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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

Barrett Business Services, Inc.

(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

PRELIMINARY PROXY MATERIALS-SUBJECT TO COMPLETION

BARRETT BUSINESS SERVICES, INC.

8100 N.E. Parkway Drive, Suite 200

Vancouver, Washington 98662

(360) 828-0700

April [_], 2020

Dear Stockholder:

Our annual meeting of stockholders will be held at 1:00 p.m., Pacific Time, on Wednesday, May 27, 2020.  Due to the issues surrounding COVID-19 with which we have all become much too familiar, we have decided to hold our annual meeting via remote communication, as permitted by Maryland law.  You will find instructions explaining how to participate in the meeting on the first page of our proxy statement.

Matters to be presented for action at the meeting include the election of directors, approval of an amendment to our Bylaws that would provide for proxy access in the election of directors, approval of our new 2020 Stock Incentive Plan, an advisory vote to approve our executive compensation program, and ratification of selection of our independent auditors. We will also act on such other business as may properly come before the meeting or any postponements or adjournments thereof.

Whether or not you plan to participate in the annual meeting, please sign, date, and return your proxy as soon as possible, or follow the instructions for telephone or Internet voting on the accompanying proxy. If you do participate in the meeting and wish to vote at that time, you may revoke your proxy and vote personally.

PRELIMINARY PROXY MATERIALS-SUBJECT TO COMPLETION

BARRETT BUSINESS SERVICES, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

May 27, 2020

You are invited to attend the virtual annual meeting of stockholders (the "Annual Meeting") of Barrett Business Services, Inc., a Maryland corporation (the "Company"), to be held via live webcast on Wednesday, May 27, 2020, at 1:00 p.m., Pacific Time. You can attend the live webcast on the internet by visiting www.https://web.lumiagm.com/[       ].

Only stockholders of record at the close of business on April 9, 2020, are entitled to notice of and to vote at the Annual Meeting or any postponements or adjournments thereof.

The Annual Meeting is being held to consider and vote on the following matters:

Whether or not you plan to attend the virtual Annual Meeting, please sign and date the accompanying proxy and return it promptly in the enclosed postage-paid envelope, or follow the instructions on the proxy for telephone or Internet voting, to avoid the expense of further solicitation. If you attend the Annual Meeting, you may revoke your proxy and vote your shares at that time.

Vancouver, Washington

April [_], 2020

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 27, 2020:

The proxy statement for the 2020 annual meeting of stockholders and 2019 annual report to stockholders are available at http://shareholdermaterial.com/bbsi

BARRETT BUSINESS SERVICES, INC.

8100 N.E. Parkway Drive, Suite 200

Vancouver, Washington 98662

(360) 828-0700

PROXY STATEMENT

2020 ANNUAL MEETING OF STOCKHOLDERS

This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors (the "Board") of Barrett Business Services, Inc., a Maryland corporation (the "Company"), to be voted at the annual meeting of stockholders to be held on May 27, 2020 (the "Annual Meeting"), and any postponements or adjournments thereof. The proxy statement and accompanying form of proxy are expected to be mailed to stockholders beginning on approximately April 24, 2020.

VOTING, REVOCATION, AND SOLICITATION OF PROXIES

Due to concerns about containing the spread of COVID-19, the Board has decided to hold this year’s Annual Meeting as a virtual meeting of stockholders conducted online via live webcast. You will be able to attend and participate in the Annual Meeting online on Wednesday, May 27, 2020, at 1:00 p.m. Pacific Time, and may also vote your shares electronically and submit any questions you may have during the meeting, by visiting: https://web.lumiagm.com/________. [The passcode for the meeting is __________.]

When a proxy in the accompanying form is properly executed and returned, the shares represented will be voted at the Annual Meeting in accordance with the instructions specified in the proxy. If no instructions are specified, the shares will be voted FOR Items 1, 2, 3, 4 and 5 in the accompanying Notice of Annual Meeting of Stockholders.

If you are a beneficial holder and do not provide specific voting instructions to your broker, the firm that holds your shares will not be authorized to vote your shares (known as a "broker non-vote") on non-routine matters under the New York Stock Exchange rules governing discretionary voting by brokers. Other than the ratification of the selection of our independent auditors, the action items being submitted to a vote at the Annual Meeting are not routine items. We encourage you to return your proxy promptly, or follow the instructions for telephone or Internet voting on the proxy, even if you plan to attend the Annual Meeting.

Beneficial owners are invited to attend the Annual Meeting. However, since a beneficial owner is not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you follow your broker’s procedures for obtaining a legal proxy. If you request a printed copy of the proxy materials by mail, your broker or nominee will provide a voting instruction card for you to use.

After obtaining a valid legal proxy from your broker, bank or other agent, to then register to attend the Annual Meeting, you must submit proof of your legal proxy reflecting the number of your shares along with your name and email address to American Stock Transfer & Trust Company, LLC. Requests for registration should be directed to proxy@astfinancial.com or to facsimile number 718-765-8730.  Written requests can be mailed to:

American Stock Transfer & Trust Company LLC

Attn: Proxy Tabulation Department

6201 15th Avenue

Brooklyn, NY 11219

Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on [_____], 2020.

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Any proxy given pursuant to this solicitation may be revoked by the person giving the proxy at any time prior to its exercise by written notice to the Secretary of the Company of such revocation, by a later-dated proxy received by the Company, or by attending the Annual Meeting and voting in person. The mailing address of the Company’s principal executive offices is 8100 N.E. Parkway Drive, Suite 200, Vancouver, Washington 98662. If your shares are held through a broker or other nominee, please follow their directions included with this proxy statement on how to vote your shares and, if necessary, how to change or revoke your voting instructions.

The solicitation of proxies will be made primarily by mail, but proxies may also be solicited personally or by telephone or email by our directors and officers without additional compensation for such services. The Company will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for their reasonable expenses in sending proxy materials to stockholders. All costs of solicitation of proxies will be borne by the Company.

OUTSTANDING VOTING SECURITIES

The close of business on April 9, 2020, has been fixed as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting. On the record date, the Company had 7,513,195 shares of Common Stock, $.01 par value ("Common Stock") outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. The presence, in person or by proxy, of stockholders entitled to cast a majority of all votes entitled to be cast at the Annual Meeting is required to constitute a quorum. Abstentions and broker non-votes, if any, will be considered present for purposes of determining the presence of a quorum.

ITEM 1 – ELECTION OF DIRECTORS

The directors will be elected at the Annual Meeting to serve until the next annual meeting of stockholders and until their successors are elected and qualify. Our Charter and Bylaws authorize the Board to set the number of positions on the Board within a range of three to nine, with the current number of positions fixed at eight. The Board may fill vacancies on the Board, including vacancies resulting from an increase in the number of positions, for a term ending with the next annual meeting of stockholders and when a successor is duly elected and qualifies.

Provided that a quorum is present at the Annual Meeting, a nominee will be elected if the nominee receives the affirmative vote of a majority of the total votes cast on his or her election (that is, the number of shares voted "for" a director nominee must exceed the number of votes cast "against" that nominee). Seven of our director nominees are currently serving on the Board. Even if a nominee who is currently serving as a director is not re-elected, Maryland law provides that the director would continue to serve on the Board as a "holdover director." However, under our Bylaws, if stockholders do not re-elect a director, the director is required to submit his or her resignation to the Board. In that event, our Nominating and Governance Committee (the "Nominating Committee") would recommend to the Board whether to accept or reject the resignation. The Board would then consider and act on the Nominating Committee's recommendation, publicly disclosing its decision and the reasons supporting it within 90 days following the date that the election results were certified.

A duly executed proxy will be voted FOR the election of the nominees named below, other than proxies marked to vote "against" or to "abstain" from voting on one or more nominees. Shares not represented in person or by proxy at the Annual Meeting, shares voted to "abstain," and broker non-votes, if any, will have no effect on the outcome of the election of directors.

The Board recommends that stockholders vote FOR each of the nominees named below to serve as a director until the next annual meeting of stockholders and his or her successor is duly elected and qualifies. If for some unforeseen reason a nominee should become unavailable for election, the proxy may be voted for the election of such substitute nominee as may be designated by the Board.

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The following table sets forth information with respect to each person nominated for election as a director, including their current principal occupation or employment and ages as of April 1, 2020. All nominees for election as directors are current Board members with the exception of Gary E. Kramer, who was appointed President and Chief Executive Officer of the Company on March 5, 2020.

The Nominating Committee evaluates the Board’s membership from time to time in determining whether to recommend that incumbent directors be nominated for re-election. In this regard, the Nominating Committee considers whether the professional and educational background, business experience and expertise represented on the Board as a whole enables it to satisfy its oversight responsibilities in an effective manner.

The experience, qualifications, attributes and skills of each director nominee, including his or her business experience during the past five years, are described below.

Thomas J. Carley has served as Chief Operating Officer and a director of Urth Organic Corporation, a privately held distributor of organic microbial fertilizers and soil amendments, since August 2018. He previously acted as the financial principal of Portal Capital, an investment management company that he co-founded, from July 2006 to June 2018. Mr. Carley served as the Company’s interim Principal Financial and Accounting Officer from March 4, 2016 until August 10, 2016, and remained an employee of the Company through August 31, 2016. Mr. Carley has an MBA from the University of Chicago Graduate School of Business, with an emphasis in Accounting and Finance, and an A.B. degree in Economics and Classics from Dartmouth College.

