UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.           )

 

 

 

 

 

SkyWest, Inc.

444 South River Road   ●   St. George, UT 84790

March 17, 2016

Dear Shareholder:

You are invited to attend the Annual Meeting of Shareholders of SkyWest, Inc. scheduled to be held at 11:00 a.m., Tuesday, May 3, 2016, at our headquarters located at 444 South River Road, St. George, Utah, 84790.

The accompanying Notice of Annual Meeting of Shareholders and Proxy Statement describe the items to be considered and acted upon by shareholders.

Your vote is very important. Whether you plan to attend the Annual Meeting or not, we urge you to vote your shares as soon as possible. This will ensure representation of your shares at the Annual Meeting if you are unable to attend.

We are pleased to make these proxy materials available over the Internet, which we believe increases the efficiency and reduces the expense of our annual meeting process. As a result, we are mailing to shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of paper copies of these proxy materials and our 2015 Annual Report. The Notice contains instructions on how to access those documents over the Internet or request that a full set of printed materials be sent to you. The Notice also gives instructions on how to vote your shares.

We look forward to seeing you at the Annual Meeting.

Sincerely,

Jerry C. Atkin

Chairman of the Board

SkyWest, Inc.

444 South River Road   ●   St. George, UT 84790

NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS

OF SKYWEST, INC.

 

By authorization of the Board of Directors

Jerry C. Atkin

Chairman of the Board

March 17, 2016

Proxy Statement for the

Annual Meeting of Shareholders of

SKYWEST, INC.

To Be Held on Tuesday, May 3, 2016

TABLE OF CONTENTS

 

 

 

 

PROXY STATEMENT

FOR THE

ANNUAL MEETING OF SHAREHOLDERS

OF

SKYWEST, INC.

TUESDAY, MAY 3, 2016

OVERVIEW

Solicitation

This Proxy Statement, the accompanying Notice of Annual Meeting, proxy card and the Annual Report to Shareholders of SkyWest, Inc. (the “Company” or “SkyWest”) are being mailed on or about March 17, 2016. The Board of Directors of the Company (the “Board”) is soliciting your proxy to vote your shares at the Annual Meeting of the Company’s Shareholders to be held on May 3, 2016 (the “Meeting”). The Board is soliciting your proxy in an effort to give all shareholders of record the opportunity to vote on matters that will be presented at the Meeting. This Proxy Statement provides information to assist you in voting your shares.

What is a proxy?

A proxy is your legal designation of another person to vote on your behalf. You are giving the individuals appointed by the Board as proxies (Jerry C. Atkin, Russell A. Childs and Robert J. Simmons) the authority to vote your shares in the manner you indicate.

Why did I receive more than one notice?

You may receive multiple notices if you hold your shares in different ways (e.g., joint tenancy, trusts, or custodial accounts) or in multiple accounts. If your shares are held by a broker (i.e., in “street name”), you will receive your notice or other voting information from your broker. In any case, you should vote for each notice you receive.

Voting Information

Who is qualified to vote?

You are qualified to receive notice of and to vote at the Meeting if you owned shares of common stock of SkyWest (the “Common Stock”) at the close of business on the record date of Friday, March 4, 2016.

How many shares of Common Stock may vote at the Meeting?

As of March 4, 2016, there were 51,353,043 shares of Common Stock outstanding and entitled to vote. Each share of Common Stock is entitled to one vote on each matter presented at the Meeting.

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

If your shares are registered directly in your name with Zion’s First National Bank, the Company’s transfer agent, you are a “shareholder of record.” If your shares are held in the name of a brokerage, bank, trust or other nominee as a custodian, you are a “street name” holder.

How can I vote at the Meeting?

You may vote in person by attending the Meeting. You may also vote in advance over the Internet, or by telephone, or you may request a complete set of traditional proxy materials and vote your proxy by mail. To vote your proxy using the Internet or telephone, see the instructions on the proxy form and have the proxy form available when you access the Internet website or place your telephone call. To vote your proxy by mail, mark your vote on the enclosed proxy card, then follow the instructions on the card.

What are the Board’s recommendations on how I should vote my shares?

The Board recommends that you vote your shares as follows:

 

What are my choices when voting?

 

 

 

How will my shares be voted if I do not specify how they should be voted?

If you execute the enclosed proxy card without indicating how you want your shares to be voted, the proxies appointed by the Board will vote as recommended by the Board and described previously in this section.

How will withheld votes, abstentions and broker non‑votes be treated?

Withheld votes, abstentions and broker non‑votes will be deemed as “present” at the Meeting, and will be counted for quorum purposes only.

Can I change my vote?

You may revoke your proxy before the time of voting at the Meeting in any of the following ways:

What vote will be required to approve each proposal?

Proposal 1 provides that the ten director‑nominees who receive a majority of the votes cast with respect to his or her election will be elected as directors of the Company. This means that the number of shares voted “for” the election of a director must exceed the number of shares voted “against” the election of that director.

Proposals 2 and 3 will be approved if the number of votes cast, in person or by proxy, in favor of a particular proposal exceeds the number of votes cast in opposition to the proposal. Proposal 2 is an advisory vote only, and has no binding effect on the Board or the Company.

Who will count the votes?

Representatives from Zion’s First National Bank, the Company’s transfer agent, or other individuals designated by the Board, will count the votes and serve as inspectors of election. The inspectors of election will be present at the Meeting.

Who will pay the cost of this proxy solicitation?

The Company will pay the costs of soliciting proxies. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their nominees, for reasonable expenses incurred by them in forwarding proxy materials to beneficial owners of shares of the Common Stock.

Is this Proxy Statement the only way proxies are being solicited for use at the Meeting?

Yes. The Company does not intend to employ any other methods of solicitation.

How are proxy materials being delivered?

The Company is pleased to take advantage of U.S. Securities and Exchange Commission rules that allow companies to furnish their proxy materials over the Internet. As a result, the Company is mailing to most of its shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this Proxy Statement and the Company’s 2015 Annual Report to Shareholders. The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how to request a paper copy of the Company’s proxy materials, including this Proxy Statement, the 2015 Annual Report to Shareholders and a form of proxy card or voting instruction card. All shareholders who do not receive a Notice will receive a paper copy of the proxy materials by mail. The Company believes this process will allow it to provide its shareholders with the information they need in a more efficient manner, while reducing the environmental impact and lowering the costs of printing and distributing these proxy materials.

PROPOSAL 1

ELECTION OF DIRECTORS

Composition of the Board

The Board currently consists of ten directors. All directors serve a one‑year term and are subject to re‑election each year.

