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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange
Act of 1934 (Amendment No. )
Filed by the Registrant
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Lockheed Martin Corporation |
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Table of Contents
As a stockholder, your
vote is important to our continued success. Please vote your
shares today.
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March 13,
2015
Dear Fellow
Stockholders:
On behalf of the
Board of Directors, I would like to invite you to attend our 2015 Annual
Meeting of Stockholders. We will meet on Thursday, April 23, 2015, at 8:00
a.m. Eastern Daylight Savings Time, at the Lockheed Martin Center for
Leadership Excellence Auditorium, 6777 Rockledge Drive, Bethesda, Maryland
20817.
Our Lead Director,
Douglas H. McCorkindale, will retire from the Board upon expiration of his
term at the Annual Meeting due to the mandatory retirement provision in
our Bylaws. We are extremely grateful for his guidance and contributions
as a member of the Board of Directors for the past 14 years, and wish him
all the best in retirement. The independent directors of our Board have
elected Nolan D. Archibald as our new Lead Director, effective following
the Annual Meeting, subject to his re-election to the Board. Mr.
Archibalds biography is on page 22.
Our performance in
2014 resulted in increased earnings per share and strong cash generation
for our stockholders. We delivered total stockholder return of 34 percent,
including $1.8 billion in dividends. This was our twelfth consecutive year
of double-digit dividend growth.
As we look ahead to
2015, we remain focused on delivering for our customers, returning value
to our stockholders, advancing our technologies, and investing in our
people. We continue our commitment to corporate governance and executive
compensation best practices.
Your vote is
important. We urge you to vote promptly, even if you plan to attend the
Annual Meeting. The accompanying Notice and Proxy Statement provide
information about the matters on which you may vote. If you wish to attend
the meeting in person, please follow the advance registration instructions
in the Proxy Statement.
Thank you for your
continued support of Lockheed Martin.
Sincerely,
Marillyn A.
Hewson Chairman,
President and Chief Executive
Officer |
Table of Contents
Lockheed Martin
Corporation
6801 Rockledge Drive
Bethesda, MD 20817
Notice of 2015 Annual Meeting of
Stockholders |
Thursday, April 23, 2015
8:00
a.m. Eastern Daylight Savings Time
Lockheed Martin Center for Leadership Excellence
Auditorium, 6777 Rockledge Drive, Bethesda, Maryland 20817
Lockheed Martin Corporation
stockholders of record at the close of business on February 27, 2015, are
entitled to receive notice of, and to vote at, the Annual Meeting.
Items of Business:
1. |
Election of 11 director-nominees to serve on
the Board for a one-year term ending at next years Annual
Meeting; |
2. |
Ratification of the appointment of Ernst
& Young LLP, an independent registered public accounting firm, as our
independent auditors for 2015; |
3. |
Advisory vote to approve the compensation of
our named executive officers; |
4. |
Consideration of two stockholder proposals
described in the accompanying Proxy Statement, if properly presented at
the Annual Meeting; and |
5. |
Consideration of any other matters that may properly come before
the meeting. |
We have enclosed our 2014
Annual Report to Stockholders. The report is not part of the proxy soliciting
materials for the Annual Meeting.
Please vote your shares at
your earliest convenience. This will help us to ensure the presence of a quorum
at the meeting. Promptly voting your shares via the Internet, by telephone, by
scanning the QR code with a mobile device, or by signing, dating, and returning
the enclosed proxy card will save the expense of additional solicitation. If you
wish to vote by mail, we have enclosed a self-addressed, postage prepaid
envelope. Submitting your proxy now will not prevent you from voting your shares
at the meeting, as your proxy is revocable at your option.
If you wish to attend
the meeting in person, please follow the advance registration instructions on
page 80 of the Proxy Statement. For security reasons, all hand-carried items
will be subject to inspection, and all bags, briefcases, and packages must be
checked.
Sincerely,
Maryanne R.
Lavan
Senior Vice President,
General Counsel and Corporate Secretary
March 13, 2015
Important Notice Regarding
the Availability of Proxy Materials for the Annual Meeting to be Held on April
23, 2015: The 2015 Proxy Statement and 2014 Annual Report are available at
http://www.lockheedmartin.com/investor.
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Table
of Contents
4 www.lockheedmartin.com/investor
Table of Contents
Proxy
Summary
PROXY STATEMENT
The Board of Directors (the
Board) of Lockheed Martin Corporation (the Corporation) is providing the
Notice of 2015 Annual Meeting of Stockholders, this Proxy Statement, and the
proxy card (Proxy Materials) in connection with the Corporations solicitation
of proxies to be voted at the Annual Meeting of Stockholders (the Annual
Meeting) to be held on April 23, 2015, at 8:00 a.m. Eastern Daylight Savings
Time, at the Lockheed Martin Center for Leadership Excellence Auditorium, 6777
Rockledge Drive, Bethesda, Maryland 20817, and at any adjournment or
postponement thereof. Proxy Materials or a Notice of Internet Availability were
first sent to stockholders on or about March 13, 2015.
PROXY SUMMARY
This summary highlights
information contained elsewhere in our Proxy Statement. The summary does not
contain all of the information that you should consider, and we encourage you to
read the entire Proxy Statement carefully.
STOCKHOLDERS
BENEFIT FROM LOCKHEED
MARTINS STRONG 2014
PERFORMANCE
2014 Financial
Measures* |
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2014
Goals ($) |
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Reported/Assessed Results ($) |
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2014 Annual Incentive Assessment |
Orders |
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41,500 43,000M |
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43,283M |
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Exceeded |
Sales |
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44,000 45,500M |
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45,600M |
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Exceeded |
Segment Operating Profit* |
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5,175 5,325M |
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5,588M |
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Exceeded |
Cash from Operations |
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≥ 4,600M |
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3,866M/4,866M |
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Exceeded** |
* |
We use the
following non-GAAP terms in this Proxy Statement Segment Operating
Profit, Return on Invested Capital (ROIC), and Performance Cash
which are defined in Appendix A. Please refer to Appendix A for an
explanation of these terms as well as our disclosure regarding
forward-looking statements concerning future performance or goals for
future performance. |
** |
In assessing
performance against our cash from operations goal, we add back unplanned
pension contributions so that the impact on annual incentive compensation
is not a factor in the decision to make the additional pension
contribution. Therefore, cash from operations was assessed after adding
back $1 billion in unplanned contributions made to the pension fund in the
4th quarter 2014. Based on an adjusted result of $4,866M, the Management
Development and Compensation Committee determined that the target was
Exceeded. |
2015 Proxy
Statement |
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5 |
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Proxy
Summary
We actively engage with our
investors as part of our annual corporate governance cycle. This includes, as
appropriate, the direct involvement of senior management. During 2014, we held
36 meetings or telephone conferences with institutional investors and other
interested stockholders. These stockholders represented more than 40 percent of
the Corporations outstanding shares.
In response to investor
feedback received in 2014, we enhanced our corporate governance disclosure
on:
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Board composition and mix of
skills and qualifications. |
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Board role in strategic
planning. |
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Board succession
planning. |
Our 2014 Compensation
Programs Reflect Investor Input |
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Burn
Rate. The number of shares
used for equity grants in 2014 and in 2013 is significantly less than
shares used in prior years. |
● |
Alignment with
Stockholder Interests.
Nearly three quarters of the Chief Executive Officers (CEO) target
compensation opportunity is in the form of long-term incentives, of which
the vast majority is equity-based, directly aligning with stockholder
interests. |
● |
Pay for
Performance. Seventy
percent of the target value of long-term incentive awards granted to the
CEO will be earned based upon achievement of specific and measurable goals
approved at the beginning of 2014. |
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Performance
Metrics. 2014 annual
incentive compensation reflects pre-established financial, strategic, and
operational goals with the financial goals weighted the heaviest at 60
percent. Enterprise level goals were based on our publicly disclosed
guidance to investors. |
● |
Market-Based
Compensation. 2014 total
target compensation for all named executive officers is at or below the
50th percentile of our comparator
group. |
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Proxy
Summary
2014 Board Composition, Qualifications, and
Diversity
Independence |
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Board Tenure |
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Gender |
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Age |
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Leadership
Experience |
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Financial Experts |
8 directors are
current or former Chief Executive Officers who add to the effectiveness of
the Board through their leadership experience in large, complex
organizations and their expertise in corporate governance, international
business operations, strategic planning, and risk
management. |
4 directors meet the
Securities and Exchange Commissions criteria as audit committee
financial experts. |
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International Experience |
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Government/Military Experience |
9 directors have
broad leadership experience with multinational companies or in
international markets. |
4 directors have
served in senior government or senior military positions and provide
experience and insight into our industry and working with our core
customers and governments around the
world. |
Stockholder Rights
Annual Election of
Directors |
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Majority Voting for
Directors |
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Mandatory Retirement Age
for Directors
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Right to
Call Special
Meeting |
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No Poison
Pill |
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Governance Best Practices |
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Independent Directors Meet Regularly
Without Management |
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Stock
Ownership Guidelines for Directors and Officers |
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Overboarding
Policy |
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Robust
Succession Planning |
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Annual
Board Self-Assessment |
2015 Proxy
Statement |
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7 |
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Proxy
Summary
Board Recommendations on Voting Matters
Proposal |
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Description |
Board
Voting Recommendations |
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Page |
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1 |
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Election of Directors |
FOR ALL DIRECTOR-NOMINEES |
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21 |
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2 |
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Ratification of Appointment of Independent Auditors |
FOR |
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27 |
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3 |
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Advisory Vote to Approve the Compensation of
our Named Executive Officers (Say-on-Pay) |
FOR |
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28 |
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4 |
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Stockholder Proposal on Written Consent |
AGAINST |
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70 |
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5 |
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Stockholder Proposal on Lobbying Expenditures |
AGAINST |
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72 |
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You can vote in the
following ways:
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Via the
Internet Visit http://www.investorvote.com |
By Telephone In the
United States, Canada, and Puerto Rico, call 1-800-652-8683; outside
the United States call 1-781-575-2300. |
By
Mail Mark, date, and sign
your proxy card or voting instruction form and return it in the
accompanying postage prepaid envelope. |
QR Code Scan this
QR code to vote with your mobile device. |
In Person Attend
the meeting to vote in person. |
Attendance at the Annual Meeting
If you plan to attend
the Annual Meeting, you must be a stockholder as of the record date (February
27, 2015) and obtain an admission ticket in advance following the instructions
set forth on page 80.
Requests for admission
tickets will be processed in the order in which they are received and must be
received no later than April 17, 2015. On the day of the Annual Meeting, each
stockholder will be required to present valid, government-issued photographic
identification (such as a drivers license or passport) with his or her admission ticket. The
Annual Meeting will begin promptly at 8:00 a.m. You also will be required to
enter through a security check point before being granted access into the Annual
Meeting. Cameras, cell phones, and other electronic devices will not be
permitted in the Annual Meeting. All hand-carried items will be subject to
inspection and all bags, briefcases, and packages must be checked. The
Corporation may implement additional security procedures to ensure the safety of
the meeting attendees.
Directions to the Annual
Meeting Location
From Dulles
International Airport |
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From Ronald
Reagan National Airport |
● |
Dulles Airport Access Road to VA-267
E |
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● |
George Washington Pkwy N |
● |
Merge onto I-495 N toward
Baltimore/Bethesda |
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● |
Exit onto I-495 N toward
Baltimore/Bethesda |
● |
Take exit 38 for I-270 SPUR N toward
Rockville/Frederick |
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● |
Exit onto I-270 SPUR N toward
Rockville/Frederick |
● |
Take exit 1 for Democracy Blvd E |
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● |
Take Exit 1 for Democracy Blvd E |
● |
Turn left at Fernwood Road |
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● |
Turn left at Fernwood Road |
● |
Turn right at Rockledge Drive |
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● |
Turn right at Rockledge Drive |
● |
Turn
right to Parking Garage at 6720-C Rockledge Drive |
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● |
Turn
right to Parking Garage at 6720-C Rockledge
Drive |
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Table of Contents
CORPORATE GOVERNANCE
Lockheed Martin believes
good governance is integral to achieving long-term stockholder value. We are
committed to governance policies and practices that serve the interests of the
Corporation and its stockholders. The Board monitors emerging issues in the governance community to ensure that it
continues to meet its commitment to thoughtful and independent representation of
stockholder interests.
Corporate Governance
Guidelines |
The Board has adopted
Corporate Governance Guidelines (Governance Guidelines) that describe the
framework within which the Board and its committees oversee the governance of
the Corporation. The current Governance Guidelines are available on the
Corporations website at http://www.lockheedmartin.com/corporate-governance, by clicking on Corporate Governance
Guidelines. The Nominating and Corporate Governance Committee (Governance
Committee) regularly assesses our governance practices in light of emerging
trends and best practices and formally implements best governance practices that
it believes enhance the operation and effectiveness of the Board.
Our Governance Guidelines
cover a wide range of subjects, including: the role of the Board and director
responsibilities; the role and responsibilities of the Lead Director;
application of our Code of Ethics and Business Conduct (the Code of Conduct)
to the Board; director nomination procedures and qualifications; director
independence standards; policies for the review, approval, and ratification of related person transactions;
director orientation and continuing education; procedures for annual performance
evaluations of the Board and the committees; director stock ownership
guidelines; and a clawback policy for executive incentive
compensation.
The Governance Guidelines
state the Boards expectation that any incumbent director who receives more
votes AGAINST his or her election than FOR his or her election is required
to offer his or her resignation to the Board. The Governance Guidelines also set
forth the procedures to be followed by the Board in considering whether to
accept or reject the resignation.
In 2013, we increased the
stock ownership guidelines for directors from two times (2X) the total annual
retainer to five times (5X) the annual cash retainer within five years of
joining the Board. In addition, all directors, officers, and employees are
prohibited from hedging or pledging transactions involving our stock either
through corporate policy statements or the Governance Guidelines.
Board Role in Strategic
Planning |
The Boards primary role is
to oversee management and represent the interests of stockholders. Directors are
expected to attend Board meetings, the meetings of the committees on which they
serve, and the Annual Meeting of Stockholders. The Board and the committees
regularly schedule and hold executive sessions without any members of management
present. Between meetings, directors interact with the Chairman, President and
CEO, the Lead Director, and other members of management and are available to
provide advice and counsel to management.
The Corporations strategy
is reviewed and implemented in a two-year cycle. The first year is devoted to a
review and development of an overall strategy and the second year is devoted to
refining and assessing the strategy. The cycle then begins again in the following year. The Board is involved in
strategic planning for the Corporation throughout the year. In January, the
Executive Vice President and Chief Financial Officer (CFO) reviews the
long-range plan with the Board. In February, the Board convenes in an off-site
strategic planning session during which management reviews the overall
long-range strategy for the Corporation and near-term and long-term initiatives.
The Strategic Affairs Committee (SA Committee) of the Board meets throughout
the year to review progress of and challenges to the Corporations strategy and
to approve specific initiatives, including acquisitions and divestitures over a
certain threshold.
Independent Lead
Director |
In accordance with our
Bylaws and Governance Guidelines, the independent members of the Board annually
elect one of the independent directors to serve as the Lead Director by
the affirmative vote of a majority of
the directors who have been determined to be independent for purposes of the
New York Stock Exchange (NYSE) listing standards. The Board has
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Corporate
Governance
structured the role of the
Lead Director with sufficient authority to serve as a counter-balance to
management. The responsibilities specified in our Bylaws for the Lead Director
are to:
● |
Preside as Chair at
Board meetings while in executive sessions of the non-management members
of the Board or executive sessions of the independent directors, or if the
Chairman is ill, absent, incapacitated, or otherwise unable to carry out
the duties of Chairman. |
● |
Determine the
frequency and timing of executive sessions of non-management directors and
report to the Chairman on all relevant matters arising from those
sessions, and invite the Chairman to join executive sessions for further
discussion as appropriate. |
● |
Consult with the
Chairman and CEO and committee chairs regarding the topics for and
schedules of the meetings of the Board and committees and approve the
topics for and schedules of Board meetings. |
● |
Review and approve
all Board and committee agendas and provide input to management on the
scope and quality of and approve information sent to the
Board. |
● |
Assist with
recruitment of director candidates and, along with the Chairman, may
extend an invitation to a potential director to join the
Board. |
● |
Act as liaison
between the Board and management and among the directors and the
committees of the Board. |
● |
Serve as member of
the Executive Committee of the Board. |
● |
Serve as ex-officio
member of each committee if not otherwise a member of the
committee. |
● |
Serve as the point of
contact for stockholders and others to communicate with the
Board. |
● |
Recommend to the
Board and committees the retention of advisors and consultants who report
directly to the Board. |
● |
Call a special
meeting of the Board or of the independent directors at any time, at any
place, and for any purpose. |
● |
Perform all other
duties as may be assigned by the Board from time to
time. |
The committee Chairmen also
review and discuss the agendas for the meetings in advance of distribution of
the agendas and related Board or committee material.
Mr. McCorkindale was
elected by the independent directors and has served as the Lead Director for
five consecutive years. Subject to his re-election at the Annual Meeting, Mr.
Archibald has been elected by the independent directors to succeed Mr.
McCorkindale as Lead Director, effective at the conclusion of the Annual
Meeting. Stockholders and other interested parties may communicate with the Lead
Director by email at Lead.Director@lmco.com.
Positions of Chairman and Chief Executive
Officer |
The Board regularly reviews
its leadership structure in light of the Corporations then current needs,
governance trends, internal assessments of Board effectiveness, and other
factors. The Board reviews and considers whether the positions of Chairman and
CEO should be combined or separated as part of an ongoing review of the
effectiveness of the Corporations governance structure.
The Board believes that it
must be independent and must provide strong and effective oversight, but also
believes that the independent Board members should have the flexibility to
respond to changing circumstances and choose the model that best fits the
then-current situation.
As a result, the roles of
Chairman and CEO have been split from time to time to facilitate leadership
transitions, while at other times the roles have been combined.
The Board believes that, at
the present time, the Corporation is best served by allocating governance
responsibilities between a combined Chairman and CEO and an independent Lead
Director with robust responsibilities. This structure allows the Corporation to
present a single face to our customers through the combined Chairman and CEO
position while at the same time providing an active role and voice for the independent directors through the Lead
Director. In making this determination, the independent members of the Board
considered:
● |
Trends in governance
and in stockholder proposals for separating the
roles; |
● |
The limited support
for stockholder proposals requiring the separation of the roles at the
Corporations 2013 and 2012 annual meetings; |
● |
The role of the
independent directors in the governance of the Corporation, including the
scheduling of an executive session of the independent directors at every
Board meeting, regular Board review and consideration of the CEO
succession plan, the scope of the duties of the Lead Director, and the
oversight of the CEOs compensation by the Management Development and
Compensation Committee (Compensation Committee), a committee composed
entirely of independent directors that is advised by an outside
independent compensation consultant; |
● |
Ms. Hewsons strong
performance as a leader since her election as
CEO; |
● |
The fact that Ms.
Hewson is the only representative of management on the Board;
and |
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Corporate
Governance
● |
The desirability of having consolidated leadership engagement
with government customers as well as the leadership of the U.S. Department of Defense and other agencies of the U.S. Government.
The independent directors plan to continue to review the leadership structure on an ongoing basis to ensure that it continues
to meet the Corporations needs. |
Board Performance
Self-Assessment |
The Board conducts a
self-assessment of its performance and effectiveness as well as that of the
committees on an annual basis. The purpose of the self-assessment is to track
progress in certain areas targeted for improvement from year to year and to
identify ways to enhance the Boards and committees effectiveness. For 2014,
each director completed a written questionnaire to provide feedback on the
effectiveness of the Board and committees. The Chairman of the Board also
conducted a private interview with each Board member designed to gather
additional suggestions to improve the Boards effectiveness and solicit
additional feedback on Board performance and operations. The collective ratings
and comments are compiled, summarized, and presented to the Governance Committee
and the full Board.
Board Succession
Planning |
Each year the Governance
Committee recommends to the Board the slate of directors to propose as nominees
for election by the stockholders at the Annual Meeting. The process for
identifying and evaluating candidates to be nominated to the Board starts with
an evaluation of a candidate by the Chairman of the Governance Committee
followed by the entire Governance Committee and the Chairman of the Board.
Director candidates also may be identified by stockholders and will be evaluated
and considered by the Governance Committee. The Governance Committee has
retained a third party firm to assist in the identification and evaluation of
potential director candidates.
The Board seeks a diverse
group of candidates who, at a minimum, possess the background, skills,
expertise, and time to make a significant contribution to the Board, the
Corporation, and its stockholders.
The Governance Guidelines list criteria against which candidates may be judged.
The Governance Committee considers, among other things:
● |
Input from the
Boards self-assessment process to prioritize areas of expertise that were
identified; |
● |
Investor feedback and
perceptions; |
● |
The candidates
skills and competencies to ensure they are aligned to the Corporations
future strategic challenges and opportunities;
and |
● |
The future needs of
the Board in light of anticipated director
retirements. |
Our Tenure Guidelines |
Mandatory Retirement |
Directors must retire at age 75. |
Change in Principal Employment |
Directors must offer to resign upon any substantial change in
principal employment. |
Overboarding Policy |
Directors may not serve on more than four other public
company boards (two if an active CEO). |
Failed Election |
Directors must offer to resign as
a result of a failed stockholder vote. |
In February of each year,
the Governance Committee reviews the membership, tenure, and leadership of each
of the committees and considers possible changes given the additional
qualifications and skill sets of newer members on the Board. The Governance
Committee also takes into consideration the membership requirements and
responsibilities set forth in each of the respective committee charters and
Governance Guidelines as well as any upcoming vacancies on the Board due to our
mandatory retirement age. The Governance Committee recommends to the Board any
proposed changes to committee assignments and leadership to be made effective at
the next annual meeting of stockholders. Subject to their election at the Annual
Meeting, committee leadership and memberships have been re-assigned effective
immediately following the 2015 Annual Meeting.
Stockholder proposals for
nominations to the Board should be submitted to the Nominating and Corporate
Governance Committee, c/o the Senior Vice President, General Counsel and
Corporate Secretary, at Lockheed Martin Corporation, 6801 Rockledge Drive,
Bethesda, MD 20817. To be considered by the Board for nomination at the 2016
Annual Meeting, written notice of nominations by a stockholder must be received
between the dates of October 15, 2015 and November 14, 2015,
inclusive.
The information
requirements for any stockholder proposal or nomination can be found in Section
1.10 of our Bylaws available on the Corporations website at http://www.lockheedmartin.com/corporate-governance.
2015 Proxy
Statement |
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Table of Contents
Corporate
Governance
The Board recognizes that
its members benefit from service on the boards of other companies and it
encourages such service. The Board also believes, however, that it is critical
that directors dedicate sufficient time to their service on the Corporations
Board. Therefore, the Governance Guidelines provide that, without obtaining the
approval of the Governance Committee:
● |
A director may not
serve on the boards of more than four other public
companies; |
● |
If the director is an
active chief executive officer or equivalent of another public company,
the director may not serve on the boards of more than two other public
companies; |
● |
No member of the
Audit Committee may serve on more than two other public company audit
committees; and |
● |
No member of the
Compensation Committee may serve on more than three other public company
compensation committees. This policy was added in 2013 in acknowledgement
of the increased workload of the Compensation
Committee. |
Directors must notify the
CEO, Lead Director, and Senior Vice President, General Counsel and Corporate
Secretary before accepting an invitation to serve on the board of any other
public company.
Director Orientation and
Continuing Education |
Upon joining the Board,
directors are provided with an orientation about the Corporation, including our
business operations, strategy, and governance. Directors may attend outside
director continuing education programs sponsored by educational and other
institutions to assist them in staying abreast of developments in corporate
governance and critical issues relating to the operation of public company boards. Members of our senior
management regularly review with the Board the operating plan of each of our
Business Segments and the Corporation as a whole. The Board also conducts
periodic visits to our facilities as part of its regularly scheduled Board
meetings.
Majority Voting Policy for
Uncontested Director Elections |
The Corporations Charter
and Bylaws provide for simple majority voting. Pursuant to the Governance
Guidelines, in any uncontested election of directors, any incumbent director who
receives more votes AGAINST than votes FOR is required to offer his or her
resignation for Board consideration.
Upon receipt of a
resignation of a director tendered as a result of a failed stockholder vote, the
Governance Committee will make a recommendation to the Board as to whether to
accept or reject the resignation, or whether other action is recommended. In
considering the tendered resignation, the Board will consider the Governance
Committees recommendation as well as any other factors it deems relevant, which
may include:
● |
The qualifications of
the director whose resignation has been
tendered; |
● |
The directors past
and expected future contributions to the
Corporation; |
● |
The overall
composition of the Board and its committees; |
● |
Whether accepting the
tendered resignation would cause the Corporation to fail to meet any
applicable rule or regulation (including NYSE listing standards and the
federal securities laws); and |
● |
The percentage of
outstanding shares represented by the votes cast at the Annual
Meeting. |
Any director whose
resignation has been tendered may not participate in the deliberations of the
Governance Committee or in the Boards consideration of the Governance
Committees recommendation with respect to such director. In the event that a
majority of the members of the Governance Committee have offered to resign as a
result of their failure to receive the required vote for election by the
stockholders, then the independent members of the Governance Committee who have
not offered to resign, without further action by the Board, will constitute a
committee of the Board for the purpose of considering the offered resignations,
and will recommend to the Board whether to accept or reject those offers and, if
appropriate, make a recommendation to take other actions. If there are no such
independent directors, then all of the independent directors, excluding the
director whose offer to resign is being considered, without further action of
the Board, will constitute a committee of the Board to consider each offer to
resign, make a recommendation to the Board to accept or reject that offer, and,
if appropriate, make a recommendation to take other actions.
