2018 Guide to Effective Proxies

2.17.1 CD&A table of contents | 247 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES Compensation Discussion and Analysis (“CD&A”) Executive Summary As one of the world’s largest and most diverse providers of technical professional and construction services, we operate with a pay-for-performance philosophy in a challenging, highly competitive, and rapidly evolving global environment. Our executive compensation program is designed to attract and retain individuals with the skills and qualifications to manage and lead the Company effectively. The overarching goal of our program is to motivate our leaders to contribute to the achievement of our financial goals and to focus on long-term value creation for our stockholders. Our named executive officers (“NEOs”) for fiscal 2017 were: Name Position Mr. Steven J. Demetriou Chairman and Chief Executive Officer (“CEO”) Mr. Kevin C. Berryman Chief Financial Officer (“CFO”) Mr. Terence D. Hagen President, Aerospace & Technology Mr. Joseph G. (“Gary”) Mandel Executive Vice President, Integration Management Office Mr. Robert V. Pragada President, Buildings & Infrastructure and Industrial How did we perform? ✓ Improved growth momentum as both third quarter and fourth quarter fiscal 2017 showed sequential revenue growth versus the previous quarter ✓ Continued strong gross margin performance in the fourth quarter of fiscal 2017, contributing to a 160 basis point annual improvement to 17.9%, driven by strong project execution and increased focus on more profitable business ✓ Backlog of $19.8 billion at fiscal year end, up over $1.0 billion versus a year ago ✓ Repurchased $97 million in shares and paid $54 million in dividends ($0.45 per share) in fiscal 2017 What did we change for 2017? ✓ Increased base salaries for NEOs (other than the CEO and CFO) between 3% and 8%, consistent with market data from our peer group and other market survey information ✓ To further increase accountability and reinforce our commitment to profitable growth and effective cash management, we updated our short-term incentive to include GM in Backlog* ✓ We updated our long-term incentive plan by including a return on invested capital (“ROIC”) metric in addition to earnings per share growth (“EPS Growth”) ✓ In connection with the Company’s announcement of its intention to pay a regular quarterly cash dividend, we provided for dividend equivalents on time-based RSUs in order to treat holders of RSUs consistently with shareholders How do we determine pay? ✓ Design pay programs to reward executives for positive Company and business unit results, mitigate material risks and align with stockholder interests by having a significant portion of compensation composed of equity-based long-term incentive awards ✓ Set pay levels commensurate with performance and the need to attract and retain high quality talent ✓ Consider many factors, including the advice of the Compensation Committee’s independent compensation consultant, internal pay equity among executives and the alignment of total pay opportunity and pay outcomes with performance and with external market data How did we pay our NEOs? ✓ Payouts aligned with our fiscal 2017 performance ✓ Base salaries reflect each NEO’s role, responsibility and experience ✓ Annual cash incentive payouts ranged from 73% to 153% of target based on achievement of Company and business area performance objectives ✓ Long-term equity incentives granted at target levels using a portfolio of performance-based restricted stock units (“PSUs”) and RSUs, with the largest portion (60%) delivered in PSUs which vest 50% based on our EPS Growth and 50% based on our ROIC over a three-year period ✓ No off-cycle equity awards or excessive perquisites for any of our NEOs How do we address risk and governance? ✓ Provide an appropriate balance of short- and long-term compensation, with payouts based on the Company’s achievement of certain financial metrics and specific business area objectives ✓ Follow practices that promote good governance and serve the interests of our stockholders, with maximum payout caps for annual cash incentives and long-term performance awards, and policies on clawbacks, anti-pledging, anti-hedging, insider trading and stock ownership ✓ Annual “say-on-pay” shareholder vote was approved at the 2017 shareholder meeting Why you should approve the say-on-pay proposal ✓ Fiscal 2017 performance continued to support long-term stockholder value ✓ Fiscal 2017 incentive payouts for our NEOs aligned with overall Company and business area performance ✓ Our pay program is aligned with stockholder interests, emphasizing achievement of strategic objectives over the long term ✓ Our pay practices are tied to robust risk management and corporate governance * See page 36 for definition of GM in Backlog 28 | 2018 Proxy Statement JACOBS ENGINEERING GROUP, INC.