The current composition of the Board is:

The Board Recommends That Shareholders Vote FOR All Ten Nominees Listed Below.

Nominees for Election as Directors

At the Meeting, the Company proposes to elect ten directors to hold office until the 2017 Annual Meeting of Shareholders and until their successors have been elected and have qualified. The ten nominees for election at the Meeting are listed below. All of the nominees are currently serving as a director of the Company and have consented to be named as a nominee. Shareholders voting in person or by proxy at the Meeting may only vote for ten nominees. If, prior to the Meeting, any of the nominees becomes unable to serve as a director, the Board may designate a substitute nominee. In that event, the persons named as proxies intend to vote for the substitute nominee designated by the Board.

The Board and the Nominating and Corporate Governance Committee believe that each of the following nominees possesses the experience and qualifications that directors of the Company should possess, as described in detail below, and that the experience and qualifications of each nominee compliments the experience and qualifications of the other nominees. The experience and qualifications of each nominee, including information regarding the specific experience, qualifications, attributes and skills that led the Board and its Nominating and Corporate Governance Committee to conclude that he or she should serve as a director of the Company at the present time, in light of the Company’s business and structure, are set forth on the following pages.

Jerry C. Atkin

 

W. Steve Albrecht

 

Russell A. Childs

 

 

Henry J. Eyring

 

Meredith S. Madden

 

 

Ronald J. Mittelstaedt

 

Andrew C. Roberts

 

Keith E. Smith

 

Steven F. Udvar‑Hazy

 

James L. Welch

 

 

EXECUTIVE OFFICERS

In addition to Russell A. Childs, the Chief Executive Officer of the Company, whose biographical information is set forth above, the following individuals served as executive officers of the Company or its operating subsidiaries during 2015.

Robert J. Simmons, 53 is the Chief Financial Officer of Company, SkyWest Airlines and ExpressJet. He is responsible for the areas of finance, accounting, treasury and investor relations for the Company and its subsidiaries.

From 2009 until his appointment as Chief Financial Officer in March 2015, Mr. Simmons served as a Partner with Bendigo Partners, LLC. (“Bendigo Partners”), a privately held firm focused on technology based financial services as private equity investors and operational consultants. In his role with Bendigo Partners, Mr. Simmons was responsible for portfolio management. He served as Chief Financial Officer for E*TRADE Financial Corporation from 2003 to 2008 and as Corporate Treasurer for E*TRADE Financial Corporation from 2001 to 2003. He has accumulated more than 29 years of finance and treasury experience in various leadership positions at companies including Oracle, Iomega, and Bank of America.  Mr. Simmons holds a master’s degree in business administration, with an emphasis in finance from the Kellogg Graduate School of Management at Northwestern University, and graduated magna cum laude with a bachelor’s degree in international business from Brigham Young University. 

Wade  J. Steel, 40 is the Chief Commercial Officer of the Company, SkyWest Airlines and ExpressJet. He is responsible for the Company’s contractual relationships with American Airlines, Inc. (“American”), Delta Airlines, Inc. (“Delta”), United Airlines, Inc. (“United”) and Alaska Airlines, Inc. (“Alaska”), development of new business opportunities with network airlines, fleet management and information technology. He also plays a vital role for the strategic planning and development opportunities of the Company.

Mr. Steel was initially employed with the Company in March 2007 as Director of Financial Planning and Analysis. He held this position until May 2011, when he was appointed to serve as Vice President—Controller for SkyWest Airlines. From May 2014 until Mr. Steel’s appointment as Chief Commercial Officer of the Company in March 2015, he served as the Executive Vice President and acting Chief Financial Officer of the Company, with responsibility for the areas of finance, treasury, investor relations and information technology for the Company and its subsidiaries. Mr. Steel is a certified public accountant.

Michael B. Thompson, 40, is the Chief Operating Officer of SkyWest Airlines. He is responsible for oversight of all aspects of SkyWest Airlines’ operations, including safety, quality, flight operations, maintenance and customer service. He also oversees SkyWest Airline’s operational relationships with American, Delta, United and Alaska.

Mr. Thompson was initially employed with the Company in April 2001 as Operations Analyst and was later named Director of Market Planning. In 2007 he was named Vice President of Market Development of SkyWest Airlines, in which position he served until May 2014, when he was appointed to serve as Chief Operating Officer of SkyWest Airlines.

Terry M. Vais,  48, is the Chief Operating Officer of ExpressJet. Mr. Vais is responsible for oversight of all aspects of ExpressJet’s operations, including safety, quality, flight operations, maintenance and customer service. He also oversees ExpressJet’s operational relationships with its major airline partners, including American, Delta and United.

Prior to his appointment as Chief Operating Officer of ExpressJet in September 2015, Mr. Vais served as Vice President of Operations, Planning and Support for ExpressJet. He has accumulated more than 25 years of airline experience in various leadership positions.

Eric J. Woodward,  44, is the Chief Accounting Officer of the Company, SkyWest Airlines and ExpressJet. He is responsible for the oversight of the Company’s financial accounting practices, internal controls and reporting to the U.S. Securities and Exchange Commission.

Mr. Woodward was employed in various other capacities with the Company from April 2004 until April 2007 and served as the Company’s Vice President—Controller from April 2007 until May 2011, when he was appointed to serve as Chief Accounting Officer of the Company. Mr. Woodward is a certified public accountant.

CORPORATE GOVERNANCE

Corporate Governance Guidelines

The Board adopted Corporate Governance Guidelines on August 2, 2005 and has periodically reviewed and ratified those guidelines, most recently on February 10, 2016. The Corporate Governance Guidelines can be accessed at the Company’s website, inc.skywest.com. The Company’s Corporate Governance Guidelines supplement the Company’s Bylaws and the charters of the Board’s committees. Excerpts from the principal sections of the Company’s Corporate Governance Guidelines are noted below:

Director Independence

At a minimum, the Board will have a majority of directors who meet the criteria for independence as required by The Nasdaq Global Select Market.

Director Qualifications

Criteria for Membership

The Company’s Nominating and Corporate Governance Committee is responsible for annually reviewing with the Board the desired skills and characteristics of directors, as well as the composition of the Board as a whole.

Terms and Limitations

All directors currently stand for election each year. The Board does not believe it should establish a limit on the number of times that a director may stand for election.

Retirement

Directors are required to submit their resignation from the Board when their term expires upon reaching the age of 72 years old. The Board will accept the resignation unless the Nominating and Corporate Governance Committee recommends otherwise. Directors generally will not be nominated for election following their 72nd birthday.

