Arcosa (ACA) DEF 14ADefinitive proxy

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
(Amendment No.   )

Check the appropriate box:

Arcosa, Inc.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than The Registrant)

Dear Fellow Shareholder:

We are pleased to invite you to our Annual Meeting of Shareholders on Tuesday, May 5, 2020 at 8:30 a.m. (CDT), which will be held at Ross Tower in the Lower Level Conference Center, 500 N. Akard St., Dallas, Texas 75201. A notice of the meeting and a Proxy Statement containing information about the matters to be acted upon are attached to this letter.

Your vote is important to us. Whether or not you plan to attend the Annual Meeting, we encourage you to vote by telephone, by Internet, or by signing, dating and returning your proxy card (or voting instruction form, if you hold shares through a broker or other nominee) by mail. You may also vote in person at the Annual Meeting.

Thank you for being a shareholder and for your continued support and interest in Arcosa, Inc.

Best regards,

/s/ Rhys J. Best

Rhys J. Best
Chairman of the Board

NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS

Tuesday, May 5, 2020
8:30 a.m., Central Daylight Time
Ross Tower, Lower Level Conference Center
500 N. Akard St., Dallas, Texas 75201*

To Arcosa, Inc. Shareholders:

Please join us for the 2020 Annual Meeting of Shareholders of Arcosa, Inc. The meeting will be held at Ross Tower in the Lower Level Conference Center at 500 N. Akard St., Dallas, Texas 75201, on Tuesday, May 5, 2020, at 8:30 a.m., Central Daylight Time.

At the meeting, the shareholders will act on the following matters:

All shareholders of record at the close of business on March 9, 2020 are entitled to vote at the meeting, or at any postponement or adjournment of the meeting. A list of the shareholders is available at the Company’s offices in Dallas, Texas.

By Order of the Board of Directors,

YUKI P. WHITMIRE
Associate General Counsel and Corporate Secretary

March 24, 2020

YOUR VOTE IS IMPORTANT!We urge you to cast your vote promptly, even if you plan to attend the Annual Meeting in person. You may vote via the Internet, by telephone or, if you have received or requested a printed version of these proxy materials, by mail.

TABLE OF CONTENTS

PROXY STATEMENT SUMMARY

This summary highlights information contained in this Proxy Statement. It does not contain all information you should consider, and you should read the entire Proxy Statement carefully before voting.

Annual Meeting of Shareholders

Agenda and Voting Recommendations

Class II Director Nominees

The following table provides summary information about each nominee for Class II director to serve for one-year terms expiring at the 2021 annual meeting of stockholders, or when their successors are duly elected and qualified. Each director is elected by a majority of votes cast.

Corporate Governance Highlights

The Company is committed to good corporate governance practices, which we believe recognize shareholder interests and support the success of our business. Our corporate governance practices are highlighted below:

How to Vote

ONLINE	TOLL-FREE NUMBER	MAIL (if you received a paper copy of the proxy materials by mail)	IN PERSON
Go to www.proxyvote.com	Use the toll-free number on the Notice or Proxy Card	Mark, sign, date and promptly mail the enclosed proxy card in the postage-paid envelope	Complete, sign and date a ballot at the Annual Meeting

Whether or not you plan to attend the meeting, we encourage you to vote by proxy as soon as possible.
Your shares will be voted in accordance with your instructions.

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

This Proxy Statement is being provided to the shareholders of Arcosa, Inc. (“Arcosa” or the “Company”) in connection with the solicitation of proxies by the Board of Directors of the Company to be voted at the Annual Meeting of Shareholders to be held at Ross Tower in the Lower Level Conference Center, 500 N. Akard St., Dallas, Texas 75201 on Tuesday, May 5, 2020, at 8:30 a.m., Central Daylight Time (the “Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The Company’s mailing address is 500 N. Akard St., Suite 400, Dallas, Texas 75201.

QUESTIONS AND ANSWERS ABOUT THE MEETING

Who is entitled to vote and how many votes do I have?

The outstanding voting securities of the Company consist of shares of common stock, $0.01 par value per share (“Common Stock”). The record date for the determination of the shareholders entitled to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board of Directors as the close of business on March 9, 2020. At that date, there were outstanding and entitled to vote 48,279,093 shares of Common Stock. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting.

Why did I receive a Notice of Internet Availability of Proxy Materials?

In order to both save money and protect the environment, we have elected to provide access to our proxy materials and Annual Report to Shareholders for the fiscal year ended December 31, 2019 (“2019 Annual Report”) on the Internet, instead of mailing the full set of printed proxy materials, in accordance with the rules of the Securities and Exchange Commission (“SEC”) for the electronic distribution of proxy materials. Proxy materials or a Notice of Internet Availability of Proxy Materials (the “Notice”) are being first released or mailed to shareholders on or about March 24, 2020. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request it. Instead, the Notice instructs you on how to obtain and review all of the important information

contained in the Proxy Statement and Annual Report. The Notice also instructs you on how you may submit your proxy over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice.

What is the difference between holding shares as a shareholder of record and as a beneficial owner of shares?

Shareholder of Record or Registered Shareholder. If your shares of Common Stock are registered directly in your name with our transfer agent, you are considered a “shareholder of record” or a “registered shareholder” of those shares.

Beneficial Owner of Shares. If your shares are held in an account at a bank, brokerage firm, or other similar organization, then you are a beneficial owner of shares held in “street name.” In that case, you will have received these proxy materials from the bank, brokerage firm, or other similar organization holding your account and, as a beneficial owner, you have the right to direct your bank, brokerage firm, or similar organization as to how to vote the shares held in your account.

How do I vote if I am a shareholder of record?

By Telephone or Internet. All shareholders of record can vote by telephone using the toll-free telephone number on the Notice or proxy card, or through the Internet at the web address provided, and using the procedures and instructions described on the Notice or proxy card.

By Written Proxy. If you are a shareholder of record and receive a Notice card, you may request a written proxy card by following the instructions included in the Notice.

In Person. All shareholders of record may vote in person at the Annual Meeting. Proof of stock ownership and some form of photo identification (such as a valid driver's license or passport) will be required to attend and vote at the Annual Meeting.

Whether or not you plan to attend the meeting, we encourage you to vote by proxy as soon as possible. Your shares will be voted in accordance with your instructions.

How do I vote if I am a beneficial owner of shares?

As the beneficial owner, you have the right to direct your broker on how to vote the shares in your account. Your broker should give you instructions for voting your shares by Internet, telephone or mail. As a beneficial owner, you are invited to attend the Annual Meeting, but you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid legal proxy from your broker giving you the legal right to vote the shares at the Annual Meeting.

Who will vote my shares at the Annual Meeting and how will they vote my shares if I provide voting instructions and/or grant my proxy?

The persons named as proxies in the proxy card or electronic voting form will vote your shares according to your instructions. If you sign and return your proxy card but do not make any of the selections, the named proxies will vote your shares: (i) FOR election of the three nominees for Class II directors as set forth in this Proxy Statement; (ii) FOR approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in these materials; and (iii) FOR ratification of Ernst & Young LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2020.

What is a Broker Non-Vote?

A “broker non-vote” occurs when a broker submits a proxy for the meeting with respect to a discretionary, or routine, matter but does not have the authority to vote on non-discretionary matters because the beneficial owner did not provide voting instructions on those matters.

