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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934

Filed by the Registrant    x

Filed by a Party other than the Registrant    ¨

Check the appropriate box:

Tidewater Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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TIDEWATER INC.

601 Poydras Street, Suite 1900

New Orleans, Louisiana 70130

June 10, 2011

To Our Stockholders:

You are cordially invited to attend the 2011 Annual Meeting of Stockholders of Tidewater Inc. to be held at the Pan-American Life Center Auditorium, 11th Floor, 601 Poydras Street, New Orleans, Louisiana, on July 14, 2011 at 10:00 a.m., Central Time.

The attached Notice of Annual Meeting and Proxy Statement describe the formal business to be conducted at the meeting. During the meeting, we will also report on the operations of the company. Our directors and officers will be present to respond to your questions.

You are requested to vote by proxy as promptly as possible. You may vote by signing, dating, and returning the enclosed proxy card in the envelope provided. You may also vote by telephone or online using the instructions on the proxy card. If you attend the meeting, which we hope that you will, you may vote in person even if you previously voted by proxy.

Sincerely,

DEAN E. TAYLOR

Chairman, President and Chief Executive Officer

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TIDEWATER INC.

601 Poydras Street, Suite 1900

New Orleans, Louisiana 70130

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

The 2011 Annual Meeting of the Stockholders of Tidewater Inc. will be held in the Pan-American Life Center Auditorium, 11th Floor, 601 Poydras Street, New Orleans, Louisiana, on July 14, 2011, at 10:00 a.m., Central Time, for the following purposes:

Only stockholders of record at the close of business on May 27, 2011 are entitled to notice of and to vote at the 2011 annual meeting.

Your vote is important. If you are unable to attend in person and wish to have your shares voted, please complete, date, and sign the enclosed proxy card, and return it in the accompanying envelope as promptly as possible. Alternatively, you may vote by telephone or online as explained on the enclosed proxy card. You may revoke your proxy by giving a revocation notice to our Secretary at any time before the 2011 annual meeting, by delivering timely a proxy bearing a later date, or by voting in person at the meeting.

By Order of the Board of Directors

BRUCE D. LUNDSTROM

Executive Vice President,

General Counsel and Secretary

New Orleans, Louisiana

June 10, 2011

IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF OUR

PROXY MATERIALS

FOR THE ANNUAL STOCKHOLDER MEETING ON JULY 14, 2011.

This proxy statement and our 2011 annual report

are available at www.edocumentview.com/TDW

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INFORMATION ABOUT ATTENDING THE ANNUAL MEETING

If you plan to attend the meeting in person, please bring the following:

“Street Name” means your shares are held of record by brokers, banks, or other institutions.

Acceptable proof of ownership is a letter from your broker, bank, or other nominee confirming that you were the beneficial owner of our stock on the record date or an account statement showing that you were the beneficial owner of our stock on the record date.

We reserve the right to deny admission to the meeting to any person other than a stockholder of record on the record date (or a duly-designated proxy) or a beneficial owner of shares held in street name on the record date who has followed the procedures outlined above.

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TIDEWATER INC.

601 Poydras Street, Suite 1900

New Orleans, Louisiana 70130

PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

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If your shares are held on your behalf in a stock brokerage account or by a bank or other nominee, you are the “beneficial owner” of shares held in “street name” and the proxy materials have been forwarded to you by your broker, bank, or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to instruct your broker, bank, or nominee how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting by telephone or the internet.

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Majority Voting Policy in Director Elections.    Although our directors are elected by plurality vote, our board has adopted a majority voting policy requiring any nominee for director who receives a greater number of “WITHHELD” votes than “FOR” votes in an uncontested election to tender his or her resignation for consideration by our board’s nominating and corporate governance committee. We have provided more information about our majority voting policy in this proxy statement under the heading “Election of Directors—Majority Voting Policy.”

Any Other Matters.    Any other matter that properly comes before the annual meeting will be decided by the vote of the holders of a majority of the shares of common stock present in person or represented by proxy, except where a different vote is required by statute, our certificate of incorporation, or our bylaws.

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Shares represented by proxies that include broker non-votes on a given proposal will be considered present at the meeting for purposes of determining a quorum, but those shares will not be considered to be represented at the meeting for purposes of calculating the vote with respect to that proposal.

If you do not vote shares registered in your name, your shares will not be voted. However, the company may vote your shares if you have returned a blank or incomplete proxy card (see “What happens if I return a proxy card without voting instructions?” below regarding record holders).

If you are a stockholder of record and return a blank or incomplete proxy card without voting instructions, your shares will be voted (i) FOR each of the director nominees, (ii) FOR the advisory say-on-pay vote, (iii) with regard to the frequency vote, to hold the say-on-pay vote EVERY YEAR, and (iv) FOR the ratification of the selection of Deloitte & Touche as our independent registered public accounting firm for fiscal year 2012.

If you are a beneficial owner of shares and do not give voting instructions to your broker, bank, or nominee, your broker, bank, or nominee will be entitled to vote your shares only with respect to those items over which it has discretionary authority to vote, as discussed above.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The table below shows the name, address and stock ownership of each person known by us to own beneficially more than 5% of our common stock as of May 27, 2011.

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SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth the beneficial ownership of our common stock as of May 27, 2011, by each director, by each executive officer named in the Summary Compensation Table (“named executive” or “NEO”), and by all directors and executive officers as a group:

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ELECTION OF DIRECTORS

(PROPOSAL 1)

Our directors are elected annually. Upon the recommendation of our nominating and corporate governance committee, our board has re-nominated each of our 12 current board members to serve another term as director. Each director elected at the 2011 annual meeting will serve a one-year term beginning at the annual meeting and ending when his or her successor, if any, is elected or appointed. Assuming stockholders elect all of these director nominees at the annual meeting, our board will continue to have 12 directors.

We intend to vote the proxies received in response to this solicitation “FOR” the election of each of the nominees. If any nominee is no longer a candidate at the time of the annual meeting, we intend to vote the proxies “FOR” the election of the other nominees and proxies may be voted for any substitute nominee of our board. Our board has no information or reason to believe that any nominee will not be a candidate at the time of the annual meeting or, if elected, will be unable or unwilling to serve as a director. In no event will the proxies be voted for more than 12 nominees.

Majority Voting Policy.    Our board has adopted a majority voting policy as a part of its Corporate Governance Policy. Under this policy, any director who stands for re-election in an uncontested election and who ultimately receives a greater number of “WITHHELD” votes than “FOR” votes must tender his or her resignation following certification of the stockholder vote. Our board’s nominating and corporate governance committee is required to promptly consider the tendered resignation and recommend to our board whether to accept the tendered resignation. Our board is required to act on the committee’s recommendation within 90 days following certification of the stockholder vote. We would then promptly and publicly disclose the board’s decision-making process and final decision in a current report on Form 8-K filed with the SEC. A copy of our Corporate Governance Policy, which includes our majority voting policy, may be obtained as described under “Corporate Governance – Availability of Corporate Governance Materials.”

Our board of directors recommends that you vote “FOR” each of the following 12 nominees: M. Jay Allison, James C. Day, Richard T. du Moulin, Morris E. Foster, J. Wayne Leonard, Jon C. Madonna, Joseph H. Netherland, Richard A. Pattarozzi, Nicholas J. Sutton, Cindy B. Taylor, Dean E. Taylor, and Jack E. Thompson.

Biographic information for each director nominee is set forth below. Each director nominee’s biography contains information regarding that person’s service as a director, business experience, other directorships held currently or at any time during the last five years, and the nominee’s experiences, qualifications, attributes, or skills that led the committee and our board to determine that he or she should serve as a director for our company.