Ownership of Company Stock

Directors are encouraged to own shares of Common Stock having a value equal to three times the amount of their annual cash retainer.

Director Responsibilities

General Responsibilities

The basic responsibility of directors is to exercise their business judgment to act in what they reasonably believe to be in the best interests of the Company and its shareholders.

Oversight of Management

The Board is responsible to encourage the Company’s management to effectively implement policies and strategies developed by the Board, and to provide dynamic leadership of the Company.

Board Meetings and Materials

Frequency of Meetings

The Board has four regularly scheduled meetings per year. As determined necessary by the Board and in order to address the Company’s needs, special meetings of the Board are convened from time to time.

Meeting Responsibilities

Absent extraordinary circumstances, directors of the Company should attend Board meetings, meetings of the committee on which they serve and shareholder meetings. The Chairman of the Board is responsible for establishing the agenda for each Board meeting. Each director is free to suggest the inclusion of items on the agenda and to raise at any Board meeting subjects that are not on the agenda for that meeting.

Executive Sessions of Independent Directors

The Company’s independent directors meet in executive session regularly, generally quarterly. The independent directors may either choose one director annually to serve as the Lead Independent Director and to preside at all executive sessions or establish a procedure by which a Lead Independent Director will be selected. The independent directors of the Company have chosen Mr. Udvar‑Hazy to serve as the Lead Independent Director.

Committees

The Board has four standing committees: (1) Audit and Finance, (2) Compensation, (3) Nominating and Corporate Governance and (4) Safety and Compliance. The Board may, from time to time, establish or maintain additional committees as the Board deems necessary or appropriate.

Director Compensation

The form and amount of director compensation is determined by the Board based on general principles established on the Nominating and Corporate Governance Committee’s recommendation. These principles are in accordance with the policies and principles set forth in the Nominating and Corporate Governance Committee’s charter and are intended to be consistent with rules established by The Nasdaq Global Select Market, including those relating to director independence and to compensation of Audit and Finance Committee members.

CEO Evaluation and Management Succession

The Nominating and Corporate Governance Committee conducts an annual review to assess the performance of the Company’s Chief Executive Officer. The Nominating and Corporate Governance Committee communicates the results of its review to the other directors in a meeting that is not attended by the Chief Executive Officer. The directors of the Company, excluding the Chief Executive Officer, review the Nominating and Corporate Governance Committee’s report to assess the Chief Executive Officer’s leadership in the long and short‑term, as well as the Company’s long‑term succession plans.

Annual Evaluations

The Board conducts an annual evaluation to determine if the Board and its committees are functioning effectively. The Nominating and Corporate Governance Committee solicits comments from all of the Company’s directors and reports annually to the Board with an assessment of the Board’s performance. Each of the Board’s standing committees conducts an annual evaluation to assess the performance of the applicable committee.

Review and Access to Guidelines

The Nominating and Corporate Governance Committee reviews the Company’s Corporate Governance Guidelines at least annually, then, as it deems appropriate, recommends amendments to the Board.

Board Leadership Structure

Although the Board does not have a formal policy on whether the roles of Chairman of the Board and Chief Executive Officer should be combined or separated, from 1991 until January 2016, Jerry C. Atkin served as both Chairman of the Board and Chief Executive Officer of the Company. In January 2016, the Board appointed Russell A. Childs to serve as the Chief Executive Officer of the Company, which resulted in the separation of the roles of Chairman of the Board and Chief Executive Officer. Currently, Mr. Atkin serves as Chairman of the Board and Mr. Childs serves as the Chief Executive Officer. The Board believes that such separation allows Mr. Childs to focus his time and energy on managing the Company’s business on a day-to-day basis, while also leveraging Mr. Atkin’s background with the Company, perspective and vast experience in the aviation industry as he devotes his time and attention to matters of Board oversight.

The Company is committed to independent Board oversight. Pursuant to the Company’s Corporate Governance Guidelines, all of the Company’s directors (other than Messrs. Atkin and Childs) meet the standards of independence applicable to the Company, and the Board has designated Steven F. Udvar-Hazy as Lead Independent Director. As Lead Independent Director, Mr. Udvar-Hazy is empowered to prepare agendas for and conduct meetings of the non-management directors, communicate with the Chairman of the Board, disseminate information to the Board, and raise issues with management on behalf of the independent directors when appropriate. The Board’s independent oversight function is enhanced by the fact that the Audit and Finance, Compensation, Nominating and Corporate Governance and Safety and Compliance Committees are comprised entirely of independent directors.

The Board believes no single leadership model is right for all companies at all times. The Board recognizes that, depending on the circumstances, other leadership models may be appropriate. The independent directors and the Nominating and Corporate Governance Committee regularly review the Company’s leadership structure and, depending on the Company’s needs and the available resources, the Board may modify the Company’s existing leadership structure. 

Communications with the Board

Shareholders and other interested parties may communicate with one or more directors or the non‑management directors as a group in writing by regular mail. The following address may be used by those who wish to send such communications by regular mail:

 

Code of Ethics

The Company has adopted a Code of Ethics for Directors and Senior Executive Officers (the “Code of Ethics”), which is available on the Company’s website, inc.skywest.com. The Code of Ethics includes the following principles related to the Company’s directors and executive officers:

Risk Oversight

The Board and its committees are involved in overseeing risk associated with the Company and its operations. The Board and the Audit and Finance Committee monitor the Company’s credit risk, liquidity risk, regulatory risk, operational risk and enterprise risk by regular reviews with management and internal and external auditors and other advisors. In its periodic meetings with the internal auditors and the Company’s independent accountants, the Audit and Finance Committee discusses the scope and plan for the internal audit and includes management in its review of accounting and financial controls, assessment of business risks, legal and ethical compliance programs and related-party transactions. The Board and the Nominating and Corporate Governance Committee monitor the Company’s governance and succession risk by regular review with management and outside advisors. The Board and the Compensation Committee monitor CEO succession and the Company’s compensation policies and related risks by regular reviews with management and the Compensation Committee’s outside advisors. The Board and the Safety and Compliance Committee monitor management’s administration of airline flight operations safety and compliance with safety regulations.

Whistleblower Hotline

The Company has established a whistleblower hotline that enables employees, customers, suppliers and shareholders of the Company and its subsidiaries, as well as other interested parties, to submit confidential and anonymous reports of suspected or actual violations of the Code of Ethics. The hotline number is (888) 273‑9994.

