12,000Agreements.

(8)

The number of shares issuable upon exercise of presently exercisable options grantedCommon stock indicated consists of (i) 15,800 shares directly owned, (ii) 2,407 shares owned pursuant to the 2001 Plan.401(k) Plan, (iii) 450 shares owned in an Individual Retirement Account and (iv) 108,750 shares issued pursuant to Restricted Stock Agreements. The number of shares of Class B common stock indicated consists of shares issued under Restricted Stock Agreements.

(10)(9)

The number of shares of Common stock indicated consists of (i) 28,954 shares directly owned, (ii) 1,2811,363 shares owned pursuant to the 401(k) Plan and (iii) 40,000 shares issued pursuant to Restricted Stock Agreements. The number of shares of Class B common stock indicated consists of (i) 35,20040,037 shares issued under Restricted Stock Agreements and (ii) 15,0004,867 shares issuable upon exercise of presently exercisable options granted pursuant to the 2001 Plan.directly owned.

(11)(10)

The number of shares of Common stock indicated consists of shares issuable upon exercise of presently exercisable options granted pursuant to the 2001Watsco, Inc. 2014 Incentive Compensation Plan (the “2014 Plan”).

(11)	The number of shares of Common stock indicated consists of (i) 7,519 shares directly owned and (ii) 8,000 shares issuable upon exercise of presently exercisable options granted pursuant to the 2014 Plan.

(12)	The number of shares of Common stock indicated consists of shares for which Mr. Keeley shares voting and dispositive power with his spouse.

(13)

The number of shares of Common stock indicated consists of (i) 10,000 shares for which Mr. Moss shares voting and dispositive power with his spouse, (ii) 10,000 shares owned by a trust controlled by Mr. Moss, (iii) 1,800 shares owned in an Individual Retirement Account, (iii)(iv) 1,000 shares owned by Mr. Moss’ spouse and (iv) 6,667(v) 3,334 shares issuable upon exercise of presently exercisable options granted pursuant to the 2014 Plan. Mr. Moss disclaims beneficial ownership of the shares held by his spouse, except to the extent of his pecuniary interest therein.

(13)(14)

The number of shares of Common stock indicatesindicated consists of (i) 8,581 shares directly owned by trusts controlled by Mr. Manley. The numberand (ii) 2,000 shares issuable upon exercise of shares of Class B common stock indicates shares owned by a trust controlled by Mr. Manley.presently exercisable options granted pursuant to the 2014 Plan.

(14)(15)

Includes shares beneficially owned by directors and named executive officers as described in footnotes(7)(6)-(13)(14).

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than 10% of a registered class of our equity securities to file with the SEC reports of ownership of, and transactions in, our equity securities. To our knowledge, based solely on a review of copies of such reports that we received, our records and written representations received from our directors, executive officers and certain of those persons who own greater than 10% of any class of our equity securities, for the year ended December 31, 2014,2017, all applicable Section 16(a) filing requirements were complied with on a timely basis.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table contains information as of December 31, 20142017 with respect to compensation plans (including individual compensation arrangements) under which any of our equity securities are authorized for issuance.

EXECUTIVE OFFICERSCOMPENSATION DISCUSSION AND ANALYSIS

The namesIntroduction

Our executive compensation program is grounded by the guiding principle that compensation should be highly dependent uponlong-term shareholder returns. This key tenet of our fourcompensation philosophy has driven the unique design of our program for many years and has enabled our executive officers are set forthleadership team to stay solidly focused on long-term performance. We have generated a compounded annual growth rate for total shareholder return of 19.3% over the last 25 years.

Our compensation philosophy is unique in comparison to other companies because of our approach to long-term incentives. All of the restricted shares we have granted to 59 leaders throughout the Company, including our NEOs, vest upon reaching retirement age (usually 62 or older). Vesting may also occur at an even later date for those who extend their careers beyond age 62.This means that our key leaders will not know the value and cannot realize the value of their equity awards until they have spent their career with the Company. We believe granting restricted stock effectively balances strategic risk-taking and long-term performance, creates an ownership culture, and aligns the interests of high-performing leaders with the interests of our shareholders. Additionally, we believe these awards help build a sustainable future by ensuring that our executives make the right long-term business decisions that will survive well past their retirement.

The Company began granting restricted stock awards to a variety of leaders in 1997. As it relates to our NEOs,none of their restricted share awards have ever vested.On a weighted-average basis, our NEO’s respective restricted share awards have been outstanding for approximately 11 years and, due to the cliff-vesting upon retirement, will not begin to vest until 2022 for the Chairman & CEO and not until 2045 for the President. This long-term vesting demonstrates the distinct nature of this program and the long-term perspective that is at the core of the Company’s compensation philosophy. Based on a review of vesting terms for data provided by Equilar of the population of companies referred to in the table below, and we refer to such persons as our Named Executive Officers (“NEOs”). In the following Compensation Discussion and Analysis, we describe the policies and practices that relate to the compensationduration of our NEOs.cliff-vesting period is unique to Watsco.

This compensation discussion and analysis (referred to as CD&A) explains our executive compensation program for our NEOs listed below. It also describes the Compensation Committee’s process for making pay decisions in 2017.