Under New York Stock Exchange (“NYSE”) rules, the proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for the year ending December 31, 2020 (Proposal 3) is considered a

“discretionary” or “routine” item. This means that brokerage firms may vote in their discretion on behalf of clients (beneficial owners) who have not furnished voting instructions. In contrast, all of the other proposals set forth in this Proxy Statement are “non-discretionary” or “non-routine” items—brokerage firms that have not received voting instructions from their clients on these matters may not vote on these proposals.

Can I change or revoke my vote?

If you are a registered shareholder, any subsequent vote you cast will replace your earlier vote. This applies whether you cast your vote by executing a proxy card bearing a later date, vote by telephone or Internet, or by attending the Annual Meeting and voting in person. The proxy may be revoked at any time before it is exercised by filing with the Company a written revocation addressed to the Corporate Secretary.

If you hold your shares in street name, you must contact your broker, bank or other nominee for specific instructions on how to change or revoke your vote.

What constitutes a “quorum” for the meeting?

The presence, in person or by proxy, of the holders of record of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to time until a quorum is obtained.

What is the voting requirement to approve each of the proposals, and how are votes counted?

Cumulative voting is not permitted in the election of directors. Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Broker non-votes on any matter, as to which the broker has indicated on the proxy that it does not have discretionary authority to vote, will be treated as votes not cast or as shares not entitled to vote with respect to that matter and will not affect the outcome of the vote. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter.

Who pays for the solicitation of proxies?

The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services or the Internet, proxies may be solicited by directors, officers, and employees of the Company (none of whom will receive any additional compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. The Company has hired Georgeson, Inc. to assist in the solicitation of proxies at an estimated cost of $9,500 plus expenses.

What does it mean if I receive more than one Notice, proxy card, or voting instructions?

This means that you have multiple accounts in which you own our Common Stock. Please vote all Notices, proxy cards, or voting instructions from us to ensure that all of your shares of Common Stock are voted.

What is “householding”?

In order to reduce expenses, we are taking advantage of certain SEC rules, commonly known as “householding,” that permit us to deliver, in certain cases, only one Notice, Annual Report, or Proxy Statement, as applicable, to multiple shareholders sharing the same address, unless we have received contrary instructions from one or more of the shareholders. If you received a householded mailing this year and would like to have additional copies of the Notice, Annual Report, Proxy Statement, or other proxy materials sent to you, please submit your request directed to our Corporate Secretary, Arcosa, Inc., 500 N. Akard St., Suite 400, Dallas, TX 75201, or by telephone at 972-942-6500. If you hold your stock in street name, you may revoke your consent to householding at any time by notifying your broker.

If you are currently a shareholder sharing an address with another of our shareholders and wish to have your future proxy statements and annual reports householded, or your materials are currently householded and you would prefer to receive separate materials in the future, please contact our Corporate Secretary at the above address or telephone number.

CORPORATE GOVERNANCE

The business affairs of the Company are managed under the direction of the Board of Directors (also referred to in this Proxy Statement as the “Board”) in accordance with the General Corporation Law of the State of Delaware and the Company’s Restated Certificate of Incorporation and Amended and Restated Bylaws. The role of the Board of Directors is to oversee the management of the Company for the benefit of the shareholders. This responsibility includes monitoring senior management’s conduct of the Company’s business operations and affairs; reviewing and approving the Company’s financial objectives, strategies, and plans; risk management oversight; evaluating the performance of the Chief Executive Officer and other executive officers; and overseeing the Company’s policies and procedures regarding corporate governance, legal compliance, ethical conduct, and maintenance of financial and accounting controls.

The Board of Directors has adopted Corporate Governance Principles, which are reviewed annually by the Corporate Governance and Directors Nominating Committee. The Company also has a Code of Business Conduct and Ethics, which is applicable to all employees of the Company, including the Chief Executive Officer, the Chief Financial Officer, principal accounting officer, and controller, as well as the Board of Directors. The Company intends to post any amendments to or waivers from its Code of Business Conduct and Ethics on the Company’s website at www.arcosa.com to the extent applicable to an executive officer, principal accounting officer, controller, or a director of the Company. The Corporate Governance Principles and the Code of Business Conduct and Ethics are available on the Company’s website at www.arcosa.com under the heading “Investors — Corporate Governance — Additional Governance Documents.”

Independence of Directors

The Board of Directors makes all determinations with respect to director independence in accordance with the NYSE listing standards and the rules and regulations promulgated by the SEC. In addition, the Board of Directors established certain guidelines to assist it in making any such determinations regarding director independence (the “Independence Guidelines”), which are available on the Company’s website at www.arcosa.com under the heading “Investors — Corporate Governance — Additional Governance Documents — Arcosa Categorical Standards of Director Independence.” The Independence Guidelines set forth commercial and charitable relationships that may not rise to the level of material relationships that would impair a director’s independence as set forth in the NYSE listing standards and SEC rules and regulations. The determination of whether such relationships as described in the Independence Guidelines actually impair a director’s independence is made by the Board on a case-by-case basis.

The Board undertook its annual review of director independence and considered transactions and relationships between each director, or any member of his or her immediate family, and the Company and its subsidiaries and affiliates. In making its determination, the Board applied the NYSE listing standards and SEC rules and regulations together with the Independence Guidelines.

As a result of its review, the Board affirmatively determined that the following directors are independent of the Company and its management under the standards set forth in the listing standards of the NYSE and the SEC rules and regulations: Joseph Alvarado, Rhys J. Best, David W. Biegler, Jeffrey A. Craig, Ronald J. Gafford, John W. Lindsay, Douglas L. Rock, and Melanie M. Trent. The Board determined that Antonio Carrillo is not independent because of his employment by the Company.

Board Leadership Structure

As our independent, non-executive Chairman of the Board, Mr. Best (i) presides over all meetings of the Board and shareholders, (ii) reviews and approves meeting agendas, meeting schedules and other information, as appropriate, (iii) acts as a liaison between the outside directors and management, (iv) consults on shareholder engagement and governance matters, (v) has the right to call special board or shareholder meetings, and (vi) performs such other duties as the Board requires from time to time. The Board believes that this structure allows our Chief Executive Officer to focus on operating and managing the Company and leverages our Chairman’s experience in guidance and oversight.

While the Board believes that this structure is currently in the best interests of the Company and its shareholders, it does not have a policy with respect to separating the Chairman of the Board and the Chief Executive Officer roles and could adjust the structure in the future as it deems appropriate.

Our Audit, Human Resources, and Corporate Governance and Directors Nominating Committees are currently comprised entirely of independent directors. The Board believes that having an independent, non-executive chairman of the Board and independent Audit, Human Resources, and Corporate Governance and Directors Nominating Committees provides a structure for strong independent oversight of our management.

Board Meetings and Committees

The directors hold regular and special meetings and spend such time on the affairs of the Company as their duties require. The Board of Directors held five meetings in 2019. The Board also meets regularly in non-management executive sessions. In 2019, all directors of the Company attended at least 75% of the meetings of the Board of Directors and the committees on which they served. It is Company policy that each director is expected to attend the Annual Meeting, and each director attended the 2019 Annual Meeting.