MEETINGS AND COMMITTEES OF THE BOARD

The Board

Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or her duties and to attend all Board, committee and shareholders’ meetings. The Board met five times during 2015, all of which were regularly‑scheduled meetings. All directors attended at least 75% of the meetings of the Board and of the committees on which he or she served during the year ended December 31, 2015 and seven of the Company’s eight directors who were then serving attended the Annual Meeting of the Company’s Shareholders held on May 5, 2015.

Committees of the Board

The Board has four standing committees to facilitate and assist the Board in the execution of its responsibilities: (1) Audit and Finance, (2) Compensation, (3) Nominating and Corporate Governance and (4) Safety and Compliance. All the committees are comprised solely of non‑employee, independent directors as defined by The Nasdaq Global Select Market listing standards. Charters for each committee are available on the Company’s website, inc.skywest.com.

The table below shows current membership for each of the standing Board committees.

 

*            Committee Chairman

Audit and Finance Committee

The Audit and Finance Committee has five members and met seven times during the year ended December 31, 2015. The Board has determined that Mr. W. Steve Albrecht, Chairman of the Audit and Finance Committee, is an “audit committee financial expert” within the meaning established by the U.S. Securities and Exchange Commission.

The Audit and Finance Committee’s responsibilities, which are discussed in further detail in its charter, include the responsibility to:

Additional information regarding the Audit and Finance Committee’s processes and procedures is addressed below under the heading “Audit and Finance Committee Disclosure.” The Report of the Audit and Finance Committee is set forth on page 55 of this Proxy Statement.

Compensation Committee

The Compensation Committee has five members and met four times during the year ended December 31, 2015. The Compensation Committee’s responsibilities, which are discussed in detail in its charter, include the responsibility to:

Additional information regarding the Compensation Committee’s processes and procedures for consideration of executive compensation are addressed below under the Heading “Compensation Discussion and Analysis.” The report of the Compensation Committee is set forth on page 33 of this Proxy Statement.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee has four members and met once during the year ended December 31, 2015. The Nominating and Corporate Governance Committee’s responsibilities, which are discussed in detail in its charter, include the responsibility to:

Safety and Compliance Committee

The Safety and Compliance Committee has four members and met twice during the year ended December 31, 2015. The responsibilities of the Safety and Compliance Committee, which are discussed in detail in its charter, include the responsibility to:

Nomination Process

The policy of the Nominating and Corporate Governance Committee is to consider properly submitted shareholder recommendations for candidates to serve as directors of the Company. In evaluating those recommendations, the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria described below. Any shareholder wishing to recommend a candidate for consideration by the Nominating and Corporate Governance Committee should submit a recommendation in writing indicating the candidate’s qualifications and other relevant biographical information and provide confirmation of the candidate’s consent to serve as a director. This information should be addressed to Jerry C. Atkin, Chairman of the Board of the Company, 444 South River Road, St. George, Utah 84790.

As contemplated by the Company’s Corporate Governance Guidelines, the Nominating and Corporate Governance Committee reviews the appropriate skills and characteristics required of directors in the context of the current composition of the Board, at least annually. There is currently no set of specific minimum qualifications that must be met by a nominee recommended by the Nominating and Corporate Governance Committee, as different factors may assume greater or lesser significance at particular times and the needs of the Board may vary in light of its composition and the Nominating and Corporate Governance Committee’s perceptions about future issues and needs. Among the factors the Nominating and Corporate Governance Committee considers, which are outlined in the Corporate Governance Guidelines, are independence, diversity, age, skills, integrity and moral responsibility, policy‑making experience, ability to work constructively with the Company’s management and directors, capacity to evaluate strategy and reach sound conclusions, availability of time and awareness of the social, political and economic environment.

The Nominating and Corporate Governance Committee utilizes a variety of methods for identifying and evaluating director nominees. The Nominating and Corporate Governance Committee assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee considers various potential candidates for director. Candidates may come to the attention of the Nominating and Corporate Governance Committee through various means, including current directors, professional search firms, shareholder recommendations or other referrals. Candidates are evaluated at meetings of the Nominating and Corporate Governance Committee, and may be considered at any point during the year. All director‑nominee recommendations which are properly submitted to the Nominating and Corporate Governance Committee are aggregated and considered by the Nominating and Corporate Governance Committee at a meeting prior to the issuance of the proxy statement for the next annual meeting of shareholders. Any materials provided by a shareholder in connection with the recommendation of a director candidate are forwarded to the Nominating and Corporate Governance Committee, which considers the recommended candidate in light of the director qualifications discussed above. The Nominating and Corporate Governance Committee also reviews materials provided by professional search firms, if applicable, or other parties in connection with a candidate who is not proposed by a shareholder. In evaluating such recommendations, the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board. The Nominating and Corporate Governance Committee has, on occasion, engaged professional search firms to assist in identifying qualified candidates for Board service. When such firms have been engaged, the Nominating and Corporate Governance Committee has utilized their services principally for the purpose of identifying and screening potential candidates and conducting background research; however, the members of the Nominating and Corporate Governance Committee, as well as other directors of the Company, have conducted interviews with prospective candidates and have performed other functions in completing the nomination process.

Compensation Committee Interlocks and Insider Participation

Keith E. Smith, Ronald J. Mittelstaedt, Henry J. Eyring, Steven F. Udvar-Hazy, Margaret S. Billson and Robert G. Sarver served as members of the Compensation Committee at various times during the year ended December 31, 2015. None of the individuals who served on the Compensation Committee during the year ended December 31, 2015, was an officer or employee of the Company in 2015 or any time prior thereto. None of the members of the Compensation Committee during the year ended December 31, 2015, had any relationship with the Company requiring disclosure under Item 404 of Regulation S‑K promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). None of the executive officers of the Company served as a member of the Compensation Committee or of any similar committee of any other company whose executive officer(s) served as a director of the Company.

COMPENSATION DISCUSSION AND ANALYSIS

The following narrative compensation discussion and analysis provides information regarding the Company’s executive compensation objectives, principles, practices and decisions as they relate to the following named executive officers of the Company (the “Executives”):

The compensation discussion and analysis provides narrative perspective to the tables and disclosure in the tables following this section.

Current Year Accomplishments

The Company’s income before income taxes improved to $194 million in 2015, from a loss before income taxes of $16 million in 2014.  Operating income improved to $234 million in 2015, from $25 million in 2014. The 2014 results included a $75 million pre-tax special items operating expense primarily related to fleet reductions. Such improvement was driven, in part, by the following accomplishments:

These accomplishments not only improved the Company’s performance, but the Board believes these accomplishments will contribute to improved financial performance in future years.