Mr. Carley brings financial expertise to the Company and the Board through his prior experience in the areas of public accounting and financial analysis, including experience as an accountant with Price Waterhouse & Co., now known as PricewaterhouseCoopers LLP, as well as President and Chief Financial Officer of Jensen Securities, a securities and investment banking firm in Portland, Oregon, for eight years in the 1990’s. He is chair of the Board’s Risk Management Committee.

Thomas B. Cusick has served as Executive Vice President and Chief Operating Officer of Columbia Sportswear Company, an outdoor and active lifestyle apparel and footwear company listed on the Nasdaq Global Select Market, since July 2017. He previously served as Columbia’s Executive Vice President and Chief Financial Officer from 2015 until 2017. He was promoted to Chief Financial Officer in 2009 and served as Vice President, Corporate Controller and Chief Accounting Officer of Columbia from 2002 until 2009. Prior to joining Columbia, Mr. Cusick spent seven years with Cadence Design Systems, Inc. (and OrCAD, a company acquired by Cadence in 1999), a public company that develops system design enablement solutions, and certain of its subsidiaries. He began his career at the public accounting firm of KPMG, LLP. He received a B.S. degree in accounting from the University of Idaho.

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Mr. Cusick brings financial expertise to the Board through his experience as an executive officer of a public company and his work with public company audit committees. He is chair of the Board’s Audit and Compliance Committee.

Diane L. Dewbrey was elected to the Board in October 2019. Ms. Dewbrey is also a director of MBIA Inc., a holding company whose subsidiaries provide financial guarantee insurance for the public and structured finance markets. For five years, until its merger with Consolidated Communications in 2014, Ms. Dewbrey served as an independent director and then chair (2013-14) of the board of directors of Enventis, Inc., a telecommunications company. Ms. Dewbrey is an NACD Governance Fellow and holds a Professional Director Certification from the American College of Corporate Directors. Beginning in 1987, Ms. Dewbrey held various senior positions at Fifth Third Bancorp, serving as Senior Vice President and Director of Central Operations for 10 years until 2005. In 2006, she became CEO and a director of Foundation Bank in Bellevue, Washington, until 2015. Ms. Dewbrey earned her B.S. degree in Mathematics from Xavier University. She is currently a Director of the YMCA of the USA, serving on its Strategic Oversight and Investment Committee.

Ms. Dewbrey brings extensive experience in board leadership and senior management in areas including finance and investments. Ms. Dewbrey has also contributed meaningfully to community organizations throughout her career.

James B. Hicks, Ph.D., has been Professor of Research in Biological Sciences at the University of Southern California since 2014. From 2004 until 2016, Dr. Hicks was Professor of Biomedical Research at Cold Spring Harbor Laboratory in New York. He is a co-founder and director of Virogenomics, Inc., a private biotechnology company located in the Portland, Oregon metropolitan area, for which he previously served as Chief Technology Officer. Dr. Hicks was a director of AVI BioPharma, Inc. (now Sarepta Therapeutics, Inc.), from 1997 until October 2007 and a member of AVI BioPharma, Inc.’s audit committee and chair of its compensation committee. Between 1990 and 2006, Dr. Hicks co-founded five biotech or internet companies. He completed a postdoctoral program at Cornell University, received a Ph.D. from the University of Oregon, and received a B.A. degree from Willamette University.

Through his experience with other public companies, Dr. Hicks provides valuable business and financial insight to the Board.

Jon L. Justesen is co-owner and Chief Executive Officer of Justesen Ranches, which operates in four counties in two states. He is also owner and President of Buckhollow Ranch, Inc., and has 35 years of experience creating wealth as a private investor. During Mr. Justesen’s 40 plus years of successfully growing and managing agribusinesses in eastern Oregon, he has overseen operations involving timber, wheat and cattle production, property management and development, and resource-based recreational activities.

Mr. Justesen brings to the Board leadership and business management skills developed during his lifelong career managing substantial ranching operations. He also provides the Company with connections to potential customers through his personal network of business contacts developed in several geographic markets in which the Company operates. Mr. Justesen is chair of the Board’s Nominating Committee.

Gary E. Kramer joined the Company on August 1, 2016, as Vice President – Finance and served as the Company’s Chief Financial Officer and Principal Accounting Officer until March 5, 2020, when he was appointed President and Chief Executive Officer of the Company. Prior to joining the Company, Mr. Kramer served as Senior Vice President for Global Services at Chubb Limited (formerly ACE Limited) beginning in 2013. In this role, Mr. Kramer led the Global Services team to support the growth of multinational businesses and meet the complex underwriting and servicing needs of large multinational customers. He also oversaw the delivery of sophisticated risk management products, programs, and services through all lines of business underwritten for global programs of U.S.-based companies. Between 2004 and 2013, Mr. Kramer held a variety of positions within the ACE Group companies, including Divisional Financial Officer of ACE Financial Solutions, Inc.

Mr. Kramer brings to the Board extensive experience in senior leadership positions as well as deep industry and financial acumen.

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Anthony Meeker serves as Chairman of the Board. He retired in 2003 as a Managing Director of Victory Capital Management, Inc. (formerly known as Key Asset Management, Inc.), where he was employed for 10 years. Mr. Meeker was previously a director of First Federal Savings and Loan Association of McMinnville, Oregon, and Oregon Mutual Insurance. He also serves on the board of two charitable organizations, MV Advancements, which provides employment, residential, and community services to clients with disabilities, and Oregon State Capitol Foundation. From 1987 to 1993, Mr. Meeker was Treasurer of the State of Oregon. His duties as state treasurer included investing the assets of the state, including the then $26 billion state pension fund, managing the state debt, and supervising all cash management programs. Mr. Meeker also managed the workers’ compensation insurance reserve fund of the State Accident Insurance Fund, providing oversight to ensure adequate actuarial reserves. He received a B.A. degree from Willamette University.

Mr. Meeker’s experience in the insurance industry assists the Company in managing risk with respect to workers’ compensation and overseeing its captive insurance subsidiaries. Mr. Meeker also brings leadership skills and a unique insight stemming from his public service as state treasurer and service on other corporate boards.

Vincent P. Price is Executive Vice President and Chief Financial Officer of Cambia Health Solutions, a nonprofit corporation headquartered in Portland, Oregon, and dedicated to transforming health care by creating a person focused and economically sustainable system through health insurance plans and related products and services. Mr. Price joined Cambia in 2009. Prior to joining Cambia, he spent 15 years as a senior finance executive with Intel Corporation, a leader in the design and manufacturing of advanced integrated digital technology platforms, followed by seven years as a consultant to start-up companies. He serves on the board of trustees of BCS Financial’s Plan Investment Fund and the Oregon Health Sciences University Foundation. He received his bachelor's degree in business from South Dakota State University. His Master of Business Administration is from Arizona State University.

Mr. Price brings his business, financial, and risk management experience as an executive officer of a large health care organization to the Board. He is chair of the Board’s Compensation Committee.

The Board recommends that stockholders vote FOR each of the nominees named above.

Litigation Involving Directors and Officers

In June 2015, a shareholder derivative lawsuit was filed against the Company, its then directors and certain of its officers and a former officer in the Circuit Court for Baltimore City, Maryland. The complaint alleged breaches of fiduciary duty, unjust enrichment and other violations of law and sought various remedies.  The lawsuit was dismissed in 2018. In March 2019, the plaintiff filed a similar lawsuit, also in Baltimore City, Maryland.  The Company’s motion to dismiss was granted in March 2020.

We have entered into indemnification agreements with each of our current directors. Each agreement generally requires us to indemnify the director against expenses, including attorney fees, judgments, fines and settlements, arising from claims such as those described above (subject to certain exceptions, including liabilities resulting from conduct committed in bad faith or active and deliberate dishonesty or resulting in actual receipt of an improper personal benefit in money, property, or services). For a more detailed discussion of indemnification of our directors and officers, see "Related Person Transactions" below.

Meetings and Committees OF THE BOARD OF DIRECTORS

The Board held seven meetings in 2019. Each director attended at least 75% of the total number of the meetings of the Board and the meetings held by each committee of the Board on which he or she served during his or her respective periods of service in 2019.

The Company does not have a policy regarding directors' attendance at the Company's annual meeting of stockholders. All directors as of last year's annual meeting attended the meeting.

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The Board has determined that Messrs. Carley, Cusick, Dewbrey, Hicks, Justesen, Meeker, and Price are independent directors as defined in Rule 5605(a)(2) of the listing standards applicable to companies listed on The Nasdaq Stock Market.

Board Leadership Structure

Michael L. Elich, previously the Company's Chief Executive Officer and a director since 2011, retired from those positions on March 5, 2020. Anthony Meeker, a long-time outside director of the Company, serves as Chairman of the Board. Mr. Meeker is an ex officio member of each Board committee of which he is not a voting member.