2017 Business Performance. Watsco produced another year of record performance:

Biographical information for Albert H. Nahmad, Barry S. Logan and Aaron J. Nahmad can be found

Philosophy, Culture & Performance

Ana M. MenendezCompensation Philosophy.We measure success by our ability to create shareholder value over significantly long periods of time.The vision and leadership of our entrepreneurial business leaders are at the core of our performance and it is their continued commitment to drive sustainable growth that we believe will contribute to our ongoing success. To this end, we must attract, motivate and retain high-caliber talent. Accordingly, our compensation program is designed to reward our leadershipwith an emphasis on long-term commitment and performance.

Pay-For-Performance & Ownership Culture. For employees throughout Watsco, including our NEOs, we maintain apay-for-performance culture that provides for a variety of potential rewards. Our stock-based plans include 401(k) matching contributions to eligible employees, a voluntary employee stock purchase plan, and the granting of stock options and restricted stock awards based on individual merit and measures of performance. The stock-based compensation plans are designed to promote long-term performance, develop and retain high-caliber talent, and foster an “ownership culture” whereby management and employees think and act as owners of the Company. As described above, our restricted stock program is unique because an employee’s restricted shares vest entirely at the end of his or her career (at retirement age of 62 or later), 50,subjecting such awards to significant market, performance, and forfeiture risks.

Concentrated Use of Long-Term Incentives Using Restricted Stock. As noted above, for our Chairman & CEO, the President, and other NEOs, the primary component of long-term incentive compensation is restricted stock. This method has servedbeen consistent over the Company’s history and is rooted in the principle that long-term, stock-based compensation is the most effective method to align the interests of executives with those of shareholders. To be fully effective and long-term focused, the Company’s stock awards havecliff-vesting upon retirement so that executives have the opportunity to build wealth, while facing significant risks over the vesting period. Due to the unusually long vesting periods and associated risks of forfeiture, the present value of such awards is likely significantly less. This program also extends beyond the NEOs to 55 other key leaders.

The Company believes this balance of risk and reward over long periods is more effective than more conventional equity-based programs that provide considerably shorter-term vesting and payouts, and effectively ties together the development ofemployee wealthandshareholder wealth. The program also serves as our Chief Financial Officer and Treasurer since November 2003, as Treasurer since 1998 and as Assistant Secretary since 1999. Ms. Menendez is a certified public accountant.an important method to retain key leaders for the duration of their working careers.

COMPENSATION DISCUSSION AND ANALYSISOverall Performance.Total shareholder return (referred to as TSR) measures share price appreciation plus the reinvestment of dividends. The Company views total shareholder return as the simplest and most fundamental method of measuring long-term value creation for shareholders and considers it as a metric in determining long-term incentive awards. Based on data provided by FactSet Research Systems Inc. (referred to as FactSet), the Company’s compounded annual growth rate (referred to as CAGR) in comparison to a variety of public-company market indices as of December 31, 2017 is as follows:

Our3-year,5-year and10-year TSR and the25-year TSR of 19.3% in particular demonstrates the sustained level of performance of our Company over long periods of time. These results are also important in assessing the Company’s business strategy, quality of leadership, culture and the relative effectiveness of our compensation practices. Based on further analysis of data from FactSet, the Company’s performance ranks as follows:

Governance, Compensation Actions & Summary of Details

Executive SummaryCompensation Governance Practices.We believe that our executive compensation program promotes sound governance standards and includes many shareholder-friendly features, such as:

We are committed

OversightDetermination of Executive Compensation

.The Board delegated to the Committee itsdelegates responsibility for determining totalthe compensation forstructure of our NEOs.Chairman & CEO and our President to the Compensation Committee. For our other NEOs, our Chairman & CEO determines their compensation after review and consultation with the Compensation Committee. The Compensation Committee currently consists of twothree independent directors appointed by the Board. Each member is independent in accordance with applicable rules and regulations ofIn providing input regarding the SEC and NYSE.

The responsibilities of the Committee, as stated in its charter, include the following:

The Committee is responsible each year to:

Role of Named Executive Officers in Determining Compensation

None of our NEOs has a direct role in determining the amount of his or her compensation. Our CEO recommends compensation packages for our NEOs, except for the VPSI and himself. The CEO’s assessment ofconsiders each executive’s compensation is based on the particular executive’s generalNEO’s responsibilities, the overall financial performance of the Company, the performance of the department or function that each executivesuch NEO leads, and thetheir collective success ofin meeting the team meeting certainCompany’s strategic priorities. Our CEO has considerable discretion in respect of the compensation packages he recommends.

ExecutiveThe Compensation Philosophy

The long-standing objective considered in the design of executive compensation is to closely align compensation with the long-term interests of the Company and its shareholders. This core philosophy is the foundation of our executive compensation decisions and reflected in a set of guiding principles. The application of these principles enables us to create a meaningful link between compensation and long-term, sustainable growth for our shareholders. The guiding principles are as follows:

Elements of Executive Compensation

Our executive compensation is made up of three principal elements: base salary; annual cash incentives; and long-term share-based compensation, each of which is intended to be an important part of total executive compensation. Each year, the Committee reviews the compensation for our NEOs and sets compensation for our VPSI and CEO. Our CEO determines, in his discretion, base salaries for all other NEOs, after consultation with and subject to the approval of the Committee. The Committee has the opportunity to meet with the executivesNEOs at various times during the year, which allows the Compensation Committee to form its own assessmentindependent of each individual’s performance.