Compensation Objectives and Principles

The overall objective of the Company’s executive compensation programs is to create long‑term value for the Company’s shareholders by attracting and retaining talented executives that effectively manage the Company in a manner that is consistent with the long‑term interest of shareholders.

Accordingly, the executive compensation program incorporates the following principles:

Executive Compensation Procedures

To attain the Company’s executive compensation objectives and to implement the underlying compensation principles, the Company follows the following procedures:

Role of the Committee.  The Compensation Committee has responsibility for establishing and monitoring the executive compensation programs and for making decisions regarding executive compensation. The Chief Executive regularly attends the Compensation Committee meetings. The Compensation Committee also meets regularly in executive sessions. The Compensation Committee recommends the compensation package of the Chief Executive to the Board, which then sets his compensation. The Compensation Committee also considers the recommendations of the Chief Executive with respect to compensation of the other Executives, and after reviewing such recommendations, sets their compensation. The Compensation Committee also monitors, administers and approves awards under the various incentive compensation plans for all levels within the Company, including awards under the Company’s annual bonus plan and 2010 Long‑Term Incentive Plan (the “2010 Plan”). As permitted by the 2010 Plan, the Compensation Committee has authorized designated directors of the Company to approve interim awards under the 2010 Plan to non-Executives on a limited basis between meetings of the Compensation Committee.

The Compensation Committee relies on its judgment in making compensation decisions in addition to reviewing relevant information and results. When setting total compensation for each of the Executives, the Compensation Committee reviews tally sheets which show the Executive’s current compensation, including base pay, annual bonus objectives, long‑term, equity‑based compensation objectives, and deferred compensation retirement funding. The Compensation Committee has the sole discretion to award compensation and make adjustments to awards based on the Compensation Committee’s review of relevant information and other unusual or non‑recurring items.

The Compensation Committee also occasionally evaluates surveys and other available data regarding the executive compensation programs of other regional and major air carriers in order to determine competitiveness of the

Company’s executive compensation programs. The Compensation Committee performed such a review in 2015 that included a review of the executive compensation practices of peer transportation companies including, but not limited to Allegiant, Hawaiian Holdings, JetBlue, Republic Airways, Virgin America, Alaska Air Group, Hub Group, Werner Enterprises and Spirit Airlines. The Compensation Committee did rely upon such review of peer company compensation practices. The executive compensation procedures and the Compensation Committee assessment process are designed to be flexible in an effort to promptly respond to the evolving business environment and individual circumstances.

Role of Consultants.  Neither the Company nor the Compensation Committee has any contractual arrangement with any compensation consultant for determining the amount or particular form of any Executive’s compensation. During 2014 and 2015, the Company and Compensation Committee received advice from Frederic W. Cook & Co., Inc. (“F.W. Cook”) with respect to executive compensation practices and trends generally and within the airline industry. The Company and the Compensation Committee retained F.W. Cook to make recommendations regarding the specific amount or forms of compensation awarded to Executives in 2014 and 2015. The Company and the Compensation Committee will continue to periodically seek the advice of such consultants, as deemed necessary, in the future. The Compensation Committee has sole authority to hire and fire external compensation consultants.

No Employment and Severance Agreements.  The Executives do not have employment, severance or change‑in‑control agreements, although the vesting of stock options, restricted stock, restricted stock units, performance shares and performance units generally is accelerated upon a change in control of the Company. The Executives serve at the will of the Board, which enables the Board to terminate the employment of any Executive with discretion as to the terms of any severance. This is consistent with the Company’s performance‑based employment and compensation philosophy.

Compensation Committee Consideration of Shareholder Advisory Vote.  At the Company’s Annual Meeting of Shareholders held in May 2015, the Company submitted the compensation of its named executive officers to the Company’s shareholders in a non‑binding vote. The Company’s executive compensation program received the support of more than 63% of the shares represented at the meeting. The Compensation Committee considered the results of the 2015 vote and views the outcome as evidence of positive shareholder support of its executive compensation decisions and policies. The Compensation Committee made some revisions to the Company’s executive compensation program for 2015 in an effort to better align the compensation packages of the Executives with the executive compensation programs of other regional carriers and major airlines. The Compensation Committee will continue to review completed compensation surveys and future shareholder voting results, including the voting results with respect to “Proposal 2—Advisory Vote on Executive Compensation” described in this Proxy Statement, and determine whether to make any changes to the Company’s executive compensation program in light of such surveys and voting results.

Elements of Compensation

The Company’s executive compensation objectives and principles are implemented through the use of the following principal elements of compensation, each discussed more fully below:

The compensation objectives for each Executive are more fully described in the following paragraphs.

Salary.  Salary is provided with the objective of paying for the underlying role and responsibility associated with the Executive’s position, which the Compensation Committee believes allows the Company to attract and retain qualified executives. The Executives’ salaries are set at levels that the Compensation Committee believes are generally competitive with the compensation paid to officers in similar positions at other airlines. Salary adjustments are considered annually and influenced by growth of the Company’s operations, individual performance, changes in responsibility, changes in cost of living, and other factors. The salaries of the Executives are set forth in the Summary Compensation Table immediately following this section.

Annual Bonus.  In an effort to encourage achievement of the Company’s objectives, an annual performance‑based bonus plan is maintained for the Executives. The combination of salary and annual bonuses is intended to result in a cash compensation package for each Executive that falls within competitive market standards as determined by the Compensation Committee based on its review and understanding of other regional and major air carrier executive compensation programs when the performance measures are met. The purpose of the bonus plan is to reward the Executives with an annual cash bonus in an amount that correlates (i) in part, to the level of pre-tax earnings of the Company or its operating subsidiaries achieved for the year; (ii) in part, to the level of cash flow from operations of the Company or its operating subsidiaries achieved for the year; and (iii) in part, to the achievement of specific operational goals during the year. The 2015 annual bonus objective of 100% of salary for Messrs. Atkin and Childs, was allocated between 65% of salary based on  a pre-tax earnings target established by the Compensation Committee, 10% of salary based on a  cash flow from operations target established by the Compensation Committee and 25% of salary based on the achievement of specific operational targets. The 2015 annual bonus objective of 80% of salary for Messrs. Steel, Simmons and Thompson was allocated between 52% of salary based on  a pre-tax earnings target established by the Compensation Committee, 8% of salary based on  a cash flow from operations target established by the Compensation Committee and 20% of salary based on the achievement of specific operational targets. Mr. Vais was appointed Chief Operating Officer of ExpressJet during 2015. Mr. Vais 2015 weighted annual bonus objective was 68% of his salary, allocated between 44% of salary based on  a pre-tax earnings target , 7% of salary based on  a cash flow from operations target and 17% of salary based on the achievement of specific operational targets. The differing percentages for the Executives are due to differing entity level responsibilities. Details are explained below under the headings “2015 Pre-tax Earnings Target Component”, “2015 Cash Flow from Operations Target Component” and “2015 Operational Targets Component”.