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OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE

“FOR” EACH OF THE TWELVE NOMINEES FOR DIRECTOR LISTED ABOVE.

Director Nominating Process and Considerations.    The nominating and corporate governance committee is responsible for reviewing and evaluating with our board of directors the appropriate skills, experience, and background desired of board members in the context of our business and the then-current composition of our board. Under our Corporate Governance Policy and the rules of the New York Stock Exchange, a majority of our directors must be independent. Our board has determined that, with the exception of Mr. Taylor, who is our Chief Executive Officer, each of our director-nominees meets the New York Stock Exchange’s definition of “independence” (discussed in greater detail below under “Board of Directors—Director Independence”).

In considering the composition of our board of directors as a whole, the committee and the board evaluate the skills and experiences of each candidate to ensure that those specific talents, skills, and other characteristics needed to maintain our board’s effectiveness are possessed by an appropriate combination of directors. The committee seeks a diverse group of prospective candidates for board service who possess the requisite characteristics, skills, and experience to make a significant contribution. Our overarching goal is that the unique skills and experiences of each individual director complement and enhance the overall capabilities of the board.

The committee and our board have not adopted specific criteria for selecting director nominees, preferring to maintain the flexibility to evaluate the board’s needs at any given point in time in light of our company’s business model, strategic plan, and the skillset of the then-current members of the board. However, as evidenced by the biographies of our director nominees that appear above, we believe it is important that our board have individual directors who possess skills in such broad areas as:

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Each candidate is evaluated to ensure that he or she possesses personal and professional character and integrity, and each must demonstrate exceptional ability and judgment in his or her respective endeavors. Candidates must possess sufficient time to effectively carry out their duties and responsibilities as a Tidewater director. The committee may employ professional search firms (for which it would pay a fee) to assist it in identifying potential nominees for board service with the right mix of skills and disciplines.

This year, the committee reviewed the qualifications of each of our 12 current directors and unanimously recommended each director for an additional one-year term. Subsequently, our board unanimously approved this slate of 12 director nominees to be submitted for election by our stockholders at the annual meeting.

Consideration of Candidates Recommended by Stockholders.    Our bylaws provide that a stockholder of our company entitled to vote for the election of directors may nominate candidates for election to our board at our annual meeting of stockholders by complying with the required notice procedures, as described in greater detail below. The nominating and corporate governance committee’s policy is to consider director candidates recommended by stockholders on the same basis and in the same manner as it considers all director candidates.

No director candidates were recommended by stockholders in time for consideration at the 2011 annual meeting. To be timely for our 2012 annual meeting, a stockholder’s notice must be given in writing and delivered or mailed to the company’s Secretary and received at our principal executive offices no earlier than April 5, 2012 and no later than April 30, 2012. However, if the 2012 annual meeting is set for a date more than 30 days before or after July 14, 2012, a stockholder’s notice, in order to be timely, must be received by the close of business on the later of 90 days prior to the date of the annual meeting or the tenth day following the day on which the meeting date was publicly announced.

Stockholder recommendations of nominees are required to be accompanied by, among other things, specific information as to the nominees and as to the stockholder making the nomination or proposal. We may require any proposed nominee to furnish such information as may reasonably be required to determine his or her eligibility to serve as a director of our company. A description of these requirements is set forth in the company’s bylaws, which may be obtained as described under “Corporate Governance—Availability of Corporate Governance Materials.”

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CORPORATE GOVERNANCE

Our board of directors and management have adopted corporate governance practices designed to aid in the fulfillment of their respective duties and responsibilities to our stockholders.

Corporate Governance Policy.    Our board has adopted a Corporate Governance Policy, which, together with our certificate of incorporation, bylaws, and board committee charters, forms the framework for the governance of our company. The nominating and corporate governance committee is charged with reviewing the Corporate Governance Policy annually to assess the continued appropriateness of the guidelines in light of any new regulatory requirements and evolving corporate governance practices. After this review, the committee recommends any proposed changes to the full board for approval.

Code of Business Conduct and Ethics.    Our board has also adopted a Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics sets forth principles of ethical and legal conduct to be followed by our directors, officers, and employees. The Code requires any employee who reasonably believes or suspects that any director or employee has violated the Code of Business Conduct and Ethics to report such activities to his or her supervisor or to our Chief Compliance Officer, either directly or anonymously. We do not tolerate retaliation of any kind against any person who, in good faith, reports any known or suspected improper activities pursuant to the Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics also references disclosure controls and procedures required to be followed by all officers and employees involved with the preparation of the company’s SEC filings. These disclosure controls and procedures are designed to enhance the accuracy and completeness of the company’s SEC filings and, among other things, to ensure continued compliance with the Foreign Corrupt Practices Act.

Communicating with Directors.    Stockholders and other interested parties may communicate directly with our board, the non-management directors, or any individual director by writing to any one of them in care of our Corporate Secretary at 601 Poydras Street, Suite 1900, New Orleans, Louisiana 70130. Our company or the director contacted will forward the communication to the appropriate director. For more information regarding how to contact the members of our board, please visit our web site at http://www.tdw.com/about/corporate-governance/communicating-concerns-to-the-board-of-directors/.

Complaint Procedures for Accounting, Auditing and Financial Related Matters.    The audit committee has established procedures for receiving, reviewing, and responding to complaints from any source regarding accounting, internal accounting controls, and auditing matters. The audit committee has also established procedures for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. Interested parties may communicate such complaints by following the procedures described under the heading “Communicating with Directors” above. Employees may report such complaints by following the procedures outlined in the Code of Business Conduct and Ethics and through other procedures communicated and available to them. We do not permit retaliation of any kind against any person who, in good faith, submits a complaint or concern under these procedures.

Availability of Corporate Governance Materials.    You may access our certificate of incorporation, our bylaws, our Corporate Governance Policy, our Code of Business Conduct and Ethics, and all committee charters under “Corporate Governance” in the “About Tidewater” section of our website at http://www.tdw.com. You also may request printed copies, which will be mailed to you without charge, by writing to us in care of our Corporate Secretary, 601 Poydras Street, Suite 1900, New Orleans, Louisiana 70130.

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BOARD OF DIRECTORS

As of the date of this proxy statement, our board consists of 12 members.

Board Meetings and Attendance.    During fiscal 2011, our board held six meetings. Each of our current directors attended at least 75% of the meetings of the board and of the committees on which he or she served. Our board does not have a policy requiring director attendance at annual meetings; however, our board’s practice is to schedule a meeting on the same day as the annual meeting to facilitate director attendance at the annual meeting. Eight of the 11 board members who were directors on the date of the 2010 annual meeting attended the 2010 annual meeting.

Director Independence.    Our board has affirmatively determined that 11 of our 12 current directors—Messrs. Allison, Day, du Moulin, Foster, Leonard, Madonna, Netherland, Pattarozzi, Sutton, and Thompson, and Ms. Taylor—are independent. The standards relied upon by the board in affirmatively determining whether a director is independent are comprised of the objective standards set forth in the corporate governance listing standards of the New York Stock Exchange. In making this determination, our board evaluated responses to a questionnaire completed annually by each director regarding relationships and possible conflicts of interest between each director, the company, and management. In its review of director independence, our board also considered the commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships any director may have with the company or management.

Board Leadership Structure.    Our board does not have a policy requiring the separation of the offices of chairman and chief executive officer; rather, our board determines from time to time whether it is in the best interests of our company and our stockholders for the roles to be separate or combined. We believe that our board should have the flexibility to make these determinations in a way that will best provide appropriate leadership for our company.

