8-KLeadership Changes

NORTHROP GRUMMAN CORP /DE/ 8-K Report, Executive Changes (Feb 17, 2023)

Filed February 17, 2023For Securities:NOC

Summary

Northrop Grumman Corporation (NOC) filed an 8-K on February 16, 2023, detailing compensation actions for its named executive officers and a board director's departure. The Compensation Committee and Board approved the 2023 incentive plan goals, with a significant weighting on financial metrics such as cash flow from operations, segment operating income growth, and adjusted operating margin, alongside non-financial metrics like People, Environment, and Customer. Additionally, Restricted Performance Stock Rights (RPSR) for the 2023-2025 performance period were awarded, focusing on cumulative free cash flow, return on invested capital, and relative total shareholder return. Restricted Stock Rights (RSR) were also approved. The company continues its practice of not awarding stock options. These compensation adjustments align executive incentives with key financial and strategic objectives.

Key Highlights

  • 1Northrop Grumman's Compensation Committee and Board approved the 2023 Annual Incentive Plan (ICP) and Incentive Compensation Plan (ICP) goals.
  • 2Financial metrics for the 2023 ICP include cash flow from operations (35%), segment operating income growth (35%), and adjusted operating margin (20%).
  • 3Non-financial metrics for the 2023 ICP comprise People (DE&I, employee experience), Environment (sustainability), and Customer (quality, satisfaction), weighted at 10%.
  • 4Restricted Performance Stock Rights (RPSR) for 2023-2025 performance period were awarded, with metrics: cumulative free cash flow (1/3), return on invested capital (1/3), and relative total shareholder return (1/3).
  • 5Restricted Stock Rights (RSR) were approved to vest on February 17, 2026.
  • 6The company has maintained its policy of not awarding stock options to named executive officers.
  • 7Director Karl J. Krapek will not seek re-election at the 2023 Annual Meeting of Shareholders and will retire from the Board.

Frequently Asked Questions

The primary financial metrics for the 2023 ICP are cash flow from operations before discretionary pension funding (35%), segment operating income growth (35%), and adjusted operating margin rate (20%). These represent a substantial portion of the incentive opportunity.

The RPSR awards for the 2023-2025 performance period will be measured against cumulative free cash flow (1/3 weighting), return on invested capital (1/3 weighting), and relative total shareholder return (1/3 weighting). These metrics are designed to align executive interests with long-term shareholder value creation.

The filing states that other than as described, there are no material changes from 2022 in the terms of the 2023 RPSR and RSR awards for named executive officers. The company also continues its practice of not awarding stock options.

Yes, Director Karl J. Krapek has notified the Board of his decision not to seek re-election at the 2023 Annual Meeting of Shareholders. He will retire from the Board at that meeting.