DEFA14A: Kirby Corp Defends Executive Pay Amid ISS Recommendation Against Say-on-Pay Proposal

Kirby Corporation is urging stockholders to approve executive compensation (Proposal 3) despite a negative recommendation from Institutional Shareholder Services (ISS), highlighting strong financial performance and alignment with shareholder interests.

Summary

• Kirby Corporation is addressing concerns raised by Institutional Shareholder Services (ISS) regarding its executive compensation program.
• ISS recommends voting against the Say-on-Pay proposal (Proposal 3) at the upcoming annual meeting.
• Kirby defends its compensation practices, emphasizing strong financial performance and alignment with shareholder value creation.
• The company highlights a 36% increase in EBITDA, an 83% increase in EPS, and a 63% increase in return on total capital in 2023.
• Over a three-year period, EBITDA increased 55% to $557 million, EPS increased 102% to $3.72 per share, and return on total capital increased 159% to 8.3%.
• Kirby argues that overlapping performance goals in its annual incentive program (AIP) and long-term performance awards reinforce key financial results.
• The company also defends cash payments made to former Vice President and Chief Human Resources Officer, Kim B. Clarke, as reasonable consideration for her transition support and restrictive covenants.
• Kirby urges stockholders to vote FOR Proposal 3 and states that they will continue to listen to stockholders through their ongoing outreach program.

Sentiment

Score: 7

Explanation: The document conveys a positive sentiment regarding Kirby's financial performance and executive compensation practices, despite the negative recommendation from ISS. The company is actively defending its position and highlighting its alignment with shareholder interests.

Positives

• Kirby demonstrates strong financial performance in 2023, with significant increases in EBITDA, EPS, and return on total capital.
• The company's three-year annualized shareholder returns outperformed GICS industry peers and the Russell 3000 index.
• Kirby emphasizes the alignment of executive compensation with key financial metrics that drive long-term shareholder value.
• The company is responsive to stockholder feedback and committed to ongoing dialogue on compensation issues.
• The company's incentive program changes over recent years have been highly responsive to the feedback received from its stockholders and serve to strengthen the alignment with its strategic objectives.

Negatives

• ISS recommends voting against Kirby's Say-on-Pay proposal due to concerns about overlapping performance goals and lack of disclosure.
• ISS noted that Ms. Kim B. Clarke, our former Vice President and Chief Human Resources Officer, had received cash payments upon her voluntary retirement from Kirby on March 1, 2023.
• Two named executive officers (Ms. Amy D. Husted, Vice President, General Counsel and Secretary, and Mr. Scott P. Miller, Vice President and Chief Information Officer) received all long-term incentive compensation in the form of time-based restricted stock units (RSUs).

Risks

• Negative vote on the Say-on-Pay proposal could indicate shareholder dissatisfaction with executive compensation practices.
• Competitive harm could result from disclosing specific operating performance targets and metrics.
• Reliance on EBITDA and return on total capital as key performance metrics may not fully capture all aspects of company performance.
• The absence of a clear peer group for performance comparison poses a challenge in aligning executive pay with market standards.

Future Outlook

Kirby will continue its dialogue with stockholders on compensation issues and adjust executive compensation arrangements taking into account stockholder feedback.

Management Comments

• The Committee has determined that EBITDA and return on total capital best align the interests of our executive officers with our stockholders and with business strategy, emphasizing objectives designed to drive sustainable value creation over both the current year and the longer term.
• We believe the current ISS Report merits a revised analysis and respectfully requests ISS to reconsider its current recommendation and reissue a report FOR Proposal 3the advisory vote on the approval of the compensation of Kirbys named executive officers.

Industry Context

Kirby operates in the domestic tank barge and distribution and services sectors. The company emphasizes its unique position and the challenges in finding a direct peer group for performance comparison, highlighting the importance of considering the differences between Kirby and potential comparator companies.

Comparison to Industry Standards

• The document states that Kirby's three-year annualized shareholder returns outperformed GICS industry peers and the Russell 3000 index, suggesting a strong relative performance.
• However, the document also mentions the difficulty in finding a direct peer group due to Kirby's unique business mix, making a precise comparison to industry standards challenging.
• Companies like Genesis Energy, Enterprise Products Partners, and Kinder Morgan operate in related sectors (midstream energy), but their business models and capital structures may differ significantly from Kirby's.

Stakeholder Impact

• Shareholders are urged to consider the information provided in the supplemental proxy material when voting on the Say-on-Pay proposal.
• Employees may be affected by changes in executive compensation practices.
• The company's performance impacts its relationships with customers, suppliers, and creditors.

Next Steps

• Stockholders will vote on Proposal 3 at the Annual Meeting on April 26, 2024.
• Kirby will continue its dialogue with stockholders on compensation issues.
• ISS may reconsider its recommendation based on the additional information provided by Kirby.

Key Dates

Keywords

executive compensation, Say-on-Pay, proxy statement, EBITDA, return on total capital, ISS, stockholders, incentive program, performance metrics, Kirby Corporation