Currently, the roles of chairman and chief executive officer are combined, which we believe fosters clear accountability, effective decision-making, and alignment on corporate strategy. Specifically, our board believes that its current leadership structure, with Mr. Taylor serving as both chief executive officer and board chairman, is appropriate and best serves the interests of our company and our stockholders given Mr. Taylor’s past experience serving in these roles and the efficiencies of having the chief executive officer also serve in the role of chairman. To assure effective independent oversight, however, our board has adopted a number of governance practices, including the appointment of a Lead Independent Director when the chief executive officer is also the chairman of the board.

Selection and Role of Lead Independent Director.    Under our Corporate Governance Policy, whenever the roles of chairman and chief executive officer are combined, the board elects a Lead Independent Director at the first board meeting following the annual meeting of stockholders. The nominating and corporate governance committee recommends a candidate for election as Lead Independent Director, and our board, taking the committee’s recommendation into consideration, elects an independent director to fill that role for a one-year term. Mr. Pattarozzi has served as our board’s Lead Independent Director since 2008, having been nominated three times by the committee and elected by our board to the position.

The Lead Independent Director’s responsibilities include:

The Lead Independent Director has authority to call meetings of the independent directors, provided notice of the meeting is given to the Chairman.

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Executive Sessions of Independent Board Members.    The non-management members of the board of directors meet in regularly-scheduled executive sessions presided over by our Lead Independent Director. Our Corporate Governance Policy requires at least three such executive meetings per year. At the conclusion of each board meeting, the non-management members have the opportunity to meet in executive session if they so choose. The non-management directors may schedule additional executive sessions throughout the year. During fiscal 2011, the non-management members of our board (all of our directors except Mr. Taylor) met six times in executive session.

Annual Board Self-Assessments.    To assist in determining whether the board and committees are functioning effectively, our board has instituted annual self-assessments of the board and each of its committees. The nominating and corporate governance committee oversees this evaluation process. In fiscal 2011, our board and each of its committees completed self-evaluations and reviewed and discussed the results, making changes as deemed necessary to improve director communications and the overall effectiveness of board and committee meetings.

Role of the Board in Risk Oversight.    While our board as a whole has responsibility for risk oversight, each of our board committees oversee and evaluate risks associated with their respective areas of responsibility, as summarized below under “Composition and Role of Board Committees.” Our board and its committees focus annually on identifying, evaluating, and managing the spectrum of key risks faced by our company. The particular areas of focus include strategic, operational, financial and reporting, compensation, regulatory and compliance, international, and other risks.

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COMPOSITION AND ROLE OF BOARD COMMITTEES

Our board currently has four standing committees: audit, compensation, nominating and corporate governance, and finance and investment. Each of these four committees is comprised entirely of independent directors and is governed by a written charter that is reviewed annually and approved by the full board. A copy of each committee charter may be obtained online or by mail as described in “Corporate Governance—Availability of Corporate Governance Materials.”

The current members of each board committee are identified in the following table, which also indicates the number of meetings each committee held in fiscal 2011:

Audit Committee.    Our board’s audit committee is a separately-designated, standing audit committee established in accordance with the Securities Exchange Act of 1934. Its members are listed in the above chart. The board has determined that three of the five committee members—Messrs. Madonna and Leonard and Ms. Taylor—qualify as an “audit committee financial expert,” as defined by SEC rules.

The main function of our audit committee is to oversee our accounting and financing reporting processes, internal systems of control, independent auditor relationship, and the audits of our financial statements. The audit committee’s key responsibilities are:

The audit committee is also responsible for any audit reports the SEC requires us to include in our proxy statements. In this proxy statement, the requisite report may be found under the heading, “Audit Committee Report.”

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Compensation Committee.    The role of the compensation committee is to assist our board of directors in discharging its responsibilities relating to:

The committee reports to the board of directors on all compensation matters regarding our executive officers and employees. The compensation committee is also responsible for reviewing and discussing with management the “Compensation Discussion and Analysis” portion of our proxy statement and, based on such review and discussion, recommending to the board that the Compensation Discussion and Analysis be included in our proxy statement and issuing a Compensation Committee Report to that effect to be included in the proxy statement.

The “Compensation Discussion and Analysis” section of this proxy statement provides a discussion of the process the committee uses in determining executive compensation. Included in the subsection entitled “The Process of Setting Compensation” is a description of the scope of the committee’s authority, the role played by our chief executive officer in setting compensation for the other named executives, and the committee’s engagement of compensation consultants.

Risk Review of Employee Compensation.    Consistent with SEC disclosure requirements, the compensation committee has performed a risk assessment of our company’s compensation programs. Management has identified the elements of our compensation program that could incentivize risk and has reported to the compensation committee its assessment of those risks and mitigating factors particular to each risk. The compensation committee has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on our company. Some of the findings the committee considered in reaching this conclusion include:

Nominating and Corporate Governance Committee.    The purpose of the nominating and corporate governance committee is to:

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Additional information regarding the committee’s role in nominating directors and the ability of stockholders to recommend candidates for director may be found under “Election of Directors—Director Nominating Process and Considerations” and “—Consideration of Candidates Recommended by Stockholders,” respectively.

The nominating and corporate governance committee is also responsible for annually reviewing and setting director compensation and benefits and for reviewing director education programs. In fiscal 2011, the nominating and corporate governance committee reviewed our company’s director retainers, meeting fees, and stock-based compensation in comparison to the director compensation provided by the companies listed in the S&P 500 as well as several general market surveys of similarly-sized public companies. The committee made no changes to our director compensation program as a result of this review.

Finance and Investment Committee.    The purpose of the finance and investment committee is to:

The finance committee also has responsibility for appointing and monitoring independent investment managers and for overseeing the development of projected operating budgets and capital expenditures and making recommendations as appropriate to our board on an annual and quarterly basis.

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DIRECTOR COMPENSATION

FISCAL YEAR 2011 DIRECTOR COMPENSATION TABLE

This table reflects all compensation paid to or accrued by each of our outside directors during fiscal 2011. The compensation of Mr. Taylor, who is our President and Chief Executive Officer in addition to serving as Chairman of our board, is disclosed in the Summary Compensation Table in the section titled “Executive Compensation.” A description of the elements of our director compensation program follows this table.

We use a combination of cash and equity-based compensation to attract and retain our non-management directors. Compensation for the non-management directors for fiscal 2011 consisted of an annual cash retainer,

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an additional annual cash retainer for the lead director and for the chairs of each board committee, meeting fees, an annual grant of deferred stock units, and other benefits. Officers of the company who also serve as directors do not receive any additional compensation for services as a director.

Director Fees.    For fiscal year 2011, the cash and equity-based compensation payable to the non-management directors was as follows:

Annual Grant of Deferred Stock Units.    Under the Directors Deferred Stock Units Plan, each non-management director receives a grant of deferred stock units on March 31 of each year. The number of units each director receives is determined by dividing $100,000 by the fair market value of a share of our common stock on the date of grant, rounded up to the next whole share. Dividend equivalents are credited to each director’s account in the form of additional deferred stock units. A person who becomes a director or leaves the board during the fiscal year receives a pro rata grant. In the event of a change of control of our company, each non-management director will be granted a pro rata number of stock units for the partial year of service beginning at the end of the prior fiscal year through the date of the change of control.

These deferred stock units are paid out in cash when a director ceases to serve on our board or upon a change of control of our company. The cash amount paid to the director is equal to the number of stock units credited to the director’s account in the Directors Deferred Stock Units Plan, multiplied by the fair market value of a share of our common stock valued as of the date of the event that triggers payout.

Stock Ownership Guidelines.    Our directors are subject to stock ownership guidelines requiring each director to hold company stock worth five times his or her annual cash retainer no later than five years after his or her appointment. Under the guidelines, a director’s annual grants of deferred stock units count as shares of company stock. At the end of fiscal 2011, each of our directors was in compliance with the guidelines. These guidelines are described in greater detail under “Compensation Discussion and Analysis—Other Compensation and Equity Ownership Policies—Stock Ownership Guidelines.”