Use of Discretion

The determinationCompensation Committee has engaged Pearl Meyer, an independent compensation consulting firm, to provide advice, relevant market data, and best practices with respect to the compensation of our Chairman & CEO and President. The Compensation Committee assessed the amountindependence of each element of compensation for NEOs, other than the CEO, is discretionary and is not weighted orPearl Meyer based on the specific performance metrics; therefore,criteria under applicable SEC and NYSE rules, received a letter from Pearl Meyer confirming its independence, and determined that no conflict of interest is raised by Pearl Meyer’s work for the relative amountCompensation Committee.

Elements of each element ofExecutive Compensation.Our executive compensation may vary from year-to-year.consist of base salary, an annual cash incentive, and long-term incentive compensation awarded in the form of restricted shares of Class B common stock, the composition of which is determined annually. As described above, however, our core compensation

philosophy focuses on long-term performance, which resultsmay result in a relatively high portionproportion of executive compensation paid in the form of share-based compensation. The annual base salary and incentive compensation for the CEO is discussed separately below.

Named Executive Officers other than the CEOrestricted shares.

Base Salary

.Base salary is designed to adequately compensate and reward the NEOs for theirday-to-day performance. The Compensation Committee determines base salary for our Chairman & CEO and for our President. Our Chairman & CEO determines in his discretion, base salaries for allour other NEOs other than the VPSIafter review and himself, after consultation with and subject to the approval of theCompensation Committee. When setting and adjusting each NEO’s salary level, the executive’s roles and responsibilities, experience, potential, and performance are considered. Other factors are considered such as the annual merit increase, if any, paid to all other Company employees, demand in the labor market for the particular executive and succession planning. These factors are not weighted. Adjustments to base salary are discretionary and based on an overall collective assessment of all of these factors. Additionally, neither base salary nor any other element of executive compensation is benchmarked at any particular level versus a peer group or compensation survey data. Instead, reasonable judgment is used to set a base salary that, when combined with all other compensation elements, results in a competitive pay package.package intended to align with the compensation philosophy of the Company, while retaining high-performing executives.

The Committee reviewsIn 2016, our NEOs accepted voluntary salary reductions in response to a broader Company-wide strategy to reduce overall costs. For 2017, having achieved the intended savings, our NEOs’ respectivepre-reduction salaries were reinstated on January 1, 2017. There were no other adjustments to NEO salaries annually and sets the salaries for our VPSI and CEO. Effective July 1, 2014, the Committee approved an increase in the base salary of our VPSI from $225,000 to $250,000 based on an increase in his responsibilities. The determination was made that the base salaries for the other NEOs were adequate based on their respective roles and responsibilities; therefore, we made no adjustments in 2014. The salaries paid to the NEOs during 20142017, which are shown in the 2014 Summary Compensation Table presented in this Proxy Statement.Table.

Annual Cash Incentives

Annual cash incentives are used to reward NEOsIncentives.The Compensation Committee has determined that our NEOs’ eligibility for their current contributions to the Company and to align executive compensation with annual performance. Our CEO determines, in his discretion,an annual cash incentivesincentive is as follows:

Long-Term Incentive Compensation. Our long-term incentive compensation plan is administered through the 2014 Summary Compensation Table presented in this Proxy Statement.

Share-Based Compensation

We currently maintain one share-based compensation plan, the 2014 Plan, which provides a broad varietyPlan. As of share-based compensation alternatives. At December 31, 2014,2017, the 2014 Plan had a total of approximately 200 participants. As of December 31, 2014, awards underparticipants, including the 2014 Plan consistedNEOs. Awards may consist of: (1)(i) non-qualified stock options; and (2) awards of non-vested (restricted) stock. Grants are made to retain executives, align their incentives with the long-term interests of our shareholders and reward them for potential long-term contributions. Our CEO determines, in his discretion, the allocation between awards of non-qualified stock options and non-vested (restricted) stock for all NEOs, other than the VPSI and himself, after consultation with and subject to the approval of the Committee.

Share-based compensation awards generally provide either medium-term or long-term incentives. Awards of non-qualified stock options are granted as medium-term incentives, which generallythat vest in two equal installments over three and four years from the date of service. By comparison, non-vested (restricted)grant, and (ii) awards of restricted stock veststhat vest upon an executive’s retirement age, generally resulting in longer vesting schedules; therefore, such awards are granted(age 62 or later). For the NEOs, as long-term incentives.

As described above, our core compensation philosophy is heavily-weightedheavily weighted toward long-term incentives,awards of restricted stock, which create an owner-oriented culture; therefore, the discretionary allocation betweennon-qualified stock options and non-vested (restricted)restricted stock generally favors the latter.