The standing committees of the Board of Directors are the Audit Committee, Corporate Governance and Directors Nominating Committee, and Human Resources Committee. Each of the committees is governed by a charter, current copies of which are available on the Company’s website at www.arcosa.com under the heading “Investors — Corporate Governance — Board Committees & Charters.” Mr. Carrillo, Chief Executive Officer and President (“CEO”) of the Company, does not serve on any Board committee. Director membership of the committees and the number of committee meetings held in 2019 are identified below.

Audit Committee

The Audit Committee’s function is to oversee, on behalf of the Board, (i) the integrity of the Company’s financial statements and related disclosures; (ii) the Company’s compliance with legal and regulatory requirements; (iii) the qualifications, independence, and performance of the Company’s independent auditing firm; (iv) the performance of the Company’s internal audit function; (v) the Company’s internal accounting and disclosure control systems and practices; (vi) the Company’s procedures for monitoring compliance with its Code of Business Conduct and Ethics; and (vii) the Company’s policies and procedures with respect to risk assessment, management, and mitigation. In carrying out its function, the Audit Committee (a) reviews with management, our VP of Audit, and the independent auditors, the Company’s financial statements, the accounting principles applied in their preparation, the scope of the audit, any comments made by the independent auditors upon the financial condition of the Company and its accounting controls and procedures; (b) reviews with management its processes and policies related to risk assessment, management,

and mitigation, compliance with corporate policies, compliance programs, internal controls, and summaries of management’s travel and entertainment reports; and (c) performs such other matters as the Audit Committee deems appropriate.

The Audit Committee also pre-approves all auditing and all allowable non-audit services provided to the Company by the independent auditors. The Audit Committee selects and retains the independent auditors for the Company and approves audit fees. The Board of Directors has determined that all members of the Audit Committee are “independent” as defined by the rules of the SEC and the listing standards of the NYSE. The Board has determined that Mr. Rock, Chair of the Audit Committee, and Mr. Craig are each qualified as an audit committee financial expert within the meaning of SEC regulations.

Corporate Governance and Directors Nominating Committee

The functions of the Corporate Governance and Directors Nominating Committee (the “Governance Committee”) are to identify and recommend to the Board individuals qualified to be nominated for election to the Board; review the qualifications of the members of each committee (including the independence of directors) to ensure that each committee’s membership meets applicable criteria established by the SEC and NYSE; recommend to the Board the members and Chairperson for each Board committee; periodically review and assess the Company’s Corporate Governance Principles and the Company’s Code of Business Conduct and Ethics and make recommendations for changes thereto to the Board; periodically review the Company’s orientation program for new directors and the Company’s practices for continuing education of existing directors; annually review director compensation and benefits and make recommendations to the Board regarding director compensation and benefits; review, approve, and ratify all transactions with related persons that are required to be disclosed under the rules of the SEC; annually conduct an individual director performance review of each incumbent director; and oversee the annual self-evaluation of the performance of the Board and its committees. Each of the members of the Governance Committee is an independent director under the NYSE listing standards. In performing its annual review of director compensation, the Governance Committee may utilize independent compensation consultants from time to time to assist in making its recommendations to the Board.

The Governance Committee will consider director candidates recommended to it by shareholders. In considering candidates submitted by shareholders, the Governance Committee will take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Governance Committee, a shareholder must submit the recommendation in writing and must include the following information:

The shareholder recommendation and information described above must be sent to the Corporate Secretary at 500 N. Akard St., Suite 400, Dallas, Texas 75201, and must be received by the Corporate Secretary not less than 120 days prior to the anniversary date of the date the Company’s proxy statement was released in connection with the previous year’s Annual Meeting of Shareholders.

The Governance Committee believes that the qualifications for serving as a director of the Company are that a nominee demonstrate depth of experience at the policy-making level in business, government, or education; possess the ability to make a meaningful contribution to the Board’s oversight of the business and affairs of the Company and a willingness to exercise independent judgment; and have an impeccable reputation for honest and ethical conduct in both professional and personal activities. In addition, the Governance Committee examines a candidate’s time availability, the candidate’s ability to make analytical and probing inquiries, and financial independence to ensure he or she will not be financially dependent on director compensation.

The Governance Committee identifies potential nominees by asking, from time to time, current directors and executive officers for their recommendations of persons meeting the criteria described above who might be available to serve on the Board. The Governance Committee may also engage firms that specialize in identifying director candidates. As described above, the Governance Committee will also consider candidates recommended by shareholders.

Once a person has been identified as a potential candidate, the Governance Committee makes an initial determination regarding the need for additional Board members to fill vacancies or expand the size of the Board. If the Governance Committee determines that additional consideration is warranted, the Governance Committee will review such information and conduct interviews as it deems necessary to fully evaluate each director candidate. In addition to the qualifications of a candidate, the Governance Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, the evaluations of other prospective nominees, and the need for any required expertise on the Board or one of its committees. The Governance Committee considers potential candidates in light of the skills, experience, and attributes (i) possessed by current directors; and (ii) that the Board has identified as important for new directors to possess. The Governance Committee also contemplates multiple dynamics that promote and advance diversity among its members. Although the Governance Committee does not have a formal diversity policy, the Governance Committee considers a number of factors regarding diversity of personal and professional backgrounds (both domestic and international), national origins, specialized skills and acumen, and breadth of experience in industry, manufacturing, financing transactions, and business combinations. The Governance Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a shareholder.

Human Resources Committee

The Human Resources Committee (the “HR Committee”) makes recommendations to the independent members of the Board of Directors in its responsibilities relating to the competitive compensation of the Company’s CEO. The HR Committee has been delegated authority by the Board of Directors to make compensation decisions with respect to the other named executive officers identified in this Proxy Statement. Each of the members of the HR Committee is an independent director under the NYSE listing standards, including those standards applicable specifically to members of compensation committees.

The HR Committee reviews management succession planning and approves awards under the Company’s incentive compensation and equity based plans. The HR Committee annually evaluates the leadership and performance of the Company’s CEO and recommends his compensation to the Company’s independent directors. The independent directors are responsible for approving the CEO’s compensation. The CEO provides to the HR Committee his assessment of the performance of the other named executive officers. The HR Committee also has direct access to the Company’s key leaders. The HR Committee reviews and approves compensation for the Chief Financial Officer (the “CFO”) and the other named executive officers.

The Role of the Compensation Consultant

In 2019, our HR Committee retained two compensation consultants, Meridian Compensation Partners, LLC (the “Compensation Consultant”) from January through July 2019, and Pay Governance LLC (“New Compensation Consultant,” and together with the Compensation Consultant, the “2019 Compensation Consultants”) from July through December 2019 to provide a variety of executive compensation consultant services as independent compensation consultants. The services provided by the 2019 Compensation Consultants in 2019 include: (i) review and assist in the design of the Company’s executive compensation programs, (ii) provide insight into executive compensation practices used by other companies, (iii) benchmark the Company’s executive compensation pay levels with relevant peer survey data, (iv) provide proxy disclosure information for comparator companies, and (v) provide input to the HR Committee on the risk assessment, structure, and overall competitiveness of the Company’s executive compensation programs.