Other Benefits.    We reimburse all directors for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors and its committees. In addition, directors are generally eligible to participate in the company’s Gift Matching Program on the same terms as employees. Under this program, the company matches a director’s contribution to an educational institution or foundation up to $5,000 per year. The company may also make other charitable contributions on behalf of a director or the full board outside of the Gift Matching Program.

Retirement Plan.    In the past, we provided a Retirement Plan for the benefit of non-management directors who retired from our board on or after reaching age 65 or after completing five or more years of service on our board. We froze benefits under the Retirement Plan as of March 31, 2006 and terminated any further benefit accruals. In March 2011, we increased the mandatory retirement age for directors from 72 to 75, and therefore we increased the Retirement Plan’s assumed retirement age from 72 to 75 as well.

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Because Mr. Madonna was a member of our board on May 31, 2001, upon his retirement from our board, he will receive an annual benefit of $30,000 for a term equal to the number of years he served as a non-management director. Each of Messrs. du Moulin, Leonard, and Thompson became directors after May 31, 2001 but before March 31, 2006, and therefore upon retirement will be eligible to receive the $30,000 annual benefit for no more than five years. Each of our other directors joined the board after March 31, 2006, and therefore are not eligible to participate in the Retirement Plan. If a director dies prior to payment of his benefit, a death benefit is payable to his beneficiaries equal to the then-present value of the unpaid benefit. The Retirement Plan provides for the protection of benefits in the event of a change of control of our company and allows a director to elect to be paid out in a lump sum in such event.

The accrued benefits of the board members under the Retirement Plan and their years of credited service are as follows:

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ADVISORY VOTE ON EXECUTIVE COMPENSATION (“SAY-ON-PAY VOTE”)

(PROPOSAL 2)

We are seeking stockholder approval of the compensation of our named executives as disclosed in this proxy statement pursuant to SEC rules. This disclosure includes the Compensation Discussion and Analysis (“CD&A”), the compensation tables, and the accompanying narrative compensation disclosures. Stockholders are asked to vote on the following resolution:

RESOLVED, that the compensation paid to the named executive officers as disclosed in the proxy statement for the company’s 2011 annual meeting of stockholders pursuant to Item 402 of Regulation S-K of the rules of the Securities and Exchange Commission is hereby APPROVED.

We understand that executive compensation is an important matter for our stockholders. Our core executive compensation philosophy and practice continue to be based on pay for performance, and we believe that our compensation program is strongly aligned with the long-term interests of our stockholders. In considering how to vote on this proposal, we encourage you to review all the relevant information in this proxy statement—our CD&A (including its executive summary), the compensation tables, and the rest of the narrative disclosures regarding our executive compensation program.

While this say-on-pay vote is not binding, our compensation committee and board will review the voting results and will consider the outcome of the vote when making future compensation decisions for our named executives. We invite stockholders who wish to communicate with our board on executive compensation or any other matters to contact us as provided under “Board of Directors—Communicating with Directors.”

Approval of this resolution requires the affirmative vote of the holders of at least a majority of the voting power present or represented by proxy at the annual meeting. See “Questions and Answers about the Annual Meeting and Voting.”

Our board unanimously recommends that you vote to approve the compensation of our

named executives as disclosed in this proxy statement by voting FOR this resolution.

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ADVISORY VOTE ON THE FREQUENCY OF THE SAY-ON-PAY VOTE

(“FREQUENCY VOTE”)

(PROPOSAL 3)

We are providing our stockholders with an advisory vote on how often we should hold the “say-on-pay” vote described under Proposal 2. You should select your preference as to how often we hold the say-on-pay vote, whether every year, every two years, or every three years.

Our board is recommending that we hold a say-on-pay vote every year. In formulating its recommendation, the board considered that an annual advisory vote on executive compensation will allow our stockholders to provide us with direct and prompt input on our compensation philosophy, policies, and practices as disclosed in the proxy statement every year. Stockholders should be aware, however, that because the say-on-pay vote occurs in the midst of the compensation year, and because the different elements of our executive compensation programs are designed to operate in an integrated and complementary manner, it may not be feasible or appropriate to change our executive compensation programs in consideration of any given year’s say-on-pay vote prior to the next annual meeting of stockholders. However, our board believes that an annual say-on-pay vote is consistent with our efforts to engage in an ongoing dialogue with our stockholders on executive compensation and corporate governance matters.

This frequency vote is not a vote for or against the board’s recommendation; your vote is as to which frequency you believe is most appropriate. This frequency vote is not binding on the board. However, the board will take into account the result of the vote when determining the frequency of future say-on-pay votes.

Because this advisory vote has three possible substantive responses (every one year, every two years, or every three years), we will consider stockholders to have “approved” the frequency selected by a plurality of the votes cast, whether present or represented by proxy at the annual meeting.

Our board unanimously recommends that you vote to hold the say-on-pay vote

EVERY YEAR.

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COMPENSATION DISCUSSION AND ANALYSIS

This section of the proxy statement describes and analyzes our executive compensation philosophy and program in the context of the compensation paid during the last fiscal year to our chief executive officer, our chief financial officer, and our three other most highly-compensated executives. We refer to these executives as our “named executives” or “NEOs.” For fiscal 2011, our named executives were:

In this CD&A, we first provide an Executive Summary of our actions and highlights from the fiscal year. We next explain the Compensation Philosophy and Objectives that guide our compensation committee’s executive compensation decisions. We then describe the committee’s Process of Setting Compensation, including the supporting role played by the chief executive officer. Finally, we discuss in detail each of the Compensation Components, which includes, for each component, a design overview as well as the actual results yielded for each named executive in fiscal 2011. We suggest that you read this section of the proxy statement in conjunction with the advisory say-on-pay vote (Proposal 2), as this section contains information you may find relevant to your voting decision.

Executive Summary

Our company operates a diversified fleet of marine service vessels and provides other marine support services to the global offshore energy industry. With operations in most of the world’s significant offshore crude oil and natural gas exploration and production regions, we have one of the broadest global operating footprints in the offshore energy industry. We provide services in support of all phases of offshore exploration, field development, and production, including towing of, and anchor handling for, mobile offshore drilling units; transporting supplies and personnel necessary to sustain drilling, workover, and production activities; offshore construction and seismic support; and a variety of specialized services such as pipe and cable laying. Our international operations are the primary driver of our revenue and earnings, as more than 90% of our revenues come from operations outside of the United States territorial waters. For more information about our business, please see “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended March 31, 2011.

Highlights of Company Performance in Fiscal 2011.    During our 2011 fiscal year, the petroleum industry not only struggled with the aftereffects of a historic global recession but also experienced new and unexpected challenges. The Deepwater Horizon catastrophe and resulting moratorium on deepwater drilling in the Gulf of Mexico, the horrific natural disaster of a tsunami that triggered a nuclear disaster in Japan, and the unprecedented political turmoil in the Middle East—each of these events put additional pressure on the energy industry and its service companies.

Although industry fundamentals improved and previously depressed crude oil prices gradually increased in the second half of fiscal 2011, demand for offshore supply vessels during the period continued to be generally weak. Our fiscal 2011 consolidated net earnings were lower by approximately 59% as compared to fiscal 2010, due in part to a 10% decrease in total revenues and a 6% increase in vessel operating costs. However, because we operate in a cyclical industry, we hold management accountable for not just maximizing returns during the cycle’s peaks, but also finding ways to moderate the impact of the cycle’s troughs. Our fiscal 2011 consolidated net earnings were over two times our fiscal 2004 consolidated net earnings, the last major down cycle in our industry.