Stock Options

Stock options provide executives with an opportunity to purchase our Common stock at an exercise price equal to the market price of our Common stock on the grant date. Options under the 2014 Plan generally vest over three to four years of service. Vesting may accelerate in certain circumstances prior to the original vesting date. There is a limited term in which the optionee can exercise stock options, known as the option term. Options under the 2014 Plan have a term of five years. A stock option becomes valuable only if our Common stock price increases above the option exercise price, and the holder of the option remains employed during the period required for the option to “vest”; therefore, these options provide an incentive for the holders to remain employed with us.

In recent years, the CEO has determined and the Committee has approved that, as between awards of non-qualified stock options and non-vested (restricted) stock, incentives would be composed entirely of non-vested (restricted) stock, which generally vest over a significantly longer period of time than stock options. This determination was based on our philosophy that compensation should both (i) help establish a culture whereby executives think and act with a long-term point of view (i.e. create an owner-oriented culture) and (ii) provide executives with an incentive to sustain their career with the Company. No For 2017, no stock options were grantedawarded to the NEOs for the 2014 fiscal year. The approval and determination not to awardNEOs.

Restricted stock options to the NEOs has been, and continues to be, entirely discretionary and is not based on any specific performance-based factors or because of any failure on the part of the executives to meet performance expectations. Instead, the determination was based on our core compensation philosophy outlined above.

Non-Vested (Restricted) Stock

Awards of non-vested (restricted) stock are designed to focus on the long-term performance of the Company for the duration of an executive’s career andawards are subject to forfeiture until certain specified events occur (generally,(upon retirement at age 62 or later, death, long-term disability, or a change in control of the Company). These features enhance our ability to retain, throughout their entire careers, those individuals who are key to the creation of shareholder value. Shares of non-vested (restricted)restricted stock awarded include the right to vote and the right to receive dividends. Awards of restricted stock may be in either shares of either our Common stock or Class B common stock, none of which may be sold or disposed of prior to vesting, and which may be forfeited in the event of termination of employment prior to the end of the restriction period. Generally, restricted shares of Class B common stock have been awarded as the Board considers long-term continuity, stability and consistency of culture as important long-term contributors to the Company’s future success. The Company also believes other stakeholders, including its largest vendor partners, are comforted by and have made long-term commitments to the Company as a result of this long-term continuity, stability, and consistency.

The grant date fair value of the award shown in the Summary Compensation Table is calculated at the date of grant (the NYSE-quoted market price of one share of Class B common stock multiplied by the number of shares awarded) and is amortized ratably over the period from the date of grant through the date of cliff-vesting. Due to the unusually long vesting periods and associated risks of forfeiture, the present value of such awards is likely significantly less. Independent valuations obtained by the Company suggest that, collectively, the present value of such awards is at least 25% less, and may be as much as 50% less than the grant date fair value.

Restricted stock awards, while discretionary, are based upon the Company’s performance, as described below. For our Chairman & CEO and our President, the number of shares granted is based on the criteria and formula set forth below.

A summary of restricted stock awards currently held by our NEOs, including the range of years such shares were granted, the range of cliff-vesting dates, and the weighted-average years remaining until the cliff-vesting date is reached as of December 31, 2017 is as follows:

Compensation & Long-Term Incentives for Our Chairman & CEO.Albert H. Nahmad has served as our Chairman & CEO since December 1972. His vision and entrepreneurship have been instrumental in our growth and success over the past 45 years, and his leadership continues to be of significant importance to our future performance.

The Chairman & CEO’s compensation is composed of base salary and a long-term incentive award of restricted shares contingent upon the attainment of specified performance criteria. From 2011 to 2015, his annual base salary was $1,100,000. Beginning in January 2016, in connection with the appointment of A.J. Nahmad as President and there-assignment of certainday-today responsibilities, our Chairman & CEO’s base salary was reduced from $1,100,000 to $825,000. In 2016, Mr. Nahmad agreed to a further 20% voluntary reduction in salary to $660,000 in response to a broader-based cost reduction effort by the Company. The voluntary reduction was reinstated effective January 1, 2017.

The design of our Chairman & CEO’s long-term incentive compensation plan is simple and has remained virtually unchanged since it was initiated in 1997. His incentive compensation award is based on the performance of two fundamental metrics: (i) annual growth of earnings per share (referred to as EPS) and (ii) the year-over-year increase in Watsco’s stock price. If either increases, then he earns a restricted period. A participantstock award. If neither increases, then he is not entitled to a restricted stock award in that year. As an example, no restricted stock awards were granted non-vested (restricted)to our Chairman & CEO in 2007 or 2008 due to EPS and stock price performance at that time.

This long-term incentive compensation plan is intended to focus our Chairman & CEO’s active leadership and strategic vision over the long-term. EPS growth recognizes the importance of a proportional return on investment earned by shareholders and is defined as diluted EPS calculated in accordance with U.S. generally hasaccepted accounting principles, referred to as GAAP. We do not consider any“non-GAAP” adjustments to EPS that have the effect of increasing EPS. Common stock price appreciation is also a fundamental method of measuring value creation on ayear-to-year basis, and reflects not only performance, but other assessments made by shareholders related to the quality and nature of the enterprise. Because our Chairman & CEO receives long-term incentive compensation only if at least one of the foregoing metrics improves, receipt of this compensation requires that the Company and all of its shareholders do well.