In the case of Messrs. Atkin, Childs, Steel and Simmons, the applicable pre-tax earnings target, cash flow from operations target and operational targets were based on the pre-tax earnings, the cash flow from operations and the operational performance of both operating subsidiaries, SkyWest Airlines (weighted 50%) and ExpressJet (weighted 50%). Because of his primary responsibility with respect to operations of SkyWest Airlines, Mr. Thompson’s pre-tax earnings, cash flow from operations and operational performance targets were set at the designated amounts at the SkyWest Airlines level. Similarly, because Mr. Vais was principally engaged with respect to the operations of ExpressJet, his pre-tax earnings, cash flow from operations and operational performance targets were set at the designated amounts at the ExpressJet level. At year‑end, the Compensation Committee reviewed the actual pre-tax earnings, cash flow from operations and operational performance for the year, as well as other items taken into account in setting the annual pre-tax earnings, cash flow from operations and operational performance targets, and determined the extent to which the applicable goals were met.

2015 Pre-tax Earnings Target Component.  In determining the annual pre-tax earnings and other financial targets to be used for the purpose of determining each bonus amount for the Executives, the Compensation Committee began with a targeted pre-tax earnings objective which the Compensation Committee considered a key measure of the financial health of the Company and the Board believes is reflective of the Company’s development of shareholder value. The Compensation Committee then considered the planned budget for the year and other unusual or non‑recurring items, including changes in pro-rate flying market yields and fuel price changes. The above measurement was identified to encourage continued focus on overall pre-tax earnings and to facilitate the exchange of best practices between the operating subsidiaries of the Company.

2015 Cash Flow from Operations Target Component.  In determining the annual cash flow from operations target to be used for the purpose of determining each bonus amount for the Executives, the Compensation Committee began with a targeted cash flow from operations objective which the Compensation Committee considered a key measure of the financial health of the Company and the Board believes is reflective of the Company’s development of shareholder value. The Compensation Committee then considered the planned budget for the year and other unusual or non‑recurring items. The above measurement was identified to encourage continued focus on overall generation of free cash flow from operations and to facilitate the continued strength of the Company’s balance sheet.

2015 Operational Targets Component.  A portion of the Executives’ annual bonus is based on their achievement of operational targets established in advance each year. The Compensation Committee has adopted this approach because it believes the use of operational goals allow awards to reflect the operational achievements of operating subsidiaries of the Company that may not be reflected by corporate financial performance. The actual amount of the bonus payment for each Executive is determined by the Compensation Committee based on the Company’s and/or applicable subsidiary’s achievement of operational goals.

The corresponding results for each Executive performance-based annual bonus for the year ended December 31, 2015, are set forth below as a percentage of each Executive’s salary.

 

 

Amount of 2015 Performance‑Based Annual Bonus.  The total annual performance‑based bonus amounts payable to the Executives for 2015 were: Mr. Atkin—$606,093; Mr. Childs—$464,277; Mr. Steel—$270,125; Mr. Simmons—$337,656; Mr. Thompson—$235,624 and Mr. Vais—$163,371. Those amounts are included in the amounts shown in the Summary Compensation Table below under the caption heading “Non‑Equity Incentive Plan Compensation.”

2016 Annual Bonus.  The Compensation Committee determined to make some changes to the annual bonus metrics for 2016 in an effort to better align the bonus with the creation of shareholder value and to align the compensation packages of the Executives with the executive compensation programs of other regional carriers and major airlines. The bonus objective will be based on two metrics, pre-tax earnings (weighted 75%) and operating performance (weighted 25%).

Long‑Term Awards.  The Company grants discretionary long‑term incentive awards, in the form of stock options, restricted stock units and performance shares to the Executives annually.

Long‑term incentive awards are made to encourage the Executives to continue their engagement with the Company throughout the vesting periods of the awards and to align management and shareholder interests. In making awards to the Executives, the grant size and the appropriate mix of equity‑ based awards are considered. The

Compensation Committee generally grants long‑term incentive awards at its first meeting of each year. Except in the case of accelerated vesting upon a change in control of the Company, long‑term incentive awards currently vest only if the Executive remains employed by the Company for three years from the date of grant, with the exception of stock options which vest one third at each annual anniversary of the date of grant over a three year period. The Compensation Committee believes the three‑year cliff‑vesting schedule for non-stock option grants and pro rata vesting over three years for stock options assists in retaining Executives and encourages the Executives to focus on the Company’s long‑term performance. 

In granting stock options, restricted stock units and performance shares to the Executives, the Compensation Committee also considers the impact of the grant on the Company’s financial performance, as determined in accordance with the requirements of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (ASC Topic 718). For long‑term equity awards, the Company records expense in accordance with ASC Topic 718. The amount of expense recorded pursuant to ASC Topic 718 may vary from the corresponding compensation value used in determining the amount of the awards.

Amount and allocation of grant—For 2015 the total annual targeted long‑term incentive grant value was 125% of salary and targeted annual bonus for Messrs. Atkin and Childs and 100% of salary and targeted annual bonus for Messrs. Steel, Simmons and Thompson. Mr. Vais’ targeted long‑term incentive grant value was awarded on a pro-rata basis at 70% of salary and targeted annual bonus through his September 2015 appointment as executive officer of ExpressJet and at 100% of salary and targeted annual bonus following his appointment. The Compensation Committee established these annual targeted amounts to provide a competitive pay package and to ensure that a large portion of each Executive’s compensation was based on continuing long‑term service and correlated to the creation of shareholder value. This has been the Compensation Committee’s policy for several years, but is subject to review and continuation or modification each year by the Compensation Committee. The targeted levels of long‑term incentive awards for Messrs. Atkin and Childs are higher than the targeted levels of long‑term incentive awards for other Executives as a result of their overall responsibility for the long‑term success of the Company. Each Executive’s 2015 long‑term incentive award was allocated among three types of long‑term awards as follows: stock options, restricted stock units and performance shares.