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Amid the industry challenges of fiscal 2011, management positioned our company for a better future by continuing to focus on our decade-long vessel acquisition and building program, resulting in the delivery or acquisition of an additional 29 vessels during the fiscal year. With these acquisitions, we have the largest fleet of new generation equipment in the industry. At the end of fiscal 2011, we were scheduled to add an additional 36 vessels over the next few fiscal years. Other notable business accomplishments during fiscal 2011 include the following:

We believe that our strong financial condition, global footprint, and significant investment in fleet modernization place us in prime position to capitalize on the opportunities presented by the cycle’s next upswing.

Highlights of our Compensation Program.    As discussed in greater detail below, our executive compensation program is designed to align each executive’s total compensation opportunity with those financial and other performance objectives most closely related to the company’s strategic business objectives. Some highlights of our compensation program include:

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Summary of Key Compensation Actions in Fiscal 2011.    Our business accomplishments in fiscal 2011 and the prevailing business environment provided the basis for the following events and key committee decisions, each of which is discussed more fully elsewhere in this CD&A.

Compensation Philosophy and Objectives

As a company with a global reach in an operationally-demanding, volatile, cyclical, and capital-intensive business, we design our executive compensation program to achieve the following objectives:

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Since our compensation programs are designed to reward achievement of corporate objectives, we change our programs from time to time as our objectives change. The specific principles followed and decisions made in establishing the compensation of the named executives in fiscal 2011 are discussed in more detail below.

Process of Setting Compensation

Our board of directors has delegated to the compensation committee the primary responsibility for overseeing our executive compensation program. The compensation committee annually reviews and sets the compensation for our executive officers, reporting to the full board on all compensation matters regarding our executives and other key salaried employees. For more information about the compensation committee’s responsibilities, see “Composition and Role of Committees—Compensation Committee.”

Role of the Chief Executive Officer.    Our chief executive officer makes recommendations to the compensation committee with respect to salary, bonus, and long-term incentive awards for all executive officers other than himself. He develops these recommendations based on the competitive market information generated by the committee’s compensation consultant, the company’s compensation strategy, his assessment of individual performance, and the experience level of the particular executive. The committee discusses those recommendations with the chief executive officer and either approves or modifies the recommendations in its discretion.

In evaluating the chief executive officer’s compensation, the committee reviews the competitive market information provided by its compensation consultant and bases its decisions regarding his compensation on our overall compensation strategy, the consolidated input of each of the board members, the chief executive officer’s own self-assessment, and the committee’s independent assessment of his performance. The chief executive officer is not present when the committee makes its determinations regarding his compensation.

Role of Compensation Consultant.    Our compensation committee has sole authority over the selection, use, and retention of any compensation consultant engaged to assist the committee in discharging its responsibilities. Towers Watson served as the committee’s primary compensation consultant from 2003 until the spring of 2010, when the committee engaged Meridian Compensation Partners, LLC as its primary consultant. The compensation committee’s primary consultant also prepares an annual survey of director compensation for our nominating and corporate governance committee, which is responsible for reviewing director compensation. Other than these relationships, neither Towers Watson nor Meridian provides any other services to, or has any other relationship with, our company.

In addition, since 2006, the committee has retained Stern Stewart & Co. to provide specific guidance on utilizing the measure of “economic value added” or “EVA” as a component of our annual incentive plan. The use of EVA^® and Stern Stewart’s role in its development are discussed in greater detail below in “Annual Cash Incentive Compensation.”

The committee endeavors to use the most current information available when making compensation decisions, reviewing an annual compensation report from its consultant. However, because base salaries and bonus opportunities are determined in advance of a fiscal year, and equity awards are typically made just prior to the close of the fiscal year, the committee reviews two compensation analyses in setting compensation for a given fiscal year. The committee reviewed a March 2010 report from Towers Watson prior to finalizing fiscal 2011 base salaries and bonus opportunities, but referenced an updated report from Meridian in setting the March 2011 equity awards. For each report, the committee asked its consultant to:

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Analysis by Towers Watson.    In its 2010 analysis, Towers Watson compared our executive compensation to their most recent data for three separate groups: a group of peer energy services companies selected by the compensation committee in consultation with Towers Watson, the Towers Watson Oilfield Service Compensation Survey, and a survey of general industry companies. The companies included in each of these three groups are provided in Annex A to this proxy statement.

Towers Watson’s general industry survey includes a large number of companies of various sizes. For certain positions, Towers Watson compared our compensation levels only to those companies in the survey with annual revenues of between $1 billion and $3 billion (the range in which our revenues fall). For other positions, Towers Watson also size-adjusted the data and compared our compensation to all of the companies included in the survey. The particular companies included in Towers Watson’s surveys with annual revenues of between $1 billion and $3 billion are also identified in Annex A.

Analysis by Meridian.    In consultation with Meridian, we updated our peer group in order to include companies in related industries that are similar to us in terms of revenues, market capitalization, enterprise value, assets, number of employees, foreign sales percentage, and asset turnover, although we retained approximately 70% of the companies in the prior peer group to ensure consistency in comparisons. The committee also reviewed detailed performance data on the peer group. Meridian’s analysis compared our executive compensation to two, rather than three, different groups: the most recent data for a revised peer group of 26 companies as well as the Towers Watson Oilfield Service Compensation Survey from August 2010. These companies are also identified in Annex A.

Policy and Analysis.    We review our actual and target total direct compensation (base salary, target annual cash incentive compensation, and annual long-term equity incentive grant) in conjunction with the consultant’s compensation analyses in order to determine where target total direct compensation for our executive officers is likely to fall. Our general goal is for our target total direct compensation to be competitive with the median range (50^th percentile) of the companies included in the competitive compensation analyses.

We do not have a specific policy for the allocation of compensation between short-term and long-term compensation or cash and equity compensation. However, we strongly emphasize the at-risk performance-based elements of compensation by keeping the salary portion of total compensation lower than that of our peer companies. For example, approximately 83% of our chief executive officer’s target total direct compensation for fiscal 2011 (base salary plus target annual incentive plus target annual equity award) was performance-based, meaning that it either had to be earned on the basis of performance (in the case of his annual incentive) or its actual value to him will be contingent upon our future performance (in the case of his annual equity award, a portion of which will only vest after four years if a cumulative four-year performance goal is met).

Maintaining below the median salary levels also allows us to appropriately manage our fixed cash obligations in our cyclical industry. By then using a higher salary multiple than that of our peer companies for our annual bonus target, we provide opportunities for our executives to achieve total cash compensation in successful years that substantially exceeds the median of cash compensation paid by our peers. We link annual cash incentive compensation to the company’s achievement of annual performance goals, while we link our long-term incentive compensation to longer-term performance goals and to the value of our common stock.

In March 2010, the committee also considered a wealth accumulation analysis prepared by Towers Watson. The purpose of this analysis was to allow the committee to understand the total wealth potential of past and future compensation and benefits. In addition, this type of tool aids the committee’s understanding of how current compensation decisions can have a long-term, potentially compounding impact on future wealth

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accumulation. The committee first considered such an analysis in 2008, and has found it to be a useful tool to gauge whether the wealth accumulated by the named executives was generally in line with peer companies, recognizing that tenure and age of the executive can have a significant impact on the amount of wealth accumulated. The committee intends to review such an analysis every few years.

Compensation Components

The three core components of our executive compensation program are: base salary, an annual cash incentive, and long-term equity incentives. In addition, we offer our executives retirement benefits, change of control protections, and certain perquisites. Each of these components is discussed in detail below.