To be eligible to receive a long-term incentive award, our Chairman & CEO must be employed for the rightsentire year unless the Compensation Committee specifically determines otherwise. The Compensation Committee determines the performance criteria each year within the first 90 days of the calendar year and formalizes such criteria as an amendment to the Chairman & CEO’s employment agreement (such agreement and amendments are referred to as the Employment Agreement), which was filed with the SEC as Exhibit 10.1 to the Quarterly Report on Form10-Q for the quarter ended March 31, 2017 and incorporated herein by reference.

The design of our Chairman & CEO’s 2017 long-term incentive program was as follows:

EPS growth

$91,350 in value is awarded for each one cent of growth in the Company’s EPS over the prior year,plus

Common stock price growth

(i) Zero in value if the NYSE quoted price of Watsco’s Common stock did not exceed $148.12* on December 31, 2017, or

(ii) $1,680 in value awarded for each one cent of increase in the NYSE quoted price of Watsco’s Common stock over the prior year (if less than $177.74#), or

(iii) $2,520 in value is awarded for each one cent of increase in the NYSE quoted price of Watsco’s Common stock over the prior year (if greater than $177.74#)

The Employment Agreement sets forth that long-term incentives, if any, will be awarded in the form of restricted Class B common shares. The maximum amount of long-term incentive that our Chairman & CEO could be awarded in 2017 was limited to $20 million. Although such awards are presented in the Summary Compensation Table at grant date fair value, due to the unusually long vesting periods and associated market and forfeiture risks,the present value of such awards is likely significantly less. Independent valuations obtained by the Company suggest that the present value of such awards is at least 25% less and may be as much as 50% less than the grant date fair value.

For 2017, Watsco’s annual EPS increased from $5.15 per share in 2016 to $5.81 per share in 2017, and the price of its Common stock increased from $148.12 to $170.04, as of December 31, 2017. Based on the performance criteria factors set forth above, the calculated gross value of the 2017 long-term incentive award earned by our Chairman & CEO was $9.7 million. However, Mr. Nahmad elected to waive the portion of his long-term incentive arising from the tax benefit recognized by the Company upon the passage of the Tax Cuts and Jobs Act of 2017 on December 22, 2017. As a result, his award was reduced by $2.5 million to gross value of $7.2 million (42,871 restricted Class B Common shares) as reflected in the Summary Compensation Table. The restricted share award for 2017 is scheduled to cliff-vest on October 15, 2026 and is subject to forfeiture prior to this date as set forth in the restricted stock agreements. Mr. Nahmad also received $11.00 in lieu of fractional shares.

Compensation & Long-Term Incentives for Our President.On January 15, 2016, A.J. Nahmad was promoted to the position of President. Under his direction and leadership, Watsco began in 2012 to actively increase its investment in a number of scalable technologies to further strengthen its leadership position in the HVAC/R marketplace and to introduce new technologies that havefar-reaching potential. His promotion to President acknowledged his leadership and recognized the importance of the successful execution and adoption of these technological innovations across the Watsco enterprise. His promotion was also considered an important event for the Company in terms of management succession with the goal of achieving long-term, generational continuity and consistency of Watsco’s unique culture.

Our President’s 2017 compensation program included: (i) a base salary of $650,000, (ii) eligibility for an annual cash incentive of up to $450,000 contingent upon achieving the operational and technology-related objectives described above, of which $200,000 was earned in 2017, and (iii) eligibility for a long-term incentive award in the form of Class B common stock contingent upon the attainment of specified performance criteria described below. The equity-based award, if any, is split into two components: (a) 75% of the amount of the

award to be issued immediately as Class B restricted stock with cliff-vesting at age 62 or later, and (b) 25% of the amount of the award to be issued as restricted stock units (RSUs) that are potentially convertible into shares of Class B restricted stock contingent upon the Company’s stock price performance measured at the end of a shareholderthree-year period. The maximum amount of long-term incentive that our President could be awarded in 2017 was limited to $8 million.

For 2017, the President’s equity-based incentive was as follows:

EPS growth

$39,150 in value is awarded for each one cent of growth in the Company’s EPS from the prior year,plus

Common stock price growth

(i) Zero in value if the NYSE quoted price of Watsco’s Common stock did not exceed $148.12* on December 31, 2017, or

(ii) $720 in value is awarded for each one cent of increase in the NYSE quoted price of Watsco’s Common stock from the prior year (if less than $177.74#), or

(iii) $1,080 in value is awarded for each one cent of increase in the NYSE quoted price of Watsco’s Common stock from the prior year (if greater than $177.74#)

Based on the performance criteria factors set forth above, the calculated gross value of the 2017 performance long-term-incentive award earned by our President was $4.2 million. However, Mr. Nahmad elected to waive the portion of his long-term incentive compensation arising from the tax benefit recognized by the Company includingupon the rightpassage of the Tax Cuts and Jobs Act of 2017 on December 22, 2017. As a result, his award was reduced by $1.1 million to votea gross value of $3.1 million including: (i) an award of $2,328,818 consisting of 13,779 shares of restricted Class B common shares that are scheduled to cliff-vest on October 17, 2043 (his estimated retirement date) and the right to receive dividends. Awards$167 in lieu of non-vested (restricted) stock are grantedfractional shares, and (ii) RSUs valued at no cost to the employee.