Throughout 2019, each of our directors other than Mr. Elich qualified as an independent director under the Nasdaq listing rules. The outside directors also meet at least two times per year in executive session without the President and Chief Executive Officer or other management being present.

The Board believes that its leadership structure reflecting the separation of the Chairman and Chief Executive Officer positions serves the best interests of the Company and its stockholders by giving an independent director a direct and significant role in establishing priorities and the strategic direction and oversight of the Company. The Board believes that the manner in which it oversees risk management at the Company has not affected its leadership structure.

The Board’s Role in Risk Oversight

The Company's management is responsible for identifying, assessing and managing the material risks facing the Company. The Board has historically performed an important role in the review and oversight of risk, and generally oversees risk management practices and processes. The Board, either as a whole or through the Audit and Compliance Committee (the “Audit Committee”), the Risk Management Committee, and other Board committees, periodically discusses with management strategic and financial risks associated with the Company's operations, their potential impact on the Company, and the steps taken to manage these risks.

While the Board is ultimately responsible for risk oversight, the Board's committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. In particular, the Audit Committee focuses on financial and enterprise risk and, through discussions by the Audit Committee or its Chair with management and the Company’s independent registered public accounting firm (the “independent auditors”), oversees the Company's policies and practices regarding the preparation of financial statements and other public disclosures. The Audit Committee also assists the Board in fulfilling its duties and oversight responsibilities relating to the Company's compliance and ethics programs. The Nominating Committee oversees the functioning of the Board and its committees, the Company's corporate governance practices, and succession planning for the Company's executive positions. The Compensation Committee monitors the Company's incentive compensation programs to assure that management is not encouraged to take actions involving excessive risk. The Risk Management Committee oversees the Company's workers' compensation insurance and other insured and self-insured risks, as well as risks associated with the Company's investment portfolio and information technology, including data privacy and cybersecurity.

Audit and Compliance Committee

The Audit Committee reviews and pre-approves audit and legally-permitted non-audit services provided by the independent auditors, makes decisions concerning the engagement or discharge of the independent auditors, and reviews with management and the independent auditors the results of their audit, the adequacy of internal accounting controls, and the quality of financial reporting. The Audit Committee also oversees the Company's Code of Business Conduct and Code of Ethics for Senior Financial Officers. It reviews for potential conflicts of interest, and determines whether to approve, any transaction by the Company with a director or officer (including their family members) that would be required to be disclosed in the Company's annual proxy statement. The Audit Committee held five meetings in 2019.

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The current members of the Audit Committee are Messrs. Cusick (chair) and Meeker and Dr. Hicks. The Board has determined that Thomas B. Cusick is qualified to be an "audit committee financial expert" as defined by the SEC's rules under the Securities Exchange Act of 1934 (the "Exchange Act"). The Board has also determined that each current member of the Audit Committee meets the financial literacy and independence requirements for audit committee membership specified in applicable rules of the Securities and Exchange Commission (the “SEC”) under the Exchange Act and in listing standards applicable to companies listed on The Nasdaq Stock Market. The Audit Committee's activities are governed by a written charter, a copy of which is available on the Company's website at www.mybbsi.com in the "Investors" section under “Governance.”

Compensation Committee

The Compensation Committee reviews the compensation of executive officers of the Company and makes recommendations to the Board regarding base salaries and other forms of compensation to be paid to executive officers, including decisions to grant stock options and other stock-based awards. The current members of the Compensation Committee are Messrs. Price (chair), Cusick, and Justesen and Dr. Hicks, each of whom is "independent" as defined in Rule 5605(a)(2) and Rule 5605(d)(2)(A) of the listing standards for companies listed on The Nasdaq Stock Market. The Compensation Committee held eight meetings in 2019.

The Compensation Committee's responsibilities are outlined in a written charter, a copy of which is available on the Company's website at www.mybbsi.com in the "Investors" section under “Governance.” The Compensation Committee is charged with carrying out the Board's overall responsibilities relating to compensation of the Company's executive officers and directors. Its specific duties include reviewing the Company's cash incentive and equity compensation programs for executive officers and director compensation arrangements, and recommending changes to the Board, as it deems appropriate. In the course of reviewing the Company's compensation policies and practices, the Compensation Committee has considered whether the Company's compensation program encourages employees to take risks that are reasonably likely to have a material adverse effect on the Company. The Committee believes that the Company's compensation program is not likely to have that effect.

The Chief Executive Officer reviews the performance of each executive officer (other than himself) and may make recommendations to the Compensation Committee regarding salary adjustments, stock-based awards, and the selection, target amounts and satisfaction of corporate and individual performance goals for cash and stock incentive awards. The Compensation Committee is responsible for annually evaluating the CEO's performance and establishing his base salary and incentive compensation. At the invitation of the Committee chair, the Company's Chief Financial Officer may attend committee meetings to provide information relevant to the Committee's determination of the satisfaction of corporate performance goals tied to cash and stock incentive compensation and the development of appropriate corporate performance targets for future awards of incentive compensation, as well as financial and accounting issues associated with the Company's executive compensation program. The Compensation Committee exercises its own discretion in accepting or modifying the CEO's recommendations regarding the performance and compensation of the Company's other executive officers.  If present at a Compensation Committee meeting, each of the CEO and CFO is excused during discussions of his compensation.

The Compensation Committee also administers the Company's stock incentive plans. The Compensation Committee, as it deems appropriate and as permitted by applicable law, may delegate its responsibilities to a subcommittee under the Company's 2015 Stock Incentive Plan, which was approved at the 2015 annual meeting of stockholders. The Compensation Committee has delegated authority, within specified limits, to the CEO (if also a director) to make stock-based awards in his discretion to corporate and branch personnel who are not executive officers.

Under its charter, the Compensation Committee has the sole authority to retain the services of outside consultants to assist it in making decisions regarding executive compensation and other compensation matters for which it is responsible. For several years, the Compensation Committee has engaged Mercer, a nationally recognized compensation consultant, to assist the committee in structuring and implementing the Company's executive compensation program. The Compensation Committee solicited information from Mercer regarding any potential conflicts of interest prior to each engagement and determined that no conflicts existed.

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In the fall of 2018, the Compensation Committee retained Mercer to assist in updating the Company’s peer group used for comparison purposes. Mercer also provided an analysis of the competitiveness of the Company’s executive compensation program by executive officer position, based on published survey data for similarly sized entities in the services industry and benchmarking data for companies in the updated peer group. The Compensation Committee used the Mercer report in setting executive compensation levels for salaries, cash incentive target bonuses, and target stock-based awards for 2019.  During 2019, the Compensation Committee engaged Mercer to provide additional information regarding various issues, including the overall structure of the Company’s long-term stock-based incentive program for executive officers, as described in more detail under "Executive Compensation--Compensation Discussion and Analysis" below.

Nominating and Governance Committee

The Nominating Committee evaluates and recommends candidates for nomination by the Board in director elections and otherwise assists the Board in determining and evaluating the composition of the Board and its committees. The Nominating Committee is also responsible for developing corporate governance policies, principles and guidelines for the Company and succession planning with respect to the Company's executive officers. The current members of the Nominating Committee are Messrs. Justesen (chair), Carley, and Price and Ms. Dewbrey.  The Nominating Committee held three meetings in 2019.

The Board has determined that each current member of the Nominating Committee is an independent director as defined in Rule 5605(a)(2) of the listing standards applicable to companies listed on The Nasdaq Stock Market. The Nominating Committee is governed by a written charter, which is available on the Company's website at www.mybbsi.com in the "Investors" section under “Governance.”

The Nominating Committee does not have any specific, minimum qualifications for director candidates. In evaluating potential director nominees, the Nominating Committee will consider:

While the Board has not adopted a formal policy with respect to the consideration of diversity in identifying director nominees, the Nominating Committee believes it is important that the Board as a whole represent a diversity of backgrounds, experience, gender and race.  Accordingly, the Nominating Committee has committed to continue its search for women and minority candidates to include in the pool from which future Board members will be chosen.

The Nominating Committee relies on its periodic evaluations of the Board in determining whether to recommend nomination of current directors for re-election. The Nominating Committee may poll current directors for suggested candidates or engage an executive search firm when called upon to identify new director candidates, because of a vacancy or a decision to expand the Board.

The Nominating Committee will also consider director candidates suggested by stockholders for nomination by the Board. Stockholders wishing to suggest a candidate to the Nominating Committee should do so by sending the candidate’s name, biographical information, and qualifications to: Nominating Committee Chair c/o Corporate Secretary, Barrett Business Services, Inc., 8100 N.E. Parkway Drive, Suite 200, Vancouver, Washington 98662. Candidates suggested by stockholders will be evaluated by the same criteria and process as candidates from other sources.

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Risk Management Committee

The Risk Management Committee is responsible for oversight of the Company's enterprise-wide risk management program.  The committee monitors the Company’s activities with regard to insurance risks; financial risks, including business models, interest rates, liquidity and the Company's investment portfolio; and technology risks, including information security and cyber defense mechanisms. The Risk Management Committee held five meetings in 2019. Its current members are Messrs. Carley (chair), Meeker, and Price and Ms. Dewbrey. The Risk Management Committee is governed by a written charter, which is available on the Company's website at www.mybbsi.com in the "Investors" section under “Governance.”