Base Salary.    We review salary levels for named executives prior to the beginning of each fiscal year. Our annual base salary determinations are based on a variety of factors, including individual performance, general market salary levels, our company’s overall financial condition, and industry conditions. As mentioned previously, however, we take a more conservative approach to setting base salaries, consistent with our philosophy of placing greater emphasis on performance-driven compensation components.

After reviewing these factors prior to fiscal 2011, we made no increases to base salaries, except for increasing Mr. Platt’s base salary from $332,072 per year to $400,000 in connection with his promotion to chief operations officer and assumption of significant additional responsibilities. In addition, we marginally adjusted each named executive’s base salary in January 2011 to offset the elimination of the executive medical plan. For our named executives, this adjustment ranged from $1,800 to $2,500 per year, which represents, for each, an increase of less than 1%.

Annual Cash Incentive Compensation.    We pay annual cash incentives for the purpose of rewarding both company and individual performance during the year. Under our annual incentive plans, company performance is measured using two metrics—a financial metric and a safety metric.

General Structure of the Program

EVA.    In fiscal 2007, the compensation committee began working with Stern Stewart to institute an annual incentive program that focused on the economic value added (EVA) to our company during the fiscal year. EVA^® is a framework developed by Stern Stewart for setting goals and measuring performance that rewards participants for both short-term and long-term results realized by the company. When we began using EVA in fiscal 2007, it was our goal to keep the EVA-based annual incentive program in place for three years in order to give us an adequate opportunity to evaluate the long-term effectiveness of the new system. At the end of fiscal 2009, we reviewed the long-term effectiveness of the EVA-based annual incentive program. As a result of that review, we decided to continue the program for another three-year period with certain limited adjustments, specifically, a cap and floor on any potential payouts, and a reduction in the percentage of the annual incentive calculated by reference to EVA from 75% to 50%. Although we are committed to use EVA through fiscal 2012, we continue to evaluate its effectiveness as a performance goal given the volatility and cyclicality of our business.

Safety.    We include a safety performance component in our annual incentive program (25% of the target incentive opportunity) to reinforce our commitment to be the industry leader in safety. Experience has taught us that a safe work environment helps us to attract and retain a more experienced work force. Additionally, a safe work environment gives us an advantage when we compete for work from the most reputable and superior customers. Finally, a solid safety record helps us to minimize our insurance premiums and overall cost of doing business.

Individual Performance.    Prior to each fiscal year, our compensation committee specifies target annual awards for each named executive based on individual performance. The target award is a percentage of base

salary and the percentage is determined by the participant’s position and ability to directly influence our financial and safety performance, with reference to data supplied by the compensation consultant. The individual performance component is 25% of the target incentive opportunity.

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Participation in Annual Incentive Plans.    The portion of the annual incentive award established for our chief executive officer that is based upon EVA and safety is earned under our Company Performance Executive Officer Annual Incentive Plan. This plan is structured to qualify as “performance-based” compensation under Section 162(m) of the Internal Revenue Code in order to be fully tax deductible by our company. We have also established a separate Individual Performance Executive Officer Annual Incentive Plan under which the compensation committee can award our chief executive officer a separate annual award that may be earned based the committee’s evaluation of his individual performance. Annual incentive awards paid to our other named executives are paid under our Management Annual Incentive Plan. These awards are also based upon EVA, safety performance, and an evaluation of individual performance by the chief executive officer and the compensation committee.

Fiscal 2011 Target Awards.    The following chart shows the target awards set for our named executives for fiscal 2011, as well as the percentage allocation to each component and the amount of payout each component would have yielded at target level of performance for each of the named executives:

The total percentage of salary that the named executive is eligible to receive increases or decreases based upon performance above or below the target for each of the performance goals. Once each component has been allocated a percentage of the total target award, it is evaluated independently of the other two components. At performance above or below target, a given component will pay more or less than the target amount. There is a maximum possible payout under each component as described under “Criteria for 2011.” In addition to the component caps, the maximum possible payout under the company performance portion for our chief executive officer (EVA and safety components together) is $3 million. The committee has discretion to reduce amounts payable under the plans.

Criteria for 2011

EVA Criteria.    We calculate EVA by subtracting from our net after-tax operating profit an appropriate charge for the opportunity cost of all capital that we have invested over the measurement period. Thus, EVA measures the amount by which our earnings exceed or fall short of a rate of return that our stockholders could reasonably expect to obtain if they invested in other securities of comparable risk. Our intent has been that by emphasizing financial performance as a function of our invested capital, management would be incentivized to make prudent investments in assets capable of providing a strong return on capital.

Our net operating profit after taxes (“NOPAT”) generally equals revenues, less operating expenses, depreciation expense, general and administrative expenses, other income and expenses, and taxes on operating profit. We subtract a capital charge from NOPAT to determine EVA. Our capital charge is determined by multiplying our average capital invested during the year by a weighted average cost of debt and equity. Prior to each fiscal year, we set the weighted average cost of capital for that year. For 2011, based on advice of Stern Stewart, we used a 10% weighted average cost of capital. Certain adjustments to NOPAT are made in determining EVA, including adjustments to eliminate the effects of accounting changes, extraordinary items, discontinued operations, and unusual or infrequently occurring items (less the amount of related income taxes).

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As in prior years, we required a $5 million improvement in EVA in fiscal 2011 over EVA for the prior year in order for the EVA target to be achieved. Failure to achieve the EVA target for fiscal 2011 would result in reduced incentive awards and no EVA bonus amount would be generated if the negative change in EVA from the prior year’s level was more than $45 million.

We have used a targeted $5 million improvement in annual EVA consistently since fiscal 2007, even though EVA levels can fluctuate substantially from year to year because of the volatility in our business sector. For example, although the $5 million improvement target was not achieved for fiscal 2010 and 2011, EVA for fiscal 2009 was a $42.1 million increase over 2008, which set a high hurdle for the next year.

There are three elements to our EVA program intended to limit volatility in annual incentive payouts—the bonus bank, the cap on annual EVA bonuses, and a floor on the bonus bank. These features are intended to moderate the future impact—positive or negative—of any single year.

Safety Criteria.    The safety performance component is based upon our achievement of a pre-established goal for the fiscal year, which is based upon our Total Recordable Incident Rate (“TRIR”) per 200,000 work hours. Like the other two components, payout based on safety performance is scaled within a certain range of results—for the safety component, the higher the TRIR, the smaller the payout. A TRIR higher than a certain threshold results in no payout.

A TRIR below a certain level will entitle a participant to a payment in an amount that is greater than the safety component’s 25% target award and which may be up to 150% of that 25% target award. As noted previously, the safety performance portion operates independently from the other components, and the EVA bonus bank does not impact any payout based on safety performance.

The TRIR goal for fiscal 2011 was 0.15, which was a 5% targeted improvement in our average safety performance levels over the preceding two years and a 16% targeted improvement over the preceding five-year average. No safety performance payout would be earned if the TRIR equaled or exceeded 0.22.

Individual Criteria.    Each year the compensation committee informs our chief executive officer of the expectations for his individual performance for the year. Likewise, the chief executive officer advises the other named executives of the qualities and individual goals on which they will be evaluated for the year. For each named executive, these criteria and goals are discussed under “Calculation of 2011 Annual Incentive—Individual Performance.”

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The chief executive officer’s individual performance payout may not exceed 150% of his target amount. Each of the other named executives could receive a maximum individual performance payout of up to 200% of his individual target award.

