8-KLeadership ChangesCorporate ChangesExhibits & Filings

NORTHROP GRUMMAN CORP /DE/ 8-K Report, Executive Changes (Feb 22, 2016)

Filed February 22, 2016For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) filed an 8-K on February 22, 2016, detailing compensation arrangements for its named executive officers and updates to its corporate bylaws. The company's Compensation Committee and Board of Directors approved the 2016 Incentive Compensation Plan (ICP) goals, which will be weighted across pension-adjusted operating margin rate, cash flow conversion, pension-adjusted net income growth, and book to bill ratio. Additionally, the company awarded Restricted Performance Stock Rights (RPSR) and Restricted Stock Rights (RSR) for the 2016-2018 performance period, with metrics focused on relative total shareholder return and cumulative free cash flow. Notably, there were no material changes from 2015 in the terms of these awards, and the company continues to refrain from awarding stock options.

Key Highlights

  • 12016 Incentive Compensation Plan (ICP) goals approved with a focus on operating margin, cash flow, net income growth, and book to bill ratio.
  • 2Restricted Performance Stock Rights (RPSR) and Restricted Stock Rights (RSR) awarded for 2016-2018 performance period.
  • 3RPSR metrics include relative total shareholder return (70%) and cumulative free cash flow (30%).
  • 4No material changes from 2015 in RPSR and RSR award terms for named executive officers.
  • 5Northrop Grumman continues to not award stock options to its named executive officers.
  • 6Bylaws amended to provide for proxy access, allowing stockholders to include director nominees in proxy materials.
  • 7Bylaw amendments also expand permissible third-party compensation and expense reimbursement for director nominees.

Frequently Asked Questions

The 2016 ICP goals are weighted across four financial metrics: pension-adjusted operating margin rate (30%), cash flow from operations conversion before discretionary pension funding (30%), pension-adjusted net income growth (30%), and awards expressed as book to bill ratio (10%).

Executive compensation for this period includes Restricted Performance Stock Rights (RPSR) and Restricted Stock Rights (RSR). 70% of the awards were RPSRs measured by relative total shareholder return (70%) and cumulative free cash flow before pension funding (30%). The remaining 30% were RSRs that vest on February 17, 2019. Importantly, there were no material changes from 2015 in the terms of these awards, and no stock options were granted.

The company's Bylaws were amended to provide for proxy access, allowing eligible stockholders to nominate directors and include them in the company's proxy materials. Additionally, the amendments expand the permissible third-party compensation and expense reimbursement for director nominees, aligning them with practices for all directors.

No, the filing indicates that there were no material changes from 2015 in the terms of the 2016 Restricted Performance Stock Rights (RPSR) and Restricted Stock Rights (RSR) awarded to named executive officers. The company also continues its practice of not awarding stock options.