Business Context and Reporting Period
This Form 8-K filing by Northrop Grumman Corporation, dated February 17, 2009, reports on compensatory arrangements for Named Executive Officers. The actions were taken by the Compensation Committee on February 17, 2009, and by the Independent Members of the Board of Directors on February 18, 2009.
Key Financial Metrics
The filing does not provide consolidated revenue, profit, cash flow, margins, debt, or liquidity figures for the company. It focuses exclusively on executive compensation details:
- 2008 Cash Bonuses Paid:
- Ronald D. Sugar (Chairman and CEO): $2,775,500
- Wesley G. Bush (President and COO): $1,197,000
- James F. Palmer (CFO): $816,000
- James F. Pitts (President, Electronic Systems): $630,000
- W. Burks Terry (Retired): $688,050
- James R. O'Neill (Terminated): $180,277
- 2009 Base Salaries: Unchanged from 2008 levels.
Material Changes
Material changes regarding compensation structure and policy include:
- CEO Salary: The Chairman and CEO requested and received approval to keep his base salary unchanged for 2009.
- Performance Metric Adjustment: The metric for Restricted Performance Stock Rights (2009-2011 period) was changed from "cumulative operating margin" to "operating margin rate."
- Perquisite Policy: The Committee approved the elimination of tax gross-up payments for personal use of the company plane and other perquisites.
Guidance, Outlook, and Management Commentary
The filing outlines the performance metrics for the 2009 Annual Incentive Plan (AIP):
- 2009 AIP Measures: New business awards, sales, operating margin before net FAS/CAS pension expense, and free cash flow before voluntary pension prefunding.
- Target Percentages of Base Salary:
- Dr. Sugar: 140%
- Mr. Bush: 90%
- Mr. Palmer: 75%
- Mr. Pitts: 75%
- Performance Factors: Non-CEO bonuses are based on Company Performance Factor (CPF) and Individual Performance Factor (IPF) ranging from 0% to 125%. The CEO bonus is determined solely by the CPF.
Investor Verification Checklist
- Verify the impact of the new "operating margin rate" metric on future Restricted Performance Stock Rights payouts.
- Confirm the total cost of the 2008 cash bonuses relative to the company's 2008 net income (data not in this filing).
- Review the specific terms of the eliminated tax gross-up payments to assess potential changes in executive net compensation.
- Check subsequent filings for the actual 2009 performance results against the new AIP targets.