Non-vested (restricted) stock awards vary each year and,$776,273 that may result in the caseissuance of NEOs other thanClass B restricted shares on December 31, 2020 (the measurement date) depending upon the VPSI,three-year average annual performance of Watsco’s share price as follows:

The Compensation Committee has discretion to determine the RSU conversion factor based on achieved growth rates between the thresholds of 0% to 10% and 10% to 20%. Restricted shares of Class B common stock, if any, issued pursuant to this award will cliff-vest on October 17, 2043, and are based in the discretion of the CEO, after consultation with and subject to the approvalterms, conditions and risks of forfeiture contained in the related restricted stock agreements. Although restricted shares granted in 2017 are presented in the Summary Compensation Table at grant date fair value, due to the unusually long vesting periods and associated market and forfeiture risks,the present value of such awards is likely significantly less. Independent valuations obtained by the Committee.Company suggest that, collectively, the present value of such awards is at least 25% less, and may be as much as 50% less than the grant date fair value.

Long-Term Incentives for our Other NEOs. For our VPSI,other NEOs, the award is based solely inChairman & CEO considers and recommends discretionary restricted share grants, which are subject to the discretionreview and approval of the Compensation Committee. We have no formal program or pre-established performance or financial targets that determine the amount, if any, of awards. The Committee’s decision to grant non-vested (restricted)restricted stock awards to our other NEOs is based on the subjective weighting of the factors described below,following criteria, together with the overall performance of the Company.

The CEO and the Committee consider the following factors with respect to the amount of an individual NEO’s non-vested (restricted) stock award:Company:

During 2014,In 2017, the amountCompensation Committee approved a discretionary award of non-vested (restricted) stock awarded to our NEOs was based on their respective current levels of equity relative to the other NEOs. The grant date fair value of the non-vested (restricted) stock awarded to the NEOs during 2014 is shown in the 2014 Grants of Plan-Based Awards Table presented in this Proxy Statement.

Authorization of Share-Based Awards

The Committee approves the grant of share-based compensation to the CEO. The Committee has delegated to the CEO the authority to grant options and award3,000 restricted stock under the 2014 Plan to the other NEOs except for the VPSI. The amounts granted to NEOs vary each year and are based on the discretion of the Committee in the case of the CEO and VPSI, and the discretion of the CEO in the case of the other NEOs.

Other than in connection with the CEO’s annual incentive opportunity, as discussed below, we do not have a formal policy or timetable for the granting of share-based compensation. Generally, we consider grants annually, during performance reviews or upon hiring. The decision to award only non-vested (restricted) stock in 2014 was based on our core philosophy described above, together with the recognition that medium-term incentives (i.e. non-qualified stock options) were already outstanding.

Additional long-term incentive compensation information related to the NEOs is included in the 2014 Summary Compensation Table, the 2014 Grants of Plan Based Awards Table and the Outstanding Equity Awards as of December 31, 2014 Table presented in this Proxy Statement.

Chief Executive Officer

Albert H. Nahmad has served as our Chairman of the Board, President and CEO since December 1972. His leadership has been instrumental in our growth and success over the past 42 years, and his leadership continues to be of great importance to our future performance. Given the foregoing, Mr. Nahmad’s compensation is materially different to, and greater than, the compensation paid to our other NEOs.

Financial Metrics Used in Executive Compensation

Two key financial metrics are considered in measuring performance for our CEO:

Earnings per Share

To ensure that compensation is proportional to the return on investment earned by shareholders, we use earnings per share, or EPS, as one of the metrics to determine annual incentive compensation for our CEO. EPS is defined as diluted earnings per share calculated in accordance with U.S. generally accepted accounting principles.

Common Stock Price

As is the case with EPS, we also look at the closing market price for our Common stock as a means to ensure compensation is proportional to the potential return on investment earned by shareholders. Incentive compensation for our CEO takes into account the change in the price of our Common stock from year to year.

Our CEO does not earn any incentive compensation unless one of the two metrics above has increased for the year in which the incentive compensation is determined.

Annual Incentive Compensation

Each year, our CEO has an annual incentive opportunity based upon the increase, if any, in EPS and Common stock price of the Company. Effective January 1, 2014, we amended and renewed, and the Committee subsequently approved, an amendment to our employment agreement with Mr. Nahmad, dated January 31, 1996, which we refer to as the CEO Agreement. Under the terms of the CEO Agreement, Mr. Nahmad may earn this annual incentive award pursuant to and under the 2014 Plan. Mr. Nahmad must be employed for the entire year to be entitled to his annual incentive compensation for such year, unless the Committee otherwise specifically determines that such amounts are to be paid in respect of a year in which Mr. Nahmad is employed for only part of such year. The Committee and Mr. Nahmad mutually agree, within the first 90 days of the calendar year, on the metrics to be used in determining performance-based compensation for the applicable year. Such metrics are administered by the Committee and documented in the form of an amendment to the CEO Agreement, which is filed with the SEC.