The Board will act on a
tendered resignation within 90 days following certification of the stockholder
vote for the annual meeting and will promptly disclose its decision and
rationale as to whether to accept the resignation (or the reasons for rejecting
the resignation, if applicable) in a press release, in a filing with the
Securities and Exchange Commission (SEC), or by other public announcement,
including a posting on the Corporations website.
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Table of Contents
Corporate
Governance
If a directors resignation
is accepted by the Board, or if a nominee for director who is not an incumbent
director is not elected, the Board may fill the resulting vacancy or may
decrease the size of the Board pursuant to the Corporations Bylaws. The Board
may not fill any vacancy so created
with a director who was nominated but not elected at the annual meeting by the
vote required under the Corporations Bylaws.
Management Succession
Planning |
Management has established
semi-annual talent reviews that coincide with our business operating reviews, as
well as quarterly reviews within each of our operating businesses. During these
reviews, the executive leadership team discusses succession plans for key
positions and identifies top talent for development in future leadership
roles.
The Board also is actively
engaged in talent management. Annually, the Board evaluates our succession
strategy and leadership pipeline for key roles. High potential leaders are given
exposure and visibility to Board
members through formal presentations and informal events. More broadly, the
Board is regularly updated on key talent indicators for the overall workforce,
including diversity, recruiting, and development programs. Board members also
are active partners, engaging and spending time with our high potential leaders
throughout the year at Board meetings and other events.
Enterprise Risk
Management |
Enterprise Risk Management
is monitored by the Board, the Audit Committee and the SA Committee. Management
reviews enterprise risk through the Risk and Compliance Committee (RCC) and
the Integrated Risk Council.
The Audit Committee reviews
our policies and practices with respect to risk assessment and risk management,
including discussing with management the Corporations major financial risk
exposures and the steps that have been taken to monitor and control such
exposures. The Audit Committee reports the results of its review to the
Board.
Matters of risk management
are brought to the attention of the Audit Committee by the Executive Vice
President and CFO, who serves as the Corporations Chief Risk Officer, or by the
Vice President, Corporate Internal Audit, who regularly reviews and assesses
internal processes and controls for ongoing compliance with internal policies
and legal and regulatory requirements, as well as for potential deficiencies
that could result in a failure of an internal control process. The SA Committee
of the Board reviews and assesses mitigation plans in areas identified as the
most significant risks.
The RCC, comprised of
representatives of the direct reports to the President and CEO, is charged with
overseeing the Corporations Enterprise Risk Management program and with the
integration and dissemination of risk information to management and throughout
the Corporation. This Committee met eight times in 2014 and reports to the
Integrated Risk Council made up of the Executive Vice President and CFO; Senior
Vice President, General Counsel and Corporate Secretary; Senior Vice President,
Communications; Vice President, Ethics and Sustainability; and Vice President,
Corporate Internal Audit. At the request of the Audit Committee, the RCC has
undertaken to regularly survey our businesses to identify risks, analyze the
probability of occurrence and potential impact to our business of those risks,
and assess mitigation efforts.
We employ a number of
additional risk identification and mitigation strategies. A panel of executives
reviews all major proposals to ensure the technical and pricing structures are
consistent with our tolerance for risk. Corporate management conducts reviews of
ongoing business performance and financial results and future opportunities
through the long-range planning process, executive management meetings, and
staff meetings.
Stockholder Right to Call Special
Meeting |
As part of the Boards
continuous review of, and commitment to, best corporate governance practices and
as a result of dialogue with stockholders, in recent years the Corporation has
adopted a number of governance changes. The Board amended the Bylaws in 2010 to
reduce the percentage of shares that an individual stockholder or a group of
stockholders must own to cause the Corporate Secretary of the Corporation to
call a special meeting of stockholders. Any stockholder who individually owns 10
percent, or stockholders who in the
aggregate own 25 percent, of the outstanding common stock may demand the calling
of a special meeting to consider any business properly before the stockholders.
Our Bylaws do not restrict the timing of a request for a special meeting. The
only subject matter restriction is that we are not required to call a special
meeting to consider a matter that is substantially the same as voted on at a
special meeting within the preceding 12 months unless requested by a majority of
all stockholders.
2015 Proxy
Statement |
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Table of Contents
Corporate
Governance
The Board believes that our
current governance practice strikes an appropriate balance between permitting
stockholders to raise important matters at any time and ensuring that all
stockholders are afforded an opportunity for meaningful participation in a
deliberative and democratic process based on accurate and complete public disclosure. The 25 percent
threshold is consistent with many of the companies in our comparator group. The
Board added the 10 percent threshold in light of our institutional ownership
profile.
The Corporation does not
have a Stockholder Rights Plan, otherwise known as a Poison Pill. Through our
Governance Guidelines, the Board has communicated that it has no intention of
adopting one at this time. The Board has indicated that, if it were to adopt a
Stockholder Rights Plan, the Board would seek stockholder ratification within 12
months of the date of adoption.
Eleven of our current
directors are independent under applicable NYSE listing standards. Under the
NYSE listing standards and our Governance Guidelines, a director is not
independent if the director has a direct or indirect material relationship with
the Corporation. The Governance Committee annually reviews the independence of
all directors and reports its findings to the full Board. To assist in this
review, the Board has adopted director independence guidelines that are included
in our Governance Guidelines, which are available on our Corporations website
at http://www.lockheedmartin.com/corporate-governance.
Our director independence
guidelines set forth certain relationships between the Corporation and directors
and their immediate family members, or affiliated entities, that the Board, in
its judgment, has deemed to be material or immaterial for purposes of assessing
a directors independence. In the event a director has a relationship with the
Corporation that is not addressed in the independence guidelines, the
independent members of the Board determine whether the relationship is
material.
The Board has determined
that the following directors are independent: Daniel F. Akerson, Nolan D.
Archibald, Rosalind G. Brewer, David B. Burritt, James O. Ellis, Jr., Thomas J.
Falk, Gwendolyn S. King, James M. Loy, Douglas H. McCorkindale, Joseph W.
Ralston, and Anne Stevens. Marillyn A. Hewson is an employee of the Corporation
and is not independent under the NYSE listing standards or our Governance
Guidelines. In determining that each of the non-management directors is
independent, the Board considered the relationships described under Certain
Relationships and Related Person Transactions of Directors, Executive Officers,
and 5 Percent Stockholders, on page 15, which it determined were immaterial to
the individuals independence.
The Governance Committee
and Board considered that the Corporation in the ordinary course of business
purchases products and services from, or sells products and services to,
companies or subsidiaries or parents of companies at which some of our directors
(or their immediate family members) are or have been directors or officers and
to other institutions with which some of these individuals have or have had
relationships. These relationships included: Mr. Akerson (The Carlyle Group,
Northrop Grumman Corporation, and PricewaterhouseCoopers); Mr. Archibald
(Brunswick Corporation); Mrs. Brewer (Walmart Stores, Inc. which includes Sams
Club); Mr. Ellis (Level 3 Communications, Inc., Dominion Resources, Inc., Draper
Laboratory, The Georgia Institute of Technology, Inmarsat plc, and Stanford
University, Hoover Institution); Mr. Falk (Catalyst, Inc.); Mrs. King (ESPN);
Mr. Ralston (The Timken Company and URS Corporation); and Ms. Stevens (XL Group
plc). In determining that these relationships did not affect the independence of
those directors, the Board considered that none of the directors had any direct
or indirect material interest in, or received any special compensation in
connection with, the Corporations business relationships with those companies.
In addition to their consideration of these ordinary course of business
transactions, the Governance Committee and the Board relied upon the director
independence guidelines included in our Governance Guidelines to conclude that
contributions to a tax-exempt organization by the Corporation or its foundation
did not create any direct or indirect material interest for the purpose of
assessing director independence.
The Governance Committee
also concluded that all members of each of the Audit Committee, the Compensation
Committee, and the Governance Committee are independent within the meaning of
our Governance Guidelines and NYSE listing standards, including the additional
independence requirements applicable to members of the Audit Committee,
Compensation Committee, and Governance Committee.
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Corporate
Governance
Related Person Transaction
Policy |
The Board has approved a
written policy and procedures for the review, approval, and ratification of
transactions among the Corporation and its directors, executive officers, and
their related interests. A copy of the policy is available on the Corporations
website at http://www.lockheedmartin.com/corporate-governance. Under the policy, all related person
transactions (as defined in the policy) are to be reviewed by the Governance
Committee. The Governance Committee may approve or ratify related person
transactions at its discretion if deemed fair and reasonable to the Corporation.
This may include situations where the Corporation provides products or services
to related persons on an arms length basis on terms comparable to those
provided to unrelated third parties. Any director who participates in or is the
subject of an existing or potential related person transaction may not
participate in the decision-making process of the Governance Committee with
respect to that transaction.
Under the policy, and
consistent with applicable SEC regulations and NYSE listing standards, a related
person transaction is any transaction in which the Corporation was, is, or will
be a participant, where the amount involved exceeds $120,000, and in which a
related person had, has, or will have a direct or indirect material interest. A related person includes any
director and director-nominee, or executive officer of the company, any person
who is known to be the beneficial owner of more than five percent of any class
of the companys voting securities, or an immediate family member of any person
described above.
The policy requires each
director and executive officer to complete an annual questionnaire to identify
his or her related interests and persons, and to notify the Corporation of
changes in that information. Based on that information, the Corporation
maintains a master list of related persons for purposes of tracking and
reporting related person transactions.
Because it may not be
possible or practical to pre-approve all related person transactions, the policy
contemplates that the Governance Committee may ratify transactions after they
commence or pre-approve categories of transactions or relationships. If the
Governance Committee declines to approve or ratify a transaction, the related
person transaction is referred to management to make a recommendation to the
Governance Committee concerning whether the transaction should be terminated or
amended in a manner that is acceptable to the Governance Committee.
Certain Relationships and Related Person
Transactions of Directors, Executive Officers, and
5 Percent
Stockholders |
The following transactions
or relationships are considered to be related person transactions under our
corporate policy and applicable SEC regulations and NYSE listing
standards.
Two of our directors, Mr.
Loy and Mr. Ralston, are employed as Senior Counselor and Vice Chairman,
respectively, of The Cohen Group, a consulting business that performs services
for the Corporation. In 2014, we paid The Cohen Group $762,817 for consulting
services and related expenses. Neither Mr. Loy nor Mr. Ralstons compensation
earned at The Cohen Group is impacted by the consulting services delivered to
the Corporation. The Board annually assesses and reviews the Corporations
relationship with The Cohen Group and has determined that the breadth of
military experience coupled with their top security clearances bring a unique
value to the Board, particularly with the oversight of our classified programs.
Neither Mr. Loy nor Mr. Ralston serves on our Audit, Compensation, or Governance
Committees.
We currently employ
approximately 112,000 employees and have an active recruitment program for
soliciting job applications from qualified candidates. We seek to hire the most
qualified candidates and consequently do not preclude the employment of family
members of current directors and executive officers. A related person
transaction (and compensation) involved a Board members (Joseph Ralston) brother-in-law, Mark E.
Dougherty, who is employed as a Capture Management Principal. Mr. Doughertys
2014 base salary was $169,250, and he received an employee incentive plan award
of $16,900. His base salary was increased to $174,253 for 2015. Mr. Dougherty
may participate in other employee benefit plans and arrangements that generally
are made available to other employees at the same level (including health,
welfare, vacation, and retirement plans). His compensation was established in
accordance with the Corporations employment and compensation practices
applicable to employees with equivalent qualifications, experience, and
responsibilities. Mr. Dougherty did not serve as an executive officer of the
Corporation during 2014.
From time to time, the
Corporation has purchased services in the ordinary course of business from
financial institutions that beneficially own five percent or more of Lockheed
Martins common stock. In 2014, the Corporation paid $4,798,501 to State Street
Bank and Trust Company, an affiliate of State Street Corporation, for credit
facility and benefit plan administration fees; $582,497 to BlackRock, Inc. and
its affiliates for investment
management of fixed-income assets held in the Corporations master savings trust; and
$6,964,647 to Capital Guardian, an affiliate of Capital World Investors, for
investment management fees.
2015 Proxy
Statement |
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Table of Contents
ETHICS AND SUSTAINABILITY
The Ethics and
Sustainability Committee (the ES Committee) of the Board of Directors oversees
efforts in corporate responsibility, human rights, environmental stewardship,
political contributions, employee health and safety, ethical business practices,
community outreach, philanthropy, diversity and inclusion and equal opportunity,
as well as the Corporations record of compliance with related laws and
regulations.
|
Independent
Reporting |
|
Ethics and
Sustainability Committee |
The Vice
President, Ethics
and Sustainability, has a dual reporting relationship, both to the
Chairman, President and CEO and also independently to the Board of
Directors. |
4
Independent Directors comprise this Board
committee, which provides oversight for the Ethics and Sustainability
programs, approves the Code of Conduct and reviews trends, risk areas and
new initiatives. |
|
Executive
Leadership Team |
|
Business Segment
Steering Committees |
The Chairman, President and
CEO, with her executive leadership team, review
the operations of the Ethics and Sustainability programs at least twice
annually. |
The Executive Vice
President of
each Business Segment, as well as of
Lockheed Martin International, chairs a steering committee that regularly
reviews the ethics program within that Business
Segment. |
Ethical business practice
is the foundation of Lockheed Martins operations. Our values Do Whats Right,
Respect Others, and Perform with Excellence underpin our business decisions
and our interactions with all stakeholders. In 2014, we introduced a digital,
interactive, mobile Code of Conduct, which was the first electronic version
among our industry peers. All of our employees and directors received the
redesigned, updated code during 2014.
Lockheed Martins Code of
Conduct has been in place since the Corporation was formed in 1995. The Code of
Conduct (which is available on the Corporations website at http://www.lockheedmartin.com/us/who-we-are/ethics/code.html) applies to all Board members, officers, and
employees and provides our policies
and expectations on a number of topics, including our commitment to good
citizenship, promoting a positive and safe work environment, providing
transparency in our public disclosures, zero tolerance for corruption, avoiding
conflicts of interest, honoring the confidentiality of sensitive information,
preservation and use of company assets, compliance with all laws, preventing
retaliation, and operating with integrity in all that we do. To implement this
Code of Conduct, Board members, officers, and employees participate annually in
ethics training. There were no waivers from any provisions of our Code of
Conduct or amendments applicable to any Board member or executive officer in
2014.
Our sustainability mission
is to foster innovation, integrity and security to protect the environment,
strengthen communities, and propel responsible growth. In 2014, we published our
third annual sustainability report, which discloses performance indicators on
our environmental, social, and governance responsibilities, and conforms to the
Global Reporting Initiative (GRI) G4 Core Guidelines. A copy of the report is
available at http://www.lockheedmartin.com/sustainability. Lockheed Martin is prioritizing six high impact
sustainability issues, based on a multi-step process to determine what affects our ability to generate
long-term stockholder value through environmental, governance, social, and
economic progress. We implemented and reported on our 2014 Sustainability
Management Plan progress, which includes 41 measures to gauge performance
through 2015 on objectives across the six high impact sustainability issues.
This set of issues is intended to help us to identify better business
opportunities, strengthen enterprise risk management mechanisms, enhance our
reputation and stakeholder confidence, drive energy and resource
16 www.lockheedmartin.com/investor
Table of Contents
Ethics and
Sustainability
efficiency, and maximize
our investments of financial, human, and natural capital. We report on our
performance twice a year to our executive leadership team.
In 2014, Lockheed Martin
accomplished the following:
● |
Sustainability Management
Plan. Reported our full
year progress on our Sustainability Management Plan, which we use to
manage, measure, and disclose performance against the six high impact
sustainability issues listed above. |
● |
Innovative Leadership in
Ethics. Introduced remote and small
site customer learning materials and combined anti-retaliation program
monitoring, training and education to prevent and detect retaliation,
thereby encouraging reporting of ethical concerns or
violations. |
Supplier and Community
Engagement |
In 2014, Lockheed Martin
partnered with suppliers, the community, and non-governmental organizations to
strengthen our communities and propel responsible growth including:
● |
Achieved
approximately $4.9 billion in total spending with nearly 10,600 small
businesses, including businesses owned by women, veterans and
service-disabled veterans, small, disadvantaged businesses, and businesses
located in historically under-utilized business zones. Small businesses
represent approximately 65 percent of our entire supplier
base. |
● |
Provided training to
15 current, past or potential protégé small businesses under various
government agency Mentor-Protégé programs. |
● |
Hired approximately
2,350 military veterans, representing approximately 34 percent of all
external hires. |
● |
Encouraged participation in the
Electronic Industry Citizenship Coalition and the Global eSustainability
Initiative (EICC-GeSI) Conflict Free Sourcing Initiative. |
● |
Issued a letter and training
package to approximately 13,600 impacted suppliers regarding counterfeit
parts. |
● |
Contributed more than $24.5 million
to nearly a thousand organizations, with a strategic focus on advancing
science, technology, engineering, and math (STEM) education and supporting
military and veteran causes. Separately, our employees donated more than
$19.3 million and reported volunteering more than one million hours to
worthy causes. Over the last decade, employees have reported volunteering
more than 11.5 million hours of their own time in service to their
communities. |
2015 Proxy
Statement |
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Table of Contents
COMMITTEES OF THE BOARD
OF DIRECTORS
The Board has seven
standing committees. The following table lists our Board committees, the chairs
of each committee, the directors who served in 2014 on them, and the number of
committee meetings held in 2014. Charters for each committee are available on
the Corporations website at http://www.lockheedmartin.com/corporate-governance.
2014 Membership on Board
Committees
Director |
|
Age |
|
Director Since |
|
Independent |
|
Audit |
|
Classified Business and Security |
|
Ethics and Sustainability |
|
Executive |
|
Management Development and Compensation |
|
Nominating and Corporate Governance |
|
Strategic Affairs |
Daniel F. Akerson |
|
66 |
|
2014 |
|
Yes |
|
X |
|
|
|
|
|
|
|
X |
|
|
|
|
Nolan D. Archibald |
|
71 |
|
2002 |
|
Yes |
|
|
|
|
|
|
|
X |
|
|
|
X |
|
Chair |
Rosalind G. Brewer |
|
52 |
|
2011 |
|
Yes |
|
|
|
|
|
X |
|
|
|
X |
|
|
|
|
David B. Burritt |
|
59 |
|
2008 |
|
Yes |
|
Chair |
|
|
|
|
|
X |
|
X |
|
|
|
X |
James O. Ellis, Jr. |
|
67 |
|
2004 |
|
Yes |
|
|
|
Chair |
|
|
|
X |
|
|
|
X |
|
X |
Thomas J. Falk |
|
56 |
|
2010 |
|
Yes |
|
X |
|
|
|
|
|
|
|
|
|
X |
|
|
Marillyn A. Hewson |
|
61 |
|
2012 |
|
No |
|
|
|
|
|
|
|
Chair |
|
|
|
|
|
|
Gwendolyn S. King |
|
74 |
|
1995 |
|
Yes |
|
|
|
|
|
Chair |
|
X |
|
|
|
X |
|
|
James M. Loy |
|
72 |
|
2005 |
|
Yes |
|
|
|
X |
|
X |
|
|
|
|
|
|
|
X |
Douglas H. McCorkindale* |
|
75 |
|
2001 |
|
Yes |
|
X |
|
X |
|
|
|
X |
|
X |
|
Chair |
|
|
Joseph W. Ralston |
|
71 |
|
2003 |
|
Yes |
|
|
|
X |
|
X |
|
|
|
|
|
|
|
X |
Anne
Stevens |
|
66 |
|
2002 |
|
Yes |
|
X |
|
|
|
|
|
X |
|
Chair |
|
|
|
|
Meetings held in 2014 |
|
|
|
|
|
|
|
7 |
|
2 |
|
3 |
|
0 |
|
4 |
|
4 |
|
5 |
* Lead Director until 2015 Annual
Meeting.
The Audit Committee is
responsible for assisting the Board in fulfilling its oversight responsibilities
relating to the financial condition of the Corporation, the integrity of the
Corporations financial statements, and the Corporations compliance with legal
and regulatory requirements. In addition, the Audit Committee has oversight of
the Corporations internal audit organization including enterprise risk
management processes. It is directly responsible for the qualifications,
independence and performance of the Corporations independent auditors. The
Audit Committee also is responsible for reviewing the allocation of resources,
the Corporations financial condition and capital structure, and policies
regarding derivatives and capital expenditures. The functions of the Audit
Committee are further described under the heading Audit Committee Report on
page 20.
All the members of the
Audit Committee are independent within the meaning of the NYSE listing
standards, applicable SEC regulations, and our Governance Guidelines. In order
to be considered independent under
applicable SEC regulations, a member of the Audit Committee cannot accept any
consulting, advisory, or other compensatory fee from the Corporation, or be an
affiliated person of the Corporation or its subsidiaries.
The Board has determined
that Mr. Burritt, Chairman of the Audit Committee, Mr. Akerson, Mr. Falk, and
Mr. McCorkindale are qualified audit committee financial experts within the
meaning of applicable SEC regulations. All members of the Audit Committee have
accounting and related financial management expertise sufficient to be
considered financially literate within the meaning of the NYSE listing
standards.
Subject to his re-election
and following the Annual Meeting, Mr. Falk will be Chairman of the Audit
Committee.
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Table of Contents
Committees of the Board of
Directors
Classified Business and Security
Committee |
The Classified Business and
Security Committee (the CBS Committee) assists the Board in fulfilling its
oversight responsibilities relating to the Corporations classified business
activities and the security of personnel, data, and facilities. The CBS
Committee consists of three or more directors who meet the independence
requirements of the NYSE listing standards and who possess the appropriate
security clearance credentials, at least one of whom must be a member of the
Audit Committee, and none of whom are
officers or employees of the Corporation and are free from any relationship
that, in the opinion of the Board, would interfere with the exercise of
independent judgment as a member of the CBS Committee. All members hold
high-level security clearances.
Subject to his re-election
and following the Annual Meeting, Mr. Ralston will be Chairman of the CBS
Committee.
Ethics and Sustainability
Committee |
The purpose of the ES
Committee is to assist the Board in fulfilling its oversight responsibilities
relating to the Corporations ethical conduct, sustainability, environmental
stewardship, and employee health and safety. The ES Committee monitors
compliance and recommends changes to our Code of Conduct. It reviews our
policies, procedures, and compliance with respect to sustainability, including
corporate responsibility, human rights, environmental stewardship, employee
health and safety, ethical business practices, community outreach, philanthropy, diversity, inclusion, and
equal opportunity. It oversees matters pertaining to community and public
relations, including government relations, political contributions and
expenditures, and charitable contributions.
Subject to his re-election
and following the Annual Meeting, Mr. Loy will be Chairman of the ES
Committee.
The Executive Committee
serves primarily as a means for taking action requiring Board approval between
regularly scheduled meetings of the Board. The Executive Committee is authorized
to act for the full Board on all matters other than those specifically reserved
by Maryland law to the full Board. The Chairman of the Board chairs the
Executive Committee.
Management Development and Compensation
Committee |
The Compensation Committee
reviews and approves the corporate goals and objectives relevant to the
compensation of the CEO, evaluates the performance of the CEO, and, either as a
committee or together with the other independent members of the Board,
determines and approves the compensation philosophy and levels for the CEO and
other members of senior management.
Additional information
regarding the role of the Compensation Committee and our compensation practices
and procedures is provided under the captions Compensation Committee Report
on page 29, Compensation Discussion
and Analysis (CD&A) beginning on page 30, and Other Corporate Governance
Considerations in Compensation on page 48.
All members of the
Compensation Committee are independent within the meaning of the NYSE listing
standards, applicable SEC regulations, and our Governance Guidelines.
Subject to his re-election
and following the Annual Meeting, Mr. Akerson will be Chairman of the
Compensation Committee.
Nominating and Corporate Governance
Committee |
The Governance Committee is
responsible for developing and implementing policies and practices relating to
corporate governance, including our Governance Guidelines. The Governance
Committee assists the Board by selecting candidates to be nominated to the
Board, making recommendations concerning the composition of Board committees,
and by overseeing the evaluation of the Board and its committees.
The Governance Committee
reviews and recommends to the Board the compensation of directors. Our executive
officers generally do not play a role in determining director pay other than to
gather publicly available information.
2015 Proxy
Statement |
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Table of Contents
Committees of the Board
of Directors
All members of the
Governance Committee are independent within the meaning of the NYSE listing
standards, applicable SEC regulations, and our Governance Guidelines.
Subject to his re-election
and following the Annual Meeting, Mr. Archibald will be Chairman of the
Governance Committee.