DIRECTOR COMPENSATION FOR 2019

The following table summarizes compensation paid to the Company’s outside directors for services during 2019. No outside director received perquisites or other personal benefits with a total value exceeding $10,000 during 2019.

CODE OF ETHICS

The Company has adopted a Code of Ethics for Senior Financial Officers ("Code of Ethics"), which is applicable to the Company's principal executive officer, principal financial officer, principal accounting officer, and controller. The Code of Ethics focuses on honest and ethical conduct, the adequacy of disclosure in financial reports of the Company, and compliance with applicable laws and regulations. The Code of Ethics is included as part of the Company's Code of Business Conduct, which is generally applicable to all of the Company's directors, officers, and employees. The Code of Business Conduct is available on the Company's website at www.mybbsi.com in the "Investors" section under “Governance.”

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Background and Experience of Executive Officers

In addition to Mr. Kramer, whose background information is presented above under "Background and Qualifications of Directors," Anthony J. Harris and Gerald R. Blotz currently serve as executive officers of the Company. Gregory R. Vaughn, who had served as an officer of the Company since 1998, retired in June 2019. Heather E. Gould was the Company’s Vice President and Chief Strategy Officer until April 3, 2020.

Anthony J. Harris, age 36, joined BBSI in September 2016 as Controller. He was promoted to Executive Director of Accounting and Finance in March 2018. Then, in March 2020, he was promoted to Chief Financial Officer and Principal Accounting Officer. Prior to joining the Company, Mr. Harris served as Controller for Holland Partner Group from 2015 to 2016. Previously, Mr. Harris spent nine years with PricewaterhouseCoopers LLP in various roles in the United States and Australia, where he supported publicly traded and large privately held companies. Mr. Harris is a certified public accountant and received a BBA with a specialization in finance and accounting from Washington State University.

Gerald R. Blotz, age 50, joined the Company in May 2002 as Area Manager of the San Jose branch office. Mr. Blotz was promoted to Vice President, Chief Operating Officer-Field Operations in May 2014. Prior to joining the Company, Mr. Blotz was President and Chief Operating Officer of ProTrades Connection, where he was instrumental in building ProTrades to 44 offices in four states.

STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT

Beneficial Ownership Table

The following table sets forth information regarding the beneficial ownership of Common Stock as of April 1, 2020, by each director, by each executive officer named in the Summary Compensation Table under the heading "Executive Compensation" below, and by all current directors and executive officers of the Company as a group. In addition, it provides information, including names and addresses, about each other person or group known to the Company to own beneficially more than 5% of the outstanding shares of Common Stock.

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Unless otherwise indicated, all shares listed as beneficially owned are held with sole voting and dispositive power.

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Anti-Hedging Policy

The Company has adopted an Anti-Hedging Policy, which is applicable to the Company’s directors and executive officers, and prohibits them from directly or indirectly engaging in hedging against future declines in the market value of any Company securities through the purchase of financial instruments designed to offset such risk. Executive officers and directors who fail to comply with the policy are subject to Company-imposed sanctions, which may include a demotion in position, reduced compensation, restrictions on future participation in cash or stock incentive plans, or termination of employment.  The Company’s Anti-Hedging Policy is available on the Company’s website at www.mybbsi.com in the "Investors" section under “Governance.”

Delinquent Section 16(a) Reports

Section 16 of the Exchange Act ("Section 16") requires that reports of beneficial ownership of Common Stock and changes in such ownership be filed with the SEC by Section 16 "reporting persons," including directors, executive officers, and certain holders of more than 10% of the outstanding Common Stock. To the Company's knowledge, based solely on a review of the copies of Forms 3, 4, and 5 (and amendments thereto) filed with the SEC and written representations by the Company's directors and executive officers, all Section 16 reporting persons complied with all applicable Section 16(a) filing requirements during 2019 on a timely basis, except (i) Messrs. Elich, Kramer, Blotz and Vaughn, each an executive officer, filed one late Form 4 reporting the vesting of performance shares and (ii) Diane Dewbrey, a director, filed one late Form 4 reporting the grant of an RSU award.

Stock Ownership Guidelines for Non-Employee Directors and Executive Officers

The Board has adopted stock ownership guidelines such that each non-employee director is expected to own shares of Common Stock with a value equal to at least three times the regular annual cash retainer, currently $60,000, within three years of first being elected. The value of shares owned is calculated quarterly based on the higher of current market price or the average daily closing price for the preceding 12 months. Any shortfall resulting from an increase in the annual cash retainer or a decrease in the stock trading price (or both) is expected to be cured within two years following the end of the quarter in which the resulting required increase in share ownership first occurred.  

The Board also adopted a policy on stock ownership for the Company's executive officers. Under the policy, executive officers will have five years from the later of July 1, 2016, and the date the officer is notified of his or her selection, to achieve and maintain ownership of shares of Common Stock with a value equal to at least three times the officer's annual base salary. Shares will be valued at the greater of the then current market price and the original purchase price. Until the minimum ownership level is reached, the officer is expected to retain at least 50% of the shares of Common Stock received upon exercise of an option or vesting of RSUs and performance shares, after payment of the exercise price and withholding and payroll taxes. Participants who are not in compliance will not be permitted to sell or dispose of shares, except as described in the preceding sentence, until they reach the required ownership level. The Nominating Committee may make an exception in its sole discretion in the case of financial hardship.

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ITEM 2 - APPROVAL OF AN AMENDMENT TO THE COMPANY’S BYLAWS PROVIDING PROXY ACCESS IN THE ELECTION OF DIRECTORS

The Board recommends that stockholders adopt an amendment to the Company’s Bylaws (the “Bylaws”) to provide for proxy access in the election of directors. The proposed amendment (the "Proxy Access Bylaw") would be added to Article I of the Bylaws as Section 1.12, a copy of which is attached to this proxy statement as Appendix A. The following description of the Proxy Access Bylaw is qualified in its entirety by reference to Appendix A.

Purposes and Effects of the Proxy Access Bylaw

At the Company’s annual meeting of stockholders held in May 2019, holders of a majority of the shares voting on a stockholder proposal regarding proxy access voted in favor of the proposal calling for the Board to draft, adopt and submit a proxy access bylaw to a vote of the stockholders. After considering various factors with respect to the implementation of proxy access, the Board approved the Proxy Access Bylaw and directed its submission to a vote of the stockholders at this Annual Meeting. If approved by the affirmative vote of a majority of all shares of our Common Stock entitled to vote at the Annual Meeting, the Proxy Access Bylaw will become effective as of the date of the Annual Meeting. The Proxy Access Bylaw would provide an additional means for the Company’s stockholders to nominate a director candidate for election to our Board. Eligible stockholders who comply with the requirements set forth in the Proxy Access Bylaw would be able to include their own nominees for director in the Company’s proxy materials, together with candidates nominated by the Board.

Vote Required and Board Recommendation

The proposal must be approved by the affirmative vote of a majority of all shares of our Common Stock entitled to vote at the Annual Meeting.  Abstentions and broker non-votes will have the effect of a vote against the proposal.

The Board unanimously recommends a vote FOR Item 2 to APPROVE amendment of the Bylaws to include the Proxy Access Bylaw.

Summary of the Proxy Access Bylaw

Eligibility of Stockholders to Nominate Directors. A stockholder or group of up to 20 stockholders (such stockholder or stockholder group, an “Eligible Stockholder”) that has maintained continuous qualifying ownership of 3% or more of the outstanding Common Stock for at least the previous three years would be permitted to nominate and include up to a specified number of proxy access nominees in the Company’s proxy materials for its annual meeting of stockholders; provided that the eligible stockholder and proxy access nominee(s) satisfy all applicable requirements of the Bylaws.

Calculation of Qualifying Ownership. To ensure that the interests of stockholders seeking to include proxy access nominees in the Company’s proxy materials are aligned with those of other stockholders, an eligible stockholder will be deemed to own only those outstanding shares of Common Stock as to which the eligible stockholder possesses both (1) the full voting and investment rights pertaining to the shares and (2) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares. The following shares would not count as “owned” shares for purposes of the Proxy Access Bylaw:

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Required Information and Supporting Statement. Each eligible stockholder seeking to include a proxy access nominee in the Company’s proxy materials would be required to provide certain information to the Company, including, but not limited to:

Eligible stockholders would also be required to make certain representations and undertakings to the Company, including, but not limited to:

Eligible stockholders would be permitted to include in the proxy statement a statement, not to exceed 500 words, in support of each proxy access nominee. The Company may omit any information or statement that it, in good faith, believes is untrue in any material respect, omits a material fact necessary in order to make the information, in light of the circumstances, not misleading, or would violate any applicable law or regulation. The Company may solicit against and include in the proxy statement its own statement relating to any proxy access nominee.

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Number of Proxy Access Nominees. The maximum number of proxy access nominees that the Company would be required to include in its proxy materials would not exceed the greater of (a) two and (b) 20% of the directors in office at the time of nomination (rounded down to the nearest whole number). If the Board decides to reduce the size of the Board after the nomination deadline but before the date of the annual meeting, the proxy access nominee limit would be calculated based on the reduced number of directors. Any director currently serving on the Board who will be included as a management nominee and who was included as a proxy access nominee for either of the two preceding annual meetings, and any proxy access nominee who is either subsequently withdrawn or included in the Company’s proxy materials as a nominee of the Board, would not be counted against the proxy access nominee limit.