The value of stock options, restricted stock units and performance shares is directly related to the value of the Common Stock and correlates to long‑term shareholder value. Stock options, restricted stock unit and performance share grants in 2015 were made pursuant to the Company’s 2010 Plan, as shown in greater detail below and in the table labeled “Grants of Plan Based Awards.”

The following table summarizes the number and nature of long‑term awards granted to the Executives by the Company on February 17, 2015, and in the case of mid-year position changes, April 2, 2015 and September 9, 2015, under the 2010 Plan.

 

Stock Options—Options are granted with an exercise price equal to the closing price per share on the date of grant and vest one third at each annual anniversary of the date of grant over a three year period. Grants are made on a systematic schedule, generally one grant per year made at the first Compensation Committee meeting of each year.

The purpose of stock options is to tie a significant percentage of the award’s ultimate value to increases in the market price of the Common Stock, thereby rewarding increased value to the shareholders. A stock option only has a value to the extent the value of the underlying shares on the exercise date exceeds the exercise price. Accordingly, stock options provide compensation only if the underlying share price increases over the option term and the Executive’s employment continues through the vesting date.

The size of the grant for each Executive is calculated by determining the number of shares with a theoretical future value equal to the targeted compensation for stock options, assuming each option will have a value equal to 33% of its exercise price. This value generally correlates to the ASC Topic 718 value of the awards. The targeted stock option allocation of each Executive’s aggregate, targeted level of long‑term incentive compensation for 2015 was 20%.

Restricted Stock Units—The Company also granted restricted stock units to the Executives in 2015 under the 2010 Plan. The restricted stock units awarded to an Executive entitle the Executive to receive a designated number of shares of Common Stock upon completion of a three‑year vesting period, measured from the date of grant. Until the vesting date, the shares underlying the restricted stock units are not issued and outstanding. Accordingly, the Executive is not entitled to vote or receive dividends on the shares underlying his restricted stock units unless and until those restricted stock units vest. The purpose of the restricted stock unit component is to support continued employment through volatile economic and stock market conditions, to manage dilution overhang, and to align officers’ interests with maintaining shareholder value already created. The Compensation Committee believes this approach mitigates the incentive for Executives to take unnecessary risks and helps retain the Executives’ expertise through continued employment. Recipients of restricted stock units do not pay for the underlying shares once the awards vest; however they must remain employed by the Company for three years to receive the underlying shares. Restricted stock unit awards provide the Executives with an indirect ownership stake in the Company and encourage the Executives to continue employment in order to receive the underlying shares. The compensation value of a restricted stock unit award does not depend solely on future stock price increases; at grant, its value is equal to the market price of the Common Stock. Although its value may increase or decrease with changes in the stock price during the period before vesting, a restricted stock unit award will likely have value even without future stock price appreciation. Accordingly, restricted stock unit awards deliver significantly greater share‑for‑share compensation value at grant than do stock options, and the Company can offer what it anticipates will be comparable grant date compensation value with approximately 65% fewer shares than if the grant were made solely with stock options.

The annual award of restricted stock units to each Executive for 2015 consisted of the right to receive upon future vesting a number of shares of Common Stock. The targeted restricted stock unit allocation of each Executive’s aggregate, targeted level of long‑term incentive compensation for 2015 was 40%.

Performance Shares—The remaining component of each Executive’s 2015 annual long‑term incentive award was performance shares payable in Common Stock under the 2010 Plan. The performance shares allocation of each Executive’s aggregate, targeted level of long‑term incentive compensation for 2015 was 40%. The purpose of the performance share awards is to reward achievement of a financial efficiency objective that supports shareholder value and reflects real performance. The objectives upon which performance share awards are based are established annually by the Compensation Committee.  It is the view of the Compensation Committee that those objectives should be set at levels which are high enough to motivate the Executives to achieve exceptional Company performance. Under each Executive’s performance shares award, a grant of Common Stock is made upon completion of a three-year vesting period from the date of the grant (subject to the Executive’s continued employment through the vesting date), based on the level of pre-tax earnings, cash flow from operations and increase in pre-tax return on equity actually attained over the 2015 to 2017 calendar years. Until the vesting date, the shares underlying the performance shares are not issued and

outstanding. Accordingly, the Executive is not entitled to vote or receive dividends on the shares underlying his performance shares unless and until those performance shares vest.

The Compensation Committee’s philosophy for setting performance share targets is to set maximum targets that will be difficult for the Executives to achieve on a consistent basis. The 2015 to 2017 committee‑designated combined targeted pre-tax earnings over the three year period was set as $318 million (with a threshold of $249 million and max of $382 million), combined cash flow from operations over the three year period was set as $803 million (with a threshold of $642 million and max of $963 million) and combined increase in pre-tax return on equity over the three year period was set as 6.96% (with a threshold of 5.46% and max of 8.37%), with the actual amount of performance shares granted to each Executive to be adjusted in proportion to the extent to which the combined actual results varied from the target levels of performance. The performance shares are allocated equally between each of the three metrics in determining the actual awarded performance shares payable in Common Stock. Specifically, (i) if pre-tax earnings, cash flow from operations and increase in pre-tax return on equity had been equal to or greater than the above listed targets, then 100% or more of the performance shares would have been earned (up to a maximum of 150% of the performance shares) by the Executive attributable to each identified target; (ii) if pre-tax earnings, cash flow from operations and increase in pre-tax return on equity had ranged from the threshold to the target, then 50% to 100% of the performance shares would have been earned by the Executive attributable to each identified target; and (iii) if pre-tax earnings, cash flow from operations and increase in pre-tax return on equity had been less than the threshold, then no performance shares would have been earned by the Executive attributable to each identified target.

The 2015 to 2017 goals for each Executive were based on the combined Company’s targeted pre-tax earnings, cash flow from operations and increase in pre-tax return on equity, and there were no alternative operating company goals set for the Chief Operating Officers of the operating subsidiaries, thus encouraging teamwork and a collective focus on the creation of long‑term value for the Company’s shareholders. In determining the degree to which the targeted pre-tax earnings, cash flow from operations and increase in pre-tax return on equity goals have been attained, the Compensation Committee will adjust results during the three year period for unusual or non‑recurring items. 

Actual results for performance shares awarded in 2015 are measured over a three year period including 2015 to 2017.  Therefore, the degree to which performance shares  granted in 2015 ultimately earned will not be determined until the conclusion of the 2017 calendar year.