Strategic Affairs
Committee |
The SA Committee reviews
and recommends to the Board managements long-term strategy for the Corporation
and reviews risks and opportunities to the strategy as identified by the
Corporations Enterprise Risk Management processes. The SA Committee reviews and
recommends to the Board certain significant strategic decisions regarding exit
from existing lines of business and
entry into new lines of business, acquisitions, joint ventures, investments or
dispositions of businesses and assets, and the financing of related
transactions.
Subject to his re-election
and following the Annual Meeting, Mr. Ellis will be Chairman of the SA
Committee.
Audit Committee
Report
We oversee Lockheed
Martins financial reporting process on behalf of the Board. Lockheed Martins
management is responsible for the financial reporting process and preparation of
the quarterly and annual consolidated financial statements, including
maintaining an effective system of internal control over financial reporting. In
addition to our oversight of the Corporations internal audit organization, we
are directly responsible for the appointment, compensation, retention,
oversight, and termination of the Corporations independent auditors, Ernst
& Young LLP, an independent registered public accounting firm. The
independent auditors are responsible for auditing the annual consolidated
financial statements and expressing an opinion on the conformity of those
financial statements with U.S. generally accepted accounting principles, and for
expressing an opinion on the effectiveness of internal control over financial
reporting.
In connection with the
December 31, 2014 audited consolidated financial statements, we have:
● |
Reviewed and
discussed the Corporations audited consolidated financial statements with
management, including discussions regarding critical accounting policies,
financial accounting and reporting principles and practices, the quality
of such principles and practices, the reasonableness of significant
judgments and estimates, and the effectiveness of internal control over
financial reporting. |
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● |
Discussed with the
independent auditors the quality of the financial statements, the clarity
of the related disclosures, the effectiveness of internal control over
financial reporting, and other items required to be discussed under Public
Company Accounting Oversight Board (PCAOB) Auditing Standard No. 16,
Communications with Audit Committees. |
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● |
Received from the
independent auditors written disclosures regarding the auditors
independence required by PCAOB Ethics and Independence Rule 3526,
Communication with Audit Committees Concerning Independence, and discussed
with the independent auditors any matters affecting their independence.
|
Based on the reviews and
discussions above, we recommended to the Board that the audited consolidated
financial statements for 2014 be included in Lockheed Martins Annual Report on
Form 10-K for the year ended December 31, 2014 for filing with the SEC. The
Board approved our recommendation.
Submitted on February 9,
2015 by the Audit Committee:
David B. Burritt, Chairman |
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Douglas H. McCorkindale |
Daniel F. Akerson |
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Anne
Stevens |
Thomas J. Falk |
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20 www.lockheedmartin.com/investor
Table of Contents
PROPOSAL 1: ELECTION OF
DIRECTORS
There are 11
director-nominees for election to the Board at the Annual Meeting. Each
director-nominee currently serves as a director. Each director-nominee was
recommended for nomination by the Governance Committee. The Governance Committee
has determined that all the director-nominees, except for Marillyn A. Hewson,
Chairman, President and CEO, are independent under the listing standards of the
NYSE and our Governance Guidelines. The Board ratified the slate of
director-nominees and recommends that our stockholders vote for the election of
all the individuals nominated by the Board.
The Board has fixed the
number of directors to 11 at the present time. The Governance Committee and the
Board will continue to review and assess additional candidates for the Board;
any candidates identified after the 2015 Annual Meeting will be considered by
the Board as candidates to serve until the 2016 Annual Meeting.
The director-nominees are
expected to attend the 2015 Annual Meeting. All director-nominees who are
elected will serve a one-year term that will end at the 2016 Annual Meeting. If
any of the director-nominees are unable or unwilling to stand for election at
the 2015 Annual Meeting (an event which is not anticipated), the Board may
reduce its size or designate a substitute. If a substitute is designated, proxy
holders may vote for the substitute nominee or refrain from voting for any other
director-nominee at their discretion. Directors ages are reported as of the
2015 Annual Meeting.
In 2014, the Board met a
total of nine times. All directors attended more than 75 percent of the total
Board and committee meetings to which they were assigned. All incumbent
directors attended the 2014 Annual Meeting, except for Ms. Stevens (who was out
of the country).
Board Composition, Qualifications, and
Diversity |
We have no agreements
obligating the Corporation to nominate a particular candidate as a director, and
none of our directors represents a special interest or a particular stockholder
or group of stockholders.
We believe that our
business accomplishments are a result of the efforts of our employees around the
world, and that a diverse employee population will result in a better
understanding of our customers needs. Our success with a diverse workforce also
informs our views about the value of a board of directors that has persons of
diverse skills, experiences, and backgrounds. To this end, the Board seeks to
identify candidates with areas of knowledge or experience that will expand or
complement the Boards existing expertise in overseeing a technologically
advanced global security and aerospace company.
Consistent with the
Governance Guidelines, the Board desires a diverse group of candidates who
possess the background, skills, expertise, and time to make a significant
contribution to the Board, the Corporation, and its stockholders. The Governance
Committee makes recommendations to the Board concerning the composition of the
Board and its committees, including size and qualifications for membership. The
Governance Committee evaluates prospective nominees against the standards and
qualifications set forth in the Corporations Governance Guidelines, as well as
other relevant factors it deems appropriate.
Listed below are the skills
and experience that we have considered important for our directors to have in
light of our current business and structure. The directors biographies that
follow note each directors relevant experience, skills, and qualifications
relative to this list.
● |
Financial Expertise. Knowledge of financial markets, financing and
funding operations, and accounting and financial reporting processes are
important because it assists our directors in understanding, advising, and
overseeing the Corporations capital structure, financing and investment
activities, financial reporting, and internal control of such
activities. |
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Public Company Board Experience. Directors who have served on other
public company boards can offer advice and insights with regard to the
dynamics and operation of a board of directors, the relationship between a
board and the CEO and other management personnel, the importance of
particular agenda items, and oversight of a changing mix of strategic,
operational, and compliance matters. |
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● |
Government and Military Expertise. Directors who have served in
government or in senior military positions provide experience and insight
into working constructively with our core customers and governments around
the world and addressing significant public policy issues, particularly in
areas related to the Corporations business and operations. Directors with
military, homeland security, or intelligence experience and security
clearance credentials have unique skills to serve on our CBS
Committee. |
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● |
Global Expertise. Because we are a global organization with
increasing revenue coming from sales outside the United States, directors
with global expertise can provide useful business and cultural
perspectives regarding many significant aspects of our
business. |
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● |
Senior Leadership Experience. Directors who have served in senior
leadership positions bring experience and perspective in analyzing,
shaping, and overseeing the execution of important operational and policy
issues at a senior level. These directors insights and guidance, and
their ability to assess and respond to situations encountered in serving
on our Board, may be enhanced if their leadership experience was developed
at businesses or organizations that operated on a global scale or involved
technology or other rapidly evolving business models.
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2015 Proxy
Statement |
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Table of Contents
Proposal 1: Election of
Directors
● |
Interpersonal Skills and Diversity. Directors with different
backgrounds and skills help build diversity on the Board and maximize
group dynamics in terms of function, thought, gender, race and
age. |
Under our Bylaws, unless
exempted by the Board, an individual is not eligible to stand for election at an
Annual Meeting following the individuals 75th birthday.
The Board
unanimously recommends a vote FOR each of the following
director-nominees.
Daniel F. Akerson |
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Age:
66 Director
since:
2014 Independent
Committees:
●Audit
●Management
Development and Compensation |
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Skills and
Qualifications
●Core leadership
skills and experience with the demands and challenges of the global
marketplace.
●Extensive
operating, financial and senior management experience in a succession of
major companies in challenging, highly competitive
industries.
●Financial,
investment, and mergers and acquisitions expertise.
●The Board has
determined that Mr. Akerson meets the SECs criteria of an audit
committee financial expert. |
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Vice Chairman and Special
Advisor to the Board of The Carlyle Group since March 2014. Previously, Mr.
Akerson was Chairman of the Board of Directors and Chief Executive Officer of
General Motors Company from January 2011 until his retirement in January 2014.
Mr. Akerson was elected to the Board of Directors of General Motors Company in
2009 and was Chief Executive Officer from September 2010 to December 2010. Prior
to joining General Motors Company, he was a Managing Director of The Carlyle
Group, serving as the Head of Global Buyout from July 2009 to August 2010 and as
Co-Head of U.S. Buyout from June 2003 to June 2009. Mr. Akerson formerly served
as a director of American Express Company from April 1995 to April 2012 and
currently serves as a director of the United States Naval Academy
Foundation.
Nolan D. Archibald |
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Age:
71 Director
since:
2002 Independent
Committees:
●Strategic
Affairs
●Executive
●Nominating and
Corporate Governance |
|
Skills and
Qualifications
●Experience with
the demands and challenges of the global marketplace with a focus on
innovation from his prior positions as Executive Chairman of Stanley Black
& Decker, Inc. and Chairman, President, Chief Executive Officer and
Chief Operating Officer of The Black & Decker Corporation, companies
that sold products in more than 100 countries.
●Experience in
talent management, business management, strategic planning, and
international business operations.
●Corporate
governance expertise from service as director of large public
companies. |
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Executive Chairman of the
Board of Stanley Black & Decker, Inc. from March 2010 until his retirement
in April 2013. Previously, Mr. Archibald was Chairman of the Board and Chief
Executive Officer of The Black & Decker Corporation from 1986 to March 2010;
President of The Black & Decker Corporation from 1985 to 2010; and Chief
Operating Officer of The Black & Decker Corporation from 1985 to 1986. Mr.
Archibald currently serves as a director of Brunswick Corporation and Huntsman
Corporation.
22 www.lockheedmartin.com/investor
Table of Contents
Proposal 1: Election of
Directors
Rosalind G. Brewer |
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Age:
52 Director
since:
2011 Independent
Committees:
●Ethics and
Sustainability
●Management
Development and Compensation |
|
Skills and
Qualifications
●Experience in
large-scale operations based on her positions as President and Chief
Executive Officer of Sams Club, Executive Vice President for Walmart
Stores, Inc., and more than two decades of experience as an executive with
Kimberly-Clark Corporation.
●Experience in
product development, product management, manufacturing, large-scale
operations, supply chain logistics, and leading change management
initiatives.
●Leadership and
executive expertise in international consumer business
operations. |
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President and Chief
Executive Officer of Sams Club, a division of Walmart Stores, Inc., since
February 2012. Previously, Mrs. Brewer was Executive Vice President and
President of Walmart Stores, Inc.s East Business Unit from February 2011 to
January 2012; Executive Vice President and President of Walmart South from
February 2010 to February 2011; Senior Vice President and Division President of
Southeast Operating Division from March 2007 to January 2010; and Regional
General Manager, Georgia Operations, from 2006 to February 2007. Previously,
Mrs. Brewer was President of Global Nonwovens Division for Kimberly-Clark
Corporation from 2004 to 2006 and held various management positions of
increasing responsibility at Kimberly-Clark Corporation from 1984 to 2006. Mrs.
Brewer formerly served as a director of Molson Coors Brewing Company from 2006
to 2011 and currently serves on the Board of Trustees of Spelman
College.
David B. Burritt |
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Age:
59 Director
since:
2008 Independent
Committees:
●Audit
●Executive
●Management
Development and Compensation
●Strategic
Affairs |
|
Skills and
Qualifications
●Expertise in
public company accounting, risk management, disclosure, financial system
management, and business transformation from roles as CFO at United States
Steel Corporation and CFO and Controller at Caterpillar Inc.
●Over 35 years
experience with the demands and challenges of the global marketplace from
his positions at United States Steel Corporation and Caterpillar Inc., a
company that manufactures equipment in 20 countries and sells products in
more than 180 countries.
●The Board has
determined that Mr. Burritt meets the SECs criteria of an audit
committee financial expert. |
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Executive Vice President
and Chief Financial Officer of United States Steel Corporation since September
2013. Previously, Mr. Burritt was Vice President and Chief Financial Officer of
Caterpillar Inc. from 2004 to June 2010; Corporate Controller and Chief
Accounting Officer of Caterpillar Inc. from 2002 to 2004; held various positions
of increasing responsibility at Caterpillar Inc. in finance, tax, accounting,
and international operations from 1978 to 2002. Mr. Burritt formerly served as a
director of Aperam from December 2010 to May 2013 and Global Brass & Copper
Holdings, Inc. from 2011 until June 2014.
2015 Proxy
Statement |
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23 |
Table of Contents
Proposal 1: Election of
Directors
James O. Ellis, Jr. |
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Age:
67 Director
since:
2004 Independent
Committees:
●Classified
Business and Security
●Executive
●Nominating and
Corporate Governance
●Strategic
Affairs |
|
Skills and
Qualifications
●Industry-specific expertise and knowledge of our core customers
from his service in senior leadership positions with the
military.
●Expertise in
aeronautical and aerospace engineering and emerging energy
issues.
●Over 40 years
experience in managing and leading large and complex technology-focused
organizations, in large part as a result of serving for 35 years as an
active duty member of the United States Navy. |
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President and Chief
Executive Officer of Institute of Nuclear Power Operations from May 2005 until
his retirement in May 2012. Mr. Ellis retired from active duty in July 2004
after serving as Admiral and Commander, United States Strategic Command, Offutt
Air Force Base, Nebraska from October 2002 to July 2004; Commander in Chief,
United States Strategic Command from November 2001 to September 2002; Commander
in Chief, United States Naval Forces, Europe and Commander in Chief, Allied
Forces from October 1998 to September 2000; Deputy Chief of Naval Operations
(Plans, Policy and Operations) from November 1996 to September 1998. He formerly
served as a director of Inmarsat plc. from June 2005 to March 2014 and currently
serves as a director of Level 3 Communications, Inc., Dominion Resources, Inc.,
and Draper Laboratory. In February 2013, Mr. Ellis was elected to the National
Academy of Engineering. He currently serves as an Annenberg Distinguished
Visiting Fellow of the Hoover Institution at Stanford University.
Thomas J. Falk |
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Age:
56 Director
since:
2010 Independent
Committees:
●Audit
●Nominating and
Corporate Governance |
|
Skills and
Qualifications
●Experience with
the demands and challenges associated with managing global organizations
from his experience as Chairman and Chief Executive Officer of
Kimberly-Clark Corporation.
●Knowledge of
financial system management, public company accounting, disclosure
requirements, and financial markets.
●Marketing,
talent management, compensation, governance, and public company board
experience.
●The Board has
determined that Mr. Falk meets the SECs criteria of an audit committee
financial expert. |
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Chairman of the Board and
Chief Executive Officer of Kimberly-Clark Corporation since 2003; Chief
Executive Officer from 2002 and President and Chief Operating Officer from 1999
to 2002; held various senior management positions since joining Kimberly-Clark
Corporation in 1983. Mr. Falk currently serves as a director of the nonprofit
organizations, Catalyst, Inc., the University of Wisconsin Foundation, and The
Consumer Goods Forum, and serves as a governor of the Boys & Girls Clubs of
America.
24 www.lockheedmartin.com/investor
Table of Contents
Proposal 1: Election of
Directors
Marillyn A. Hewson |
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Age:
61 Director
since:
2012 Non-Independent
Committees:
●Executive |
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Skills and
Qualifications
●Broad insight
and knowledge into the complexities of global business management,
strategic planning, finance, supply chain, and leveraged services based on
more than two decades of experience in executive and operational roles
with the Corporation and in our industry.
●Expertise in
government relations, government contracting, manufacturing, marketing,
and human resources.
●Corporate
governance and audit expertise derived from service on boards of other
multinational corporations and nonprofit organizations. |
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Chairman, President and
Chief Executive Officer of Lockheed Martin since January 2014. Having served 32
years at Lockheed Martin in roles of increasing responsibility, she held the
positions of Chief Executive Officer and President from January 2013 to December
2013; President and Chief Operating Officer from November 2012 to December 2012;
Executive Vice President Electronic Systems from January 2010 to November
2012; President, Systems Integration Owego from September 2008 to December
2009; and Executive Vice President Global Sustainment for Aeronautics from
February 2007 to August 2008. She previously served as Chairman of the Board of
Directors of Sandia Corporation from 2010 to July 2013. Ms. Hewson currently
serves on the Board of Directors of E. I. du Pont de Nemours and Company
(DuPont); the University of Alabamas Culverhouse College of Commerce and
Business Administration Board of Visitors; the Board of Governors of the USO;
the Board of Governors of the Aerospace Industries Association; the Board of
Directors of the Congressional Medal of Honor Foundation; the Board of the
National Geographic Education Foundation; the Board of Directors of Catalyst,
Inc.; and the International Advisory Board of the Atlantic Council. In September
2013, Ms. Hewson was appointed by President Barack Obama to the Presidents
Export Council, the principal national advisory committee on international
trade.
Gwendolyn S. King |
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Age:
74 Director
since:
1995 Independent
Committees:
●Ethics and
Sustainability
●Executive
●Nominating and
Corporate Governance |
|
Skills and
Qualifications
●Experience and
industry-specific knowledge of our civil customers and the demands and
challenges associated with managing large organizations and regulated
industries from experience as Senior Vice President at PECO Energy Company
and Commissioner of the Social Security Administration.
●Expert in
external communications and extensive experience in matters relating to
public policy, regulatory oversight, and government relations from her
senior advisory roles in two previous White House
administrations.
●Corporate
governance expertise and compliance experience from her service on the
board of the National Association of Corporate
Directors. |
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President of Podium Prose,
a Washington, D.C. speakers bureau and speechwriting service, since 2000.
Founding Partner, The Directors Council, a corporate board search firm, from
October 2003 to June 2005; Senior Vice President of Corporate and Public Affairs
of PECO Energy Company (formerly Philadelphia Electric Company) from October
1992 until her retirement in February 1998; and Commissioner of the Social
Security Administration from August 1989 to September 1992. Mrs. King formerly
served as a director of Marsh & McLennan Companies, Inc. from 1998 to May
2011 and currently serves as a director of Monsanto Company.
2015 Proxy
Statement |
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25 |
Table of Contents
Proposal 1: Election of
Directors
James M. Loy |
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Age:
72 Director
since:
2005 Independent
Committees:
●Classified
Business and Security
●Ethics and
Sustainability
●Strategic
Affairs |
|
Skills and
Qualifications
●Experience with
the demands and challenges associated with managing large organizations
from his service as Commandant of the Coast Guard.
●Industry-specific expertise and knowledge with our core customers
including requirements for acquisition of products and services from prior
senior management positions with the Department of Homeland Security, the
Transportation Security Administration, and the Coast Guard.
●Leadership
skills in organization transformation and redesigning larger scale
operations from his 45-year career in public service. |
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Senior Counselor of The
Cohen Group since 2005. Deputy Secretary of Homeland Security from 2003 to 2005;
Administrator, Transportation Security Administration from 2002 to 2003;
Commandant, U.S. Coast Guard from 1998 to 2002; Coast Guard Chief of Staff from
1996 to 1998; Commander of the Coast Guards Atlantic Area from 1994 to 1996.
Mr. Loy formerly served as a director of L-1 Identity Solutions, Inc. from 2006
to 2011, Board of Trustees of RAND Corporation, a nonprofit organization, from
2012 until November 2014 and currently serves as a director of Rivada Networks,
LLC.
Joseph W. Ralston |
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Age:
71 Director
since:
2003 Independent
Committees:
●Classified
Business and Security
●Ethics and
Sustainability
●Strategic
Affairs |
|
Skills and
Qualifications
●Industry-specific expertise and insight into our core customers,
including requirements for acquisition of products and services, from
prior senior leadership positions with the military.
●Experience with
large organization management and assessing human resources, equipment,
cyber, and financial requirements, as well as reputational risks during
his service as a senior military officer, including Vice Chairman of the
Joint Chiefs of Staff.
●Skilled in
executive management, logistics, and military procurement due to his
distinguished career managing 65,000 troops from 23 countries as Supreme
Allied Commander. |
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Vice Chairman of The Cohen
Group since March 2003. Retired from active duty in March 2003. Commander, U.S.
European Command and Supreme Allied Commander Europe, NATO, Mons, Belgium from
May 2000 to January 2003; Vice Chairman, Joint Chiefs of Staff, Washington, D.C.
from March 1996 to April 2000. Mr. Ralston formerly served as a director of URS
Corporation from 2003 to October 2014 and currently serves as a director of The
Timken Company.
Anne Stevens |
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Age:
66 Director
since:
2002 Independent
Committees:
●Management
Development and Compensation
●Audit
●Executive |
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Skills and
Qualifications
●Experience with
the demands and challenges associated with managing global organizations
from prior executive positions at Ford Motor Company.
●Public company
management, talent management, and governance experience from prior
positions as Chairman, President, and CEO of Carpenter Technology
Corporation and Executive Vice President, Ford Motor Company.
●Engineering and
manufacturing expertise derived from educational training and experience
managing production lines at Ford Motor Company. |
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Chairman and Principal of
SA IT Services from June 2011 until her retirement in December 2014. Previously,
Ms. Stevens was Chairman, President and Chief Executive Officer of Carpenter
Technology Corporation from November 2006 to October 2009; Executive Vice
President, Ford Motor Company and Chief Operating Officer, The Americas, from
November 2005 to October 2006; Group Vice President, Canada, Mexico and South
America, Ford Motor Company from October 2003 to October 2005; Vice President,
North America Vehicle Operations of Ford Motor Company from August 2001 to
October 2003; and Vice President, North America Assembly Operations of Ford
Motor Company from April 2001 to August 2001. Ms. Stevens is a member of the
National Academy of Engineering and currently serves as a director of Anglo
American plc and XL Group plc.
26 www.lockheedmartin.com/investor
Table of Contents
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS
The Audit Committee has
appointed Ernst & Young LLP (Ernst & Young), an independent registered public accounting firm, as the
independent auditors to perform an integrated audit of the Corporations
consolidated financial statements and internal control over financial reporting
for the year ending December 31, 2015. Ernst & Young served as our
independent auditors in 2014 and 2013. The services provided to the Corporation
by Ernst & Young for the last two fiscal years are described under the
caption Fees Paid to Independent Auditors below.
The Audit Committee is
directly responsible for the appointment, compensation, retention, oversight and
termination of the Corporations independent auditor in accordance with the NYSE
listing standards. The Audit Committee also is responsible for the audit fee
negotiations associated with the retention of Ernst & Young. The Audit Committee has discussed the
advantages and disadvantages of external audit firm rotation. Further, in
conjunction with the periodic mandated rotation of the audit firms lead
engagement partner, the Audit Committee and its chairman are directly involved
in the selection of Ernst & Youngs new lead engagement partner. The members
of the Audit Committee and the Board believe that the continued retention of
Ernst & Young to serve as the Corporations
independent external auditor is in the best interest of our
stockholders.
Stockholder approval of the
appointment is not required. However, the Board believes that obtaining
stockholder ratification of the appointment is a sound corporate governance
practice. If the stockholders do not vote on an advisory basis in favor of Ernst
& Young, the Audit Committee will reconsider whether to hire the firm and
may retain Ernst & Young or hire another firm without resubmitting the
matter for stockholders approval. The Audit Committee retains the discretion at
any time to appoint a different independent auditor.
Representatives of Ernst
& Young are expected to be present at the Annual Meeting, will be available
to respond to appropriate questions, and will have the opportunity to make a
statement if they desire.
The Board
unanimously recommends a vote FOR the ratification of the appointment of Ernst
& Young as independent auditors for 2015.
Pre-Approval of Independent
Auditors Services |
The Audit Committee
pre-approves all audit, audit-related, tax, and other services performed by the
independent auditors. The Audit Committee pre-approves specific categories of
services up to pre-established fee thresholds. Unless the type of service had
previously been pre-approved, the Audit Committee must approve that specific
service before the independent auditors may perform such service. In addition,
separate approval is required if the amount of fees for any pre-approved category of service exceeds the fee
thresholds established by the Audit Committee. The Audit Committee also has
delegated to the Committee Chairman pre-approval authority with respect to
permitted services, provided that the member must report any pre-approval
decisions to the Audit Committee at its next scheduled meeting.
Fees Paid to Independent
Auditors |
The following table sets
forth the fees billed by Ernst & Young, the Corporations independent
auditors, for audit, audit-related services, tax services, and all other
services rendered for 2014 and 2013. All fees were pre-approved in accordance
with the Audit Committees pre-approval policy. The Audit Committee considered
and concluded that the provision of these services by Ernst & Young was
compatible with the maintenance of the auditors independence.
|
2014 ($) |
|
2013 ($) |
Audit Fees (a) |
16,905,000 |
|
15,275,000 |
Audit-Related Fees (b) |
1,810,000 |
|
1,220,000 |
Tax
Fees (c) |
2,545,000 |
|
2,030,000 |
All Other Fees (d) |
60,000 |
|
25,000 |
(a) Audit fees for 2014 and
2013 are for services related to the annual audit of the Corporations
consolidated financial statements, including the audit of internal control over
financial reporting, the interim
reviews of the Corporations quarterly financial statements, statutory audits of
the Corporations foreign subsidiaries, consultation on accounting matters,
registration statements, and other documents filed by the Corporation with the
SEC.
(b) Audit-related fees for
2014 and 2013 are related to audits of the Corporations employee benefit plans,
due diligence services in connection with acquisitions, reviews of information
technology systems, reviews of financial models related to customer proposals,
and a carve-out audit of a business units financial statements.
(c) Tax fees
for 2014 and 2013 are for domestic and international tax compliance and advisory
services.
(d) All other fees for 2014
are primarily for advisory work related to our 2014 Conflict Minerals Report.
All other fees for 2013 are primarily for services related to government
contracting matters.
2015 Proxy
Statement |
|
|
|
27 |
Table of Contents
PROPOSAL 3: ADVISORY VOTE TO APPROVE
THE COMPENSATION OF OUR
NAMED
EXECUTIVE OFFICERS (SAY-ON-PAY)
We ask our stockholders to
vote annually to approve, on an advisory (non-binding) basis, the compensation
of our named executive officers (NEOs) as described in detail in the
Compensation Discussion and Analysis (CD&A) and the accompanying tables in
the Executive Compensation section beginning on page 30. This vote is commonly
known as Say-on-Pay.
Stockholders should review
the entire Proxy Statement and, in particular, the CD&A for information on
our executive compensation programs and other important items.
We believe that the
information provided in this Proxy Statement demonstrates that our executive
compensation programs are designed to link pay to performance. Accordingly, the
Board recommends that stockholders approve the compensation of our NEOs by
approving the following Say-on-Pay resolution:
RESOLVED, that the
stockholders of Lockheed Martin Corporation approve, on an advisory basis, the
compensation of the named executive officers identified in the Summary
Compensation Table, as disclosed in the Lockheed Martin Corporation 2015 Proxy
Statement pursuant to Item 402 of Regulation S-K, including the Compensation
Discussion and Analysis, the compensation tables and the accompanying footnotes
and narratives.
This vote is not intended
to address any specific item of compensation, but rather our overall
compensation policies and procedures related to the NEOs. Although the results
of the Say-on-Pay vote do not bind the Corporation, the Board will, as it does
each year, continue to review the results carefully and plans to continue to
seek the views of our stockholders year-round.
We currently hold our
Say-on-Pay vote annually. Stockholders will have an opportunity to cast an
advisory vote on the frequency of Say-on-Pay votes at least every six years. The
next advisory vote on the frequency of the Say-on-Pay vote will occur no later
than 2017.
The Board
unanimously recommends that you vote FOR the advisory vote to approve the
compensation of our named executive officers.
28 www.lockheedmartin.com/investor
Table of Contents
EXECUTIVE COMPENSATION
Compensation Committee Report
The Management Development
and Compensation Committee (Compensation Committee) makes recommendations to
the Board of Directors concerning the compensation of the Corporations
executives. We have reviewed and discussed with management the Compensation
Discussion and Analysis below which will be included in the Corporations
Schedule 14A Proxy Statement, filed pursuant to Section 14(a) of the Securities
Exchange Act of 1934, as amended.
Based on that review and discussion, we recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in the Proxy Statement
and incorporated by reference in the Corporations Annual Report on Form 10-K
for the year ended December 31, 2014. The Board approved our
recommendation.
Submitted on February 26,
2015, by the Management Development and Compensation Committee:
Anne Stevens, Chairman |
David B. Burritt |
Daniel F. Akerson |
Douglas H. McCorkindale |
Rosalind G. Brewer |
|
Dear Lockheed Martin
Stockholders:
The executive compensation
programs of our Corporation are designed to be competitive with market
practices, to attract, motivate, and retain top-tier talent and to pay for
performance. The Compensation Committee is composed solely of independent
directors who are responsible for providing the appropriate level of oversight
that ensures executive pay is aligned with your interests as a Lockheed Martin
stockholder.
When making executive pay
design decisions, we consider your feedback. We also take into account the
result of the Say-on-Pay vote cast by you. In 2014, more than 93% of the votes
cast by stockholders approved of the compensation of Lockheed Martins named
executive officers, compared to 85% in the prior year. Based on investor
feedback, we view this strong increase in the level of support as affirmation of
our compensation programs. We will continue to monitor your views through our
stockholder engagement program.
Lockheed Martin is proud to be
part of your portfolio and to share the results of a very successful year of
financial, strategic, and operational performance.
Sincerely,
|
|
Anne
Stevens,
Chairman |
David B.
Burritt |
|
|
|
|
Daniel F.
Akerson |
Douglas H.
McCorkindale |
|
|
|
|
Rosalind G.
Brewer |
|
2015 Proxy
Statement |
|
|
|
29 |
Table of Contents
Executive
Compensation
Compensation Discussion and Analysis
(CD&A)
This CD&A discusses the
compensation decisions for the NEOs listed in the Summary Compensation Table on
page 50. The NEOs are:
NEO |
|
Title in
2014 |
|
Years in Position At
End of 2014 (rounded) |
|
Years of Service At
End of 2014 (rounded) |
Marillyn A. Hewson |
|
Chairman of the Board, President and Chief
Executive Officer* |
|
2 |
|
32 |
Bruce L. Tanner |
|
Executive Vice President and Chief Financial Officer |
|
7 |
|
33 |
Sondra L. Barbour |
|
Executive Vice President, Information
Systems & Global Solutions |
|
2 |
|
28 |
Orlando P. Carvalho |
|
Executive Vice President, Aeronautics |
|
2 |
|
35 |
Maryanne
R. Lavan |
|
Senior
Vice President, General Counsel and Corporate Secretary |
|
5 |
|
25 |
* |
Ms. Hewson was
elected President and CEO effective January 1, 2013 and Chairman effective
January 1, 2014. |
To assist stockholders in
finding important information, this CD&A is organized as follows:
|
|
Page |
Executive Summary |
|
31 |
2014 Say-on-Pay Vote
Results & Stockholder Engagement |
|
33 |
Summary of Compensation Approach |
|
34 |
2014 Named Executive
Officers Compensation |
|
37 |
2015 Compensation
Decisions |
|
46 |
Other Corporate Governance
Considerations in Compensation |
|
48 |
30 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
Our 2014 Performance
Lockheed Martin delivered
another year of strong performance in 2014 despite a challenging environment
with evolving customer requirements and a volatile security landscape.
Several of our key
financial metrics were better than expected, including sales of $45.6 billion
(above the top end of the range of our outlook at the beginning of 2014),
segment operating profit of $5.6 billion, diluted earnings per share from
continuing operations of $11.21; new orders of $43.3 billion; net earnings from
continuing operations of $3.6 billion (up 23% from 2013); and cash from
operations of $3.9 billion. In 2014, we returned $1.8 billion in dividends to
our stockholders, our twelfth consecutive year of double-digit dividend growth.
We also repurchased 11.5 million shares of stock for $1.9 billion.
Across the enterprise, we
continued to strengthen our customer relationships and achieved 100% Mission
Success® (on critical client events and deliverables) for the third consecutive
year. The F-35 Lightning II program made strides in development testing, production deliveries, and international orders. Our Littoral Combat Ship program has advanced both in production and in deployment. Lockheed Martins Joint Light Tactical Vehicle program surpassed 159,000 miles of Engineering & Manufacturing Development durability testing in 2014. We have continued to invest in our information technology business, expanding our capability in the growing fields of cyber security, commercial aerospace, and healthcare information technology. The successful first flight test of the Orion Multipurpose Crew Vehicle captured the imaginations of people around the world. Finally, we continued to grow our international business and expand our partnerships in various countries.
Through these accomplishments, Lockheed Martin delivered one-year and three-year total stockholder returns (TSR) that significantly exceeded the Dow Jones Industrial, S&P 500, S&P Industrials, NASDAQ, and S&P Aerospace & Defense (S&P Aerospace) indices for the one- and three-year periods ended December 31, 2014.
1-Year TSR
3-Year TSR
Compensation Overview
Our executive compensation
programs covering our NEOs are designed to attract and retain critical executive
talent, to motivate behaviors that align with stockholders interests, and to
pay for performance. The majority of our NEOs pay is variable and contingent on
performance, and approximately 70%, on average, is in the form of long-term
incentives (LTI).
To ensure pay is competitive with market practices, we conduct benchmarking
analyses each year when establishing base salary, annual incentive target opportunities, and LTI target opportunities. Each element
of compensation is benchmarked against the 50th percentile, which we refer to as market rate, of a comparator
group of companies, as shown on page 36. For executives new to their role, we target 85% of the market rate (50th percentile) and will consider
increasing pay to 100% of the market rate over a three-year period based on a
variety of factors including individual performance, experience, time in
position, and critical skills. Although target incentive opportunities are set
by reference to the market rate, incentive plan terms provide for actual payouts
to be based upon performance results. In light of the Corporations performance,
above-target payouts were made under the 2014 annual incentive and 20122014
performance-based LTI components.
We also provide retirement
programs and perquisites that are competitive in our industry and security that
is appropriate for the business in which we operate.
2015 Proxy
Statement |
|
|
|
31 |
Table of Contents
Executive
Compensation
2014 Chairman, President & CEO Compensation
Base
Salary. Two years into her
role as CEO, Ms. Hewsons 2014 base salary of $1,520,000 was set at 92.5% of the
market rate (50th percentile of CEOs base salaries in our
size-adjusted comparator group of companies). This amount was consistent with
the Compensation Committees philosophy for executives in the second year of
their role.
Annual
Incentive. Ms. Hewsons
target annual incentive amount for 2014 was $2,660,000 (175% of salary),
representing 92.5% of the market rate. Although her annual incentive target
percentage of 175% is at the market rate, Ms. Hewsons annual incentive target
amount is below the market rate because her base salary was set at 92.5% of the
market rate. Based on performance results relative to pre-established annual
targets, Ms. Hewson was awarded 180% of her target or $4,788,000 under the
annual incentive plan for 2014 performance.
Long-Term Incentive
Opportunity. Ms. Hewsons LTI
award opportunity for 2014 of $11,120,120 was also set at 92.5% of the market
rate consistent with our philosophy for executives in the second year of their
role.
20122014 Long-Term
Incentive Performance (LTIP) Award. Under the 20122014 LTIP, Ms. Hewsons target
award of $1,380,000 was established during her previous role as Executive
Vice President, Electronic Systems.
She received a payout of 164.7% of her target consistent with all plan
participants or $2,272,860 in cash based on performance results relative to the
three-year performance goals that were established in 2012.
Pension.
The increase in Ms. Hewsons
salary and annual incentive target between 2012 to 2014, coupled with her 32
years of tenure with Lockheed Martin, led to a significant increase in the value
of her pension through the application of the standard pension formula in the
plan. The formula is based on years of service and pension eligible compensation
and is the same formula applied to all employees receiving a pension benefit
under our defined benefit plan. None of our executives received additional years
of service credits or other forms of formula enhancements under our pension
plan. Approximately $5 million of the $15.8 million change in pension value
reported in the Summary Compensation Table for Ms. Hewson (on page 50) is the
result of lower interest rates and new longevity assumptions that reflect longer
life expectancies, which also apply to all employees eligible for the
pension.
Pay
Mix. We believe that, to the
maximum extent possible, the compensation opportunities of our CEO should be
variable and the variable elements of the compensation package should tie to the
Corporations long-term success and the achievement of sustainable long-term
total return to our stockholders. As shown in the chart below, a significant
portion of our CEOs target compensation is variable and in the form of LTI and
more than half of total target pay is in the form of equity.
CEO TARGET OPPORTUNITY
MIX*
*Fixed vs. variable and
cash vs. equity components are designated in the Core Compensation Elements
table on page 37. We consider base salary and annual incentives as short-term
pay and performance stock units, LTIP, and restricted stock units as long-term
pay. We do not consider retirement or other compensation components in the
chart.
32 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
Our
Compensation Programs Incorporate Best Practices
Best Practices in Our Program |
✓ |
Pay for performance |
✓ |
Active stockholder engagement
program |
✓ |
Market-based approach for determining NEO
target pay |
✓ |
LTI based on Relative TSR and value-driving
financial metrics |
✓ |
Caps on annual and long-term
incentives |
✓ |
Lower cap for performance stock units
(PSUs) when TSR is negative |
✓ |
Perquisites limited to those that are
business-related |
✓ |
Severance provisions at or below
market |
✓ |
Clawback policy on all variable
pay |
✓ |
Double-trigger provisions for change in
control (for all grants after 2012) |
✓ |
Consideration by Compensation Committee of
stockholder dilution and burn rate in equity grant
decisions |
✓ |
Stock ownership
requirements |
✓ |
Annual comparator group
review |
✓ |
Policy prohibiting hedging or pledging of
company stock by directors, officers, and employees |
✓ |
Plan design and administration used to
minimize incentives for imprudent risk taking |
✓ |
Independent consultant reports directly to
the Compensation Committee |
Practices We Do Not Engage In or
Allow |
✕ |
No employment
agreements (other than exit transitions) |
✕ |
No option backdating,
cash out of underwater options or repricing |
✕ |
No excise tax
assistance upon a change in control |
✕ |
No individual change
in control agreements |
✕ |
No automatic
acceleration of unvested incentive awards in the event of
termination |
✕ |
No enhanced
retirement formula or inclusion of LTI in pensions |
✕ |
No enhanced death
benefits for executives |
2014 Say-on-Pay Vote Results &
Stockholder Engagement |
At our 2014 Annual Meeting,
more than 93% of the votes cast by our stockholders approved our Say-on-Pay
proposal, a considerable increase over the 85% approval at our 2013 Annual
Meeting. As the result of the strong support conveyed by the vote, input
received from stockholders, as well as other factors conveyed in this CD&A,
the Compensation Committee made no significant changes to its compensation
decisions and policies in 2014.
We proactively engage with
our key investors throughout the year to understand the issues that matter most
to them as it relates to our executive compensation programs and corporate
governance practices. We considered the input of our stockholders and emerging
best practices in adopting our executive pay programs.
During 2014, we engaged
with representatives of stockholders owning more than 40% of our outstanding
shares. Most investors with whom we met reacted positively to our pay governance
and executive compensation programs.
Since the advent of
Say-on-Pay, we have taken several positive steps to ensure that our pay
governance and programs are aligned with investor expectations and emerging best
practices.
We welcome feedback
regarding our executive compensation programs and will continue to engage with
our stockholders in 2015.
2015 Proxy
Statement |
|
|
|
33 |
Table of
Contents
Executive
Compensation
Summary of Compensation Approach |
Our Decision-Making Process
The Compensation Committee
seeks input from our CEO and other members of our management team as well as
input and advice from the independent compensation consultant to ensure the
Corporations compensation philosophy and all information relevant to individual
compensation decisions are taken into account.
Independent Pay Governance
|
Independent Board
Members |
|
Independent Compensation
Committee |
Reviews and approves the compensation of the
CEO and the NEOs. Reviews with management, at least annually, the CEO and
other senior positions succession plan and executive talent
pool. |
Reviews and approves corporate objectives
relevant to NEO compensation. Evaluates the performance of the CEO and
each NEO against specified objectives. Recommends to the independent
members of the Board the compensation of the CEO and each
NEO. |
|
Independent Compensation Consultant |
|
Stockholders & Other Key
Stakeholders |
Provides advice on executive pay programs
and best practices. Provides design advice for annual and LTI vehicles and
other compensation and benefit programs. |
Provide feedback on various executive pay
practices and governance during periodic meetings with management that is
also reviewed by and discussed with our independent Board members.
|
The following summary sets
forth the responsibilities of various parties in connection with the
implementation of our compensation
programs.
Role |
|
Responsibilities |
Independent
Compensation Committee: Anne Stevens, Chairman Daniel F.
Akerson Rosalind G. Brewer David B. Burritt Douglas H.
McCorkindale |
|
●Reviews and
approves corporate objectives relevant to NEO compensation.
●Evaluates and
approves the performance of the CEO and each NEO against specified
individual objectives.
●Recommends to
the independent members of the Board the compensation of the CEO and each
NEO.
●Approves
Enterprise and Business Segment performance measures, weightings, and
goals for the annual and LTI compensation plans.
●Reviews proposed
candidates for senior executive positions and recommends their
compensation to the Board.
●Approves equity
and other LTI grants. This authority resides solely in the Compensation
Committee (subject to ratification by the independent members of the
Board) and has not been delegated to any member of management.
|
Independent Members
of Board of Directors |
|
●Reviews and
approves the compensation of the CEO and the NEOs.
●Reviews with
management, at least annually, the CEO and other senior position
succession plan and executive talent pool. |
Independent
Compensation Consultant: Meridian Compensation Partners,
LLC (Meridian) |
|
●Provides input
to the Compensation Committees decision-making on executive compensation
matters in light of the Corporations business strategy, pay philosophy,
prevailing market practices, stockholder interests, and relevant
regulatory mandates.
●Provides advice
on executive pay philosophy and relevant peer groups.
●Provides design
advice for short-term and LTI vehicles and other compensation and benefit
programs.
●Provides input
to and interprets the results of, or conducts, competitive market studies
as background against which the Compensation Committee can consider CEO
and senior management compensation.
●Reviews and
provides an independent assessment of the data and materials presented by
management to the Compensation Committee, including data provided by the
regular compensation consultant of the Corporation.
●Participates in
Compensation Committee meetings as requested and communicates with the
Chairman of the Compensation Committee between meetings.
●Advises the
Compensation Committee about emerging best practices and changes in the
regulatory and corporate governance environment.
●Reviews the
CD&A and provides input to the Compensation
Committee. |
34 www.lockheedmartin.com/investor
Table of
Contents
Executive
Compensation
Role |
|
Responsibilities |
Management |
|
●The CEO reviews
and approves corporate goals and objectives and provides feedback to the
Compensation Committee on compensation and performance of the other NEOs
and other senior management.
●The EVP and CFO
develops internal financial goals for both our annual and LTI programs,
which are reviewed by the CEO before presentation to the Compensation
Committee for consideration and approval.
●The Senior Vice
President, Human Resources (SVP HR) presents a schedule with a market
rate for each compensation element (base salary, annual incentive, and
LTI) to the Compensation Committee and consults with the CEO on
recommended compensation for senior executives. The SVP HR does not
recommend a specific amount of compensation for the
CEO. |
Corporations
Compensation Consultants: Aon Hewitt & Towers
Watson |
|
●Provide
management with market data and compensation practices from our comparator
group.
●Perform market
research and other analyses to assist management in making plan design
recommendations to the Compensation Committee and the
Board. |
How We Determine Market Rate Compensation
As a starting point, for
each of the principal elements of executive compensation we define the market
rate as the size-adjusted 50th percentile of the comparator group of
companies we have identified for compensation purposes. Size-adjusted market
rates were calculated for us by Aon Hewitt using regression analysis. This
statistical technique accounts for revenue size differences within the peer
group and results in a market rate for all compensation elements consistent with
our revenue relationship to our peers. We also may adjust the market rate to
reflect differences in an executives job scope relative to the industry or the
comparator group of companies, as appropriate.
Actual annual and long-term
incentive compensation earned by executives may be above or below the target
level we set for each executive based on our performance results against
pre-established metrics and goals. Our incentive plans are designed so that
actual performance in excess of the performance targets results in payouts above
target and actual performance below the performance targets results in payouts
below target or no payout.
How We Select the Comparator Group for Market Rate and Performance
Purposes
Companies for Market Rate Determination
We regularly review our
comparator group to maintain relevancy and to ensure the availability of data,
while seeking to avoid significant annual changes in the group to ensure a level
of consistency.
To establish the market
rate for each of the principal elements of compensation, we select a group of
publicly-traded companies (our comparator group) to identify market rates for
all pay elements. Because the number of comparable companies with our revenue
level is not extensive, we include companies in our comparator group based on a
number of factors, including:
● |
Similarity in size (a
high correlative factor in determining pay), generally between one-half
and two times our annual revenue. |
● |
Participation in the
Aon Hewitt executive compensation survey (our primary source for data in
making market comparisons); this enables us to obtain reliable data for
market comparisons that otherwise may not be publicly
available. |
● |
Industrial companies
and, to the extent possible, companies that compete in the aerospace and
defense industry; this enables comparison with companies that face similar
overall labor costs and market fluctuations. |
● |
Companies that are
included in the executive talent pool we consider when recruiting outside
talent. Competitive conditions and a limited number of comparably sized
aerospace and defense companies require us to recruit outside the core
aerospace and defense companies for a broad range of disciplines (e.g.,
finance, human resources, supply chain management) to obtain individuals
with a broad range of skills that are transferable across
industries. |
● |
Companies with
comparable executive officer positions or management structures, which
enables more appropriate compensation
comparisons. |
We do not consider market
capitalization in selecting our comparator group because market capitalization
can change quickly as industries and companies go in and out of favor as
investments and as companies restructure. Market capitalization may be more
reflective of future expectations about a particular companys growth potential
rather than its actual financial performance or complexity.
The data presented to and
considered by the Compensation Committee regarding the level of compensation at
the Corporations comparator group of peer companies was developed from the
proprietary results of the Aon Hewitt executive compensation survey, subject to
review by Meridian. All of the comparator group companies participate in the Aon
Hewitt survey.
2015 Proxy
Statement |
|
|
|
35 |
Table of
Contents
Executive
Compensation
At the beginning of 2014,
based on the objectives and criteria summarized above, we selected the following
companies as our comparator group for purposes of establishing market rate
compensation for each of the principal elements of our compensation programs.
Our 2014 revenue represented the 59th percentile of our comparator
group.
|
|
Comparator Group
Rationale |
Company |
|
A&D Industry |
|
Similarity (size,
revenue, geographic presence or business model) |
|
Comparable
Executive Officer Positions (scope,
responsibilities) |
|
Participation in
Executive Compensation Survey |
3M
Company |
|
|
|
|
|
|
|
|
The Boeing
Company |
|
|
|
|
|
|
|
|
Caterpillar Inc. |
|
|
|
|
|
|
|
|
Cisco Systems,
Inc. |
|
|
|
|
|
|
|
|
Deere
& Company |
|
|
|
|
|
|
|
|
The Dow Chemical
Company |
|
|
|
|
|
|
|
|
E. I.
du Pont de Nemours & Company |
|
|
|
|
|
|
|
|
FedEx
Corporation |
|
|
|
|
|
|
|
|
General Dynamics Corporation |
|
|
|
|
|
|
|
|
Honeywell
International Inc. |
|
|
|
|
|
|
|
|
Intel
Corporation |
|
|
|
|
|
|
|
|
International Paper
Company |
|
|
|
|
|
|
|
|
Johnson Controls, Inc. |
|
|
|
|
|
|
|
|
Northrop Grumman
Corporation |
|
|
|
|
|
|
|
|
Raytheon Company |
|
|
|
|
|
|
|
|
United Parcel
Service, Inc. |
|
|
|
|
|
|
|
|
United Technologies Corporation |
|
|
|
|
|
|
|
|
Consideration of Internal Pay Equity
Consistent with past
practice, the Compensation Committee reviewed the pay relationship of the CEO to
the other NEOs as part of the January 2014 and January 2015 meetings. This
material was presented to the Compensation Committee by Meridian in its capacity
as the Committees independent compensation consultant.
Compensation and Risk
The Corporations executive
and broad-based compensation programs are intended to promote decision-making
that supports a pay for performance philosophy while utilizing the following
risk mitigating features:
●Mix of fixed and
variable pay opportunities
●Multiple
performance measures, multiple time periods and capped payouts under the
incentive plans
●Stock ownership
requirements
●Oversight by
Board Committees
●Clawback
policy |
|
●Moderate
severance program
●Moderate
post-employment restrictive covenants
●Institutional
focus on ethical behavior
●Annual risk
review
●Compensation
Committee oversight of equity run rate and
overhang |
At the Compensation
Committees request, Meridian reviews all executive and broad-based compensation
programs annually and determined that risks arising from our incentive
compensation programs are not reasonably likely to have a material adverse
effect on the Corporation as a whole.
36 www.lockheedmartin.com/investor
Table of
Contents
Executive
Compensation
2014 Named Executive Officers
Compensation |
Guiding Pay Principles
● |
Attract, motivate, and retain highly competent executives |
● |
Align target pay to
the market 50th percentile for all compensation
elements |
● |
Link pay to Enterprise, Business Segment, and Individual performance |
● |
Provide an appropriate mix of short-term vs.
long-term pay and fixed vs. variable
pay |
● |
Align to stockholder interests and long-term company value |
Core
Compensation Elements
Our compensation programs
are designed to provide a mix of short- and long-term compensation, fixed and
variable pay, and cash and equity-based compensation, as well as to reflect our
philosophy of providing pay for performance. Retirement or all other
compensation programs are not included in our core compensation elements below
(additional information about these programs can be found on page
45).
|
WHAT? |
|
Cash |
|
Cash |
|
Equity |
|
Cash |
|
Equity |
|
|
|
WHEN? |
|
Annual |
|
Annual |
|
3-year Performance Cycle |
|
3-year Performance Cycle |
|
3-year Cliff Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
|
HOW?