Nominating Procedure. In order to provide adequate time to assess proxy access nominees, requests to include proxy access nominees in the Company’s proxy materials must be received no earlier than 120 days and no later than 90 days before the anniversary of the date that the Company first mailed its proxy materials for the preceding year’s annual meeting of stockholders, subject to adjustment in the event the annual meeting is held more than 30 days before or after the anniversary of the date of the prior year’s annual meeting.

Procedure for Selecting Proxy Access Nominees if Nominee Limit is Exceeded. Any eligible stockholder that submits more than one proxy access nominee would be required to provide a ranking of its proposed proxy access nominees. If the number of proxy access nominees exceeds the proxy access nominee limit, the highest ranking qualified individual from the list proposed by each eligible stockholder, beginning with the eligible stockholder with the largest qualifying ownership and proceeding through the list of eligible stockholders in descending order of qualifying ownership, would be selected for inclusion in the Company’s proxy materials until the proxy access nominee limit is reached.

Information Required of all Proxy Access Nominees. Each proxy access nominee would be required to make certain written representations to and agreements with the Company, including, but not limited to:

Proxy access nominees would also be required, at the request of the company, to submit completed and signed questionnaires required of company directors and officers and provide any additional information necessary for the board’s independence evaluation and determination.

Exclusion and Future Disqualification of Proxy Access Nominees. The Company would not be required to include a proxy access nominee in the Company’s proxy materials if, among other things:

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In addition, the Board or the chairman of the annual meeting will declare a proxy access nomination by an eligible stockholder to be invalid, and such nomination will be disregarded, if (1) the proxy access nominee or the eligible stockholder breaches any of their respective obligations under the Bylaws or (2) the eligible stockholder does not appear at the annual meeting in person or by proxy to present the nomination.

Any proxy access nominee who is included in the Company’s proxy materials but subsequently either (1) withdraws from or becomes ineligible or unavailable for election at the annual meeting, or (2) does not receive the affirmative vote of at least 25% of the shares represented in person or by proxy at such meeting and entitled to vote in the election of directors would be ineligible for nomination for the following three annual meetings.

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ITEM 3 – APPROVAL OF 2020 STOCK INCENTIVE PLAN

The Board adopted the Barrett Business Services, Inc., 2020 Stock Incentive Plan (the "2020 Plan") on April ___, 2020.  The 2020 Plan is subject to stockholder approval at the Annual Meeting.  If approved, the 2020 Plan will become effective as of the date of the Annual Meeting and will serve as successor to the Company's 2015 Stock Incentive Plan (the "Prior Plan"), which will expire on May 27, 2020.  Below is a summary of the principal provisions of the 2020 Plan and its operation.  A copy of the 2020 Plan is set forth in full in Appendix B to this Proxy Statement, and the following description of the 2020 Plan is qualified in its entirety by reference to Appendix B.

Purposes and Effects of the 2020 Stock Incentive Plan

We have historically maintained a stock-based compensation program for the benefit of our employees, directors and consultants.  The Board believes that stock-based incentives are essential to attract and retain the services of individuals who are likely to make significant contributions to our success and to promote success by providing rewards for exceptional service and long-term incentives for future contributions to the Company.  Stock-based awards also encourage ownership of Common Stock by our directors, executive officers, and other employees.

The Board adopted the 2020 Plan to provide the overall structure for future awards of stock-based incentive compensation.  The 2020 Plan will serve as successor to the Prior Plan.  As described under "Executive Compensation" below, our long-term incentive program for executive officers has consisted of awards under the Prior Plan and its predecessors.  Such awards have included stock options, restricted stock units ("RSUs"), and performance shares.  As of April 15, 2020, there were [__________] shares available for future awards under the Prior Plan but, as noted above, the Prior Plan will expire on the date of the Annual Meeting.  Additional information regarding outstanding stock-based awards under the Prior Plan and earlier plans appears below under "Additional Equity Compensation Plan Information."

If the 2020 Plan is approved at the Annual Meeting, all stock-based awards previously granted under the Prior Plan will remain outstanding until exercised or terminated and will be subject to the terms of the Prior Plan.  However, no new awards will be granted under the Prior Plan, and the 2020 Plan will be used thereafter.  If the 2020 Plan is not approved at the Annual Meeting, the Company will be precluded from granting stock-based awards as part of its executive compensation program unless the Company's stockholders approve a different stock-based compensation plan at a future meeting.

Vote Required and Board Recommendation

The affirmative vote of a majority of the votes cast on Item 3 is required for approval.  Abstentions and broker non-votes will have no effect on the outcome of the vote.

The Board of Directors unanimously recommends that you vote FOR approval of the Barrett Business Services, Inc., 2020 Stock Incentive Plan.

SUMMARY OF THE 2020 STOCK INCENTIVE PLAN

Administration

Except to the extent the Board determines otherwise, the 2020 Plan will be administered by the Compensation Committee (referred to in this section as the "Committee").  Under its charter, the Committee must consist of three or more directors of the Company, each of whom satisfies the applicable independence criteria of the stock exchange or quotation system on which the Company's common stock is listed or quoted and qualifies as a "non-employee director" as defined by Rule 16b-3 promulgated under the Exchange Act.

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Eligibility.  Employees, including employees who may also be directors, non-employee directors, and outside consultants are eligible to receive awards under the 2020 Plan.  Individuals who receive awards are referred to as "Participants."  As of April 15, 2020, seven non-employee directors, three executive officers, and approximately [__] other employees were considered to be eligible to receive awards under the 2020 Plan, assuming its approval by the stockholders. Compensation paid to the Company's non-employee directors in any calendar year may not exceed a total of $400,000 per director, including all cash compensation and the value of all awards granted under the 2020 Plan.

Shares Available for Issuance under the 2020 Plan.  A maximum of 375,000 shares of Common Stock may be made the subject of awards granted under the 2020 Plan.  This amount will be adjusted in the event of certain changes in the Company's capitalization.

If an award is canceled or expires for any reason before having been fully vested or exercised, or is exchanged for another award, or is otherwise forfeited, all shares covered by such award will be added back to the number of shares available for future awards.  The shares subject to awards that are payable or settled solely for cash also will not reduce the number of shares available for future awards.  In no event will any of the following shares again become available for other awards:  (i) shares tendered or withheld in respect of taxes; (ii) shares tendered or withheld to pay the exercise price of options; (iii) shares repurchased by the Company from a Participant with the proceeds from the exercise of options; and (iv) the total number of shares underlying exercised stock appreciation rights, not just the net number of shares issued.

The 375,000 shares that will be authorized for issuance under the 2020 Plan represent approximately [__] percent of outstanding shares as of April 15, 2020.

The 2020 Plan is separate from the Prior Plan, and the adoption of the 2020 Plan neither affects nor is affected by the Prior Plan, except that no further awards will be granted under the Prior Plan after the effective date of the 2020 Plan.  The closing sale price of the Common Stock on April 1, 2020, was $35.98 per share.

Duration of the 2020 Plan.  The 2020 Plan will terminate ten years after its effective date or, if earlier, when all awards have been granted covering all available shares or the plan is otherwise terminated by the Board.  Termination of the 2020 Plan will not affect outstanding awards.

Description of Awards under the 2020 Plan.  The Committee may make awards to eligible Participants of incentive stock options ("ISOs"), non-qualified stock options ("Nonqualified Options"), stock appreciation rights ("SARs"), restricted shares ("Restricted Shares"), restricted stock units ("RSUs"), and performance shares.  The general terms of such awards are summarized below.  Each award will be evidenced by a written agreement between the Company and the Participant with such terms and conditions as are approved by the Committee in its discretion, subject to the provisions of the 2020 Plan.

Stock Options.  Options granted under the 2020 Plan provide Participants with the right to purchase shares at a predetermined exercise price.  The Committee may grant ISOs or Nonqualified Options.  Each award agreement will state the option exercise price per share of common stock purchasable under each option, which may not be less than 100 percent of the fair market value of a share on the date of grant.  The applicable award agreement will specify when the option becomes exercisable, which may be in full or in installments based on continuation of employment over a specified period, satisfaction of performance goals, or other criteria.  No option may be exercised after the expiration of its term, which may be no longer than ten years from the date of grant.  The Committee will determine the terms of each ISO or Nonqualified Option at the time of grant.

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Special rules apply for ISOs.  The terms of ISOs and the applicable award agreement must conform to the statutory and regulatory requirements of Section 422 of the Internal Revenue Code of 1986 (the "Code").  ISOs may only be granted to employees of the Company or its subsidiaries.  The maximum number of shares as to which ISOs may be granted under the 2020 Plan is 375,000.