Each of the 2019 Compensation Consultant’s ownership structure, limited service lines, and policies and procedures are designed to ensure that such 2019 Compensation Consultant’s work for the HR Committee does not raise any conflicts of interest. The amount of fees paid in 2019 to each of the 2019 Compensation Consultants by the Company represented less than 1% of such 2019 Compensation Consultant’s total annual revenues for 2019. The internal policies of each of the 2019 Compensation Consultants prohibit its members, partners, consultants, and employees from engaging in conduct that could give rise to conflicts of interest and from acquiring securities in their client

organizations. The employees of each of the 2019 Compensation Consultants providing consulting services to the HR Committee have no other business or personal relationship with any member of the HR Committee or any executive officer of the Company. After a review of these factors and the considerations outlined in applicable SEC and NYSE rules, the HR Committee has concluded that the work of the 2019 Compensation Consultants has not raised any conflicts of interest and that each of the 2019 Compensation Consultants is independent from the Company and from management.

The Role of Management

The CEO, the CFO, and the head of Human Resources work with the HR Committee and the compensation consultant to develop the framework and design the plans for all compensation components. The CEO and CFO recommend the financial performance measurements for the annual incentive awards and the long-term performance-based equity awards, subject to HR Committee approval. The CFO certifies the achievement of these financial performance measures. The HR Committee recommends the CEO's compensation to the independent directors for their approval. The CEO makes recommendations to the HR Committee on compensation for each of the other named executive officers.

The Role of the HR Committee

Throughout the year, the CEO provides the HR Committee with his ongoing assessment of the performance of the other named executive officers. These assessments provide background information for any adjustment to base salary, annual incentives, or long-term incentives. Both annual incentives and long-term incentives are established with threshold, target, and maximum payout levels.

The HR Committee realizes that benchmarking and comparing peer group proxy disclosure data require certain levels of interpretation due to the complexities associated with executive compensation plans. The HR Committee uses the benchmarking information and the peer group proxy disclosure data provided by the compensation consultant as general guidelines and makes adjustments to compensation levels based on what the HR Committee believes is in the best interests of the Company’s shareholders. The HR Committee uses its judgment and bases its consideration of each executive’s compensation on performance in respect to the value of the executive’s contributions to the Company, the executive’s tenure, and peer survey data that establishes the ranges against which compensation is benchmarked.

Board’s Role in Risk Oversight

While management is responsible for the day-to-day management and mitigation of risk, our Board of Directors has ultimate responsibility for risk oversight. Management reviews and discusses risks with the Board of Directors as part of the business and operating review conducted at each of the regular meetings of the Board of Directors. While the Board of Directors has primary responsibility for overseeing the Company’s risk management, each committee of the Board of Directors also considers risk within its area of responsibility. Each committee regularly reports back to the Board of Directors on its risk oversight activities.

The Audit Committee assesses major financial risk exposures and steps taken by management to address the same, is responsible for the review and assessment of information technology and cybersecurity risk exposures and the steps taken to monitor and control those exposures, and reviews risks identified during the internal and external auditors’ risk assessment procedures. The HR Committee reviews risks arising from our executive compensation programs and management succession planning. The Governance Committee oversees risks related to our governance structure and director compensation programs.

Risk Assessment of Compensation Policies and Practices

The New Compensation Consultant performed a risk assessment with respect to our 2019 incentive compensation plans applicable to our executive officers. Based on this review, the New Compensation Consultant concluded that the Company's executive incentive programs do not encourage excessive risk-taking behaviors. The Company also conducted a detailed risk assessment of our 2019 compensation policies and practices (the “Compensation Policies”)

for our employees, including our executive officers, and assessed the likelihood and potential impact of the risk presented by the Compensation Policies. Participants in the Compensation Policies risk assessment included the Company’s management, human resources group, internal audit group, and the HR Committee. Based on this review, management has concluded that sufficient controls exist to mitigate the risks related to the Compensation Policies.

Compensation Committee Interlocks and Insider Participation

Messrs. Biegler, Alvarado, and Lindsay served on the HR Committee during the last completed fiscal year. None of the members of the HR Committee had ever served as an executive officer or employee of the Company or any of its subsidiaries. There were no compensation committee interlocks during 2019.

Communications with Directors

The Board has established a process to receive communications by mail from shareholders and other interested parties. Shareholders and other interested parties may contact any member of the Board or the non-management directors as a group, any Board committee or any chair of any such committee. To communicate with the Board of Directors, any individual director, or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent “c/o Corporate Secretary” at 500 N. Akard St., Suite 400, Dallas, Texas 75201.

All communications received as set forth in the preceding paragraph will be opened by the office of the Corporate Secretary for the sole purpose of determining whether the contents represent a message to directors. Any contents that are not in the nature of advertising, promotions of a product or service, or offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the Corporate Secretary will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the envelope is addressed.

Employee, Officer and Director Pledging and Hedging Policy

The Company has adopted a policy prohibiting pledging and hedging. The policy prohibits officers, directors and employees of the Company and their respective related persons from (i) selling Arcosa securities short, (ii) pledging or hypothecating any Arcosa securities (e.g. using Arcosa securities for margin loans or to collateralize other indebtedness), or (iii) engaging in derivative transactions, including without limitation hedging, puts and calls, or other transactions involving Arcosa securities.

PROPOSAL 1 - ELECTION OF CLASS II DIRECTORS

The Board of Directors currently consists of nine members and is currently divided into three classes. The Class II directors have terms expiring at the Annual Meeting. The Class III directors have terms expiring at the 2021 annual meeting of shareholders, and the Class I directors have terms expiring at the 2022 annual meeting of shareholders. Class II directors will be elected to one-year terms at the Annual Meeting, and Class III directors will be elected to one-year terms at the 2021 annual meeting of shareholders. Commencing with the 2022 annual meeting of shareholders, the Board of Directors will no longer be classified, and directors will no longer be divided into classes.

On the recommendation of the Governance Committee, the Board has nominated three candidates to be re-elected as Class II directors at the Annual Meeting. If re-elected, the Class II directors will serve for one-year terms expiring at the 2021 annual meeting of shareholders, or when their successors are duly elected and qualified.

All of the Class II nominees are incumbent directors and, pursuant to the Company's Amended and Restated Bylaws, an incumbent director nominee who is not elected is required to tender his or her resignation for consideration by the Governance Committee and the Board (with the affected director recusing himself or herself from the deliberations). The Board will be free to accept or reject the resignation and will make its decision known publicly within 90 days of certification of the vote results. If a director’s resignation is accepted by the Board, then the Board may fill the resulting vacancy.

The Board is not seeking the election of Class I or Class III directors, whose terms expire at the 2022 and 2021 annual meetings, respectively. You may not vote for a greater number of persons than the nominees named in this Proxy Statement.

Each nominee has agreed to be named in this Proxy Statement and to serve if elected. We have no reason to believe that any of the nominees would be unable to serve if elected, but if any nominee is unavailable for election, the proxy holders may vote for another nominee proposed by the Board, in which case your shares will be voted for such other nominee.

The Board of Directors believes that each of the director nominees possesses the qualifications described above under “Board Meetings and Committees—Corporate Governance and Directors Nominating Committee.”

The information provided below is biographical information about each of the Class II nominees, as well as the remaining incumbent directors, including a description of the experience, qualifications, attributes, or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company.

The Board of Directors recommends that you vote FOR each of the Nominees for Class II Director.

Class II - Nominees for Election as Directors for Terms Expiring in 2021

Class III - Continuing Directors Whose Terms Expire in 2021

Class I - Continuing Directors Whose Terms Expire in 2022

PROPOSAL 2 - ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

The Company seeks approval, on an advisory basis, from its shareholders of the compensation of its named executive officers as described in this Proxy Statement.