Long‑Term Awards for 2016.  The Compensation Committee determined to adjust the long‑term incentive metrics for performance shares awarded for 2016 in an effort to better align the incentive awards with the creation of shareholder value and to align the compensation package of the Executives with those of other regional and major air carrier executive compensation programs. The actual performance shares granted will be measured with respect to pre-tax earnings, cumulative earnings per share and return on invested capital over the applicable three‑year measurement period.

Retirement and Other Benefits.

The Company and SkyWest Airlines sponsor a 401(k) retirement plan for their eligible employees, including the Executives other than Mr. Vais. ExpressJet also maintains a substantially equivalent 401(k) plan for its eligible employees, including Mr. Vais. Both plans are broad based, tax‑qualified retirement plans under which eligible employees, including the Executives, may make annual pre‑tax salary reduction contributions subject to the various limits imposed under the Internal Revenue Code of 1986, as amended (the “Code”). The sponsoring employers make matching contributions under the plans on behalf of eligible participants; however, the right of Executives and other officers to such matching contributions is limited. The Compensation Committee believes that maintaining the 401(k) retirement plans and providing a means to save for retirement is an essential part of a competitive compensation package necessary to attract and retain talented executives.

The Company also maintains the SkyWest, Inc. 2002 Deferred Compensation Plan, a non‑qualified deferred compensation plan for the benefit of officers and other highly compensated employees. All of the Executives other than Mr. Vais participate in the SkyWest, Inc. 2002 Deferred Compensation Plan. ExpressJet also maintains a separate but similar non‑qualified deferred compensation plan, the ExpressJet Executive Deferred Compensation Plan, for its highly compensated management employees, including Mr. Vais. Under both such deferred compensation plans (the “Deferred Compensation Plans”), the employer credits each Executive’s account with a discretionary employer contribution equal to 15% of salary and annual bonus. These amounts are included in the Summary Compensation Table under the column “All Other Compensation”. Additional information on the Deferred Compensation Plans is found in the section “Non‑Qualified Deferred Compensation for 2015” below.

The SkyWest Inc. 2002 Deferred Compensation Plan (but not the ExpressJet Executive Deferred Compensation Plan) also permits eligible executives, including the Executives, to elect in advance of each calendar year to defer up to 100% of their cash salary and annual bonus compensation for the year. Only Mr. Thompson elected to defer any portion of his salary or annual bonus for 2015. The Company and its subsidiaries do not maintain any defined benefit pension plans for the Executives.

Other Benefits.  In addition to the benefits described above, the Company provides certain other benefits to the Executives that the Compensation Committee believes are generally consistent with the benefits provided to senior executives of other airlines. The Compensation Committee believes that those benefits, which are detailed in the footnotes to the Summary Compensation Table applicable to the heading “All Other Compensation” below, are reasonable, competitive and consistent with overall executive compensation objectives. Those benefits consist primarily of employer‑paid premiums on health, dental and eye insurance, a personal automobile allowance, and use of Company owned recreational equipment.

The Company and its subsidiaries also maintain a non‑discriminatory, broad based program under which all full‑time employees and their dependents, including the Executives and their dependents, may fly without charge on a space available basis on regularly scheduled flights of aircraft operated by the Company’s operating airline subsidiaries.

Ownership Guidelines

The Company maintains ownership guidelines for the Executives to encourage the alignment of their interests with the long‑term interests of the Company’s shareholders. Each Executive is strongly encouraged to maintain a minimum ownership interest in the Company. The guideline ownership level is a number of shares of Common Stock having a value equal to a recommended multiple of the annual base salary for each Executive. Any Executive that did not meet the guidelines at December 31, 2015 is encouraged to make progress towards the ownership guideline. The holdings of the Executives are summarized in the table entitled “Security Ownership of Certain Beneficial Owners” below.

Deductibility of Executive Compensation

Section 162(m) of the Code imposes a $1 million annual limit on the amount that a publicly traded company may deduct for compensation paid to the company’s principal executive officer during a tax year or to any of the company’s three other most highly compensated executive officers who are still employed at the end of the tax year (other than the Company’s principal financial officer). The limit does not apply to compensation that meets the requirements of Section 162(m) of the Code for “qualified performance‑based compensation” (i.e., compensation paid only if the executive meets pre‑established, objective goals based upon performance criteria approved by the Company’s shareholders). The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Code. In certain situations, the Compensation Committee may approve compensation that will not meet the requirements of Code Section 162(m) in order to ensure competitive levels of total compensation for its executive officers. Stock options and performance shares awarded to the Executives during 2015 were intended to constitute “qualified performance‑based compensation” under Section 162(m) of the Code. The Company’s 2015

restricted stock unit grants and 2015 performance‑based annual bonuses, however, were not “qualified performance‑based compensation.” As a result, a portion of the compensation earned by Messrs. Atkin and Childs for 2015 exceeded the deduction limit of Section 162(m) of the Code.

Effect of Compensation on Risk

Based on the Compensation Committee’s review of the various elements of the Company’s executive compensation practices and policies, the Compensation Committee believes the Company’s compensation policies and practices are designed to create appropriate and meaningful incentives for the Company’s employees without encouraging excessive or inappropriate risk taking. Among other factors, The Compensation Committee considered the following information:

Based on the review outlined above, the Company has concluded that the risks arising from its compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company.

 

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed the foregoing compensation discussion and analysis and discussed with the Company’s management the information set forth herein. Based on such review and discussions with management, the Compensation Committee recommended to the Board that the foregoing compensation discussion and analysis be included in this proxy statement.

The Compensation Committee

Keith E. Smith, Chair

Henry J. Eyring

Meredith S. Madden

Ronald J. Mittelstaedt

Steven F. Udvar‑Hazy

EXECUTIVE COMPENSATION

Summary Compensation Table

The table below summarizes the total compensation paid to or earned by each of the Executives for the years indicated.

 

The amounts in column (d) also include the amounts, approved by the Compensation Committee, of discretionary performance unit awards issued in 2015 with respect to 2014, but payable in cash in 2017, subject to forfeiture in the event of termination of employment prior to February 18, 2017. The 2017 cash value of those discretionary performance unit awards for 2014 service were $392,641 for Mr. Atkin, $233,375 for Mr. Childs, $117,895 for Mr. Steel and $112,050 for Mr. Thompson. Messrs. Simmons and Vais did not earn discretionary performance unit awards with respect to 2014.

Grants of Plan‑Based Awards For 2015

The following table provides information about non‑equity based and equity‑based plan awards granted to the Executives for the year ended December 31, 2015: