What is the purpose of the new 'clawback' policy?

The 'clawback' policy, officially a recoupment policy, is designed to deter intentional misconduct, gross negligence, or fraud by elected officers that negatively affects Lockheed Martin's financial statements or reputation. It grants the Board of Directors the authority to recover incentive and equity awards previously granted to such officers.

What are the key components of the new Executive Severance Plan?

The Executive Severance Plan provides standardized benefits for certain management employees whose employment is terminated by the company (and not for cause). Benefits typically include one times base salary, one year's target bonus, a lump sum for one year of medical benefits, and outplacement/relocation services. The CEO's benefit is a multiplier of 2.99 times base salary.

What are the conditions for an executive to receive full severance benefits?

To receive the full severance benefit, an executive officer must execute a release of claims against the Corporation and agree to post-employment restrictive covenants. These covenants generally include not accepting employment with specified competitors or soliciting employees/customers for two years, protecting proprietary information, cooperating in investigations, and not disparaging the company.

When do these new policies become effective?

The clawback policy is effective for awards granted on or after January 1, 2008. The Executive Severance Plan was approved by the Board of Directors in January 2008 and applies to terminations initiated by the Corporation after its adoption.

LMT 8-K: Leadership Changes

Summary

Lockheed Martin Corporation (LMT) filed an 8-K on January 29, 2008, detailing significant changes to its executive compensation and governance policies. The most notable update is the adoption of a "clawback" policy, effective January 1, 2008, which allows the Board of Directors to recoup incentive and equity awards from elected officers under specific circumstances. These circumstances include intentional misconduct, gross negligence, or fraud that materially impacts the company's financial statements or reputation. The company also introduced an Executive Severance Plan for certain management employees, effective January 2008. This plan standardizes severance benefits for involuntary terminations (not for cause), providing a multiple of base salary and target bonus, along with medical benefits and outplacement services. Both the clawback policy and the severance plan require executive agreement to restrictive post-employment covenants, including non-solicitation and non-competition clauses, to receive full benefits.

Key Highlights

1Lockheed Martin adopted a "clawback" policy for elected officers, allowing recoupment of incentive and equity awards in cases of intentional misconduct, gross negligence, or fraud impacting financial statements or reputation.
2The clawback policy is effective for awards granted on or after January 1, 2008.
3The company implemented an Executive Severance Plan for certain management employees, effective January 2008.
4Severance benefits under the new plan are triggered by company-initiated terminations (not for cause) and include salary, bonus, and medical benefits.
5Executive officers must agree to restrictive post-employment covenants (non-solicitation, non-competition, protection of proprietary information) to receive full severance benefits and equity awards.
6These covenants include a two-year restriction on employment with specified competitors and solicitation of employees or customers for executive officers.
7The Board of Directors amended Corporate Governance Guidelines and the Management Incentive Compensation Plan (MICP) to incorporate these policy changes.

LOCKHEED MARTIN CORP 8-K Report, Executive Changes (Jan 29, 2008)

Summary

Key Highlights

Frequently Asked Questions