As described in the Compensation Discussion and Analysis, the Company’s executive compensation program (i) encourages high levels of performance and accountability, (ii) aligns the interests of executives with those of shareholders, and (iii) links compensation to business objectives and strategies.

This proposal provides shareholders the opportunity to approve or not approve the Company’s executive compensation program through the following resolution:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and the related narrative discussion, is hereby approved.”

Because this is an advisory vote, it will not be binding upon the Board of Directors. However, the HR Committee will take into account the outcome of the vote when considering future executive compensation arrangements. At the 2019 Annual Meeting, the Company had an advisory vote regarding the frequency of having the Company’s shareholders vote on named executive officer compensation. The proposal received 93% in favor of every year, and the Company followed that recommendation. Therefore, after the 2020 Annual Meeting, the next advisory vote to approve the compensation of the named executive officers will occur at the 2021 Annual Meeting of Shareholders unless the Board modifies its policy on the frequency of holding such advisory votes.

The Board of Directors recommends that you vote FOR approval of this resolution

PROPOSAL 3 - RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP

The Audit Committee has appointed Ernst & Young LLP (“Ernst & Young”) as the independent registered public accounting firm of the Company for the year ending December 31, 2020. Although the Bylaws do not require that we seek shareholder ratification of the appointment of Ernst & Young as our independent registered public accounting firm, we are doing so as a matter of good corporate governance. If the shareholders do not ratify the appointment, the Audit Committee will reconsider whether or not to retain Ernst & Young. Even if the appointment is ratified, the Audit Committee in its discretion may change the appointment at any time during the year if it determines that a change would be in the best interests of the Company and its shareholders.

The Company has been advised by Ernst & Young that the firm has no relationship with the Company or its subsidiaries other than that arising from the firm’s engagement as auditors, tax advisers, and consultants.

The Company has also been advised that representatives of Ernst & Young will be present at the Annual Meeting where they will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

Fees of Independent Registered Public Accounting Firm for Fiscal Years 2019 and 2018

The following table presents fees for professional audit services rendered by Ernst & Young for the audits of the Company’s annual financial statements for the years ended December 31, 2019 and December 31, 2018, and fees for other non-audit services rendered by Ernst & Young during the period.

Services rendered by Ernst & Young in connection with fees presented above were as follows:

Audit Fees

Audit fees include fees associated with the annual audit of the Company’s consolidated and combined financial statements; incremental audit procedures related to the acquisition of ACG Materials; and statutory audits in Mexico and Europe.

Audit-Related Fees

Audit related fees are for due diligence services and agreed upon services related to the Company's 401(k) plan, and the use of online research tools.

Tax Fees

Tax fees include fees for general tax consultations, consultations on legal entity restructuring, and tax advice related to the work opportunity tax credit.

Audit Committee Pre-Approval Policy and Procedures

The Audit Committee has a policy for the pre-approval of all audit and permissible non-audit services provided by Ernst & Young. These services may include audit services, audit-related services, tax services, and other services. Under this policy, pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the services or

category of services and includes an anticipated budget. In addition, the Audit Committee also may pre-approve services on a case-by-case basis. The Audit Committee has delegated pre-approval authority to the Chair of the Audit Committee. Pursuant to this delegation, the Chair must report any pre-approval decision to the Audit Committee at its first meeting after the pre-approval was obtained. All services set forth in the table above were pre-approved by the Audit Committee before being rendered.

Report of the Audit Committee

We are a standing committee comprised of independent directors as “independence” is currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board of Directors has determined that two of the members of the Audit Committee are “audit committee financial experts” as defined by applicable SEC rules. We operate under a written charter adopted by the Board of Directors. A copy of the charter is available free of charge on the Company’s website at www.arcosa.com under the heading “Investors — Corporate Governance — Board Committees & Charters— Arcosa Audit Committee Charter.”

We annually select the Company’s independent auditors. That recommendation is subject to ratification by the Company’s stockholders.

Management is responsible for the Company’s financial statements, internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company’s consolidated and combined financial statements in accordance with auditing standards generally accepted in the United States of America and issuing a report thereon. As provided in our charter, our responsibilities include the monitoring and oversight of these processes.

Consistent with our charter responsibilities, we met and held discussions with management and the independent auditors. In this context, management and the independent auditors represented to us that the Company’s consolidated and combined financial statements for the fiscal year ended December 31, 2019 were prepared in accordance with U.S. Generally Accepted Accounting Principles. We reviewed and discussed the consolidated and combined financial statements with management and the independent auditors and discussed with the independent auditors matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees,” issued by the Public Company Accounting Oversight Board.

The Company’s independent auditors have also provided to us the written disclosures and the letter required by applicable requirements of The Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Audit Committee, and we discussed with the independent auditors that firm’s independence. We also considered whether the provision of non-audit services is compatible with maintaining the independent auditors’ independence and concluded that such services have not impaired the auditors’ independence.

Based upon our reviews and discussions with management, the Company's internal auditors, and the independent auditors, and our review of the representation of management and the report of the independent auditors to the Audit Committee, we recommended to the Board of Directors that the audited consolidated and combined financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission.

Audit Committee

Douglas L. Rock, Chair
Jeffrey A. Craig
Melanie M. Trent

The Board of Directors recommends that you vote FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2020

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes the Company’s executive compensation philosophy and the pay programs applicable to our named executive officers (“NEOs” or “Named Executive Officers”) in 2019, which was Arcosa’s first full year as an independent, publicly-traded company following the Separation from Former Parent on November 1, 2018. For 2019, the Named Executive Officers of the Company were:

For this CD&A, we have included all six executive officers of the Company as Named Executive Officers for purposes of continuity year-to-year.

This CD&A is organized into the following sections:

Executive Summary

2019 Performance

In 2019, Arcosa delivered strong results in its first year as an independent public company, exceeding its performance expectations. From the Separation date on November 1, 2018 through December 31, 2019, Arcosa had a cumulative total return to shareholders of 63%, compared to the S&P Small Cap 600 Index’s return of 7%:⁽¹⁾

In 2019, we successfully executed our Stage 1 priorities, setting the foundation for our long-term vision to (i) grow in attractive markets where we can achieve sustainable competitive advantages; (ii) reduce the complexity and cyclicality of the overall business; (iii) improve long-term returns on invested capital; and (iv) integrate environmental, social, and governance initiatives into our long-term strategy.

Our 2019 Adjusted EBITDA results exceeded the top end of our guidance range for 2019, which was raised twice during 2019 from the Adjusted EBITDA guidance range that was initially announced at the time of Separation.

The following is a summary of our 2019 consolidated and segment Adjusted EBITDA* results:

In addition, our sales, general, and administrative (“SG&A”) expense finished below budget due to successful expense control across corporate and business units despite incremental stand-alone costs following the Separation.

Payouts to the NEOs under our 2019 annual incentive compensation program (“AIP”) reinforced our strong pay-for-performance philosophy. In designing the 2019 AIP, the HR Committee approved performance metrics that were directly related to our Stage 1 Priorities in furtherance of our long-term goals and approved performance metrics and targets in line with our 2019 guidance. The HR Committee also tied a significant majority of each of the segment president Named Executive Officer’s AIP award to their respective segment performance.