For 2014, the CEO’s incentive compensation was determined using the following formula:

For 2014, the CEO’s incentive compensation was paid in a number of non-vested (restricted) Class B common shares equal to the dollar amount earned (as described in the table above), multiplied by a factor of two and divided by the closing price for the Class B common stock on the NYSE as of the close of trading on December 31, 2014. The value of any fraction of a share was paid in cash. The incentive compensation earned is multiplied by a factor of two because it is converted from cash to shares that vest in their entirety in approximately 8 years and are subject to events of forfeiture prior thereto as set forth in the restricted stock agreements.

For 2014, based on the achievement of the performance factors described above, Mr. Nahmad’s incentive compensation for 2014 was $10,977,600. Mr. Nahmad was entitled to receive 102,479 shares of Class B common stock which was issued by the Company during the first quarter of 2015. These non-vested (restricted) shares vestto both Ms. Menendez, our CFO, and Mr. Logan, our SVP.

Benefits Programs. Our NEOs are eligible to participate in their entirety on October 15, 2022our health and are subject to forfeiture prior to this vesting date as set forth in the restricted stock agreements. Mr. Nahmad also received $50.00 in cash related to fractional shares.

Other Benefitswelfare plans (medical, dental, vision, life and Programs

A limited number of other benefits and programs is available to our NEOs. We offer these benefits and programs as part of each NEO’s total compensation package. A list of specific benefits is noted below:

Employee Stock Purchase Plan

We maintain aninsurance), a 401(k) plan, employee stock purchase plan which isand other programs that are generally available to all eligible employees, that enables such employees to purchase our Common stock at a discounted rate, thereby keeping our employees’ interests aligned with the interests of our shareholders. Executives (other than our CEO) may participate in this plan on the same basis as all other eligible employees. After ninety days of employment, eligible employees may elect to contribute to this plan through payroll deductions or lump sum contributions of up to $25,000 in any calendar year based on calculating the fair market value as of the grant date, as provided under the plan. Shares are purchased at a 5% discount to the closing share price of our Common stock at specified times, subject to certain restrictions.

Health and Welfare Benefits

We offer a variety of health and welfare programs to all eligible employees. Executives generally are eligible for the same benefit programs on the same basis as the rest of our employees. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs include medical, wellness, pharmacy, dental, vision and life, accidental death and disability insurance.

Company Airplane

.Pursuant to his employment agreement, Albert H. Nahmadour Chairman & CEO has limited access to our corporate aircraft for personal use (up to 4060 hours per calendar year)during 2017), and the value of such use is included in his annual compensation. We review the aircraft flight logs and categorize the flights as business-related ornon-business-related to determine Mr. Nahmad’sour Chairman & CEO’s personal use of the aircraft. The value of the personal use of the Company aircraft reported as compensation to our Chairman & CEO is determined following the Internal Revenue Service guidelines, which may be different than the Company’s aggregate incremental cost of such use.

Pension Plans

While we.We do not provide a defined benefit pension plan or supplemental executive retirement plan, we provide to all of our eligible employees a profit sharing retirement plan that is qualified under Section 401(k) of the U.S. Internal Revenue Code of 1986, as amended. Under the plan, we may make matching contributions in our discretion, which may be in the form of our Common stock or cash. For 2014, we elected to match 50% of each participant’s contributions up to a maximum 1.5% of such participant’s compensation (as defined under the plan) in the form of our Common stock.plan.

Other CompensationEmployment Agreements

We provide.There are no employment agreements with our NEOs, with other benefits described in the All Other Compensation column in the 2014 Summary Compensation Table presented in this Proxy Statement, which we believe are reasonable, competitive and consistent withexcept for our overall executive compensation philosophy. The costs of these benefits constitute only a small amount of each NEO’s total compensation.Chairman & CEO’s Employment Agreement.

Severance PlanPlan.

We do not have severance agreements with any of our NEOs.NEOs, except for the established termination provisions set forth in our Chairman & CEO’s Employment Agreement.

Clawback Policy. The Company maintains a clawback policy whereby the Company has the ability to require that NEOs reimburse the Company for all or any portion of any incentive or equity-based compensation in the event of a material restatement of the Company’s financial statements or if the NEOs engaged in fraud or criminal misconduct related to the Company or its business.

Stock Option Backdating & Repricing.We do not and have not backdated or repriced stock option awards.

Hedging of Shares Prohibited.We do not permit and have not permitted short sales or transactions using derivatives of our common stock, including hedging transactions.

Certain Tax Considerations. Under Section 162(m) of the Internal Revenue Code (referred to as Section 162(m)), public companies may generally not take a tax deduction for nonperformance-based compensation, and, effective January 1, 2018, for performance-based compensation in excess of $1.0 million paid to named executive officers, including the Chairman & CEO or any of the next three most highly compensated officers. However, performance-based compensation payable pursuant to contracts entered into prior to November 2, 2017 does not count against the $1.0 million deduction limit. Our policy with respect to Section 162(m) is to make reasonable efforts to ensure that compensation is deductible without limiting our ability to attract and retain qualified executives. The Compensation Committee has not adopted a policy that all

Employment Agreementscompensation must be deductible, believing in the importance of retaining flexibility to design compensation programs that recognize a full range of criteria important to our success, even where compensation payable under the programs may not be fully deductible. Our Compensation Committee intends to monitor compensation levels and the deduction limitation.