SARs.  A SAR is an award entitling a Participant to receive an amount equal to the excess (or, if the Committee determines at the time of grant, a portion of the excess) of the fair market value of a share of Common Stock on the date of exercise of the SAR over the base price multiplied by the number of shares as to which the SAR is being exercised.  The base price may not be less than 100 percent of the fair market value of a share on the date of grant.  Upon the exercise of a SAR, payment may be made in cash, shares of Common Stock, or in any combination of the foregoing as the Committee may determine.  No stock appreciation right may be exercised after the expiration of its term, which may be no more than ten years from the date of grant.

Restricted Shares.  A Restricted Share is an award of shares to a Participant that is subject to such terms and conditions as the Committee deems appropriate, including, for example, completing a specified number of years of service or attaining specified performance goals.  No cash or other consideration is required to be paid for shares subject to an award of Restricted Shares.  Any portion of an award of Restricted Shares that is not vested because the specified conditions were not met is forfeited.

Restricted Stock Units.  RSUs are units (with each unit having a value equivalent to one share) granted to a Participant on such terms as the Committee may determine, including, for example, a requirement that the Participant forfeit such RSUs upon termination of employment or service as a non-employee director.  Upon vesting of an award of RSUs, the Participant is entitled to receive a payment in an amount equal to the aggregate fair market value of the shares covered by such RSUs at the end of the applicable restriction period.  Payment made be made in unrestricted shares of Common Stock equal to the number of RSUs, in installments, in cash, or in any other manner as determined by the Committee.

Performance Shares.  A performance share represents a right of a Participant to an actual share or a share unit having a value equal to one share of Common Stock.  The Committee will determine whether and to whom performance awards will be granted, the performance goals applicable to each award, the periods during which performance is to be measured, and all other limitations and conditions applicable to the performance shares.  Payment with respect to performance shares will be in cash or in shares of Common Stock as specified in the award agreement.  Following the end of the performance period, a participant holding performance shares will be entitled to receive payment of an amount, not exceeding the maximum value of the performance shares, based on the achievement of the performance goals for such performance period, as determined by the Committee.

Provisions Governing All Awards.  All awards under the 2020 Plan are subject to the following provisions:

Minimum Vesting Period.  No award may vest in whole or in part before the one-year anniversary of the grant of such award; provided that the Committee may grant Awards covering up to five percent of the shares authorized for issuance under the 2020 Plan without regard to the foregoing restriction.  The provision also does not restrict the Committee's authority, in its sole discretion, to accelerate the vesting of, and waive any restrictions applicable to, any outstanding awards.

Performance Goals.  If an award is intended to be performance-based, the Committee will establish performance goals for specific performance periods on the basis of such criteria as the Committee may select, such as performance criteria for the Company, an operating group or a branch, a Participant's individual performance, or a combination of both.  Performance goals may be objective or subjective.

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Rights as Stockholders. Participants will have no rights of a stockholder with respect to shares subject to an award until such shares are issued in the name of the Participant, including the right to receive cash dividends or dividend equivalents.  No cash dividends or dividend equivalents will be paid or accrued on Restricted Shares before they vest.  Stock dividends issued with respect to unvested Restricted Shares will be subject to the same restrictions.  Unless the award agreement for Restricted Shares provides otherwise, a Participant will have voting rights with respect to unvested Restricted Shares that have not been forfeited.

Change in Control.  If a change in control of the Company occurs, the Committee has broad discretion to, among other things, accelerate the vesting of outstanding awards, convert or replace outstanding awards, or cancel outstanding awards in exchange for specified payments.  Replacement and converted awards would continue to vest over the period (and at the same rate) as the awards which the replacement or converted awards replaced, unless otherwise determined by the Committee.  The Committee may provide for a 30-day period prior to a change in control during which all outstanding awards will tentatively become fully vested; when the change in control occurs, all outstanding and unexercised awards will then immediately terminate.  Unless the Committee specifically provides otherwise in an award agreement, awards will become vested as of a change in control date only if, or to the extent, such acceleration of vesting does not result in an "excess parachute payment" within the meaning of Section 280G(b) of the Code.  The definition of change in control used in the 2020 Plan is summarized below under "Agreements with Executive Officers."

No Repricing.  No options or SARs may be repriced, replaced, regranted through cancellation, or modified without stockholder approval (except in connection with a change in the Company's capitalization or similar event), if the effect would be to reduce the exercise or base price for the shares underlying the award.

Nontransferability of Awards.  Awards granted under the 2020 Plan are not transferable other than by will or the laws of descent and distribution and may be exercised during the Participant's lifetime only by the Participant.

Clawback of Compensation.  All compensation pursuant to awards granted under the 2020 Plan are subject to recovery under the Company's compensation recovery policy described under "Compensation Recovery 'Clawback' Policy" above, as well as any future policies that may be adopted by the Company.

Termination of Employment.  The terms and conditions under which an award may be exercised, if at all, after a Participant's termination of employment or service as a non-employee director will be determined by the Committee and specified in the applicable award agreement.

Amendment and Termination.  The 2020 Plan may be amended by the Board at any time, but no such amendment will be effective unless approved by the Company's stockholders to the extent that such approval is required to satisfy applicable law or securities exchange listing requirements.  The Board may also terminate the 2020 Plan at any time, but termination will not affect outstanding awards.  Also, an amendment will not materially impair the rights of a Participant with respect to outstanding awards without the Participant's consent, unless the amendment provides for payment of the value of the vested portion of the award to the Participant.

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EXPECTED FEDERAL INCOME TAX CONSEQUENCES

The following is a general discussion of certain U.S. federal income tax consequences relating to awards granted under the 2020 Plan.  This discussion is not intended to constitute tax advice, does not address all aspects of U.S. federal income taxation, does not discuss state, local, employment, and foreign tax issues, and does not discuss considerations applicable to a holder who is, with respect to the United States, a non-resident alien.  This summary of federal income tax consequences does not purport to be complete and is based upon interpretations of the existing laws, regulations, and rulings, which could be altered materially with enactment of any new tax legislation.  Participants should consult their own tax advisors because the summary below may not apply to a Participant's particular situation.

Under the Code, the Company will generally be entitled to a deduction for federal income tax purposes at the same time and in the same amount as the ordinary income that Participants recognize pursuant to awards.  For Participants, the expected U.S. federal income tax consequences of awards are as follows:

Nonqualified Options.  A Participant will not recognize income at the time a Nonqualified Option is granted.  At the time a Nonqualified Option is exercised, the Participant will recognize ordinary income in an amount equal to the excess of (i) the fair market value of the shares issued to the Participant on the exercise date over (ii) the exercise price paid for the shares.  At the time of sale of shares acquired pursuant to the exercise of a Nonqualified Option, the appreciation (or depreciation) in value of the shares after the date of exercise will be treated either as short-term or long-term capital gain (or loss) depending on how long the shares have been held.

ISOs.  A Participant will not recognize income upon the grant of an ISO.  There are generally no tax consequences to the Participant upon exercise of an ISO (except that the amount by which the fair market value of the shares at the time of exercise exceeds the option exercise price will be included in the Participant's alternative minimum taxable income).  If the shares are not disposed of within the later of two years from the date the ISO was granted or one year after the ISO was exercised, any gain realized upon the subsequent disposition of the shares will be characterized as long-term capital gain and any loss will be characterized as long-term capital loss.  If either of these holding period requirements are not met, then a "disqualifying disposition" occurs.  Upon a disqualifying disposition, (i) the Participant recognizes ordinary income in the amount by which the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disqualifying disposition) exceeded the exercise price for the ISO and (ii) any excess amount realized on the disqualifying disposition over the fair market value of the shares at the time of exercise will be characterized as capital gain.  If the amount the Participant realizes from a disqualifying disposition is less than the exercise price paid and the loss sustained upon the disposition would otherwise be recognized, the Participant will not recognize any ordinary income from the disqualifying disposition and instead the Participant will recognize a capital loss.

Stock Appreciation Rights.  A Participant will not recognize income at the time of grant of a SAR.  Upon exercise of a SAR, the Participant will recognize ordinary income in an amount equal to the value of any cash or shares that the Participant receives.  At the time of sale of any shares acquired pursuant to the settlement of a SAR, the appreciation (or depreciation) in value of the shares after the date of settlement will be treated either as short-term or long-term capital gain (or loss) depending on how long the shares have been held.

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Restricted Shares.  In general, a Participant will not recognize income at the time of grant of Restricted Shares unless the Participant elects with respect to the Restricted Shares to accelerate income taxation to the date of the award, as described further below.  In the absence of an election to accelerate income taxation to the date of an award, upon lapse of the forfeiture conditions or transfer restrictions (the "vesting date"), a Participant will recognize ordinary income equal to the fair market value of the Restricted Shares on the vesting date (less any amount the Participant paid for such Restricted Shares).  If permitted by the applicable award agreement, a Participant may, within 30 days after the date of the grant, elect to immediately recognize (as ordinary income) the fair market value of the Restricted Shares (less any amount the Participant paid for the Restricted Shares), determined as of the date of grant (without regard to the forfeiture conditions and transfer restrictions).  This election is made pursuant to Section 83(b) of the Code.  If a Participant making such an election later forfeits the Restricted Shares, no deduction or capital loss will be available to the Participant (even though the Participant previously recognized ordinary income with respect to such Restricted Shares).