Measures, Weightings & Payouts |
|
Individual performance, experience, time in position, and
critical skills |
|
Enterprise
Performance (60%
Financial, 20% Strategic, 20% Operational) X Business
Segment Performance (60% Financial, 20% Strategic, 20%
Operational) X Individual
Performance Payout: 0-200% of target |
|
Relative TSR* ROIC** Performance
Cash** |
|
(50%) (25%) (25%) |
|
Value
delivered through Long-Term Stock Price Performance |
|
|
|
●Award 0-200% of target # of shares
●400% of Fair Market Value on date of grant X
shares earned
●Relative TSR measure capped at 100% if TSR
is negative |
|
●Payout: 0-200% of target |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WHY?
|
|
Provides competitive
levels of fixed pay to attract and retain executives |
|
Attracts and motivates
executives by linking annual company, Business Segment and individual
performance to an annual cash incentive |
|
Creates strong
alignment with stockholder interests by linking long-term pay to key
performance metrics and stock price |
|
Promotes retention of
key talent and aligns executive and stockholder interests
|
* |
Relative TSR
performance is measured against our industry peers in the S&P
Aerospace Index. |
** |
See Appendix A for
explanation of non-GAAP terms. |
2015 Proxy
Statement |
|
|
|
37 |
Table of
Contents
Executive
Compensation
2014 Target Compensation
Consistent with our pay
philosophy to consider moving executives from 85% to 100% of the market rate
(50th percentile) over a three-year period assuming they perform
effectively in their new roles, Ms. Hewsons, Ms. Barbours, and Mr. Carvalhos
target pay levels were aligned to 92.5% of the market rate given it was the
second year in their respective roles. Mr. Tanner and Ms. Lavan had been in
their respective roles for multiple years and were aligned to the market
rate.
|
|
Base Salary ($) |
|
Annual Incentive |
|
2014 LTI Grant ($) |
|
Total
Target Direct Compensation ($) |
|
Target % |
|
Target
Amount ($) |
NEO |
Ms. Hewson |
|
1,520,000 |
|
175 |
|
2,660,000 |
|
11,120,120 |
|
15,300,120 |
Mr. Tanner |
|
890,209 |
|
105 |
|
934,719 |
|
4,050,119 |
|
5,875,047 |
Ms. Barbour |
|
654,050 |
|
90 |
|
588,645 |
|
2,613,118 |
|
3,855,813 |
Mr. Carvalho |
|
726,156 |
|
95 |
|
689,848 |
|
3,006,326 |
|
4,422,330 |
Ms.
Lavan |
|
706,198 |
|
95 |
|
670,888 |
|
2,650,053 |
|
4,027,139 |
Base Salary
Base salaries are reviewed
annually and may be increased to reflect the executives individual performance
and/or adjusted to align more appropriately with the market rate (50th
percentile). In establishing the base salary for each NEO, we determined the
market rate using comparator group company data and evaluate whether the market
rate should be adjusted up or down based on differences in the scope of the
NEOs position as compared to the industry and the comparator group companies.
For 2014, we did not apply adjustments to the market rate for any of the
NEOs.
The Compensation Committee
establishes an executives base salary relative to the market rate with
consideration for the executives individual performance, experience, time in
position, and critical skills.
Annual Incentive
The annual incentive uses a
multiplicative approach to determine bonuses based on Enterprise, Business
Segment, and Individual performance as follows:
Target Award |
|
X |
|
Enterprise Performance
Factor |
|
X |
|
Business Segment Performance
Factor |
|
X |
|
Individual Performance
Factor |
|
= |
|
Payout |
|
|
|
|
-
Financial (60%) |
|
|
|
-
Financial (60%) |
|
|
|
|
|
|
|
|
|
|
|
|
-
Strategic (20%) |
|
|
|
-
Strategic (20%) |
|
|
|
|
|
|
|
|
|
|
|
|
- Operational
(20%) |
|
|
|
- Operational
(20%) |
|
|
|
|
|
|
|
|
Because we multiply the
Enterprise, Business Segment, and Individual performance factors together, a
zero rating on any factor results in no payout. Under the terms of our 2014
annual incentive program, the CEOs bonus may not exceed 0.3% of Performance
Cash (see Appendix A for non-GAAP definition) and the bonus for each of the
other NEOs cannot exceed 0.2% of Performance Cash. Annual incentive payouts may
not exceed 200% of the target award.
The Compensation Committee
adopted these parameters to establish the structure around which annual
incentive decisions would be made, to align participants to the performance of
the overall Enterprise, and to use financial performance as a core element of
the rating. Although the annual incentive plan uses a formulaic approach, the
Compensation Committee retains discretion, which includes choosing and approving
metrics, assessing strategic, operational, and individual performance of our
NEOs and approving the final ratings for each factor based on performance
results. The Business Segment factor applied to the corporate officers (Ms.
Hewson, Mr. Tanner, and Ms. Lavan) is the average of all Business Segment performance factors, which can be
adjusted up or down (maximum 0.05) based on the Compensation Committees
assessment. In accordance with the annual incentive plan, factors are determined
in .05 increments (i.e., there are no factors between .05
increments).
Establishment of 2014 Goals
At its January 2014
meeting, the Compensation Committee approved corporate objectives for 2014
reflecting financial, strategic, and operational goals. These objectives serve
as the corporate organizational goals for all participants as well as the
individual goals of the CEO. The Compensation Committee used the guidance we
disclosed publicly at the beginning of the year for our financial metrics as
disclosed in the 2014 proxy statement. We
believe this approach to setting the financial metrics for annual bonus purposes
appropriately links compensation to our effectiveness in meeting our public
commitments to our stockholders.
38 www.lockheedmartin.com/investor
Table of
Contents
Executive
Compensation
Financial
Commitments: Our financial
commitments are established at the completion of our annual long-range planning
process and are consistent with our long-range plan commitments. The long-range
planning process includes reviews of the assumptions used by the Business
Segments in generating their financial projections, such as industry trends and
competitive assessments, current and future projected program performance
levels, and the risks and opportunities surrounding these baseline assumptions.
Business Segment financial projections are also compared against historical
patterns of performance. The long-range plan on which our financial goals are
based is tied to the business environment in which we operate, which can vary
year over year. In recent years, the U.S. Government, representing 79% of our
net revenues for 2014, has faced significant deficit reduction pressures that
are likely to continue. These constraints have affected members throughout the
aerospace and defense industry, including expectations of financial performance
that correspond to our incentive goals.
Our long-range plan values
for Orders, Sales, Segment Operating Profit (see Appendix A for definition of
non-GAAP terms), and cash from operations become the target level (1.0 rating)
for each of these metrics. We established maximum (1.30 rating for Enterprise,
1.25 rating for Business Segments) and threshold payout levels (0.50 rating)
around these targets based on a review of historical performance against
long-range plan commitments for each of the four annual incentive goal metrics.
We used straight-line interpolation between target and both maximum and minimum
historical performance levels. In all cases, payouts deteriorate more rapidly as
we move from target level to the minimum payout level compared to the level of
increase as we move from target level to maximum payout level. This asymmetry
reflects the importance we place on meeting our financial goals.
Strategic and
Operational Commitments: Our
strategic and operational performance assessments are inherently different than
financial performance assessments. For the 2014 performance year, objective
metrics were set for each of our strategic and operational commitments at the
beginning of the year. The Compensation Committee used these as a reference
point for its assessment along with past levels of performance to identify the
top and bottom of the performance rating range and the expected target level.
The Compensation Committee also took into account qualitative considerations
that could not be forecasted reliably and used discretion where appropriate to
evaluate the level of performance. For example, because some strategic goals,
such as having no Red Programs are aspirational in nature, achieving the goal
represents the maximum rating rather than the target rating (we designate a
program as a Red Program when it has a value over $100 million and exhibits
significant cost, schedule, technical, or quality challenges).
Performance Ratings
Performance results for
2014 were assessed using the rating scales below. The higher maximum rating for
the Enterprise performance factor reflects the importance we place on
company-wide results.
● |
Enterprise
performance (0.00 or 0.50 1.30 rating) |
● |
Business Segment
performance (0.00 or 0.50 1.25 rating) |
● |
Individual
performance (0.00 or 0.50 1.25 rating) |
Enterprise Performance Component
Enterprise Financial Assessment (60% of Enterprise Performance
Component)
We exceeded the target
ranges established at the beginning of the year for all of the financial
measures. In assessing performance against our cash from operations goal, we add
back unplanned pension contributions so that the impact on incentive
compensation is not a factor in the decision to make the additional pension
contribution. Therefore, cash from operations was assessed after adding back $1
billion in unplanned contributions made to the pension fund in the 4th quarter
2014. Based on an adjusted result of $4,866M, the Compensation Committee
determined that the target was Exceeded.
2014 Financial Measures |
|
Weighting % |
|
2014
Goals ($) |
|
Reported / Assessed Results ($) |
|
2014 Assessment |
Orders |
|
20 |
|
41,500 43,000M |
|
43,283M |
|
Exceeded |
Sales |
|
20 |
|
44,000 45,500M |
|
45,600M |
|
Exceeded |
Segment Operating Profit* |
|
30 |
|
5,175 5,325M |
|
5,588M |
|
Exceeded |
Cash from
Operations |
|
30 |
|
≥ 4,600M |
|
3,866M / 4,866M |
|
Exceeded |
* See Appendix A for definition of non-GAAP
terms.
Performance Rating (Financial) |
1.16 |
2015 Proxy
Statement |
|
|
|
39 |
Table of
Contents
Executive
Compensation
Enterprise Strategic Assessment (20% of Enterprise Performance
Component)
The Enterprise strategic
performance goals were set to further develop focus around growth of the core
businesses, sustaining return in new businesses, maximizing international and
adjacent business opportunities, and talent management. We exceeded the target
for each goal in this category.
2014 Strategic Measures |
|
Weighting % |
|
Assessment Summary |
|
2014 Assessment |
Meet all Corporate focus program objectives
for 2014 and drive new business capture through winning new business,
maintaining all follow-on program value and adjacent market
opportunities. |
|
60 |
|
●Business capture
and retention of existing business exceeded target level. |
Exceeded |
Identify international growth opportunities and successfully meet
long-range plan. |
|
20 |
|
●Continued
expansion, increased orders and exceeded sales goals in international
markets. |
Exceeded |
Embed our
workforce planning strategies to define the capabilities needed for today
and tomorrow delivering an integrated talent management strategy that
reinforces our culture of leadership, performance, and
inclusion. |
|
20 |
|
●Exceeded
workforce goals through retention, merit increase differentiation, and
placement of high performers in critical positions. |
|
Exceeded |
Performance Rating (Strategic) |
1.15 |
Enterprise Operational Assessment (20% of Enterprise Performance
Component)
The operational performance
targets were set with a focus on achieving Mission Success and no Red Programs.
We exceeded the target for Mission Success (based on a list of identified
critical client events or deliverables), successfully completing 100% of
scheduled events for only the third time in the Corporations history.
Additionally, given the difficulty of achieving an aspirational goal of no Red
Programs (considering there are over 200 programs that are valued over $100
million), the maximum assessment applies only if the goal was
accomplished.
2014 Operational Measures |
|
Weighting % |
|
Assessment Summary |
|
2014 Assessment |
Perform successfully (achieve Mission
Success) on identified critical events. |
|
50 |
|
●100% Mission
Success in targeted events. |
Maximum |
Have no Red Programs (Note: Having no Red Programs would result in
a maximum rating). |
|
50 |
|
●Continued
reduction in Red Programs compared to prior years. |
Exceeded |
Performance Rating
(Operational) |
1.26 |
Overall Enterprise Performance Factor
As described, the
Enterprise Performance Factor was based on a formulaic approach with 60%
weighted on financial performance, 20% weighted on strategic performance, and
20% weighted on operational performance. Based on the results discussed above,
the 2014 Enterprise Performance Factor for the NEOs was 1.20.
Goal |
Performance Rating |
|
Weighting |
|
Result |
Financial |
1.16 |
|
X .60 |
|
.70 |
Strategic |
1.15 |
|
X
.20 |
|
.23 |
Operational |
1.26 |
|
X .20 |
|
.25 |
NEO
Enterprise Factor (Rounded to nearest .05) |
|
|
|
|
1.20 |
40 www.lockheedmartin.com/investor
Table of
Contents
Executive
Compensation
Business Segment Performance Component
At the January 2014
meeting, the Compensation Committee approved key financial, strategic, and
operational performance commitments that would be used to evaluate each Business
Segments performance. As a result, the Compensation Committee assessed
financial, strategic, and operational goals specific to each Business Segment to
determine the performance factors. The following chart describes indicative
accomplishments of each Business Segment among a wide range of measures and
performance results that were reviewed.
Business Segment |
|
Measure |
|
Weighting % |
|
Indicative Financial, Strategic, and Operational
Accomplishments |
|
Performance Factor |
Aeronautics |
|
Financial Strategic Operational |
|
60 20 20 |
|
●Exceeded Sales,
Segment Operating Profit, and Cash from Operations targets.
●Increased
stability, customer satisfaction and met deliveries of core
programs.
●100% Mission
Success. |
|
1.15 |
Information Systems & Global Solutions |
|
Financial Strategic Operational |
|
60 20 20 |
|
●Exceeded all
financial targets.
●Successful
expansion in international markets through key wins and
acquisitions.
●100% Mission
Success. |
|
1.20 |
Missiles and Fire Control |
|
Financial Strategic Operational |
|
60 20 20 |
|
●Exceeded Sales,
Segment Operating Profit, and Cash from Operations targets.
●Significant
expansion into adjacent markets and secured key international
contracts.
●100% Mission
Success. |
|
1.20 |
Mission Systems and Training |
|
Financial Strategic Operational |
|
60 20 20 |
|
●Exceeded Orders,
Segment Operating Profit, and Cash from Operations targets.
●Secured key
contracts both domestically and internationally.
●100% Mission
Success. |
|
1.20 |
Space Systems |
|
Financial Strategic Operational |
|
60 20 20 |
|
●Significantly
exceeded all financial targets.
●Successful
acquisitions and restructuring of operations.
●100% Mission
Success, including launch of Orion. |
|
1.25 |
LM International* |
|
Financial Strategic Operational |
|
60 20 20 |
|
●Exceeded Sales,
Segment Operating Profit, and Cash from Operations targets.
●Improved
customer relationships and strategies in various countries.
●Effective
transition of new leadership. |
|
1.15 |
EO Business Segment Factor (Rounded Average) |
|
1.20 |
* |
LM International
supports each of the other Business Segments named above in our strategy
to grow our international sales. Our international operating results are
included within each of the other Business Segments operating results as
presented in our 2014 Annual Report on Form
10-K. |
Individual Performance Component
For 2014, the Compensation
Committee used the following individual performance definitions which align with
the Corporations individual performance management system:
Factor |
Performance Definitions |
1.15 1.25 |
Significantly exceeded all or majority of
commitments and met or exceeded all behavioral expectations. |
1.00
1.15 |
Exceeded all or majority of commitments and met or exceeded
behavioral expectations. |
0.75 1.00 |
Achieved all or majority of commitments and
met all or majority of behavioral expectations. |
0.00 or 0.50
0.75 |
Did not achieve majority
of commitments and/or did not meet majority of behavioral
expectations. |
2015 Proxy
Statement |
|
|
|
41 |
Table of Contents
Executive
Compensation
In January 2015, the
Compensation Committee assigned a factor for each NEO based on individual
performance goals established at the beginning of 2014. The individual goals and
assessments take into account both the Enterprise and/or Business Segment
results, as well as the individuals impact on the overall organization, the
difficulty of their roles and leadership contributions. The Compensation
Committee evaluated the performance of each of our NEOs against his or her
pre-established goals and assigned an
individual performance factor for their 2014 awards. The Compensation Committee
concluded that the performance of each of the NEOs exceeded his or her
commitments for the year and warranted an individual performance factor above
the 1.0 target level. In making that determination, the Compensation Committee
took a wide range of accomplishments into account including, but not limited to,
the following:
NEO |
|
Performance Considerations |
Performance Factor |
Ms. Hewson |
|
● |
Exceeded all Enterprise financial, strategic,
and operational goals. |
1.25 |
|
|
● |
Drove international business growth through key
wins, resource allocation, and strategic initiatives. |
|
|
|
● |
Positioned company for continued value creation
through strong backlog and cash flow, pipeline of innovation, and strong
operational performance. |
|
Mr. Tanner |
|
● |
Exceeded all Enterprise financial goals;
maintained backlog over $80B. |
1.25 |
|
|
● |
Successfully engaged with key
investors. |
|
|
|
● |
Provided financial leadership for pension
redesign implementation. |
|
Ms. Barbour |
|
● |
Exceeded all IS&GS financial
goals. |
1.15 |
|
|
● |
Expanded international business; significantly
exceeding orders plan with key wins. |
|
|
|
● |
Completed three key acquisitions in core growth
markets. |
|
Mr. Carvalho |
|
● |
Exceeded Sales, Segment Operating Profit, and
Cash from Operations goals. |
1.20 |
|
|
● |
Led
substantive progress in development and maturation of the F-35
aircraft. |
|
|
|
● |
Ensured key deliveries were achieved and made
significant progress in securing new orders. |
|
Ms. Lavan |
|
● |
Successful litigation management. |
1.20 |
|
|
● |
Broadened investor engagement. |
|
|
|
● |
Leadership in cross-functional
initiatives. |
|
Summary of Annual Incentive Payout
Calculations
NEO |
|
Base Salary ($) |
|
Target % of
Salary (%) |
|
Target Award ($) |
|
X |
|
|
Enterprise Factor |
|
X |
|
Business Segment Factor |
|
X |
|
Individual Factor |
|
|
= |
|
Payout* ($) |
Ms. Hewson |
|
1,520,000 |
|
175 |
|
2,660,000 |
|
|
|
|
1.20 |
|
|
|
1.20 |
|
|
|
1.25 |
|
|
|
|
4,788,000 |
Mr.
Tanner |
|
890,209 |
|
105 |
|
934,719 |
|
|
|
|
1.20 |
|
|
|
1.20 |
|
|
|
1.25 |
|
|
|
|
1,682,500 |
Ms. Barbour |
|
654,050 |
|
90 |
|
588,645 |
|
|
|
|
1.20 |
|
|
|
1.20 |
|
|
|
1.15 |
|
|
|
|
974,800 |
Mr.
Carvalho |
|
726,156 |
|
95 |
|
689,848 |
|
|
|
|
1.20 |
|
|
|
1.15 |
|
|
|
1.20 |
|
|
|
|
1,142,400 |
Ms. Lavan |
|
706,198 |
|
95 |
|
670,888 |
|
|
|
|
1.20 |
|
|
|
1.20 |
|
|
|
1.20 |
|
|
|
|
1,159,300 |
* |
|
Final
payouts are rounded to the nearest
hundred. |
42 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
2014
Long-Term Incentive Compensation
The following summary shows
the 2014 LTI compensation mix for the CEO, EVPs, and Senior Vice Presidents
(SVPs) and other principal terms of the awards.
|
|
% of Target
LTI |
|
Form |
|
Principal Terms of
Awards |
PSUs |
|
50 |
|
Equity |
|
Minimum, target and maximum award levels based
on three-year: |
|
|
|
|
|
|
● |
Relative TSR (50%) |
|
|
|
|
|
|
● |
ROIC* (25%) |
|
|
|
|
|
|
● |
Performance Cash* (25%) |
|
|
|
|
|
|
● |
The PSUs are subject to the following
caps: |
|
|
|
|
|
|
|
|
|
200%
of target shares |
|
|
|
|
|
|
|
|
|
400%
of Fair Market Value on date of grant times shares earned |
|
|
|
|
|
|
|
|
|
Relative TSR measure capped at 100% if TSR is
negative |
LTIP |
|
20 |
|
Cash |
|
Minimum, target and maximum award levels based
on three-year: |
|
|
|
|
|
|
● |
Relative TSR (50%) |
|
|
|
|
|
|
● |
ROIC* (25%) |
|
|
|
|
|
|
● |
Performance Cash* (25%) |
|
|
|
|
|
|
Payout is capped at 200% of target |
RSUs |
|
30 |
|
Equity |
|
RSUs vest 100% after three years from the grant
date |
|
|
|
|
|
|
Grant Date Value cannot exceed: |
|
|
|
|
|
|
● |
CEO 0.2% of actual 2014 Performance
Cash |
|
|
|
|
|
|
● |
Other Elected Officers
0.1% of actual 2014 Performance Cash |
* |
|
ROIC
and Performance Cash targets for PSUs and LTIP represent the amounts
reflected in the long-range plan for the applicable performance
period. |
In making its
determinations about the appropriate level of equity grants for 2014, the
Compensation Committee took into consideration a variety of factors, including
the number of awards outstanding and shares remaining available for issuance
under the Corporations equity incentive plans, the number of shares that would
be issued under contemplated awards over the range of potential performance
achievement, the total number of the Corporations outstanding shares, the
resulting implications for stockholder dilution, and the number of shares
granted to our executives per year. The Compensation Committee believes that the
Corporations equity compensation program appropriately balances its objectives
with those considerations.
PSU Awards (50% of the
LTI award)
PSU awards are calculated
by multiplying the overall target LTI award value by the weighting assigned to
the PSU element. The total PSU value is then multiplied by the weighting
assigned to each PSU component (50% to Relative TSR, 25% to ROIC, 25% to
Performance Cash). The number of PSUs granted is determined by the fair value of
each PSU element on the date of grant.
Each NEOs PSU target
number of shares is determined at the beginning of the three-year performance
period and the actual number of shares earned at the end of the period is
calculated based on our performance measured against the three financial
metrics: Relative TSR, ROIC, and Performance Cash.
The number of shares
granted at the end of the cycle can range from 0% to 200% of the applicable
target number of shares. If TSR is negative at the end of the performance cycle,
the rating for the Relative TSR measure is capped at 100%. In addition, the
maximum value that can be earned
under a PSU grant is 400% of the Fair Market Value on the date of grant times
the shares earned. The award calculation is formulaic and no adjustment can be
made to the final number of shares granted.
LTIP Awards (20% of the
LTI award)
LTIP awards are calculated
by multiplying the overall target LTI award value by the weighting assigned to
the LTIP element.
Each NEOs LTIP target is
determined at the beginning of the three-year performance period and the actual
award earned at the end of the period is calculated based on the same
performance measures as the PSUs: Relative TSR, ROIC, and Performance Cash.
Payouts can range from 0% to 200% of the applicable target. The award
calculation is formulaic and no adjustment can be made to the final payout
factor.
For the 20142016 LTIP
grants, any amount payable to a single participant in excess of $10 million will
be forfeited.
RSU Awards (30% of LTI
award)
RSU awards are calculated
by multiplying the overall target LTI award value by the weighting assigned to
the RSU element. The number of RSUs granted is determined by the fair value on
the date of grant.
All RSUs awarded to NEOs in
2014 were subject to forfeiture to the extent the grant date value of the RSUs
exceeded 0.2% of 2014 Performance Cash in the case of the CEO and 0.1% in the
case of each of the other NEOs. These performance requirements were satisfied
and no forfeitures occurred.
2015 Proxy
Statement |
|
|
|
43 |
Table of Contents
Executive
Compensation
Selection of Performance
Measures
The LTI performance metrics
approved by the Compensation Committee are measures that we believe most
effectively support our long-term business and strategic goals and directly tie
the long-term goals of our executive leadership team to the interests of our
stockholders. The measurements used for the financial component of our annual
incentive plan (Orders, Sales, Segment Operating Profit, and cash from
operations) also serve as the foundation for achieving our long-term goals such
that we must consistently achieve or exceed the Corporations annual goals in
order to achieve our LTI goals.
The selected LTI
performance metrics consist of Relative TSR (50% weight), ROIC (25% weight) and
Performance Cash (25% weight). We chose these three metrics as we believe that
they represent the best measures of value creation for the company over a
long-term period. And, we applied equal weighting to the market-based measure of
value creation, TSR, to what we believe are the best internal measures of value
creation, Performance Cash and ROIC.
We selected Relative TSR to
measure our performance against our industry peers in the S&P Aerospace
Index. Because every industry faces different challenges and opportunities, we
believe that comparing our TSR against peers facing a similar business
environment is preferred to those outside our industry. While the S&P
Aerospace Index is, in our judgment, the best index against which to compare our
Relative TSR, we recognize that it does not perfectly correlate to the
environment in which Lockheed Martin operates given some firms in the index are
almost entirely in the commercial aerospace business, some are entirely
government contractors, and some have a mixture of the two
businesses.
Because the Relative TSR
index is not perfectly aligned with the businesses in which Lockheed Martin
operates and because any number of macro-economic factors that could affect
market performance are beyond the control of the Corporation, we use ROIC and
Performance Cash as internal measures that can be directly affected by managements decisions. ROIC
measures how effectively we employ our capital over time, while our Performance
Cash over time provides the means for value creation through capital deployment.
By including a cash measure in both our annual and long-term incentive plans,
the plans also mitigate the risk of short-term cash strategies that do not
provide long-term value.
In tandem, we believe that
these metrics drive the behaviors of our management team in ways that will
create the most value for our stockholders.
Setting Goals for LTI
(PSUs and LTIP)
Our long-range planning
process is used to establish the target (100% level of payment) for the
Performance Cash and ROIC metrics in the PSU and LTIP grants. In setting minimum
and maximum levels of payment, we reviewed historical levels of performance
against long-range plan commitments, and conducted sensitivity analyses on
alternative outcomes focused on identifying likely minimum and maximum boundary
performance levels. Levels between 100% and the minimum and maximum levels were
derived using linear interpolation between the performance hurdles. As with our
annual incentive performance goals, PSU and LTIP payouts deteriorate more
rapidly as we move from target level to the minimum payout level than they
increase as we move from target level to maximum payout level. This asymmetry
reflects the importance we place on meeting our financial commitments.