Program Changes in 2019

Following the Separation, the HR Committee engaged in a process of evaluating our pay-for-performance practices to strengthen shareholder alignment, while providing that risk was appropriately mitigated within our pay programs. The following are highlights of key compensation changes that were approved in 2018 and 2019 by the HR Committee to address our objectives moving forward.

Shareholder Engagement and Say-on-Pay Results

Arcosa conducted investor outreach in 2018 and 2019 in anticipation of the Separation and as a new publicly-traded company. The HR Committee considered this input when it made changes to our long-term incentive program, including the adoption of new performance metrics. The HR Committee also considered our 2018 say-on-pay vote (over 97% voting in favor) as a sign of our shareholders’ support of Arcosa’s executive compensation philosophy and plans.

This CD&A will be subject to an advisory, non-binding say-on-pay vote at the 2020 Annual Meeting. Our Board and the HR Committee value the benefits of maintaining a dialogue with our shareholders and understanding their views. The HR Committee will consider the outcome of future say-on-pay votes as it evaluates the design of our executive compensation programs and the specific compensation decisions for each of our Named Executive Officers.

Our Executive Compensation Policies and Practices

We have adopted the following compensation practices, which are intended to promote strong governance and alignment with shareholder interests:

What We Do:

What We Don’t Do:

2019 Compensation Program Philosophy

Our executive compensation program reflects our pay-for-performance philosophy. The HR Committee utilizes a combination of fixed and variable pay elements in order to achieve the following objectives:

Compensation Approach and Benchmarking

Compensation Approach

The HR Committee, in consultation with management and its compensation consultant, oversees our executive compensation philosophy and reviews and approves compensation for our Named Executive Officers other than the CEO. The independent directors of the Board approve the CEO’s compensation following a review and recommendation by the HR Committee.

The HR Committee retains a compensation consultant to provide it with guidance on executive compensation-related matters and to perform an annual total compensation study, the product of which is compensation benchmarking information (the “Peer Survey Data”) for our Named Executive Officers from peer group companies (the “Peer Group”). After evaluating the Peer Survey Data, our CEO discusses with the HR Committee his evaluation of each Named Executive Officer, excluding himself. The compensation consultant’s analyses, along with the CEO’s compensation recommendations for each Named Executive Officer, are presented to the HR Committee for consideration in determining Named Executive Officer compensation. The HR Committee, following a review and in consultation with the compensation consultant, recommends the CEO’s compensation to the independent directors for their approval.

The HR Committee generally targets the total target compensation of the Named Executive Officers within a competitive range around the median of the Peer Survey Data. The HR Committee considers the targeted range and develops a total target compensation amount for each Named Executive Officer using the objectives described above and the Peer Survey Data as general guidelines. The HR Committee considers additional internal and external factors when making individual compensation decisions, including overall experience and future potential, individual performance, internal reporting structure, internal equity, and our overall pay objectives. This approach supports our philosophy of driving performance and accountability.

Benchmarking and Peer Survey Data for 2019 Compensation

Prior to the Separation, our Former Parent engaged the Compensation Consultant to assist in designing Arcosa’s executive compensation program, including development of a compensation benchmarking peer group for Arcosa as a stand-alone company post-Separation. The Arcosa peer group was developed based on the following attributes:

The resulting peer group consisted of 33 companies with median revenues of approximately $2.068 billion. The Arcosa peer group shown below was approved by the Board of Directors of the Former Parent prior to the Separation and remained in effect for 2019 compensation. The Peer Survey Data included data from each company named in the peer group.

The Compensation Consultant used regression analysis to provide size-adjusted market data for a company of our revenue size to the HR Committee. The Peer Survey Data includes data for base salary, target annual and long-term incentive compensation, and total target compensation obtained from the Aon Hewitt Total Compensation Measurement Survey.

In December 2018, the HR Committee reviewed benchmarking analysis for each Named Executive Officer based on the Peer Survey Data in developing 2019 base salaries, annual incentive compensation, long-term incentive compensation, and total target compensation for our Named Executive Officers. As a point of reference, when available for the Named Executive Officers, the Compensation Consultant also provided the HR Committee with the most recently available peer group proxy disclosure data for the 2019 peer companies above.

Components of Compensation

In 2019, the three primary components of the Named Executive Officers' total target direct compensation were base salary, annual incentives and long-term incentives, as described below:

2019 Annual Target Total Compensation Mix

Consistent with our pay for performance philosophy, a significant portion of each Named Executive Officer’s total compensation opportunity is weighted toward performance-based pay and components we believe align with the interests of shareholders. Our annual incentive awards and the performance-based restricted stock unit component of the LTI awards are considered performance-based pay because the payout of these awards is dependent on the achievement of specified performance goals. The time-based restricted stock unit awards are retentive while also aligning with Company performance as the final value realized is based on the Company’s share price.

For our CEO and our other Named Executive Officers, on average, the charts below show the percentage of 2019 target total direct compensation allocated to each compensation element as well as the amount of target compensation that is at risk. We consider compensation to be at risk if the award or vesting is subject to achievement of performance goals and/or the value received is dependent on our stock price.

2019 Annual Target Total Compensation Opportunities

The following table depicts 2019 target total compensation opportunities for the Named Executive Officers based on their target compensation as in effect at December 31, 2019.

2019 Annual Compensation Determination

Individual base salaries and incentive targets for the Named Executive Officers are established based on the breadth, complexity, and scope of each Named Executive Officer’s responsibilities, individual prior performance, experience, internal equity considerations, and market pay data.

Set forth below are the components of total target compensation, how these components were applied to each Named Executive Officer, and an analysis of why such amounts were set or paid.

Prior to the Separation, the Former Parent reviewed market compensation data for Arcosa and approved certain additional or revised terms of compensation for each of Messrs. Beasley, Collins, Essl, and Stevenson, effective as of November 1, 2018, to reflect their promotions into senior executive roles with the Company. Mr. Carrillo’s compensation was approved by the Former Parent, effective in April 2018 in connection with his appointment as an officer of our Former Parent and the future Chief Executive Officer of the Company.

In December 2018, the HR Committee reviewed market compensation data to determine 2019 compensation for each of the Named Executive Officers. Other than as discussed below, the HR Committee made no changes to the components of 2019 target compensation for the NEOs from that which was in effect as of the Separation on November 1, 2018.

Base Salary

Base salary is intended to attract, motivate and retain key executives by providing a consistent level of pay that appropriately compensates the executive for the breadth, complexity, and scope of responsibility inherent in the position.

The HR Committee reviewed and set the salaries of the Named Executive Officers for 2019 after consideration of the median of the peer group for their respective positions, performance, previous salary changes including those associated with the Separation, experience, and other factors. For 2019, Messrs. Cole, Collins, and Stevenson received a base salary increase as partial compensation for the elimination of the Executive Perquisites Plan and other perquisites previously provided by the Former Parent.

The following chart reflects the adjustments made to each Named Executive Officer’s base salary for 2019:

Annual Incentive Compensation

Our goal setting philosophy for the annual incentive compensation program is based on the Company’s annual operating plan. The HR Committee selects performance metrics, performance goals, and other elements of annual incentive compensation with the objective of assuring management’s focus on appropriate operational and financial objectives. The HR Committee believes that there should be clear accountability for the performance of one’s business segment. As a result, under our annual incentive compensation plan, the segment president Named Executive Officers are compensated primarily upon the results of their respective segments. The HR Committee also believes that our corporate executives share the responsibility to support the Company’s overall goals and performance. Accordingly, our annual incentive awards tie a portion of the executives’ pay across our businesses to overall Company performance.