Calculation of 2011 Annual Incentive

For fiscal 2011, each named executive earned between 35% and 45% of his target annual incentive award. With regard to EVA, there has been no annual incentive paid on the basis of EVA in the past two fiscal years (2010 or 2011), all amounts banked in prior years have been completely depleted, and each executive’s “bonus bank” balance has been reduced to a negative number (the bonus bank floor previously discussed) that will reduce any future possible EVA payout to that executive. The safety component paid out at less than target for all the executives, including Messrs. Taylor and Platt who, as our chief executive and operating officers, respectively, received zero safety payout at their request because of two fatalities during fiscal 2011. Finally, the individual performance award for each named executive ranged between 135% and 140% of his target individual performance award (compared to a maximum possible award for the chief executive officer of 150% of his target, and for each other named executive of 200% of his target).

The calculation of each component’s payout is discussed below.

EVA.    For fiscal 2011, the company’s EVA was a negative $139.6 million, as compared to fiscal 2010 EVA of a positive $25.1 million, resulting in a change in fiscal 2011 EVA of a negative $164.7 million. Historically, changes in EVA from year to year have been substantial. For example, fiscal 2007’s change in EVA was a positive $132.5 million, but fiscal 2008 and 2009’s changes were approximately $6.7 million and $42.1 million, respectively. With the depressed market environment and continuing effects of the global recession during fiscal 2010, the change in EVA during that year was a negative $178.7 million.

Fiscal 2011 EVA was calculated in accordance with the EVA program design that we established in consultation with Stern Stewart, as set forth in the following chart and more fully described below:

NOPAT for the year ended March 31, 2011 equals revenues (vessel revenues and other marine revenues):

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The charge for capital employed equals average total capital employed of $2.5 billion multiplied by the weighted average cost of capital of 10%. Total capital employed at March 31, 2011 equals current assets plus the allowance for doubtful accounts adjusted by a decrease of $12.0 million for deferred vessel revenue, investments in and advances to unconsolidated companies, net properties and equipment as decreased by approximately $358.3 million, primarily for the effect of vessels under construction, goodwill as increased by $35.5 million for the effect of accumulated goodwill amortization, other assets as decreased by $9.5 million, primarily for the effect of certain deferred charges; less current liabilities decreased by $11.0 million for certain taxes payable and certain deferred credits, deferred income taxes, accrued property and liability losses, and other liabilities and deferred credits. Average capital was further decreased by $206.2 million for the after-tax effect of cumulative gains on sales of assets, by $72.5 million for the cumulative after-tax effect of discontinued operations, and by $21.0 million for the after-tax effect of a tax litigation settlement during fiscal 2010. Average capital was further increased by $20.3 million for the after-tax effect of cumulative asset impairments, and by $22.0 million for the after-tax effect of the proposed settlements with the SEC, the U.S. Department of Justice and the Federal Government of Nigeria related to an internal investigation recorded in fiscal 2010 and 2011. Cumulative adjustments give effect to such items beginning in fiscal 1996.

As in fiscal 2010, none of the named executives received an award based on EVA for 2011. Fiscal 2011 EVA performance further reduced the bonus bank balance for each named executive to his bonus bank floor (negative 50% of the executive’s target award), a negative amount that will be carried forward and reduce EVA-based payouts for future years:

Safety.    The TRIR for fiscal 2011 was 0.19, which did not reach the target level but did generate a small payout for each of our named executives. The TRIR for fiscal 2010 was the best in company history at 0.13. Fiscal 2011 performance was more in line with fiscal 2009 when the TRIR was 0.18 but significantly better than fiscal year 2008 at 0.24. However, due to two fatalities occurring during fiscal 2011, the chief executive officer recommended that the safety award component of the annual incentive be eliminated for himself and our chief operations officer, and the compensation committee agreed with that recommendation.

Individual Performance.    For purposes of awarding the individual performance portion of the annual incentive award to the named executives, the compensation committee independently assessed the performance of the chief executive officer but relied on the judgment of our chief executive officer in assessing the performances of our other named executives. Each named executive received between 135% and 140% of his target individual performance award.

In the case of Mr. Taylor, the company’s financial strength and ability to weather the credit crisis, the solid operations and overall safety of our fleet, the continued realization on our new vessel building and acquisition program, and the ability to attract and retain top management candidates were important considerations in his

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individual performance award. Mr. Fanning’s continued leadership in improving our financial profile, including the extension and enhancement of the company’s revolving credit agreement and the closing of an additional debt financing at attractive terms and pricing, were important factors in his award. Mr. Platt’s leadership in all aspects of our operations in a challenging commercial environment, including the maintenance and creation of constructive customer relationships, and the incorporation of increasingly sophisticated new vessels into our fleet profile were instrumental to his award. In the case of Mr. Dick, his management of our new vessel building program in a challenging shipyard environment, his important role in maintaining and advancing key partnership and other relationships, and his oversight of vessel dispositions on favorable terms were key factors in awarding his individual performance portion. Finally, Mr. Lundstrom’s ongoing work to reinvigorate our legal compliance program and resolve the company’s internal investigation with regulatory agencies and the discharge of his general duties as the company’s general counsel led to his award.

Long-term Incentive Compensation.    Historically, we have granted long-term incentive compensation in the form of annual equity grants to our named executives, generally using a multiple of each executive’s base salary to determine the overall grant size. The multiple used for any particular executive reflects the nature and scope of the executive’s duties. Grant values were increased in fiscal 2010 to bring our long-term incentive compensation more in line with the median of long-term incentive compensation provided by our peer group companies. In recent years, the committee has decreased the emphasis on stock options, and in fiscal 2011, each named executive’s award was entirely in shares of restricted stock, including a portion with a return on capital performance requirement.

We believe that granting restricted stock provides our named executives with a significant equity ownership opportunity. Further, time-based restricted stock is widely used among our competitors. In such a cyclical industry, the use of restricted stock encourages executives to remain with our company even during periods of stock price volatility. Notably, our recent grants of restricted stock include grants tied to performance hurdles, thus placing added emphasis on financial performance goals, as well as providing rewards for growth in the value of our common stock. Shares of restricted stock are subject to forfeiture and vest in accordance with certain performance and continued employment requirements. Information relating to the shares of restricted stock granted to our named executives is set forth in the Fiscal 2011 Summary Compensation Table and the Fiscal 2011 Grants of Plan-Based Awards Table.

Annual Grant of Restricted Stock.    For fiscal 2011, two-thirds of each named executive’s annual grant of restricted stock was time-based, as the shares will vest based on continued employment in four equal tranches over the next four years. The remaining one-third of each grant will vest only if a pre-established performance target is met. The performance-based shares will vest following fiscal 2015, provided the simple average of the preceding four fiscal years of return on capital employed (“SAROCE”) meets or exceeds 9%. The committee elected to vest the performance-based shares only after completion of a full four-year period rather than annually in order to emphasize long-term, multi-year performance and value creation. If the performance metric is not met, all performance-based shares will be forfeited.

Special Grant of Restricted Stock.    In addition to the annual grant of restricted stock, the committee approved a special award of restricted stock to a select number of our employees, including each of the named executives. Because we operate in a cyclical industry, the use of an annual incentive plan that focuses so heavily on a single performance metric occasionally produces results that fail to properly reward management and our employees for a job well done in the face of adverse prevailing market conditions. The committee concluded that fiscal 2011 was such a year. The committee determined that our management team did an extraordinary job in fiscal 2011 in mitigating the effects of the down cycle on the business as well as in positioning us to capitalize on the next upswing by, among other things, improving our financial position by both managing costs effectively and securing timely debt at attractive interest rates and terms, implementing a comprehensive regulatory compliance program appropriate for our many challenging operating environments, and focusing on our vessel acquisition program.