The specific Performance
Cash and ROIC target values for the 20142016 PSU and LTIP plans are not
publicly disclosed at the time of grant due to the proprietary nature and
competitive sensitivity of the information. However, the method used to
calculate the awards will be based on the actual performance compared to the
Corporations 20142016 targets as shown below, which use straight-line
interpolation between points. The Compensation Committee does not have
discretion to adjust the results of the PSU and LTIP awards.
2014-2016 Performance Goals
Relative TSR
(50%)* |
|
Performance Cash
(25%) |
|
ROIC
(25%) |
Relative TSR Percentile |
Payout Factor |
|
Cash Performance Metric |
Payout Factor |
|
ROIC Performance Metric |
Payout Factor |
75th 100th |
200% |
|
Target
+ ≥ $2.0B |
200% |
|
Target
+ ≥ 160 bps |
200% |
60th |
150% |
|
Target + $1.5B |
175% |
|
Target + 120 bps |
175% |
50th |
100%
(Target) |
|
Target
+ $1.0B |
150% |
|
Target
+ 80 bps |
150% |
40th |
50% |
|
Target + $0.5B |
125% |
|
Target + 40 bps |
125% |
35th |
25% |
|
Target |
100% |
|
Target |
100% |
< 35th |
0% |
|
Target - $0.2B |
75% |
|
Target - 10 bps |
75% |
* Relative TSR performance is measured
against our industry peers in the S&P Aerospace Index. |
|
Target
- $0.5B |
50% |
|
Target
- 20 bps |
50% |
|
Target - $0.7B |
25% |
|
Target - 30 bps |
25% |
|
|
|
Target
- ≥ $1.0B |
0% |
|
Target
- ≥ 40 bps |
0% |
44 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
20122014
LTIP Award
The cash-based LTIP payout
factor for the performance period ended December 31, 2014, was calculated by
comparing actual corporate performance for the period January 1, 2012 through
December 31, 2014, against a table for each metric of payment levels from 0% to
200% (with the 100% payout level being considered target)
established at the beginning of the performance period in January 2012. The
award calculation is formulaic and no adjustment can be made to the final payout
factor. The final weighted payout factor for this performance period is shown
below. The S&P Industrial Index was used for the 20122014 Relative TSR goal
since that Index was specified at the time the awards were made.
Measure |
|
Performance Target |
|
Performance Result |
|
Payout Factor |
|
Weighting |
|
Weighted
Payout Factor |
TSR |
|
50th Percentile |
|
80th Percentile |
|
200% |
|
50% |
|
100.0% |
Performance Cash |
|
$10.3B |
|
$11.8B |
|
117.1% |
|
25% |
|
29.3% |
ROIC |
|
15.80% |
|
16.60% |
|
141.7% |
|
25% |
|
35.4% |
Total Payout Factor as a % of
Target |
|
|
|
|
|
|
|
|
|
164.7% |
Based on a payout factor of
164.7%, the following table shows the payouts under the 20122014
LTIP.
|
|
20122014
LTIP |
NEO |
|
Target ($) |
|
Payout ($) |
Ms. Hewson 1 |
|
1,380,000 |
|
2,272,860 |
Mr. Tanner |
|
1,620,000 |
|
2,668,140 |
Ms. Barbour 1 |
|
440,000 |
|
724,680 |
Mr. Carvalho 1 |
|
490,000 |
|
807,030 |
Ms.
Lavan |
|
950,000 |
|
1,564,650 |
(1) |
|
Payouts
are based on targets established while in 2012
roles. |
Benefit,
Retirement and Perquisite Programs
In addition to base salary
and annual and long-term incentive compensation, we offer a number of other
compensatory arrangements to our executive officers. These indirect elements of
executive compensation are not performance-based. The purpose for offering these
benefits is to provide an overall total rewards package that ensures security of
executives, are for business-related purposes, and are competitive with the
other companies with which we compete for talent.
Set forth below is a
summary of the benefit, retirement, and perquisite programs earned by our
NEOs.
Element |
|
Description |
Health, Welfare and
Retirement Benefits |
|
Our NEOs are eligible
for savings, pension, medical, and life insurance benefits under the plans
available to salaried, non-union employees. We also make available
supplemental pension and savings plans to employees (including the NEOs)
to make up for benefits that otherwise would be unavailable due to
Internal Revenue Service (IRS) limits on qualified plans. These plans
are restorative and do not provide an enhanced benefit. We also offer a
plan for the deferral of short-term and certain long-term incentive
compensation, which allows our executives to defer all or a portion of
their incentive compensation as part of their overall financial planning.
All NEOs are eligible for four weeks of vacation.
In 2014, we announced
that accruals for all employees (including the NEOs) under our defined
benefit plan will be frozen in two steps, with compensation accruals
frozen on January 1, 2016, and service accruals frozen on January 1, 2020.
Thereafter, retirement benefits will be earned through defined
contribution plans. |
2015 Proxy
Statement |
|
|
|
45 |
Table of Contents
Executive
Compensation
Element |
|
Description |
Perquisites and Security |
|
We provide limited
perquisites as a retention and recruiting tool to provide for the health,
safety, and business needs of our key executives. The perquisites provided
to NEOs for 2014 are described in footnotes to the Summary Compensation
Table on page 53. For security reasons, our Board has directed our CEO to
use the corporate aircraft for personal travel. As an additional element
of our security program, we provide home security to certain executives.
We believe this approach is consistent with security generally provided to
corporate executives in public companies in our industry.
We also have a
corporate policy to provide any employee who is the subject of a credible
and specific threat on account of his or her employment at the Corporation
with security that is appropriate to the nature and extent of the threat.
The Board believes it is important to provide this protection due to the
nature of our defense business and because it believes that an employee
should not be placed at personal risk due to his or her association with
the Corporations business. In the event of a threat to an executive
officer, the CBS Committee reviews and approves the security recommended
by our Chief Security Officer. We believe that providing personal security
in response to threats arising out of employment by the Corporation is
business-related. |
Tax
Assistance |
|
We do not have
agreements or severance arrangements that provide tax gross-ups (tax
assistance) for excise taxes imposed as a result of a change in control.
In 2014, we provided tax assistance for taxable business association
expenses, security expenses, and travel expenses for a family member
accompanying a NEO for a business reason. These items are reported in the
All Other Compensation column of our Summary Compensation Table on page
50 and are further identified in the chart included in the footnote to
that table on page 53. The IRS requires that the executive pay income tax
for these items even though the executive receives no cash in connection
with the item. Tax assistance for these perquisites took the form of
additional payments and was made for the purposes of ensuring that these
perquisites and the associated tax assistance was economically neutral to
the NEOs. We believe the items for which we provide tax assistance are
business-related and the associated tax liability imposed on the executive
would not have been incurred unless business reasons required the items be
provided. |
2015
Compensation Decisions |
At its January 2015
meeting, the Compensation Committee took the following actions with respect to
2015 compensation matters.
2015 Base
Salary
The Compensation Committee
approved the following 2015 salary increases based on the market rate and each
executives performance and time in position. For the CEO, the base salary
market rate used for 2015 decreased relative to 2014 as a result of new CEO incumbents in our comparator peer group
with lower base salaries. Consistent with our pay philosophy to consider moving
executives from 85% to 100% of the market rate (50th percentile) over
a three-year period assuming they perform effectively in their new roles, Ms.
Hewsons, Ms. Barbours, and Mr. Carvalhos base salaries were increased to
align with the market rate given it was the third year in their respective
roles. Mr. Tanner and Ms. Lavan received an increase in accordance with the
market rate and individual performance.
NEO |
|
2014 Base
Salary ($) |
|
2015 Base
Salary ($) |
|
% Increase |
Ms. Hewson |
|
1,520,000 |
|
1,565,000 |
|
2.96 |
Mr. Tanner |
|
890,209 |
|
925,000 |
|
3.91 |
Ms. Barbour |
|
654,050 |
|
705,000 |
|
7.79 |
Mr. Carvalho |
|
726,156 |
|
790,000 |
|
8.79 |
Ms.
Lavan |
|
706,198 |
|
735,000 |
|
4.08 |
46 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
Annual
Incentive Program
No changes were made to
annual incentive target percentages for any of the NEOs for 2015. The
multiplicative factors, weightings and performance rating scales did not change
from the 2014 design. The Compensation Committee approved the key corporate
commitments set forth below for purposes of assessing performance in
2015.
2015 Enterprise
Financial Goals (Weighted 60%)
The financial commitments
for the Enterprise Performance Factor are consistent with our long-range plan
commitments, and are the same ranges we provided as public guidance in January
2015 in our year-end earnings release. These commitments for 2015 are set forth
below.
2015
Commitments |
|
2015
Goal ($) |
Orders |
|
43,500M - 45,000M |
Sales |
|
43,500M - 45,000M |
Segment Operating Profit |
|
5,100M - 5,250M |
Cash from Operations |
|
≥ 5,000M |
For the purposes of
assessing performance under our annual incentive program, results may be
adjusted from reported amounts for the incremental benefits or impacts
associated with acquisitions or divestitures. Cash from operation results also
may be adjusted for unplanned pension contributions so that the impact on
incentive compensation is not a factor in the decision to make the additional
pension contribution.
2015 Enterprise
Strategic Goals (Weighted 20%)
● |
Meet all
Enterprise Focus Program objectives for 2015 and drive new enterprise performance through winning
new business, maintaining all
critical programs core to our business and adjacent market opportunities. |
|
|
● |
Identify
growth areas internationally and position the Corporation for successful entry and sustainable returns
in these areas. |
|
|
● |
Embed our
workforce planning strategies to define the capabilities needed for today and tomorrow,
delivering an integrated talent
management strategy that reinforces our culture of leadership and
performance. |
2015 Enterprise
Operational Goals (Weighted 20%)
● |
Achieve
Mission Success on identified critical program events. |
|
|
● |
No Red
Programs. |
Similar financial,
strategic, and operational goals were established by each Business Segment based
on the programs in their respective portfolios.
Subject to the Compensation
Committees consideration of any other relevant factors, the Enterprise goals
highlighted above will serve as the basis for the individual performance
assessment of the CEO for 2015; likewise, the Business Segment goals will serve
as the basis for the individual performance assessment of the EVPs for
2015.
2015 Long-Term Incentive
Award Opportunities
The Compensation Committee
approved 2015 LTI award opportunities for all executive officers commensurate
with their respective 2015 LTI market rate, the executives performance and time
in position.
For 2015, the LTI award
opportunity for EVPs and SVPs is allocated 50% toward PSUs, 20% toward LTIP, and
30% toward RSUs.
The same measures and
approach used for the 20142016 PSU and LTIP awards (see page 44) will be used
to determine the 20152017 PSU and LTIP awards, other than the
following:
● |
The
threshold payout for Performance Cash and ROIC will be 25% (eliminated payouts below
25%). |
|
|
● |
Similar to
PSUs, the LTIP payout factor for the Relative TSR measure will be capped at 100% if our TSR is
negative over the performance
period. |
For the 20152017 LTIP
grants, any amount payable to a single participant in excess of $10 million will
be forfeited.
2015 Proxy
Statement |
|
|
|
47 |
Table of Contents
Executive
Compensation
Other
Corporate Governance Considerations in
Compensation |
Our Use of
Independent Compensation Consultants
The Compensation Committee
believes that an independent compensation consultant can provide important
information about market practices, the types and amounts of compensation
offered to executives generally, and the role of corporate governance
considerations in making compensation decisions. The Compensation Committees
charter authorizes it to retain outside advisors that it believes are
appropriate to assist in evaluating executive compensation.
For 2014, the Compensation
Committee continued to retain Meridian as an independent compensation
consultant. In connection with its retention of Meridian, the Compensation
Committee considered the following factors in assessing Meridians
independence:
● |
Meridian
does not perform other services for the Corporation. |
|
|
● |
The
compensation paid to Meridian is less than 1% of Meridians revenues. |
|
|
● |
Meridian
has business ethics and insider trading and stock ownership policies, which are designed to
avoid conflicts of interest. |
|
|
● |
Meridian
employees supporting the engagement do not own Lockheed Martin stock or
securities. |
|
|
● |
Meridian
employees supporting the engagement have no business or personal relationships with members of
the Compensation Committee or
with any Lockheed Martin executive officer. |
At its February 2015
meeting, the Compensation Committee renewed the engagement of Meridian. At that
time, Meridian confirmed the continuing validity of each of the factors
described above.
The nature and scope of
Meridians engagement was determined by the Compensation Committee and not
limited in any way by management. A description of the services provided by
Meridian can be found on page 34.
Policy
Regarding Timing of Equity Grants
We have a corporate policy
statement concerning the grant of equity awards. Under that policy:
● |
The
Compensation Committee is responsible for determining the grant date of all equity
awards. |
|
|
● |
No equity
award may be backdated. The grant date will not be earlier than the date the Compensation
Committee approves the equity
award. A future date may be used if, among other reasons, the Compensation Committees action occurs
in proximity to the release of
earnings or during a trading blackout period. |
|
|
● |
Proposed
equity awards are presented to the Compensation Committee in January of each year. Off-cycle
awards may be considered in the
Compensation Committees discretion in special circumstances, which may include hiring, retention,
or acquisition
transactions. |
In addition, our existing
incentive performance award plan prohibits repricing of stock options or paying
cash for underwater stock options.
Clawback
and Other Protective Provisions
In January 2008, the Board
amended its Governance Guidelines to include what is commonly referred to as a
clawback policy. Under the policy (as incorporated in our award agreements), if
the Board determines that an officers intentional misconduct, gross negligence,
or failure to report such acts by another person:
● |
was a
contributing factor in requiring us to restate any of our financial statements; or |
|
|
● |
constituted fraud, bribery or other illegal act, or
contributed to another persons
fraud, bribery or other illegal act, which adversely impacted our financial position or
reputation; |
the Board shall take such
action as it deems in the best interests of the Corporation and necessary to
remedy the misconduct and prevent its recurrence. Among other actions, the Board
may seek to recover or require reimbursement of any amount awarded to the
officer after January 1, 2008, in the form of an annual incentive bonus or LTI
award.
To implement the policy on
clawbacks, to ensure that proprietary information is protected, and to
facilitate retention of key employees, the Compensation Committee amended our
annual incentive plan and included provisions in the award agreements for the
RSUs, stock options, PSUs and LTIP beginning with the January 2008 grants
setting forth the Corporations right to recapture amounts covered by the
policy.
In the event the Board
recoups incentive compensation under our policy, management intends to disclose
the aggregate amount of incentive compensation recovered, so long as the
underlying event has already been publicly disclosed in our filings with the
SEC. This disclosure would appear in the proxy statement following any such
Board action and would provide the aggregate amount of recovery for each event
if there is more than one applicable event.
The award agreements for
the NEOs also contain post-employment restrictive covenants. The post-employment
restrictions were incorporated into all executive level award agreements
beginning in 2011.
48 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
Anti-Hedging and Pledging Policy
Our policies prohibit
hedging and pledging of Lockheed Martin stock by all directors, officers, and
employees.
Stock
Ownership Requirements for Key Employees
To better align their
interests with the long-term interests of our stockholders, we expect our
officers (including the NEOs) and other members of management to maintain an
ownership interest in the Corporation. Our stock ownership requirements were
increased in 2012.
Title |
Annual
Base Salary Multiple |
Chairman, President and Chief Executive Officer |
6
times |
Chief Financial Officer |
4
times |
Executive Vice Presidents |
3
times |
Senior Vice Presidents |
2
times |
NEOs are required to
achieve ownership levels within five years of assuming their role and must hold
net shares from vested RSUs and PSUs and net shares from options exercised until
the value of the shares equals the specified multiple of base salary. The
securities counted toward their respective target threshold include common
stock, unvested RSUs, unvested PSUs at target (which will no longer be counted
towards ownership levels beginning with 2015 awards), and stock units under our
401(k) plans and other deferral plans. As of February 2, 2015, our NEOs exceeded
their respective ownership requirements.
Post-Employment, Change in Control, and Severance
Benefits
Our NEOs do not have
employment agreements. In January 2008, the Board approved the Lockheed Martin
Corporation Severance Benefit Plan For Certain Management Employees (renamed the
Lockheed Martin Corporation Executive Severance Plan). Benefits are payable
under this plan in the event of a company-initiated termination of employment
other than for cause. All of the NEOs are covered under the plan.
The benefit payable in a
lump sum under the plan is two weeks basic severance plus a supplemental payment
of one times the NEOs base salary and the equivalent of one years target
annual incentive bonus. For the CEO, the multiplier is 2.99 instead of
1.
NEOs participating in the
plan will also receive a lump sum payment to cover the cost of medical benefits
for one year in addition to outplacement and relocation services. To receive the
supplemental severance benefit, the NEO must execute a release of claims and an
agreement containing post-employment, non-compete, and non-solicitation
covenants comparable to those included in our NEOs LTI award
agreements.
With respect to LTI, upon
certain terminations of employment, including death, disability, retirement,
layoff, divestiture, or a change in control, the NEOs may be eligible for
continued vesting on the normal schedule, immediate payment of benefits
previously earned, or accelerated vesting of LTI in full or on a pro rata basis.
The type of event and the nature of the benefit determine which of these
approaches will apply. The purpose of these provisions is to protect previously
earned or granted benefits by making them available following the specified
event. We view the vesting (or continued vesting) to be an important retention
feature for senior-level employees. Because benefits paid at termination consist
of previously granted or earned benefits, we do not consider termination
benefits as a separate item in compensation decisions. Our LTI plans do not
provide for tax assistance.
In the event of a change in
control, our plans provide for the acceleration of the payment of the
nonqualified portion of earned pension benefits and nonqualified deferred
compensation. In the case of stock options and LTIP, for awards made prior to
January 1, 2013, vesting following a change in control is a single trigger
(occurs upon the change in control). In the case of RSUs granted prior to
January 1, 2013, the award agreements impose a double trigger (both a change
in control and termination of employment must occur).
Beginning in 2013, unless
the successor does not assume the award agreements, all LTI awards require a
double trigger for vesting to accelerate (both a change in control and a
qualifying termination of employment).
Tax
Deductibility of Executive Compensation
The Corporations tax
deduction for compensation paid to each of the NEOs who are subject to the
compensation deduction limits of Section 162(m) of the Internal Revenue Code is
capped at $1 million. Section 162(m) provides an exemption from the $1 million
cap for compensation qualifying as performance-based. We intend for our annual
incentive and LTI programs for NEOs to qualify as performance-based
compensation exempt from the $1 million cap on deductibility. The Corporation
and Compensation Committee reserve the right to provide compensation that does
not qualify under Section 162(m).
2015 Proxy
Statement |
|
|
|
49 |
Table of Contents
Executive
Compensation
Summary Compensation
Table
The following table shows
annual and long-term compensation awarded, earned, or paid for services in all
capacities to the NEOs for the fiscal year ended December 31, 2014 and, where
applicable, the prior fiscal years. Numbers have been rounded to the nearest
dollar.
Name and Principal Position |
|
Year |
|
Salary |
|
Bonus |
|
Stock Awards |
|
Option Awards |
|
Non-Equity Incentive
Plan Compensation |
|
Change in Pension
Value and Nonqualified Deferred Compensation Earnings |
|
All Other Compensation |
|
Total |
|
Total Without Change
In Pension Value* |
|
|
|
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
|
($) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
(j) |
|
|
Marillyn A.
Hewson Chairman,
President and Chief
Executive Officer |
|
2014 |
|
1,497,692 |
|
0 |
|
8,896,120 |
|
0 |
|
7,060,860 |
|
15,817,715 |
|
415,055 |
|
33,687,442 |
|
17,869,727 |
|
2013 |
|
1,368,654 |
|
0 |
|
8,160,021 |
|
0 |
|
5,979,710 |
|
9,409,264 |
|
238,150 |
|
25,155,799 |
|
15,746,535 |
|
2012 |
|
738,462 |
|
1,880,100 |
|
876,569 |
|
876,623 |
|
1,281,800 |
|
5,406,361 |
|
330,407 |
|
11,390,322 |
|
5,983,961 |
Bruce L. Tanner Executive Vice President and Chief Financial Officer |
|
2014 |
|
884,311 |
|
0 |
|
3,240,119 |
|
0 |
|
4,350,640 |
|
3,864,483 |
|
55,018 |
|
12,394,571 |
|
8,530,088 |
|
2013 |
|
838,586 |
|
0 |
|
2,950,538 |
|
0 |
|
3,384,234 |
|
865,902 |
|
74,779 |
|
8,114,039 |
|
7,248,137 |
|
2012 |
|
762,346 |
|
1,205,700 |
|
1,027,402 |
|
1,027,541 |
|
1,553,240 |
|
2,249,096 |
|
54,060 |
|
7,879,385 |
|
5,630,289 |
Sondra L. Barbour Executive Vice President Information Systems and Global Solutions |
|
2014 |
|
651,119 |
|
0 |
|
2,090,518 |
|
0 |
|
1,699,480 |
|
2,704,031 |
|
32,740 |
|
7,177,888 |
|
4,473,857 |
|
2013 |
|
593,752 |
|
0 |
|
1,928,340 |
|
0 |
|
1,450,165 |
|
918,254 |
|
28,377 |
|
4,918,888 |
|
4,000,634 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Orlando P. Carvalho Executive Vice President Aeronautics |
|
2014 |
|
720,836 |
|
0 |
|
2,405,027 |
|
0 |
|
1,949,430 |
|
3,694,876 |
|
72,074 |
|
8,842,243 |
|
5,147,367 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
Maryanne R. Lavan Senior Vice President, General Counsel and Corporate Secretary |
|
2014 |
|
702,287 |
|
0 |
|
2,120,053 |
|
0 |
|
2,723,950 |
|
2,745,209 |
|
48,970 |
|
8,340,469 |
|
5,595,260 |
|
2013 |
|
668,348 |
|
0 |
|
1,446,833 |
|
0 |
|
2,114,090 |
|
1,193,094 |
|
46,158 |
|
5,468,523 |
|
4,275,429 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
* See explanation of Total Without
Change In Pension Value on page 53.
Name and Principal
Position (Column (a)) |
Ms. Hewson was appointed
Chairman of the Board effective January 2014 and President and CEO effective
January 2013. She served as Executive Vice President Electronic Systems from
January 2010 to November 2012, and as President and Chief Operating Officer from
November 2012 to December 2012.
Information is provided for
2014 and 2013 only for Ms. Barbour and Ms. Lavan as they were not NEOs in
2012.
Information is provided for
2014 only for Mr. Carvalho as he was not a NEO in 2013 or 2012.
Salary is paid in arrears.
The amount of salary reported may vary from the approved annual rate of pay
because the salary reported in the table is based on the actual number of weekly
pay periods in a year.
50 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
Annual incentive bonuses
are reported in the year the bonus is earned. In years prior to 2013, the annual
incentive bonuses were listed in this column (d). Beginning with 2013, column
(g) includes the amount paid for annual incentive bonuses. We are reporting the
annual incentive in column (g) because the annual incentive bonus is based on an
assessment of performance against pre-established goals.
Stock Awards (Column
(e)) |
Represents the aggregate
grant date fair value computed in accordance with Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC) Topic 718 (ASC 718)
for RSUs granted in 2014, 2013 and 2012, and PSUs granted in 2014 and 2013
disregarding potential forfeitures based on service requirements.
|
2014 Grant Date Fair
Value RSUs ($) |
|
2014 Grant Date Fair
Value PSUs ($) |
Ms.
Hewson |
3,335,991 |
|
5,560,129 |
Mr. Tanner |
1,214,890 |
|
2,025,229 |
Ms.
Barbour |
783,885 |
|
1,306,633 |
Mr. Carvalho |
901,806 |
|
1,503,221 |
Ms.
Lavan |
794,899 |
|
1,325,154 |
The grant date fair value
of one 2014 RSU of $146.85, one 2013 RSU of $89.24, and one 2012 RSU of $81.93
is based on the closing price of one share of our stock on the date of grant,
discounted to take into account the deferral of dividends until
vesting.
Values for the PSUs, which
are subject to performance conditions, are based on the probable outcome on the
grant date of three separate performance conditions (approximately 50% of the
target shares are earned based upon
Relative TSR, approximately 25% of the target shares are earned based upon
Performance Cash, and approximately 25% of the target shares are earned based
upon ROIC).
The grant date fair value
of $134.15 for 2014 and $61.13 for 2013 for the TSR portion of the award was
determined using a Monte Carlo simulation model. The value was determined using
the historical stock price volatilities of the companies in our comparator group
over the most recent 2.93-year period for 2014 and 2.92-year period for 2013,
assuming dividends for each company are reinvested on a continuous basis and a
risk-free rate of interest of 0.73% for 2014 and 0.44% for 2013. The grant date
fair value of $146.85 for 2014 and $89.24 for 2013 for the Performance Cash and
ROIC portions of the awards is based on the closing price of one share of our
stock on the date of grant, discounted to take into account the deferral of
dividends until vesting.
The maximum grant date
values of the 2014 PSU awards, assuming a 200% maximum payout on all three
metrics are as follows: Ms. Hewson - $11,120,259; Mr. Tanner - $4,050,458; Ms.
Barbour - $2,613,267; Mr. Carvalho - $3,006,442; and Ms. Lavan -
$2,650,308.