Restricted Stock Units and Performance Shares.  In general, a Participant will not recognize income at the time of grant of RSUs or performance shares.  Upon distribution of cash or unrestricted shares that the Participant receives in settlement of RSUs or performance shares after vesting, a Participant will recognize ordinary income equal to the value of any cash or unrestricted shares that the Participant receives.  At the time of sale of any shares acquired pursuant to the settlement of RSUs or performance shares, the appreciation (or depreciation) in value of the shares after the date of settlement will be treated either as short-term or long-term capital gain (or loss) depending on how long the shares have been held.

Payment of Exercise Price or Tax Withholding in Shares.  The Committee may permit Participants to pay all or a portion of the exercise price of stock options or tax withholding obligations upon exercise or vesting of an award by tendering previously acquired shares of common stock or by relinquishing a portion of the shares otherwise issuable upon exercise or vesting.  If an option is exercised and payment is made in shares the Participant already owns, there generally is no taxable gain or loss to the Participant other than any gain recognized as a result of exercise of the option, as described above.  A number of new shares equal to the number of shares transferred to pay the exercise price will have a basis equal to the basis of the transferred shares and the same holding period as the transferred shares.  (If ISO shares are used to exercise a nonqualified option, a number of the new shares equal to the number of ISO shares transferred to pay the exercise price of the nonqualified option will also be treated as ISO shares subject to the same holding periods as the original ISO shares.)  The remainder of the new shares will have a new holding period and a basis equal to (i) for nonqualified options, the fair market value of those shares on the exercise date or (ii) for ISOs, zero.

Special Tax Provisions.  A Participant will also be subject to a 3.8 percent tax on the lesser of (i) the Participant's "net investment income" for the relevant tax year and (ii) the excess of the Participant's modified adjusted gross income for the taxable year over a certain threshold.  Net investment income generally includes net gains from the disposition of shares.  Under certain circumstances, the accelerated vesting, cash-out or accelerated lapse of restrictions on awards in connection with a change in control of the Company may be deemed an "excess parachute payment" for purposes of the golden parachute tax provisions of Section 280G of the Code, the Participant may be subject to a 20 percent excise tax, and the Company may be denied a tax deduction.

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  ITEM 4 – ADVISORY VOTE TO APPROVE COMPENSATION OF OUR EXECUTIVE OFFICERS

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") included a provision that requires public companies to hold an advisory stockholder vote to approve or disapprove the compensation of their named executive officers. The Dodd-Frank Act also included a provision providing stockholders of a public company the opportunity to vote, on an advisory basis, on how frequently they would like the company to hold an advisory vote on the compensation of executive officers. At the 2017 annual meeting, the Company's stockholders approved the Board's recommendation that an advisory vote on executive compensation be conducted annually. Accordingly, we are conducting an advisory vote to approve the compensation of the Company's executive officers again this year. Unless the Board changes its policy, the next “say on pay” advisory vote will be held in 2021.

The Compensation Committee believes that executive compensation should align with the stockholders' interests, without encouraging excessive or unnecessary risk. This compensation philosophy and the program structure approved by the Compensation Committee are central to the Company's ability to attract, retain, and motivate individuals who can achieve our goals and provide stability in leadership. Our philosophies and goals with respect to compensation are explained in detail below under the subheading "Executive Compensation – Compensation Discussion and Analysis – Compensation Philosophy and Objectives." A detailed description of compensation paid to our named executive officers in 2019 follows that discussion and analysis.

This advisory vote, which is not binding on the Company, the Compensation Committee, or the Board, is intended to address the overall compensation of our executive officers and the policies and practices described in this proxy statement. The Board and the Compensation Committee value the opinions of our stockholders and will take into account the outcome of the vote when considering future executive compensation arrangements.

The Board of Directors unanimously recommends that you vote, on an advisory basis, FOR the following resolution:

"RESOLVED, that the compensation paid to our named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K adopted by the SEC, including the Compensation Discussion and Analysis, executive compensation tables and accompanying footnotes and narrative discussion, is hereby approved. "

The above-referenced disclosures appear below under the heading "Executive Compensation" in this proxy statement.

The above resolution will be deemed to be approved if it receives the affirmative vote of a majority of the votes cast at the Annual Meeting, as long as a quorum is present at the Annual Meeting. Abstentions and broker non-votes will have no effect on the outcome of the vote.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Compensation Philosophy and Objectives. The Compensation Committee (for purposes of this section, the "Committee") has responsibility for establishing, implementing, and continually monitoring adherence with the Company’s compensation philosophy. The goal of the Committee is to ensure that the total compensation paid to the Company’s executive officers is fair, reasonable, and competitive.

The Committee believes that the most effective executive compensation program is one that is designed to reward the achievement of specific annual and long-term strategic goals by the Company. The principles underlying our compensation policies are:

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At the 2019 annual meeting of stockholders, more than 97% of the votes cast with respect to the advisory vote on executive compensation approved the compensation of the Company's named executive officers. The Committee took this indication of support into consideration in reviewing the Company's executive compensation program. Our executive compensation program processes are consistent with those established by the Committee and are monitored by the Company’s finance functions.

2019 Executive Compensation Components. For the fiscal year ended December 31, 2019, the principal components of compensation for executive officers were:

Base Salary

Salary levels of executive officers are reviewed periodically by the Committee and the CEO as part of the performance review process, as well as in connection with a promotion or other change in job responsibility. In determining base salaries for executives in 2019, the Committee primarily considered:

Based on the foregoing factors, the Committee determined not to adjust the annual base salary levels for any of the Company’s executive officers for 2019.

Annual Cash Incentive Compensation

The Company's executive officers were eligible to receive annual cash bonuses following yearend for services during 2019. The Committee set the target bonus amounts in April 2019 at 100% of base salary for Mr. Elich and 80% of base salary for the other executive officers. Of the total bonus opportunity, 75% was awarded under the Company's Annual Cash Incentive Award Plan based on achievement of objective corporate performance goals selected by the Committee. The other 25% of the total bonus opportunity was reserved for award in the Committee's discretion based on its assessment of each officer's individual performance during 2019.

Achievement above or below established target levels for the corporate financial metrics results in an upward or downward adjustment in the cash incentive amount payable for corporate level goals. The adjustment is calculated based on a defined factor (2.5% for 2019) multiplied by the percentage by which the actual achievement of a given metric is above or below the target level. If the Company fails to achieve a specified financial target at the 80% level or above, no part of the cash incentive associated with that metric is earned. The maximum cash incentive payable is 200% of the target amount.  An executive must remain employed by the Company through the date of the Committee's determination of performance to be eligible to receive annual cash incentive payouts.

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In April 2019, the Compensation Committee determined that the corporate portion of the annual cash incentive would be based 50% on achievement of net income and 50% on achievement of gross billings and set target levels of achievement.  At its meeting on February 24, 2020, the Committee reviewed the Company's financial results for 2019 and concluded that growth in gross billings in 2019 was 5.65%, compared to the target goal of 8.0%.  Therefore, the Committee determined that the corporate goal for gross billings had not been attained at the minimum threshold level of 80%, such that no target bonus amounts tied to that goal were payable. The Committee then determined that growth in net income for 2019 was 26.9%, compared to the target goal of 11.7%.  Therefore, the corporate net income goal had been achieved at 229% of the target goal.  With the 2.5% adjustment for each percentage point above the 100% level, the multiplier factor was substantially above, and limited to, the maximum payout of 200% of the target award. Actual cash incentive payouts are shown in the "Non-Equity Incentive Plan Compensation" column in the Summary Compensation Table below.

The Committee also approved target cash incentive amounts in April 2019 tied to the subjective individual performance of the executive officers and representing 25% of the total bonus opportunity. In February 2020, the Company’s CEO met with the Committee to present his views regarding the performance of each member of the executive team other than himself.  He stated that six of the goals by which he assessed the team’s performance related to companywide initiatives and comprised approximately 70%-80% of each officer’s performance for purposes of his evaluation. The goals focused on transparency, assuring the accuracy of financial records, implementation of the Company’s product framework, organizational readiness in the face of changing market conditions, progress in implementing the Company’s five-year strategic plan, and adoption of improved methods for product delivery.  Mr. Elich commented on the executive management team’s progress with respect to each of the six goals, stating that, in his view, the executive team had met his expectations in 2019.  He also noted that the team had been required to absorb the responsibilities assigned to Mr. Vaughn prior to his retirement on June 30, 2019.  At its meeting in late February 2020, the Committee approved payouts of 100% of the target cash incentive amounts tied to individual performance for Mr. Elich, Mr. Blotz, and Ms. Gould, and 125% of the target cash incentive amount tied to individual performance for Mr. Kramer, as shown in the "Bonus" column in the Summary Compensation Table below.  

Long-Term Equity Incentive Compensation

The Committee continued its practice of making annual grants of restricted stock units ("RSUs") and performance share awards to the Company's executive officers under the Company's 2015 Stock Incentive Plan in 2019.  The Committee determined that the target dollar value of the awards, based on the closing sale price of the Common Stock on the date of grant, should be equal to 170% of annual base salary for Mr. Elich and 130% of annual base salary for the other executive officers.  The Committee determined that the RSU grants would equal 75% of the total dollar value and the target level of performance shares would represent 25% of the total dollar value.  

