8-KLeadership Changes

NORTHROP GRUMMAN CORP /DE/ 8-K Report, Executive Changes (Feb 18, 2021)

Filed February 18, 2021For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) disclosed key compensation-related actions for its named executive officers, as approved by its Compensation Committee and Board of Directors on February 16, 2021. The filing details the 2021 goals under the Incentive Compensation Plan (ICP) and awards of Restricted Performance Stock Rights (RPSR) for the 2021-2023 performance period. These updates signal the company's continued focus on aligning executive pay with key financial and operational performance metrics. Of particular interest to investors is the shift in RPSR award structure, with an increase in the maximum payout from 150% to 200%. The performance metrics for both the ICP and RPSR awards are heavily weighted towards cash flow, operating income, and margin rates, indicating a strategic emphasis on profitability and operational efficiency. The company also continues its practice of not awarding stock options, with 70% of executive awards comprised of RPSRs and 30% of Restricted Stock Rights (RSRs).

Key Highlights

  • 1Northrop Grumman's Compensation Committee and Board approved 2021 Incentive Compensation Plan (ICP) goals.
  • 2ICP financial metrics for 2021 include cash flow from operations (35%), segment operating income growth (35%), net income growth (15%), and operating margin rate (15%).
  • 3Restricted Performance Stock Rights (RPSR) for 2021-2023 performance period were awarded.
  • 4Maximum payout for RPSR awards increased from 150% to 200%.
  • 5RPSR performance metrics are cumulative free cash flow (1/3), operating return on net assets (1/3), and relative total shareholder return (1/3).
  • 670% of executive awards were RPSRs, and 30% were Restricted Stock Rights (RSRs) vesting in February 2024.
  • 7The company continues its policy of not awarding stock options to named executive officers.

Frequently Asked Questions

The primary financial metrics for the 2021 Incentive Compensation Plan (ICP) are cash flow from operations before discretionary pension funding (35%), segment operating income growth (35%), net income growth (15%), and operating margin rate (15%).

The maximum payout for Restricted Performance Stock Rights (RPSR) awards for the 2021-2023 performance period has been increased from 150% to 200%. The performance metrics remain cumulative free cash flow, operating return on net assets, and relative total shareholder return, each weighted at 1/3.

No, similar to prior years, Northrop Grumman's Compensation Committee did not award any stock options as part of the compensation for named executive officers.

For the compensation awarded, 70% were in the form of Restricted Performance Stock Rights (RPSRs), which are tied to achieving specific performance metrics over a three-year period. The remaining 30% were Restricted Stock Rights (RSRs), which vest based on time, specifically on February 16, 2024.