The maximum grant date
values of the 2013 PSU awards, assuming a 200% maximum payout on all three
metrics as follows: Ms. Hewson - $10,200,142; Mr. Tanner - $3,688,103; Ms.
Barbour - $2,410,637; and Ms. Lavan - $482,045.
Option Awards (Column
(f)) |
We did not grant options in
2014 and 2013. For 2012, the amounts represent the aggregate grant date fair
value of options granted computed in accordance with ASC 718 using the closing
price of our stock on the date of grant and the Black-Scholes methodology using
the following assumptions:
|
|
2012 |
Closing price |
$ |
82.01 |
Grant date fair value |
$ |
10.57 |
Risk-free interest rate |
|
0.78 |
Dividend yield |
|
5.40 |
Volatility factor |
|
0.283 |
Expected option life |
|
5
years |
2015 Proxy
Statement |
|
|
|
51 |
Table of Contents
Executive
Compensation
Non-Equity Incentive
Plan Compensation (Column (g)) |
Beginning with 2013, column
(g) includes the amount paid for annual incentive bonuses. We report the annual
incentive bonus in column (g) because the annual incentive bonus is based on an
assessment of performance against pre-established goals. The Compensation
Committee will continue to use discretion to assess performance against
objectives established at the beginning of the year. We also report amounts
earned under our LTIP awards in the three-year period ending on December 31 of
the year reported in column (g) of
the table. For the three-year period ending December 31, 2012, 50 percent of the
amount shown is deferred as stock units by the Corporation for two years and
treated during that period as if it were invested in our common stock. Deferred
amounts (whether mandatory deferrals by the Corporation or voluntary deferrals
by the executive) are reported for the year earned and not when paid to the
executive. See the 2014 Nonqualified Deferred Compensation table on page
60.
The table below shows the
respective annual incentive bonus and amount earned under LTIP and reported for
2014 for each NEO:
|
Annual Incentive
Bonus ($) |
|
LTIP ($) |
Ms.
Hewson |
4,788,000 |
|
2,272,860 |
Mr. Tanner |
1,682,500 |
|
2,668,140 |
Ms.
Barbour |
974,800 |
|
724,680 |
Mr. Carvalho |
1,142,400 |
|
807,030 |
Ms.
Lavan |
1,159,300 |
|
1,564,650 |
Change in Pension Value
and Nonqualified Deferred Compensation Earnings (Column
(h)) |
Reports the present value
of the change in pension benefit for the NEO for the year reported (for example,
from December 31, 2013 to December 31, 2014) and is not the amount that will be
paid to the NEO.
The disclosure is based on
the Corporations final average compensation formula in its defined benefit plan
which multiplies a percentage (1.25% of compensation below the social security
wage base and 1.5% above that level) times years of service times the average of
the employees highest three years of compensation in the last ten years. This
is the same formula used for all participants accruing a pension benefit in
2014; none of the NEOs (including Ms. Hewson) has been credited with any extra
years of service or provided a benefit from a special or enhanced formula. Under
a three-year final average compensation formula, increasing service, age and
compensation will result in an increase in the earned benefit. When an employee
receives a compensation increase, the three-year average compensation that goes
into the formula likewise increases. The impact of that increase in the average
is greater with a long service employee because the pension formula multiplies
the now-higher average compensation by years of service. The year-over-year
value is also affected by the changes in interest rate and increased life
expectancy assumptions.
The amounts reported for
2012, 2013, and 2014 used a discount rate of 4.00%, 4.75%, and 4.00%,
respectively, as the interest rate which is the same rate we used to report
pension liabilities in our financial statements for each of those years. Using a
lower interest rate assumption results in a larger present value of accumulated
pension benefits and, therefore, results in a larger change in the accumulated
pension benefit than otherwise would be the case. The interest rate is
determined at December 31 of each year and the 75 basis point lower rate for
2014 is reflective of the downward trend in interest rates during the last
year.
Longevity assumptions are
used to estimate the life expectancy of plan participants during which they are
expected to receive benefit payments. Recent actuarial studies indicate life
expectancies are longer and have the resultant effect of increasing the total
expected benefit payments to plan participants. The amounts reported for 2014
reflect the use of new longevity assumptions, which results in a larger change
in the accumulated pension benefit than otherwise would be the case. We used the
same new longevity and interest rate assumptions to report pension liabilities
for all pension plan participants in our financial statements for 2014.
Approximately $5 million of the amount reported for Ms. Hewson for 2014 is
attributable to interest rate and longevity assumption changes. In the years
reported, there were no nonqualified deferred compensation earnings in the
numbers shown.
52 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
All Other Compensation
(Column (i)) |
Perquisites and other
personal benefits provided to the NEOs in 2014 included: security; annual
executive physicals; business association expenses; use of corporate aircraft
for personal travel; and travel for a family member accompanying the NEO while
on business travel. Not all of the listed perquisites or personal benefits were
provided to each NEO. In addition, the Corporation made available event tickets
and a company-provided car and driver for personal commuting, and access to club
memberships to some of the NEOs, but required the NEOs to reimburse the
Corporation for the incremental cost to the Corporation in 2014 of such items.
The cost of any category of the listed perquisites and personal benefits did not
exceed the greater of $25,000 or 10% of total perquisites and personal benefits
for any NEO, except for (i) security for Ms. Hewson ($73,362) and (ii) use of
the corporate aircraft for Ms. Hewson ($218,568). The incremental cost for use
of corporate aircraft for personal travel was calculated based on the total
personal travel flight hours multiplied by the estimated hourly aircraft
operating costs for 2014 (including fuel, maintenance, staff travel expenses,
and other variable costs, but excluding fixed capital costs for the aircraft,
hangar facilities, and staff salaries).
The amounts reported for
security include providing home security to some of our executives consistent
with what is provided to corporate executives in other public companies in our
industry. Security is also provided in accordance with our corporate policy to
provide any employee who is the subject of a credible and specific threat on
account of his or her employment at Lockheed Martin with security that is
appropriate to the nature and extent of the threat. We believe that providing
personal security in response to threats arising out of employment by the
Corporation is business-related.
In addition to perquisites,
column (i) also contains items of compensation listed in the following table.
All items are paid under broad-based programs for U.S. salaried employees except
for the tax assistance and the Lockheed Martin Corporation Supplemental Savings
Plan (NQSSP) match. Items include matching contributions made to eligible
universities, colleges, and other non-profit organizations under the
Corporations matching gift programs. Listed amounts may include contributions
made in 2015 to match 2014 executive contributions or actions as
applicable.
Other Items of Compensation
Included in All Other Compensation Column (i)
Name |
|
Tax Assistance
for Business-Related Items ($) |
|
Corporation
Matching Contribution to 401(k) Plan ($) |
|
Corporation
Matching Contribution to NQSSP (Nonqualified 401(k)
Plan) ($) |
|
Group
Life Insurance ($) |
|
Matching
Gift Programs ($) |
Ms. Hewson |
|
24,584 |
|
4,375 |
|
55,421 |
|
15,444 |
|
6,600 |
Mr. Tanner |
|
3,141 |
|
4,375 |
|
30,968 |
|
8,535 |
|
0 |
Ms. Barbour |
|
0 |
|
4,375 |
|
21,655 |
|
3,367 |
|
0 |
Mr. Carvalho |
|
17,785 |
|
10,340 |
|
0 |
|
6,883 |
|
0 |
Ms.
Lavan |
|
1,592 |
|
4,375 |
|
23,697 |
|
6,770 |
|
11,000 |
In 2014, the Corporation
provided tax assistance on business-related items associated with taxable
business association expenses, security expenses, and travel expenses for a
family member accompanying the NEO while on business travel.
*Total Without Change In
Pension Value |
The separate column
labelled Total Without Change in Pension Value shows total compensation as
required to be disclosed by the SEC in column (j) less the amount shown in
Change in Pension Value and Nonqualified Deferred Compensation Earnings in
column (h). The amounts shown in this column are not a substitute for the
amounts reported in the Total column, and differ substantially from the amounts
reported in the Total column for several reasons. The amount reported in column
(h) for Change in Pension Value is not current compensation and represents the
present value of an estimated stream of payments to be made following
retirement. The methodology used to report the Change in Pension Value under applicable accounting rules
is sensitive to assumptions about life expectancy and changes in the discount
rate determined at each year end, which are functions of economic factors and
actuarial calculations that are outside of the control of the Compensation
Committee. In 2014, the reduction in the discount rate used for pension plan
purposes and the increased life expectancy reflected in updated actuarial tables
released by the Society of Actuaries in 2014 was responsible for approximately
$5 million of the increase in the Change in Pension Value for the CEO.
2015 Proxy
Statement |
|
|
|
53 |
Table of Contents
Executive
Compensation
2014 Grants of
Plan-Based Awards
|
|
|
|
|
|
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan
Awards |
|
Estimated Future Payouts Under Equity Incentive Plan
Awards |
|
Grant
Date Fair Value of Stock Awards ($) |
Name |
|
Grant Date |
|
Approval Date |
|
Award Type |
|
Threshold ($) |
|
Target ($) |
|
Maximum ($) |
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
|
(a) |
|
(b) |
|
|
|
|
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(l) |
Marillyn A. Hewson |
|
- |
|
- |
|
MICP |
|
332,500 |
|
2,660,000 |
|
5,320,000 |
|
- |
|
- |
|
- |
|
0 |
|
|
1/27/2014 |
|
1/23/2014 |
|
RSU |
|
- |
|
- |
|
- |
|
0 |
|
22,717 |
|
22,717 |
|
3,335,991 |
|
|
- |
|
- |
|
LTIP |
|
4,633 |
|
2,224,000 |
|
4,448,000 |
|
- |
|
- |
|
- |
|
0 |
|
|
1/27/2014 |
|
1/23/2014 |
|
PSU |
|
- |
|
- |
|
- |
|
83 |
|
39,655 |
|
79,310 |
|
5,560,129 |
Bruce L. Tanner |
|
- |
|
- |
|
MICP |
|
116,840 |
|
934,719 |
|
1,869,438 |
|
- |
|
- |
|
- |
|
0 |
|
|
1/27/2014 |
|
1/23/2014 |
|
RSU |
|
- |
|
- |
|
- |
|
0 |
|
8,273 |
|
8,273 |
|
1,214,890 |
|
|
- |
|
- |
|
LTIP |
|
1,687 |
|
810,000 |
|
1,620,000 |
|
- |
|
- |
|
- |
|
0 |
|
|
1/27/2014 |
|
1/23/2014 |
|
PSU |
|
- |
|
- |
|
- |
|
30 |
|
14,444 |
|
28,888 |
|
2,025,229 |
Sondra L. Barbour |
|
- |
|
- |
|
MICP |
|
73,581 |
|
588,645 |
|
1,177,290 |
|
- |
|
- |
|
- |
|
0 |
|
|
1/27/2014 |
|
1/23/2014 |
|
RSU |
|
- |
|
- |
|
- |
|
0 |
|
5,338 |
|
5,338 |
|
783,885 |
|
|
- |
|
- |
|
LTIP |
|
1,089 |
|
522,600 |
|
1,045,200 |
|
- |
|
- |
|
- |
|
0 |
|
|
1/27/2014 |
|
1/23/2014 |
|
PSU |
|
- |
|
- |
|
- |
|
19 |
|
9,319 |
|
18,638 |
|
1,306,633 |
Orlando P. Carvalho |
|
- |
|
- |
|
MICP |
|
86,231 |
|
689,848 |
|
1,379,696 |
|
- |
|
- |
|
- |
|
0 |
|
|
1/27/2014 |
|
1/23/2014 |
|
RSU |
|
- |
|
- |
|
- |
|
0 |
|
6,141 |
|
6,141 |
|
901,806 |
|
|
- |
|
- |
|
LTIP |
|
1,253 |
|
601,300 |
|
1,202,600 |
|
- |
|
- |
|
- |
|
0 |
|
|
1/27/2014 |
|
1/23/2014 |
|
PSU |
|
- |
|
- |
|
- |
|
22 |
|
10,721 |
|
21,442 |
|
1,503,221 |
Maryanne R. Lavan |
|
- |
|
- |
|
MICP |
|
83,861 |
|
670,888 |
|
1,341,776 |
|
- |
|
- |
|
- |
|
0 |
|
|
1/27/2014 |
|
1/23/2014 |
|
RSU |
|
- |
|
- |
|
- |
|
0 |
|
5,413 |
|
5,413 |
|
794,899 |
|
|
- |
|
- |
|
LTIP |
|
1,104 |
|
530,000 |
|
1,060,000 |
|
- |
|
- |
|
- |
|
0 |
|
|
1/27/2014 |
|
1/23/2014 |
|
PSU |
|
- |
|
- |
|
- |
|
20 |
|
9,451 |
|
18,902 |
|
1,325,154 |
Estimated Future Payouts
Under Non-Equity Incentive Plan Awards (Columns (c), (d) and
(e)) |
Includes annual incentive
grants (MICP) for 2014 and LTIP grants for the 20142016 period ending December
31, 2016.
The MICP plan measures
performance over a one-year period and is described under Annual Incentive
beginning on page 38 under the CD&A. The threshold, or minimum amount
payable, is 12.5% of target while the maximum is 200% of target.
The LTIP plan measures
performance against three separate metrics described under 2014 Long-Term
Incentive Compensation in the CD&A on page 43. The threshold is the minimum
amount payable for a specified level of performance stated in the LTIP
award agreement. For the 20142016
plan, the threshold amount payable is 0.2083% of the target award. The maximum
award payable under the LTIP plan is 200% of target. Awards are subject to
forfeiture upon termination of employment prior to the end of the performance,
except in the event of retirement, death, disability, divestiture, or layoff. If
the event occurs prior to the end of the performance period, LTIP awards are
prorated. Following a change in control, the 20142016 LTIP awards immediately
vest at the target amount upon involuntary termination without cause or
voluntary termination with good reason or if the successor does not assume the
LTIP awards.
54 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
Estimated Future Payouts
Under Equity Incentive Plan Awards (Columns (f), (g) and
(h)) |
Shows the number of RSUs
granted by the Compensation Committee on January 27, 2014. The RSU grants made
to the NEOs were subject to forfeiture to the extent the value of the RSUs
granted for a recipient on the award date was greater than 0.20% for the CEO and
0.10% for each of the other NEOs of 2014 Performance Cash. Based on 2014
Performance Cash, none of the RSUs were forfeited. The RSUs vest on the third
anniversary of the date of grant or upon death, disability, divestiture, or
involuntary termination without cause or voluntary termination for good reason
following a change in control or if the RSUs are not assumed, upon the change in
control. If the employee retires or is laid off after July 27, 2014, but prior
to the third anniversary of the date of grant, the RSUs become nonforfeitable.
During the vesting period, dividend equivalents are accrued and subject to the
same vesting schedule as the underlying RSUs. If any tax withholding is required
on the 2014 RSUs or dividend equivalents during the vesting period (for example,
on account of retirement-eligibility), the RSUs provide for accelerated vesting
of the number of shares or dividend equivalents required to satisfy the tax
withholding. The award is then reduced either by the number of shares or by the
amount of accrued dividend equivalents that were accelerated for the tax
withholding.
Includes PSU grants for the
20142016 period ending December 31, 2016. At the end of the three-year
performance period, the amount earned is payable in shares of stock and cash
representing dividend equivalents accrued during the three-year performance
period. Awards are subject to forfeiture upon termination of employment prior to
the end of the performance period, except in the event of termination following
retirement, death, disability, divestiture, or layoff. If the event occurs after
July 27, 2014, but prior to the end of the performance period, PSU awards are
paid out at the end of the performance period on a prorated basis. Following a
change in control, the PSUs immediately vest at the target amount upon
involuntary termination without cause or voluntary termination with good reason
or if the successor does not assume the PSUs.
Shares are earned under the
PSU awards based upon performance against three separate metrics described under
PSU Awards beginning on page 43. If performance falls below the threshold
level of performance for a metric, no shares would be earned with respect to
that metric. Assuming any payment is earned, the minimum amount payable under
the PSU is 0.2083% of the target, the lowest level payable under one metric. The
maximum number of shares payable under the PSU is 200% of the target.
Grant Date Fair Value of
Stock Awards (Column (l)) |
Represents the aggregate
grant date fair value computed in accordance with FASB ASC 718 for RSUs and PSUs
granted in 2014 disregarding potential forfeitures based on service
requirements.
The grant date fair value
of the 2014 RSU grant is $146.85 per RSU, which is based on the closing price of
one share of our stock on the date of grant, discounted to take into account the
deferral of dividends until vesting.
The grant date fair value
for the PSUs, which are subject to performance conditions, is based on the
probable outcome of each of the three performance conditions. The grant date
fair value of $134.15 for the TSR
portion of the award is determined using a Monte Carlo simulation model. The
grant date fair value of $146.85 for the Performance Cash and ROIC portions of
the awards is based on the closing price of one share of our stock on the date
of grant, discounted to take into account the deferral of dividends until
vesting.
Columns (i), (j), and (k)
have been omitted because no stock options were granted by the Compensation
Committee in 2014.
2015 Proxy
Statement |
|
|
|
55 |
Table of Contents
Executive
Compensation
Outstanding Equity
Awards at 2014 Fiscal Year-End
|
|
Option
Awards |
|
Stock
Awards |
Name |
|
Number
of Securities Underlying Unexercised Options (#) Exercisable |
|
Number of Securities Underlying Unexercised Options
1 (#) Unexercisable |
|
|
Option Exercise Price ($) |
|
Option Expiration Date |
|
Number of Shares or Units
of Stock That Have Not Vested (#) |
|
|
Market
Value of Shares
or Units of Stock That
Have Not Vested 2,3 ($) |
|
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other Rights That
Have Not Vested 4 (#) |
|
|
Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units
or Other Rights That Have Not Vested 5 ($) |
(a) |
|
(b) |
|
(c) |
|
|
(e) |
|
(f) |
|
(g) |
|
|
(h) |
|
(i) |
|
|
(j) |
Marillyn A. Hewson |
|
55,290 |
|
27,645 |
6 |
|
82.01 |
|
1/28/2022 |
|
22,717 |
7 |
|
4,374,613 |
|
48,550 |
8 |
|
9,349,274 |
|
|
59,434 |
|
0 |
|
|
79.60 |
|
1/29/2021 |
|
34,289 |
9 |
|
6,603,033 |
|
133,437 |
10 |
|
25,695,963 |
|
|
45,700 |
|
0 |
|
|
74.89 |
|
1/31/2020 |
|
10,699 |
11 |
|
2,060,306 |
|
- |
|
|
- |
Bruce L. Tanner |
|
64,808 |
|
32,405 |
6 |
|
82.01 |
|
1/28/2022 |
|
8,273 |
7 |
|
1,593,132 |
|
17,684 |
8 |
|
3,405,408 |
|
|
64,531 |
|
0 |
|
|
79.60 |
|
1/29/2021 |
|
12,399 |
9 |
|
2,387,675 |
|
48,248 |
10 |
|
9,291,117 |
|
|
55,000 |
|
0 |
|
|
74.89 |
|
1/31/2020 |
|
12,540 |
11 |
|
2,414,828 |
|
- |
|
|
- |
|
|
81,700 |
|
0 |
|
|
82.52 |
|
1/25/2019 |
|
- |
|
|
- |
|
- |
|
|
- |
Sondra L. Barbour |
|
9,857 |
|
8,803 |
6 |
|
82.01 |
|
1/28/2022 |
|
5,338 |
7 |
|
1,027,939 |
|
11,410 |
8 |
|
2,197,224 |
|
|
0 |
|
0 |
|
|
79.60 |
|
1/29/2021 |
|
8,102 |
9 |
|
1,560,202 |
|
31,536 |
10 |
|
6,072,888 |
|
|
0 |
|
0 |
|
|
74.89 |
|
1/31/2020 |
|
3,406 |
11 |
|
655,893 |
|
- |
|
|
- |
|
|
31,200 |
|
0 |
|
|
82.52 |
|
1/25/2019 |
|
- |
|
|
- |
|
- |
|
|
- |
|
|
16,600 |
|
0 |
|
|
106.87 |
|
1/26/2018 |
|
- |
|
|
- |
|
- |
|
|
- |
|
|
9,400 |
|
0 |
|
|
96.06 |
|
1/29/2017 |
|
- |
|
|
- |
|
- |
|
|
- |
Orlando P. Carvalho |
|
19,802 |
|
9,903 |
6 |
|
82.01 |
|
1/28/2022 |
|
6,141 |
7 |
|
1,182,572 |
|
13,126 |
8 |
|
2,527,674 |
|
|
20,466 |
|
0 |
|
|
79.60 |
|
1/29/2021 |
|
6,712 |
9 |
|
1,292,530 |
|
3,144 |
10 |
|
605,440 |
|
|
15,300 |
|
0 |
|
|
74.89 |
|
1/31/2020 |
|
3,832 |
11 |
|
737,928 |
|
- |
|
|
- |
|
|
12,700 |
|
0 |
|
|
82.52 |
|
1/25/2019 |
|
- |
|
|
- |
|
- |
|
|
- |
Maryanne R. Lavan |
|
0 |
|
19,202 |
6 |
|
82.01 |
|
1/28/2022 |
|
5,413 |
7 |
|
1,042,381 |
|
11,570 |
8 |
|
2,228,035 |
|
|
14,518 |
|
0 |
|
|
79.60 |
|
1/29/2021 |
|
13,512 |
9 |
|
2,602,006 |
|
6,308 |
10 |
|
1,214,732 |
|
|
- |
|
- |
|
|
- |
|
- |
|
7,431 |
11 |
|
1,430,988 |
|
- |
|
|
- |
(1) |
Column
(d) omitted because none of the NEOs held options that qualified as equity
incentive plan awards at 2014 year-end. |
(2) |
We
reported RSUs granted in January 2014 as equity incentive awards in
columns (f) through (h) of the 2014 Grants of Plan-Based Awards table
because there was the potential for forfeiture based on failure to achieve
the performance metrics specified in the award agreements. For this table,
we reported the RSUs in columns (g) and (h) because the performance
feature of the RSU grants was satisfied at the end of
2014. |
(3) |
The
market value shown in column (h) is calculated by multiplying the number
of RSUs by the December 31, 2014 per share closing price of our stock
($192.57). |
(4) |
Represents PSUs granted on January 27, 2014 for the 20142016
performance period and on January 28, 2013 for the 20132015 performance
period; the PSUs are earned and paid out in shares of our stock at the end
of the three-year performance period based upon performance on three
separate metrics (Relative TSR, Performance Cash, and ROIC). The number of
shares of stock shown in column (i) is based upon the threshold level of
performance for each of the three metrics or, if performance to date on
the metric, has exceeded the threshold level (as is the case for 2014 and
2013), the estimated level of performance as of December 31, 2014.
Performance under each metric is determined separately, with the three
results added together to obtain the number of shares shown in column
(i). |
(5) |
The
market value shown in column (j) is calculated by multiplying the number
of PSUs reported in column (i) by the December 31, 2014 per share closing
price of our stock ($192.57). |
(6) |
Represents stock options granted on January 30, 2012, which vested
in three equal annual installments on January 30, 2013, January 30, 2014,
and January 30, 2015. |
(7) |
Represents RSUs granted on January 27, 2014, which vest January 27,
2017, except that vesting may occur earlier as described in connection
with the 2014 Grants of Plan-Based Awards table. |
(8) |
Represents PSUs granted on January 27, 2014 and which are earned
over a three-year period but provide for pro rata payments for certain
terminations as described in connection with the 2014 Grants of
Plan-Based Awards table. |
(9) |
Represents RSUs granted on January 28, 2013, which vest on January
28, 2016, except that vesting may occur earlier as described in connection
with the 2014 Grants of Plan-Based Awards table. |
(10) |
Represents PSUs granted on January 28, 2013 and which are earned
over a three-year period but provide for pro rata payments for certain
terminations as described in connection with the 2014 Grants of
Plan-Based Awards table. |
(11) |
Represents RSUs granted on January 30, 2012, which vested on
January 30, 2015. |
56 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
Option Exercises and
Stock Vested During 2014
|
Option
Awards |
|
Stock
Awards |
|
Name |
Number of Shares Acquired on
Exercise (#) |
|
Value Realized on Exercise
1 ($) |
|
Number of Shares Acquired on
Vesting (#) |
|
|
Value Realized on
Vesting ($) |
|
(a) |
(b) |
|
(c) |
|
(d) |
|
|
(e) |
|
Marillyn A.
Hewson |
70,167 |
|
5,118,636 |
|
9,771 |
2 |
|
1,474,542 |
3 |
Bruce L. Tanner |
0 |
|
0 |
|
10,609 |
2 |
|
1,601,004 |
3 |
Sondra L.
Barbour |
50,000 |
|
4,843,813 |
|
3,362 |
2 |
|
507,359 |
3 |
Orlando P. Carvalho |
13,100 |
|
868,355 |
|
3,363 |
2 |
|
507,510 |
3 |
Maryanne R.
