8-KLeadership Changes

NORTHROP GRUMMAN CORP /DE/ 8-K Report, Executive Changes (Feb 18, 2020)

Filed February 18, 2020For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) has filed an 8-K detailing compensation actions approved by its Compensation Committee and Board of Directors on February 12, 2020. The report outlines the key performance metrics for the 2020 Incentive Compensation Plan (ICP) and the metrics for Restricted Performance Stock Rights (RPSR) for the 2020-2022 performance period. These compensation structures are designed to align executive incentives with critical financial and operational performance drivers for the company.

Key Highlights

  • 1The 2020 Incentive Compensation Plan (ICP) will be weighted towards cash flow from operations (35%), segment operating income growth (35%), net income growth (15%), and operating margin rate (15%).
  • 2Restricted Performance Stock Rights (RPSR) for the 2020-2022 period will be measured by cumulative free cash flow (1/3), operating return on net assets (1/3), and relative total shareholder return (1/3).
  • 3The company awarded 70% of its Restricted Stock Rights (RSR) as RPSRs and 30% as RSRs, a structure similar to prior years.
  • 4Northrop Grumman's Compensation Committee opted not to award any stock options for the named executive officers.
  • 5Special grants of 1,414 RSRs were awarded to Blake Larson (President, Space Systems) and Janis Pamiljans (President, Aeronautics Systems), vesting on December 31, 2021.
  • 6Financial metrics for net income growth and operating margin rate under the ICP are adjusted for certain items including net pension, purchased intangible amortization, and merger-related costs.

Frequently Asked Questions

The 2020 Incentive Compensation Plan (ICP) emphasizes cash flow from operations (35%) and segment operating income growth (35%), with net income growth (15%) and operating margin rate (15%) also playing significant roles. These metrics are designed to align executive focus with key operational and financial success drivers.

Long-term performance is incentivized through Restricted Performance Stock Rights (RPSR) for the 2020-2022 period. These awards are tied to a balanced scorecard of cumulative free cash flow, operating return on net assets, and relative total shareholder return, each carrying equal weighting (1/3).

The filing indicates that, apart from the specific grants and metrics outlined, there are no material changes from 2019 in the terms of the 2020 Restricted Performance Stock Rights (RPSR) and Restricted Stock Rights (RSR) awards for the named executive officers. Notably, stock options were not awarded.

Yes, special grants of 1,414 Restricted Stock Rights (RSRs) were awarded to Blake Larson, Corporate Vice President and President of Space Systems, and Janis Pamiljans, Corporate Vice President and President of Aeronautics Systems. These grants have a vesting date of December 31, 2021, and are not subject to retirement provisions, but otherwise share the terms of the 2020 RSR awards.