Except for the CEO Agreement discussed above, weRisk Considerations in our Compensation Programs.We have reviewed our compensation structures and policies as they pertain to risk and have determined that our compensation programs do not create or encourage the taking of risks that are reasonably likely to have employment agreementsa material adverse effect on the Company.

Consideration of Shareholder Advisory Vote on Executive Compensation

Shareholders are asked annually to castnon-binding advisory votes to approve the executive compensation of our NEOs. In 2017, we presented our shareholders with anon-binding advisory proposal to approve the compensation of our NEOs. A majority of votes cast by our Common shareholders and Class B shareholders voting separately voted in favor of the proposal (82% of the combined votes cast). The Committee considers the results of the advisory votes on executive compensation together with the Company’s compensation philosophy, as described in this Compensation Discussion and Analysis, when considering executive compensation arrangements, including any changes to the executive compensation program. The nextnon-binding advisory vote to approve the executive compensation of our NEOs will be held on June 4, 2018 at our upcoming annual meeting. Please see Proposal 2 contained in this Proxy Statement.

Compensation Committee Interlocks and Insider Participation.

No member of the Compensation Committee during 2017 was an officer, employee, or former officer of ours or any of our NEOs.

Accelerationsubsidiaries or had any relationship that would be considered a compensation committee interlock and would require disclosure in this Proxy Statement pursuant to SEC rules and regulations. None of Vesting; Change in Control

Under the 2014 Plan the Committee or the Board may, in its discretion, accelerate the exercisability, the lapsing of restrictions or the expiration of deferral or vesting periods of any award, and such accelerated exercisability, lapse, expiration and, if so provided in the award agreement, vesting shall occur automatically in the caseour named executive officers served as a member of a “changecompensation committee or a director of another entity under the circumstances requiring disclosure in control” of the Company. Except in the case of our CEO, a “change in control” generally means (a) the electionthis Proxy Statement pursuant to the Board of the Company, without the recommendation or approval of the incumbent Board of the Company, of directors constituting a majority of the number of directors of the Company then in office; or (b) approval by shareholders of (i) a reorganization, merger or consolidation with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities, (ii) a liquidation or dissolution of the Company or (iii) the sale of all or substantially all of the assets of the Company.

In the case of our CEO, a “change in control” means (a) the acquisition by any person, entity or group of beneficial ownership of 20% or more of the outstanding shares of any class of common stock entitled to vote in the election of any directors of the Company; provided, however, that the acquisition of any shares owned by or for the benefit of the CEO or the CEO’s spouse or descendants shall not be taken into account for this purpose; (b) the election to the Board of the Company, without the recommendation or approval of the incumbent Board of the Company, of directors constituting a majority of the number of directors of the Company then in office; or (c) approval by shareholders of (i) a reorganization, merger or consolidation with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities, (ii) a liquidation or dissolution of the Company or (iii) the sale of all or substantially all of the assets of the Company.SEC rules and regulations.

COMPENSATION COMMITTEE REPORT

The following report of the Compensation Committee shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission nor shall this information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into a filing.

The Compensation Committee has reviewed and discussed the Compensation Discussion and AnalysisCD&A contained in this Proxy Statement with management. Based on that review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and AnalysisCD&A be included in this Proxy Statement.

This report is provided by theThe following independent directors, who comprise the Compensation Committee:Committee, provide this report:

Risk Considerations in our Compensation Programs

We have reviewed our compensation structures and policies as they pertain to risk and have determined that our compensation programs do not create or encourage the taking of risks that are reasonably likely to have a material adverse effect on the Company.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee during 2014 was an officer, employee or former officer of ours or any of our subsidiaries or had any relationship that would be considered a compensation committee interlock and would require disclosure in this Proxy Statement pursuant to SEC rules and regulations. None of our executive officers served as a member of a compensation committee or a director of another entity under the circumstances requiring disclosure in this Proxy Statement pursuant to SEC rules and regulations.

COMPENSATION TABLES

20142017 Summary Compensation Table

The following table sets forth the compensation earned by the NEOs for services rendered for the years ended December 31, 2014, 20132017, 2016 and 2012.2015.

2014Comparison of CEO Compensation to Total Shareholder Return. The following chart represents the comparison for the last five calendar years of (i) our Chairman & CEO’s total compensation as summarized in the Summary Compensation Table, (ii) compensation actually paid (consisting of his base salary) and (iii) total shareholder return for each of the last five calendar years. Actual realized compensation in the last five years is substantially lower while the Company continues to outperform on TSR.

2017 Grants of Plan-Based Restricted Stock Awards

This table discloses the number of non-vested (restricted)restricted stock awards granted to our NEOs during 20142017 and the grant date fair value of these awards. No stock options to purchase shares of common stock were granted to our NEOs during 2014. This table should be read together with the information set forth under the heading “Chief Executive Officer” contained in the Compensation Discussion and Analysis section of this Proxy Statement.2017.