Under our AIP, the HR Committee may choose to, among other things, (i) modify or discontinue annual incentive compensation at any time; (ii) increase or decrease a Named Executive Officer’s annual incentive compensation on a discretionary basis; and (iii) recoup all or any portion of annual incentive compensation under circumstances where the Company restates its financial statements. The HR Committee may remove any unusual or infrequently occurring or non-recurring items of income or expense from the calculation of financial goal attainment and incentive compensation.

For 2019, the HR Committee approved the following financial metrics and performance targets for 2019 annual incentive compensation for each of the Named Executive Officers to incentivize performance in alignment with our Stage 1 priorities:

The HR Committee approved the following 2019 target annual incentive opportunities for each Named Executive Officer based on such officer’s position. The HR Committee approved an increase in annual incentive opportunities for Messrs. Cole, Collins, and Stevenson as partial compensation for the elimination of the Executive Perquisites Plan and other perquisites as discussed above. These target opportunities are set forth in the table below.

The following sets forth the financial metrics and actual results that the HR Committee approved for Messrs. Carrillo, Beasley, and Stevenson for 2019, whose performance is evaluated at a corporate level.

The following sets forth the financial metrics and actual results that the HR Committee approved for Mr. Cole for 2019, whose performance is evaluated primarily based on the Energy Equipment Segment.

The following sets forth the financial metrics and actual results that the HR Committee approved for Mr. Collins for 2019, whose performance is evaluated primarily based on the Transportation Products Segment.

The following sets forth the financial metrics and actual results that the HR Committee approved for Mr. Essl for 2019, whose performance is evaluated primarily based on the Construction Products Segment.

Performance below the minimum threshold results in no payout and performance above the maximum level is capped at a maximum total payout of 200% of the target award. For each of the segment presidents, threshold performance for their respective Adjusted Segment EBITDA metrics had to have been met to be eligible for payout for the Arcosa Adjusted EBITDA metric. The amount of incentive compensation earned is linearly interpolated for performance falling between the specified performance levels.

In March 2020, the HR Committee evaluated our performance and certified 2019 actual results in accordance with the predefined performance metrics and targets under the AIP. Based on this review, the HR Committee approved the following 2019 award payouts for the Named Executive Officers without exercising any discretionary adjustment:

2019 Long-Term Incentive Compensation

LTI compensation is a key part of the total target compensation for our Named Executive Officers. The overarching purpose of LTI compensation is to align executives’ interests with those of shareholders and motivate executives to create long-term shareholder value by growing earnings and returns on capital through a variety of strategic and operational initiatives that align to the long-term business plan of the Company as a whole.

For 2019, the HR Committee awarded the Named Executive Officers LTI compensation, consisting of 60% performance-based restricted stock units for the performance period January 1, 2019 through December 31, 2021 and 40% time-based restricted stock units. The HR Committee approved new performance metrics for the performance-based restricted stock units of average return on capital and cumulative adjusted earnings per share, to incentivize long-term growth of shareholder value. The 2019 target LTI award for each Named Executive Officer was set as a specified target dollar value as set forth below. The target values of the Named Executive Officers’ annual LTI awards were set effective as of the Separation as follows:

Time-Based Restricted Stock Units (“RSUs”). Each Named Executive Officer received 40% of his target 2019 LTI grant in the form of time-based restricted stock units to promote long-term executive retention and alignment with shareholders. The time-based restricted stock units cliff vest 100% on the third anniversary of the grant date (May 2022) if the Named Executive Officer remains continuously employed by Arcosa through such date. All time-based restricted stock unit awards are non-voting and provide for dividend equivalent units payable in cash, which will vest on the same schedule as the corresponding time-based restricted stock unit awards.

Performance-Based Restricted Stock Units. The remaining 60% of each Named Executive Officer’s target 2019 LTI grant was made in the form of performance-based restricted stock units. This program is designed to (i) increase the visibility of the long-term incentive performance goals for the program’s participants, (ii) align their efforts toward achieving these goals, and (iii) reinforce pay for performance linkage through settlement of awards following the end of the relevant performance period. These units are non-voting and do not receive dividends or dividend equivalents during the performance period.

The HR Committee approves performance targets and payout ranges at the beginning of the 3-year performance period. Our attainment of the performance levels during the performance period determines the number of performance-based restricted stock units that will be ultimately earned following the end of the performance period. The earned performance-based restricted stock units are settled in shares of common stock after the results of the performance period are determined.

For the 2019-2021 performance period, the HR Committee approved the following company-wide performance metrics and weighting for the performance-based restricted stock units:

The awards will settle in 2022 following determination of results of the 2019-2021 performance period. Each Named Executive Officer may receive from 0% to 200% of his target performance-based restricted stock unit award based on actual performance against the target levels set by the HR Committee. The Named Executive Officers will earn 0% of the target if the threshold performance level is not achieved. For performance falling between the specified levels, the amount of performance-based restricted stock units earned will be interpolated accordingly.

2018-2020 Performance-Based Restricted Stock Unit Awards

In 2018, each of the Named Executive Officers received an annual LTI award from the Former Parent, which included a 2018-2020 performance-based restricted stock unit award. At the time of the Separation, these awards were converted to Arcosa performance-based restricted stock unit awards. The awards are based on Arcosa’s Relative Total Stockholder Return as measured against the companies in the S&P MidCap 400 Index, with a baseline stock price as adjusted to reflect the Separation. The following table sets forth the target number of outstanding 2018-2020 performance-based restricted stock unit awards for each of the Named Executive Officers.

The awards will settle in 2021 following determination of results of the 2018-2020 performance period. The Named Executive Officers will earn 0% if the threshold performance level is not achieved. For performance falling between the specified levels, the amount of performance-based restricted stock units earned will be interpolated accordingly between 30% and 200%.

2017-2019 Performance-Based Restricted Stock Units

In 2017, each of the Named Executive Officers received an annual LTI award from the Former Parent, which included a 2017-2019 performance-based restricted stock unit award. At the time of the Separation, these awards were converted to Arcosa time-based restricted stock units at 158% of target, which was the then-accrued performance level achievement as of the Separation date determined by the Former Parent. The Arcosa time-based restricted stock units vest on the same vesting schedule as the original performance-based restricted stock units of the Former Parent.

Definition of Non-GAAP Performance Measures

The following sets forth the definitions of the non-GAAP financial measures that were approved by the HR Committee in establishing performance levels under our incentive plans. In determining final awards, the HR Committee retains the discretion to make adjustments for incentive plan purposes to eliminate the impact (positive or negative) of items that the HR Committee deems are appropriate.

dispositions, gains or losses from currency translation adjustments, acquisition-related gains or expenses (including transaction expenses and purchase price accounting adjustments), the impact of changes in accounting rules, in each case as approved by the HR Committee.

