8-KLeadership ChangesExhibits & Filings

LOCKHEED MARTIN CORP 8-K Report, Executive Changes (Feb 3, 2011)

Filed February 3, 2011For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) filed an 8-K on February 2, 2011, reporting on compensatory arrangements for its officers as of January 27, 2011. A key development is that Chairman and CEO Robert J. Stevens voluntarily requested to freeze his base salary at $1,800,000 for the third consecutive year, aligning with a company-wide decision to withhold merit increases for most employees at the vice president level and above. This signals a focus on cost management and potentially a conservative approach to executive compensation in the current economic environment. The company also amended its Management Incentive Compensation Plan (MICP) for 2011 bonuses, increasing target bonus percentages for Executive Vice Presidents, Senior Vice Presidents, and other elected officers. While base salaries for top executives are frozen, the potential upside for incentive compensation has been enhanced for certain senior roles. Additionally, changes were made to restricted stock unit (RSU) and stock option award agreements, including stricter forfeiture clauses for non-vested options upon layoff or retirement, the introduction of post-employment restrictive covenants, and a delay in dividend equivalent payments on RSUs until vesting.

Key Highlights

  • 1CEO Robert J. Stevens voluntarily freezes his base salary for the third consecutive year at $1.8 million.
  • 2Company-wide decision to not award merit increases to most employees at the vice president level or above.
  • 3Amended Management Incentive Compensation Plan (MICP) to increase target bonus percentages for Executive Vice Presidents, Senior Vice Presidents, and other elected officers.
  • 4New RSU and stock option award agreements include stricter forfeiture of non-vested options upon layoff or retirement.
  • 5Post-employment non-compete, non-solicit, and confidentiality covenants are now included for executive grants.
  • 6Dividend equivalents on RSUs will only be paid upon vesting.
  • 7A discretionary partial bonus of $441,800 was approved for former SVP and General Counsel James B. Comey.

Frequently Asked Questions

The CEO, Robert J. Stevens, voluntarily requested to freeze his base salary for the third consecutive year. This decision aligns with the company's broader strategy to not award merit increases to most employees at the vice president level and above, reflecting a focus on cost management or a conservative approach to compensation.

The Management Incentive Compensation Plan (MICP) was amended to increase target bonus percentages for key executive roles. Specifically, targets were raised for Executive Vice Presidents (from 75% to 90% of base salary), Senior Vice Presidents (from 55%-65% to 55%-75%), and other elected officers (from 40%-55% to 40%-65%). This means that while base salaries are frozen, the potential bonus payouts for these senior executives have been enhanced.

The new agreements introduce several changes. Firstly, non-vested stock options will be forfeited upon layoff or retirement, making the treatment more consistent between options and RSUs. Secondly, post-employment restrictive covenants (non-compete, non-solicit, confidentiality) are now required for executive grants. Lastly, dividend equivalents on RSUs will not be paid until the units vest.

The stricter forfeiture terms for non-vested stock options upon layoff or retirement, and the inclusion of post-employment restrictive covenants, suggest an effort to align executive incentives more closely with continued service and to protect company interests post-employment. The delayed payment of dividend equivalents on RSUs until vesting also encourages long-term retention.