The Committee believes that RSUs provide a near-term opportunity to receive an ownership stake in the Company, thus serving as a significant incentive aligning the long-term interests of the executive team with the interests of the Company's stockholders. Each RSU represents a contingent right to receive one share of Common Stock. The RSUs vest in four equal annual installments. The awards are shown in the “All Other Stock Awards” column of the Grants of Plan-Based Awards table below.

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The vesting of performance share awards granted in 2019 is conditioned on attaining specified target cumulative amounts of gross billings and net income for the three-year period ending December 31, 2021.  The target dollar levels of performance shares granted on May 31, 2019, were: Mr. Elich, $340,000; Mr. Blotz, $162,500; Mr. Kramer, $162,500; and Ms. Gould, $162,500, with 50% of the performance shares tied to achievement of each financial metric. Target award amounts are subject to upward or downward adjustment by 2.5% for each one percent by which the actual achievement of a given financial metric is above or below the target level, but not less than 80% of the target level or more than 140% of the target level. If achievement is below the 80% level, no part of the target award tied to that financial metric is payable. At the 80% level, 50% of the target award for the related financial metric would be paid. The maximum payout is 200% of a target award.  The awards in terms of numbers of shares are shown in the “Estimated future payouts under equity incentive plan awards” column of the Grants of Plan-Based Awards table below.

In February 2020, the Committee reviewed the achievement of performance goals for performance share awards granted in early 2017.  The awards had been tied to the achievement of EBITDA, net income, and gross billings targets for the three years ended December 31, 2019, with each factor weighted equally.  The Committee determined that the EBITDA goal had been achieved at the 90.8% level; the downward adjustment of 2.5% for each 1% below target yielded a payout of 59.6% of the target award tied to EBITDA.  It determined that the net income goal had been achieved at the 118.0% level; the upward adjustment of 2.5% for each 1% below target yielded a payout of 145.0% of the target award tied to net income.  Finally, the Committee determined that the gross billings goal had been achieved at the 88.2% level, yielding a payout of 70.5% of the target award tied to gross billings, yielding an overall payout of approximately 98% of the target awards.  The performance share awards were settled on February 26, 2020, in the following share amounts: Mr. Elich, 6,203; Mr. Blotz, 2,965; Mr. Kramer, 2,372; and Ms. Gould, 2,372.

As described in more detail under “Item 3—Approval of 2020 Stock Incentive Plan” above, the Board, at the recommendation of the Committee, has directed the submission of a new 2020 Stock Incentive Plan to a vote of the stockholders at the Annual Meeting. During 2019, the Committee engaged Mercer to evaluate the Company’s current long-term incentive program and advise the Committee regarding appropriate changes in the structure of the program in light of recent market trends, based in part on the Company’s peer group and a survey of several additional insurance companies. Among other matters, the Committee determined that, beginning in 2020, stock-based awards to the Company’s CEO will be split 50/50 between RSUs and performance shares based on grant date fair value. Mercer also made recommendations to the Committee regarding development of the new plan, including the incorporation of provisions corresponding to leading practices in executive compensation and corporate governance that have developed since approval of the current plan in 2015.

Deferred Compensation Plan

Under the Company’s Nonqualified Deferred Compensation Plan adopted in 2017, executive officers and other participants may defer receipt for income tax purposes of up to 90% of salary, as well as up to 100% of bonuses and other compensation. Deferred amounts are credited to each participant's account and adjusted to reflect amounts of income, gain, or loss as if the amounts credited to such accounts had been invested in investment funds designated under the plan and selected by the participant.  The Committee also approved the establishment of a Rabbi trust under which compensation deferred at the election of participants is deposited in trust and held separately from the Company's other assets, subject to the claims of the Company's creditors in the event of its bankruptcy or insolvency.  Although the Company does not make cash matching contributions to participants’ accounts under the plan, RSUs that cliff vest five years following the grant date are awarded each January 1 and July 1, with a matching award of RSUs equal to 35% of the amount deferred into a participant's account during the preceding six months, up to a maximum value of $75,000 per year.  The RSU awards during 2019 are shown in the Grants of Plan-Based Awards table below.  Additional information about the deferred compensation plan is included under "Nonqualified Deferred Compensation" below.

Retirement Benefits

Employees, including executive officers, may participate in the Company's 401(k) defined contribution plan. The Company matches each employee's contributions at a rate of 100% on the first 3% of salary deferrals and 50% on the next 2% of salary deferrals, with a maximum Company-paid match of $11,200. All executive officers participated in the 401(k) plan in 2019.

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Agreements with Executive Officers

In May 2019, the Company entered into an agreement with Mr. Vaughn to provide for his transition following his retirement as an executive officer of the Company on June 30, 2019. In April 2020, the Company entered into a separation agreement with Ms. Gould in connection with her departure from the Company.

The Company has entered into agreements with Messrs. Kramer and Blotz that provide for severance benefits in the event that the officer's employment is terminated for specified reasons following a change in control of the Company. The Committee approved the agreements with the goal of providing the Company's stockholders with greater assurance of stability within senior management.

The Company also has entered into agreements with Messrs. Kramer and Blotz that provide, in the event of the officer's death, for the Company to make a lump sum payment to the officer's designated beneficiary. The agreements are intended to provide a benefit to each officer’s heirs in the event of his death while employed by the Company.

The Committee approved all of the foregoing agreements, which are described under “Agreements with Executive Officers” below.

Compensation Recovery (“Clawback”) Policy. The Company demands that its employees, officers and directors conduct business in accordance with the highest standards of integrity and personal and professional ethics. As an adjunct to this standard of conduct, the Board has adopted a compensation recovery (“clawback”) policy that applies to its executive officers. Under this policy, the Compensation Committee may instruct the Company to seek to recover payments of incentive compensation if the performance measure upon which the award was based is subsequently restated or otherwise adjusted in a manner that would reduce the size of the award or payment. If the incentive compensation was tied to a subjective measure, the Compensation Committee will decide how much, if any, of the compensation the Company should seek to recover. The Compensation Committee may also direct the Company to seek recovery of up to the entire amount of any incentive compensation awarded for a period during which a covered executive committed a significant legal or compliance violation. A copy of the policy is available on the Company's website at www.mybbsi.com in the "Investors" section under “Governance.”

Tax Deductibility of Executive Compensation.  Section 162(m) of the Internal Revenue Code limits the amount that the Company may deduct for income tax purposes for compensation paid to our executive officers to $1,000,000 per person. Prior to the enactment of the Tax Cuts and Jobs Act by Congress in late 2017, performance-based compensation that met the requirements of Section 162(m) and regulations thereunder was excluded from the limit. This exception was repealed on a prospective basis. Accordingly, subject to certain limitations, effective with the 2018 tax year, all compensation paid to a named executive officer or other covered employee in excess of $1,000,000 is non-deductible, other than qualifying performance-based compensation paid under written binding agreements in effect as of November 2, 2017. No compensation shown in the Summary Compensation Table below qualified as performance-based compensation under Section 162(m). The performance shares that vested in February 2020 did qualify as performance-based compensation for purposes of Section 162(m). In February 2019, the Compensation Committee amended and restated our Annual Cash Incentive Award Plan to remove references to Section 162(m).

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Peer Group and Survey Data for Comparison Purposes. For several years, the Committee has retained Mercer, a nationally recognized compensation consultant, to provide advice to the Committee regarding the structure and implementation of the Company's executive compensation program.  In late 2018, the Committee asked Mercer to prepare an updated analysis of executive compensation data for all executive officer positions.  In consultation with the Committee, Mercer developed an updated peer group for purposes of comparing the Company's executive compensation with similarly sized companies in the human resources and employment services and related industries.  At the Committee’s request, Mercer added two insurance companies, James River Group Holdings, Ltd., a casualty insurer and reinsurer, and United Fire Group, Inc., a property and casualty insurer.  Four companies were removed from the group:  CEB Inc., CDI Corp., Hill International Inc., and Wageworks, Inc.  The first two were acquired and are no longer public companies. In addition, ASGN Incorporated was previously known as On Assignment Inc.

Members of the revised peer group include:

The peer group was developed in consultation with Mercer without consideration of individual company compensation practices, and no company was included or excluded from the peer group due to paying above-average or below-average compensation.

Based on its analysis of the peer group and survey data, Mercer advised the Committee that the Company’s overall compensation levels for all executive officer positions were at approximately the median. Accordingly, the Committee did not make any changes in base salaries or target compensation levels for the Company’s executive officers in 2019 compared to 2018 levels.

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Summary Compensation Table

The following table sets forth information regarding compensation received by the persons serving as executive officers of the Company during 2019.

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Incentive Compensation

The following table sets forth information regarding awards under the Cash Incentive Plan and the 2015 Plan to the named executive officers during the year ended December 31, 2019.

Grants of Plan-Based Awards for the Year Ended December 31, 2019

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Option Exercises and Stock Vested During 2019

The following table provides information regarding exercises of stock options and vesting of RSUs during 2019 with respect to our named executive officers.

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The table below provides information regarding outstanding stock options, RSUs and performance shares held by the named executive officers at the end of 2019.

Outstanding Equity Awards at December 31, 2019