Other Former Parent Compensation Decisions

Prior to the Separation, the Former Parent approved a Separation success bonus for each of Messrs. Beasley and Stevenson in the amount of $125,000 in recognition of his significant efforts and performance in support of the Separation, contingent on his continued employment through the date of payment. Half of the bonus was paid 30 days following the effective date of the Separation in November 2018, and the other half was paid 90 days following the effective date of the Separation in January 2019. The amount paid in January 2019 is reflected as Bonus for 2019 in the Summary Compensation Table.

Other Compensation Plans

Post-employment Benefits

Arcosa’s retirement and savings compensation plans are designed to assist executives in the transition from active employment. The HR Committee believes these plans assist in recruiting and retaining senior executives and facilitate employment transition. Arcosa’s retirement and savings compensation plans consist of the following:

Effective January 1, 2020, the HR Committee recommended for approval, and the Board approved, amendments to the 401(k) Plan and Supplemental Plan to bring the plans in line with market practice. These amendments included, among other things:

Change in Control Severance Plan

On December 6, 2018, the HR Committee recommended for approval, and our Board of Directors approved, the CIC Plan. Arcosa’s Board of Directors has determined that it is appropriate to reinforce and encourage the continued attention and dedication of members of Arcosa’s management to the interests of shareholders without distraction in potential circumstances arising from the possibility of a change in control of Arcosa.

Each of the Named Executive Officers entered into a participation agreement under the CIC Plan upon which such officer became subject to the CIC Plan and any prior individual change in control agreements were terminated. The CIC Plan is effective through the third anniversary of the effective date of the CIC Plan, provided that the Company has the right to renew the CIC Plan for additional one-year terms.

The CIC Plan contains a “double trigger” provision that requires both a change in control of the Company and a qualifying termination of the Named Executive Officer’s employment before compensation will be paid under the CIC Plan or for acceleration of equity awards that are granted on or after the date of the CIC Plan. Pursuant to the CIC Plan, if a Named Executive Officer’s employment is terminated by the Company without “Cause” or by the participant for “Good Reason,” in each case, within two years following a “Change in Control” (each, as defined in the CIC Plan), then:

With respect to equity awards outstanding prior to the effective date of the CIC Plan, such awards will become 100% vested following a Change in Control. The Named Executive Officers are required to execute a release in favor of the Company in exchange for receiving CIC Plan benefits. Pursuant to the CIC Plan, each Named Executive Officer is subject to non-competition, non-solicitation, and non-recruitment covenants for 12 months following termination of employment as well as confidentiality obligations and non-disparagement covenants that survive indefinitely.

The CIC Plan does not include excise tax gross ups. In the event payments under the CIC Plan would trigger the “golden parachute” excise tax under Sections 280G and 4999 of the Code, such payments will be reduced if such reduction would result in a greater after-tax benefit to the Named Executive Officer.

Arcosa considers the compensation payable under the CIC Plan upon specified events of termination following a Change in Control to be appropriate in light of the unique mix of the industries in which it is engaged, the limited number of companies in many of those industries and the uncertain length of time necessary to find new employment. The level of payments and benefits provided under the CIC Plan are considered appropriate. These benefits are recognized as

part of the total compensation package and are reviewed periodically, but may not be specifically considered by the HR Committee when making changes in base salary, annual incentive compensation or long-term incentive compensation.

The Change in Control severance benefits are discussed in the Compensation of Executives section under “Potential Payments Upon Termination or Change in Control.” Arcosa does not have severance agreements with Named Executive Officers other than in connection with the CIC Plan.

Health and Welfare Benefits

The Arcosa-supported medical plan, life insurance and long-term disability plan and employee-paid dental, vision, critical illness insurance and supplemental life insurance are substantially similar for the Named Executive Officers as for all full-time employees. Arcosa does not provide health benefits to retirees.

Tax and Accounting Implications of Executive Compensation

Section 162(m) of the Code limits to $1.0 million per year the federal income tax deduction to public corporations for compensation paid for any fiscal year to the Named Executive Officers. The HR Committee will establish executive compensation arrangements that it believes are in the best interests of the Company and our shareholders, even if those arrangements are not fully deductible under Section 162(m).

Human Resources Committee Report

We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

Human Resources Committee

David W. Biegler, Chair
Joseph Alvarado
John W. Lindsay

Compensation of Executives

Summary Compensation Table

The following table and accompanying narrative disclosure should be read in conjunction with “Compensation Discussion and Analysis” above, which sets forth the objectives of the Company’s executive compensation programs.

The “Summary Compensation Table” below summarizes the total compensation paid to or earned by each of the Named Executive Officers for the fiscal years ended December 31, 2019, 2018, and 2017, other than Mr. Stevenson, who became a Named Executive Officer in 2019. The amounts paid and compensation granted in 2017 and during the period in 2018 before Separation were paid or provided by our Former Parent.

Summary Compensation Table

Grants of Plan-Based Awards

The following table summarizes the 2019 equity and non-equity plan-based awards granted to the Named Executive Officers.

Grants of Plan-Based Awards Table

Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table

In 2019, the Named Executive Officers were granted 40% of their respective target LTI compensation as time-based restricted stock units. These awards were granted to reflect the HR Committee’s desire to incentivize the long-term commitment of key executives to build shareholder value. These time-based restricted stock units will cliff vest on May 15, 2022 if the Named Executive Officer remains an employee on such date. During the vesting period, recipients do not earn dividends on, and are not entitled to vote with respect to, the time-based restricted stock units.

The remaining 60% of the Named Executive Officer's target LTI compensation was granted in the form of performance-based restricted stock units for the 2019-2021 performance period based on three-year average pre-tax return on capital and cumulative adjusted earnings per share. Each performance-based restricted stock unit earned will convert into either one share of Common Stock or the cash value of one share of Common Stock and vest on May 15, 2022. During the vesting period, recipients do not earn dividends on, and are not entitled to vote with respect to, the performance-based restricted stock units.

See “2019 Annual Compensation Determination—2019 Long-Term Incentive Compensation” under “Compensation Discussion and Analysis” above and “Potential Payments Upon Termination or Change in Control” below for a description of the terms of 2019 LTI compensation.

In the “Grants of Plan-Based Awards” table, the estimates for future payouts under the 2019 AIP awards represent potential payments of annual incentive compensation for 2019 based on achievement of specified performance metrics. See “2019 Annual Compensation Determination—Annual Incentive Compensation” under “Compensation Discussion and Analysis” above for a description of the 2019 AIP awards.

We have a 401(k) plan that permits employees to elect to set aside a portion of their compensation (subject to the maximum limit on the amount of compensation permitted by the Code to be deferred for this purpose) in a trust to pay future retirement benefits. For 2019, depending upon years of service, we matched up to 50% of no more than 6% of the employee’s compensation set aside for this purpose. For 2019, we contributed up to an additional 3% of the employee’s base salary (subject to the maximum limit permitted by the Code) depending upon years of service as an annual retirement contribution. See “Compensation Discussion and Analysis—Other Compensation Plans—Post-Employment Benefits.”

Outstanding Equity Awards at Year-End

The following table summarizes as of December 31, 2019, for each Named Executive Officer, the number of shares of unvested stock awards held in both Arcosa and Trinity. The market value of the stock awards was based on the closing price of the common stock as of December 31, 2019, which was $44.55 for Arcosa (stock ticker “ACA”) and $22.15 for our Former Parent (stock ticker “TRN”).

Outstanding Equity Awards at Fiscal Year-End Table