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To fail to properly recognize these contributions could, in the view of the committee, expose our company to the potential loss of key contributors to our long-term success, particularly when no annual incentive based on EVA has been awarded for two consecutive years and other attractive employment opportunities are available in our industry. Rather than awarding cash, however, the committee awarded each executive an additional grant of restricted stock, in an amount equal to approximately 66% of our chief executive officer’s base salary and approximately 52% of annual base salary for each other named executive. To address the committee’s retention concerns, these grants will vest 25% per year over a four-year period; therefore, the ultimate value of these awards will be dependent upon how well management and the company perform in the future. These special equity grants are subject to the same other terms and conditions as apply to our time-based shares of restricted stock generally.

Stockholder Rights to Restricted Stock.    The named executives have voting rights with respect to all of their shares of restricted stock. While we pay dividends currently on the shares of time-based restricted stock, any dividends on the fiscal 2011 performance-based shares will accrue and be paid or forfeited in tandem with the related shares of restricted stock.

Retirement Benefits.    Our named executives participate in employee benefit plans generally available to all employees. These broad-based plans include a Pension Plan (now frozen and closed to new participants), a qualified defined contribution Retirement Plan, and our 401(k) Plan. We have frozen the benefits under our Pension Plan for all participants effective December 31, 2010, and there will be no future benefit accruals under that plan. Future qualified retirement benefits will be provided through our Retirement Plan and our 401(k) Plan.

In addition to these broad-based programs, we provide our executives with a non-qualified deferred compensation plan, the Supplemental Savings Plan, which acts as a supplement to our 401(k) Plan, and a SERP that operates as a supplement to our Pension and Retirement Plans. Both the Supplemental Savings Plan and the SERP are designed to provide retirement benefits to our officers that they are precluded from receiving under the underlying qualified plans due to the compensation and benefits limits in the Internal Revenue Code. These plans are described in more detail in “Executive Compensation—2011 Pension Benefits” and “Executive Compensation—2011 Non-Qualified Deferred Compensation.”

In connection with freezing of our Pension Plan, the committee has been considering how to deliver its executive retirement benefits going forward. During fiscal 2010, the committee with the assistance of Towers Watson reviewed the SERP and the prevalence of SERPs as part of the executive compensation programs of other companies. According to data provided by Towers Watson, non-qualified executive retirement plans continue to be prevalent. However, the committee made the decision to close the SERP to new participants effective March 1, 2010.

Change of Control Agreements.    We have entered into Change of Control Agreements with our executives, including each of our named executives. We continue to offer our named executives change of control benefits for several reasons. These benefits serve our company’s interests by encouraging key management personnel to remain employed with the company in the event of an impending change of control while simultaneously alleviating individual concerns about the possible involuntary loss of employment. We believe that these change of control protections preserve morale and productivity and encourage retention in the face of the potential disruptive impact of an actual or potential change of control of our company. Change of control protections for our named executives and other key personnel are an important part of good corporate governance, as they ensure that the interests of our named executives will be materially consistent with the interests of our stockholders when considering corporate transactions. Information regarding the current Change of Control Agreements, including the estimated amounts payable to each named executive, is set forth under the heading “Potential Payments upon Termination or Change in Control—Change in Control.”

Other Benefits.    We also provide certain limited perquisites to our named executives.

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Use of Corporate Airplane.    At the time of the acquisition of the corporate airplane, our board of directors, for security reasons, adopted a policy that required that the chief executive officer complete all air travel, both business and personal, aboard our airplane. We reviewed this policy during fiscal 2010, and we continue to believe that this is an appropriate and reasonable practice because it increases the level of safety and security for Mr. Taylor and his family. Furthermore, commercial travel has become more inefficient in recent years. Making the aircraft available to Mr. Taylor maximizes his availability to conduct business before, during and after flights and allows him to travel on short notice, quickly take advantage of business opportunities, and respond to urgent situations. For certain international travel, use of the corporate airplane is impractical, and Mr. Taylor does fly commercially in those instances.

The value of the use of the corporate airplane for personal travel by Mr. Taylor during 2011 was $69,940, valued at the incremental cost to the company of such personal travel as required by the SEC for proxy statement disclosure purposes.

Other Perquisites.    For fiscal 2011, the other perquisites provided to our named executives consist primarily of club dues for one country club membership for each named executive, financial planning services, lunch club memberships, corporate apartments for two named executives who are expected to divide their time between two different company offices, and executive medical benefits. Our executive medical plan was terminated on December 31, 2010, and we implemented a new executive wellness program including a comprehensive annual physical exam. We do not provide tax gross-ups on any after-tax benefits.

Other Compensation and Equity Ownership Policies

Recovery Policy.    During fiscal 2008, the compensation committee adopted an Executive Compensation Recovery Policy under which the company may recover cash and equity incentive compensation awarded after adoption of the policy if the compensation was based on the achievement of financial results that were subsequently the subject of a restatement of our financial statements, if the executive officer engaged in intentional misconduct that caused the need for a restatement and the effect was to increase the amount of the incentive compensation.

Stock Ownership Guidelines.    Under stock ownership guidelines adopted by the Board in September of 2007 for the company’s directors and officers and reevaluated by the compensation committee in fiscal 2011, our directors and officers are required to hold the following values in the form of company stock within five years of becoming a director or officer (the director’s annual cash retainer or the officer’s base salary is multiplied by the appropriate multiple):

If an officer’s ownership guideline increases because of a change in title or if a new officer or director is added, a five-year period to achieve the incremental guideline begins in January following the year of the title change or addition as a director or officer. The deferred stock units granted to directors each year count as shares of company stock under the guidelines.

As of the end of fiscal 2011, all executive officers and directors were in compliance with the policy.

Prohibition on Hedging Transactions.    Each of our named executives is subject to our Policy Statement on Insider Trading, an internal company policy adopted by our board. In January 2011, our board approved certain changes to this policy, including a blanket prohibition on engaging in certain forms of hedging or monetization

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transactions, such as prepaid variable forward contracts, equity swaps, collars, and exchange funds, with respect to our securities, regardless whether those securities were received as compensation. This prohibition applies to all company insiders (including our directors and our named executives) as well as all of our other employees.

$1 Million Pay Deductibility Cap.    Section 162(m) of the Internal Revenue Code limits our federal income tax deductions for compensation, other than qualified performance-based compensation, to $1 million for compensation paid to each of our most highly-compensated executive officers. Performance-based restricted stock granted by us in fiscal 2011 is designed to qualify as performance-based and to be excluded in calculating the $1 million limit of Section 162(m). The portion of Mr. Taylor’s annual bonus based upon company performance for fiscal 2011 under the Company Performance Executive Officer Annual Incentive Plan has also been structured to be fully deductible under Section 162(m) as performance-based compensation.

We intend to continue to establish executive officer compensation programs that will maximize our company’s income tax deduction. However, from time to time, the committee may award compensation that is not fully tax deductible if we determine that such award is consistent with our philosophy and in the best interest of our company and our stockholders.

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COMPENSATION COMMITTEE REPORT

The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this proxy statement. Based upon this review and discussion, the committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.

Compensation Committee:

Richard T. du Moulin, Chairman

James C. Day

Morris E. Foster

Joseph H. Netherland

Nicholas J. Sutton

Jack E. Thompson

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of our compensation committee are Messrs. Day, du Moulin, Foster, Netherland, Sutton, and Thompson. None of the members of our compensation committee has been an officer or employee of our company or any of our subsidiaries. No executive officer of our company served in the last fiscal year as a director or member of the compensation committee of another entity one of whose executive officers served as a member of our board or on our compensation committee.

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EXECUTIVE COMPENSATION

The following table summarizes, for the fiscal year ended March 31, 2011, the compensation paid to each of our named executives in all capacities in which they served.

FISCAL 2011 SUMMARY COMPENSATION TABLE