What are the key changes to executive compensation for 2009?

The primary changes involve the elimination of tax gross-up payments for personal use of the company plane and other perquisites. Base salaries remain unchanged for most officers, and the Chairman and CEO also did not receive a base salary increase. The 2009 Annual Incentive Plan goals and metrics have been set, and a metric for Restricted Performance Stock Rights has been adjusted.

How is executive bonus compensation determined for 2009?

For 2009, cash bonus compensation under the Annual Incentive Plan (AIP) will be based on the Company Performance Factor (CPF) and an Individual Performance Factor (IPF) ranging from 0-125% for most participants. However, the CEO's AIP bonus will be determined solely based on the CPF. Performance measures for the AIP include new business awards, sales, operating margin (before certain pension expenses), and free cash flow (before voluntary pension prefunding).

Have any executives left the company or retired?

Yes, the filing notes that W. Burks Terry, Former Corporate Vice President and General Counsel, retired on December 31, 2008, and James R. O’Neill, Former Corporate Vice President and President, Information Technology, had his employment terminated on May 1, 2008. Their 2008 bonus figures are listed for context.

What are the performance metrics for executive incentive plans?

For the 2009 Annual Incentive Plan, the key metrics are new business awards, sales, operating margin before net FAS/CAS pension expense, and free cash flow before voluntary pension prefunding. For the 2009-2011 Restricted Performance Stock Rights, the performance metric has been changed from cumulative operating margin to operating margin rate.

NOC 8-K: Leadership Changes

Summary

Northrop Grumman Corporation (NOC) filed an 8-K on February 23, 2009, detailing executive compensation decisions made in mid-February 2009. The primary focus is on the compensation for Named Executive Officers for the upcoming year and bonuses paid for 2008 performance. Notably, base salaries for most Named Executive Officers remain unchanged from 2008. The Chairman and CEO, Ronald D. Sugar, also did not receive a base salary increase for 2009, as per his request and Board approval. The filing also outlines the 2009 goals for the Annual Incentive Plan (AIP), which will determine cash bonus compensation. Performance metrics for the AIP include new business awards, sales, operating margin (before specific pension expenses), and free cash flow. The Compensation Committee also adjusted a metric for Restricted Performance Stock Rights, changing from cumulative operating margin to operating margin rate for the 2009-2011 performance period. Additionally, tax gross-up payments for personal use of the company plane and other perquisites for executive officers have been eliminated.

Key Highlights

1Base salaries for Named Executive Officers remain unchanged for 2009 compared to 2008.
2Chairman and CEO Ronald D. Sugar's base salary was not increased for 2009, at his request.
3Cash bonuses for 2008 performance were awarded to key executives, with the CEO receiving $2,775,500.
42009 Annual Incentive Plan (AIP) goals were approved, with bonus payouts dependent on Company Performance Factor (CPF) and Individual Performance Factor (IPF), except for the CEO whose bonus is solely based on CPF.
52009 AIP performance metrics include new business awards, sales, operating margin (excluding certain pension expenses), and free cash flow (excluding voluntary pension prefunding).
6A metric for Restricted Performance Stock Rights (2009-2011) was changed from cumulative operating margin to operating margin rate.
7Tax gross-up payments for personal use of company aircraft and other executive perquisites have been eliminated.

NORTHROP GRUMMAN CORP /DE/ 8-K Report, Executive Changes (Feb 23, 2009)

Summary

Key Highlights

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