Lavan |
44,200 |
|
3,944,794 |
|
6,497 |
2 |
|
980,462 |
3 |
(1) |
Value
realized was calculated based on the difference between the aggregate
exercise price of the options and the weighted average sale price per
share on the date of exercise and sale. |
(2) |
Vesting
on January 31, 2014 of RSUs granted on January 31, 2011. Number of shares
shown as vesting is prior to reduction in shares to satisfy tax
withholding requirements. |
(3) |
Value
realized was calculated based on the number of shares multiplied by the
per share closing market price of our common stock on the date of vesting
($150.91). |
Retirement
Plans
During 2014, the NEOs
participated in the Lockheed Martin Corporation Salaried Employee Retirement
Program (LMRP), which is a combination of several prior plans (collectively,
the Prior Plan) for salaried employees with some protected
benefits.
The calculation of
retirement benefits under the LMRP is determined by a formula that takes into
account the participants years of credited service and average compensation for
the highest three years of the last ten years of employment. Average
compensation includes the NEOs base salary, annual incentive bonuses, and lump
sum payments in lieu of a salary increase. NEOs must have either five years of
service or be actively employed by the Corporation at age 65 to vest in the
LMRP. Normal retirement age is 65; however, benefits are payable as early as age
55 (with five years of service) at a reduced amount or without reduction at age
60. Benefits are payable as a monthly annuity for the lifetime of the employee,
as a joint and survivor annuity, as a life annuity with a five or ten year
guarantee, or as a level income annuity.
The calculation of
retirement benefits under the Prior Plan is based on a number of formulas, some
of which take into account the participants years of credited service and pay
over the career of the NEO. Certain other formulas in the Prior Plan are based
upon the final average compensation and credited service of the employee. Pay under certain formulas
in the Prior Plan currently includes salary, commissions, overtime, shift
differential, lump sum pay in lieu of a salary increase, annual incentive
bonuses awarded that year, and 401(k) and pre-tax contributions. A portion of
the pension benefits for Mr. Tanner was earned under the Prior Plan.
Ms. Hewson, Mr. Tanner, Mr.
Carvalho, and Ms. Lavan were eligible for early retirement as of December 31,
2014. As of December 31, 2014, all of the NEOs were vested in the
LMRP.
During 2014, the NEOs also
participated in the Lockheed Martin Corporation Supplemental Retirement Plan
(Supplemental Pension), which is a restorative plan and provides benefits in
excess of the benefit payable under IRS rules through the LMRP, our
tax-qualified plan. See the footnote to column (b) to the 2014 Pension
Benefits table on page 58.
In July 2014, the
Corporation announced that the LMRP will be frozen, in two steps, with increases
in compensation no longer taken into account effective January 1, 2016 and
increases in service no longer taken into account effective January 1, 2020.
This change in plan structure also will carry over to the Supplemental Pension
benefit accruals available to the NEOs. Thereafter, retirement benefits will be
earned through defined contribution plans.
2015 Proxy
Statement |
|
|
|
57 |
Table of Contents
Executive
Compensation
2014 Pension
Benefits
Name |
|
Plan
Name |
|
Number of Years Credited
Service (#) |
|
Present Value
of Accumulated Benefit ($) |
|
Payments During Last Fiscal
Year ($) |
(a) |
|
(b) |
|
(c) |
|
(d) |
|
(e) |
Marillyn A. Hewson |
|
Lockheed Martin Corporation Salaried Employee Retirement
Program |
|
32.1 |
|
1,900,921 |
|
0 |
|
|
Lockheed Martin Corporation
Supplemental Retirement Plan |
|
|
|
36,669,580 |
|
0 |
Bruce L. Tanner |
|
Lockheed Martin Corporation Salaried Employee Retirement
Program |
|
32.1 |
|
1,486,354 |
|
0 |
|
|
Lockheed Martin Corporation
Supplemental Retirement Plan |
|
|
|
12,233,968 |
|
0 |
Sondra L. Barbour |
|
Lockheed Martin Corporation Salaried Employee Retirement
Program |
|
28.8 |
|
1,230,206 |
|
0 |
|
|
Lockheed Martin Corporation
Supplemental Retirement Plan |
|
|
|
5,941,041 |
|
0 |
Orlando P. Carvalho |
|
Lockheed Martin Corporation Salaried Employee Retirement
Program |
|
34.5 |
|
1,637,951 |
|
0 |
|
|
Lockheed Martin Corporation
Supplemental Retirement Plan |
|
|
|
8,899,526 |
|
0 |
Maryanne R. Lavan |
|
Lockheed Martin Corporation Salaried Employee Retirement
Program |
|
24.8 |
|
1,241,725 |
|
0 |
|
|
Lockheed Martin Corporation
Supplemental Retirement Plan |
|
|
|
7,199,702 |
|
0 |
The Supplemental Pension
uses the same formula for benefits as the tax-qualified plan uses for
calculating the NEOs benefit. Although all service recognized under the
tax-qualified plan is recognized under the Supplemental Pension, a benefit would
be earned under the Supplemental Pension only in years when the employees total accrued benefit would exceed
the benefit accrued under the tax-qualified plan. The Supplemental Pension
benefits are payable in the same form as benefits are paid under the LMRP,
except lump sum payments are available under the Supplemental
Pension.
Present
Value of Accumulated Benefit (Column (d)) |
The amounts in column (d)
were computed using the same assumptions we used to account for pension
liabilities in our financial statements and as described in Note 9 to our
financial statements contained in our 2014 Annual Report, except that the
amounts were calculated based on benefits commencing at age 60 (or current age
if greater). We used these ages rather than the plans normal retirement age of
65 because an employee may commence receiving pension benefits at age 60 without
any reduction for early commencement. A portion of Mr. Tanners benefit was
earned under grandfathered plans that apply a reduction for early commencement
at age 60. The amounts shown for Mr. Tanner reflect the reduction for early
commencement of the benefit. Amounts paid under our plans use assumptions
contained in the plans and may be different than those used for financial
statement reporting purposes.
Only the benefit payable
under the Supplemental Pension is payable in the form of a lump sum. If an
executive elected a lump sum payment, the amount of the lump sum would be based
on plan assumptions and not the assumptions used for financial statement
reporting purposes. As a result, the actual lump sum payment would be an amount
different than what is reported in this table. The age of the executive at
retirement would also impact the size of the lump sum payment. The amount using
plan assumptions is shown on the Potential Payments Upon Termination or Change
in Control table.
58 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
Nonqualified Deferred
Compensation
Participants in our
tax-qualified 401(k) plan may defer up to 25% of base salary. In addition, we
make a matching contribution equal to 50% of up to the first 8% of compensation
contributed by the participant. Employee and Corporation matching contributions
in excess of the Internal Revenue Code limitations are contributed to the NQSSP.
Employee and Corporation matching contributions are nonforfeitable at all times.
NQSSP contributions are credited with earnings or losses, as appropriate, based
on the investment option or options in which the account has been invested, as
elected by the participant. Each of the NQSSP investment options is available
under our tax-qualified 401(k) plan for salaried employees. The NQSSP provides
for payment following termination of employment in a lump sum or up to 25 annual
installments at the participants election. All amounts accumulated and unpaid
under the NQSSP must be paid in a lump sum within 15 calendar days following a
change in control.
The DMICP provides the
opportunity to defer, until termination of employment or beyond, the receipt of
all or a portion of annual incentive bonuses, LTIP awards, and amounts paid in
respect of the termination of the Lockheed Martin Post-Retirement Death Benefit
Plan. Employees may elect any of the investment funds available in the NQSSP
(with the exception of the Company Stock Fund) or two investment alternatives
available only under the DMICP for crediting earnings (losses). Under the DMICP
Stock Investment Option, earnings (losses) on deferred amounts will accrue at a
rate that tracks the performance of
our common stock, including reinvestment of dividends. Under the DMICP Interest
Investment Option, earnings accrue at a rate equivalent to the then published
rate for computing the present value of future benefits under Cost Accounting
Standards 415, Deferred Compensation (CAS 415 rate). The Interest Investment
Option was closed to new deferrals and transfers from other investment options
effective July 1, 2009. Amounts credited to the Stock Investment Option may not
be reallocated to other options. In addition, Stock Investment Option voluntary
deferrals will be paid in shares of our common stock upon distribution. Prior to
the 20112013 LTIP grant, 50% of any LTIP award was mandatorily deferred for two
years to the Stock Investment Option and subject to the continued employment
requirements of the award. Mandatory LTIP deferrals are paid in cash at the end
of two years or further deferred at the election of the executive. The two-year
mandatory deferral was eliminated for the current NEOs beginning with the
20112013 LTIP grant. For the 20132015 LTIP grant, any award is subject to a
one-year mandatory deferral to the extent the award value would exceed $10
million. For the 20142016 LTIP grant, the amount in excess of $10 million is
forfeited. The DMICP provides for payment in January or July following
termination of employment in a lump sum or up to 25 annual installments at the
NEOs election. All amounts accumulated under the DMICP must be paid in a lump
sum within 15 days following a change in control.
2015 Proxy
Statement |
|
|
|
59 |
Table of Contents
Executive
Compensation
2014 Nonqualified
Deferred Compensation
Name |
|
|
|
Executive Contributions in Last FY ($) |
|
Registrant Contributions in Last FY ($) |
|
Aggregate Earnings in Last FY ($) |
|
Aggregate Withdrawals/ Distributions ($) |
|
Aggregate Balance at Last
FYE ($) |
(a) |
|
|
|
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
Marillyn A. Hewson |
|
NQSSP |
|
346,382 |
|
55,421 |
|
80,521 |
|
0 |
|
2,730,412 |
|
|
DMICP (Bonus) |
|
3,100,064 |
|
0 |
|
691,184 |
|
0 |
|
12,809,333 |
|
|
DMICP (LTIP1 Mandatory) |
|
0 |
|
0 |
|
353,236 |
|
276,373 |
|
1,402,870 |
|
|
DMICP (LTIP2
Voluntary) |
|
276,373 |
|
0 |
|
390,131 |
|
0 |
|
5,170,469 |
|
|
TOTAL |
|
3,722,819 |
|
55,421 |
|
1,515,072 |
|
276,373 |
|
22,113,084 |
Bruce L. Tanner |
|
NQSSP |
|
193,550 |
|
30,968 |
|
453,989 |
|
0 |
|
3,204,844 |
|
|
DMICP (Bonus) |
|
0 |
|
0 |
|
280,862 |
|
0 |
|
1,392,177 |
|
|
DMICP (LTIP1 Mandatory) |
|
0 |
|
0 |
|
438,340 |
|
811,271 |
|
1,740,858 |
|
|
DMICP (LTIP2
Voluntary) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
TOTAL |
|
193,550 |
|
30,968 |
|
1,173,191 |
|
811,271 |
|
6,337,879 |
Sondra L. Barbour |
|
NQSSP |
|
135,344 |
|
21,655 |
|
69,703 |
|
0 |
|
811,207 |
|
|
DMICP (Bonus) |
|
0 |
|
0 |
|
40,244 |
|
0 |
|
159,864 |
|
|
DMICP (LTIP1 Mandatory) |
|
0 |
|
0 |
|
178,741 |
|
300,471 |
|
709,864 |
|
|
DMICP (LTIP2
Voluntary) |
|
0 |
|
0 |
|
79,084 |
|
0 |
|
314,079 |
|
|
TOTAL |
|
135,344 |
|
21,655 |
|
367,772 |
|
300,471 |
|
1,995,014 |
Orlando P. Carvalho |
|
NQSSP |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
DMICP (Bonus) |
|
0 |
|
0 |
|
44,300 |
|
0 |
|
182,261 |
|
|
DMICP (LTIP1 Mandatory) |
|
0 |
|
0 |
|
123,416 |
|
125,196 |
|
490,144 |
|
|
DMICP (LTIP2
Voluntary) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
TOTAL |
|
0 |
|
0 |
|
167,716 |
|
125,196 |
|
672,405 |
Maryanne R. Lavan |
|
NQSSP |
|
100,712 |
|
23,697 |
|
151,249 |
|
0 |
|
1,647,752 |
|
|
DMICP (Bonus) |
|
19,043 |
|
0 |
|
228,969 |
|
0 |
|
918,609 |
|
|
DMICP (LTIP1 Mandatory) |
|
0 |
|
0 |
|
89,370 |
|
150,235 |
|
354,932 |
|
|
DMICP (LTIP2
Voluntary) |
|
24,521 |
|
0 |
|
150,187 |
|
0 |
|
661,625 |
|
|
TOTAL |
|
144,276 |
|
23,697 |
|
619,775 |
|
150,235 |
|
3,582,918 |
This table reports
compensation earned by the NEOs and deferred under our NQSSP and DMICP. The
NQSSP is a nonqualified 401(k) plan with an employer match on a portion of the
salary deferral. Three types of compensation may be deferred into the
DMICP:
● |
Annual incentive
bonus (DMICP (Bonus)). |
|
|
● |
Amounts earned under
our LTIP program but mandatorily deferred into company stock for two years
(and subject to forfeiture) (DMICP (LTIP1 Mandatory)). |
|
|
● |
Amounts payable under
our LTIP program and voluntarily deferred (DMICP (LTIP2 Voluntary)).
|
|
|
Executive Contributions in Last Fiscal Year (Column
(b)) |
Includes 2014 salary
deferrals to NQSSP, annual incentive bonus paid in 2014 for 2013 performance
deferred to DMICP, and voluntary deferrals of LTIP for the 20112013 period to
the DMICP. The table reflects the year in which the deferral is credited to the
NEOs account (2014) and not the year in which it was earned (2013).
60 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
Registrant Contributions in Last Fiscal Year
(Column (c)) |
Includes 2014 Corporation
matching contributions to NQSSP. The NQSSP match is also included in column (i)
of the Summary Compensation Table. The table reflects the year in which the
deferral is credited to the NEOs account (2014) and not the year in which it
was earned (2013).
Aggregate Withdrawals/Distributions (Column
(e)) |
Includes distributions of
mandatory LTIP deferral from the 2009-2011 period in January 2014 following the
end of the two-year deferral period.
Aggregate Balance at Last Fiscal Year End (Column
(f)) |
The following table lists
the amounts reported as executive or registrant contributions in columns (b) and
(c) of the 2014 Nonqualified Deferred Compensation table that are also
reported as compensation in the Summary Compensation Table for 2014. These
contributions consist of NEO and Corporation contributions made to the NQSSP for
service in 2014. Contributions with respect to 2014 performance deferred in 2015
(annual incentive bonus and LTIP) are
not included as these amounts are not credited until 2015, and are not included
in column (f). The following table also lists the amounts reported in column (f)
as part of the Aggregate Balance at Last FYE (2014) that is reported as
compensation for prior years in the Summary Compensation Table for years
beginning with 2006. For 2014, there were no earnings in excess of 120% of the
applicable federal rate.
|
|
|
|
Of Amount Reported in
Column (f) |
Name |
|
Aggregate Balance at December
31, 2014 in Column (f) ($) |
|
NEO and Corporation Contributions
to NQSSP Reported in Summary Compensation Table for
2014 ($) |
|
Amount Reported in
Summary Compensation Table for Prior Years (Beginning with
2006) ($) |
Ms. Hewson |
|
22,113,084 |
|
401,803 |
|
7,839,595 |
Mr. Tanner |
|
6,337,879 |
|
224,518 |
|
2,842,073 |
Ms. Barbour |
|
1,995,014 |
|
156,999 |
|
144,129 |
Mr. Carvalho |
|
672,405 |
|
0 |
|
0 |
Ms. Lavan |
|
3,582,918 |
|
124,409 |
|
146,973 |
2015 Proxy
Statement |
|
|
|
61 |
Table of Contents
Executive
Compensation
Potential Payments Upon
Termination or Change in Control
The table below summarizes
the benefits that become payable to a NEO at, following, or in connection with
any termination, including resignation, severance, retirement, or a constructive
termination of a NEO, or a change in control under the terms of our benefit
plans.
SUMMARY OF PAYMENT
TRIGGERS |
PENSION-QUALIFIED1 |
Retirement - Annuity payable on a reduced basis at age
55; annuity payable on a non-reduced basis at age 60; steeper reduction
for early commencement at age 55 for terminations prior to age 55 than for
terminations after age 55.
Change in Control - No acceleration.
Death/Disability/Layoff - Spousal annuity benefit as required by law
in event of death unless waived by participant. For either (i) disability
between age 53 and 55 with eight years of service or (ii) layoff between
age 53 and 55 with eight years of service or before age 55 with 25 years
of service, participant is eligible for the more favorable actuarial
reductions for participants terminating after age 55.
Divestiture2 - No provisions; absent a negotiated transfer of liability to buyer,
treated as retirement or termination.
Termination/Resignation - Annuity payable on a reduced basis at age
55; annuity payable on a non-reduced basis at age 60; steeper reduction
for early commencement at age 55 for terminations prior to age 55 than for
terminations after age 55.
SUPPLEMENTAL
PENSION1
Retirement - Annuity or lump sum at later of age 55 or
termination.
Change in Control - Lump sum.
Death/Disability/Layoff - Annuity or lump sum at later of age 55 or
termination.
Divestiture2 - No provisions; absent a negotiated transfer of liability to buyer,
treated as retirement or termination.
Termination/Resignation - Annuity or lump sum. |
LTIP |
Retirement/Death/Disability/Layoff
- Prorated payment at the end
of the three-year performance period for retirement, death, disability, or
layoff during that period. Immediate payment for retirement, death,
disability, or layoff during the mandatory deferral period (if applicable)
based on closing price of our stock on date of triggering
event.
Change in Control - Immediate payment at target for change in
control event occurring during performance cycle if award is not assumed
by buyer; immediate payment at target following involuntary termination
without cause or voluntary termination with good reason within 24 months
of change in control during performance cycle if award is assumed by
buyer.
Divestiture2 - Prorated payment at the end of the three-year performance period
for divestiture during that period.
Termination/Resignation - Forfeited if termination occurs prior to
becoming retirement-eligible; termination on or after (i) age 55 and ten
years of service or (ii) age 65 treated as
retirement-eligible. |
OPTIONS |
Retirement - Forfeit unvested options if retirement
occurs prior to one-year anniversary of date of grant. If retirement
occurs after one-year anniversary of date of grant, forfeit unvested
options and vested options expire at ten-year term.
Change in Control - Immediate vesting.
Death/Disability/Layoff - Immediate vesting in event of
death/disability. In the event of layoff, forfeit unvested options if
layoff occurs prior to one-year anniversary of date of grant.
If layoff occurs after one-year anniversary of date of grant,
forfeit unvested options and vested options expire at the end of ten-year
term.
Divestiture2 - Term of options limited to five years; options become exercisable
on date the options would have otherwise vested.
Termination/Resignation - Vested options expire 30 days after
termination or resignation. Forfeit unvested options if termination occurs
prior to age 55; resignation on or after age 55 treated as
retirement. |
62 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
RSUs |
Retirement - For 2012 awards, vest in one-third
increments for each full year of service following date of grant.
Beginning with 2013 award, continued vesting subject to six-month minimum
service from date of grant.
Change in Control - For 2012 awards, immediate vesting of RSUs
and dividend equivalents on effective date of termination of employment
following change in control. Beginning with 2013 awards, immediate vesting
if not assumed by buyer. If assumed by buyer, immediate vesting following
involuntary termination without cause or voluntary termination with good
reason within 24 months of change in control.
Death/Disability/Layoff - For 2012 awards, vest in one-third
increments for each full year of service following date of grant.
Beginning with 2013 award, continued vesting after layoff, subject to
six-month minimum service from date of
grant. For all awards, immediate vesting following death or
disability.
Divestiture2 - Immediate vesting.
Termination/Resignation - Forfeit unvested RSUs and dividend equivalents if termination
occurs prior to becoming retirement-eligible; for 2012 awards, termination
on or after (i) age 55 and five years of service or (ii) age 65 treated as
retirement-eligible. Beginning with 2013 awards, termination on or after
(i) age 55 and ten years of service or (ii) age 65 with at least six
months of service during the performance cycle is treated as
retirement-eligible. |
PSUs |
Retirement - Prorated payment of PSUs and dividend
equivalents at the end of the three-year performance period for retirement
during that period subject to six-month minimum service from date of
grant.
Change in Control - Immediate payment of PSUs and dividend
equivalents at target if award is not assumed by buyer. If award is
assumed by buyer, immediate payment at target following involuntary
termination without cause or voluntary termination with good reason within
24 months of change in control.
Death/Disability/Layoff - Prorated payment of PSUs and dividend
equivalents at the end of the three-year performance period for death,
disability, or layoff during
that period subject to six-month minimum service from date of grant in the
case of layoff.
Divestiture2 - Prorated payment of PSUs and dividend equivalents at the end of the
three-year performance period for divestiture during that period.
Termination/Resignation
- Forfeit PSUs and dividend
equivalents if termination occurs prior to becoming retirement-eligible;
termination on or after (i) age 55 and ten years of service or (ii) age 65
treated as retirement-eligible. |
EXECUTIVE
SEVERANCE PLAN |
Retirement - No payment.
Change in Control - No payment unless terminated.
Death/Disability
- No payment for death or
disability.
Layoff - Payment of a lump sum amount equal to a
multiple of salary, MICP, and health care continuation coverage cost and
outplacement and relocation
assistance. The multiple of salary and MICP for the CEO is 2.99; for all
other NEOs it is 1.0.
Divestiture2 - No payment.
Termination/Resignation - No payment. |
ANNUAL INCENTIVE
BONUS3 |
Retirement - Payment may be prorated for retirement
during the year with six months of participation in the year.
Change in Control - No provision.
Death/Disability/Layoff - Payment may be prorated for death,
disability, or layoff during the year with six months of participation in
the year.
Divestiture2 - No provision.
Termination/Resignation - Eligible for prorated award if termination/
resignation occurs after December 1 with six months of participation in
the year. |
DMICP4 |
Retirement - Lump sum or installment payment in
accordance with NEO elections.
Change in Control - Immediate lump sum payment.
Death/Disability/Layoff - Lump sum or installment payment in
accordance with NEO elections, except lump sum only for layoff prior to
age 55.
Divestiture2 - Follows termination provisions.
Termination/Resignation - Lump sum if termination is prior to age 55;
after age 55, lump sum or installment payment in accordance with NEO
elections. |
NQSSP4 |
Retirement - Lump sum or installment payment in
accordance with NEO elections.
Change in Control - Immediate lump sum payment
Death/Disability/Layoff - Lump sum for death; for disability or
layoff, lump sum or installment payment in accordance with NEO
elections.
Divestiture2 - Lump sum or installment payment in accordance with NEO
elections.
Termination/Resignation - Lump sum or installment payment in
accordance with NEO
elections. |
(1) |
See
2014 Pension Benefits table on page 58 for present value of accumulated
benefit. |
(2) |
Divestiture is defined as a transaction which results in the
transfer of control of a business operation to any person, corporation,
association, partnership, joint venture, or other business entity of which
less than 50% of the voting stock or other equity interests (in the case
of entities other than corporations) is owned or controlled directly or
indirectly by us, one or more of our subsidiaries, or by a combination
thereof following the transaction. |
(3) |
See
Compensation Discussion and Analysis commencing on page 30 for
discussion of annual incentive bonus payment calculation. |
(4) |
See
Aggregate Balance at Last FYE column in 2014 Nonqualified Deferred
Compensation table on page 60 for amount payable. |
|
2015 Proxy
Statement |
|
|
|
63 |
Table of Contents
Executive
Compensation
The following table
quantifies the payments under our executive compensation programs as a result of
a change in vesting provisions in stock options, RSUs, and LTIP awards and the
lump sum payable under the Supplemental Pension that would be made assuming a
termination event had occurred on December 31, 2014. Payments under other plans
do not change as a result of the termination event and quantification of those
payments are found elsewhere in this Proxy Statement or are paid under plans
available generally to salaried employees. Numbers have been rounded to the
nearest dollar.
Potential Payments Upon
Termination or Change in Control
Name |
|
|
|
Retirement ($) |
|
Change In Control ($) |
|
Death/ Disability ($) |
|
Layoff ($) |
|
Divestiture ($) |
|
Termination/ Resignation ($) |
Marillyn A. Hewson |
|
Supplemental Pension |
|
35,596,156 |
|
35,596,156 |
|
35,596,156 |
|
35,596,156 |
|
35,596,156 |
|
35,596,156 |
|
|
LTIP |
|
0 |
|
4,264,000 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Options |
|
0 |
|
3,056,431 |
|
3,056,431 |
|
0 |
|
3,056,431 |
|
0 |
|
|
RSUs |
|
1,476,391 |
|
13,669,096 |
|
13,669,096 |
|
1,476,391 |
|
13,669,096 |
|
1,476,391 |
|
|
PSUs |
|
0 |
|
22,111,693 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Executive Severance |
|
0 |
|
0 |
|
0 |
|
12,523,190 |
|
0 |
|
0 |
|
|
TOTAL |
|
37,072,547 |
|
78,697,376 |
|
52,321,683 |
|
49,595,736 |
|
52,321,683 |
|
37,072,547 |
Bruce L. Tanner |
|
Supplemental Pension |
|
11,849,720 |
|
11,849,720 |
|
11,849,720 |
|
11,849,720 |
|
11,849,720 |
|
11,849,720 |
|
|
LTIP |
|
0 |
|
1,548,000 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Options |
|
0 |
|
3,582,697 |
|
3,582,697 |
|
0 |
|
3,582,697 |
|
0 |
|
|
RSUs |
|
1,730,436 |
|
6,749,218 |
|
6,749,218 |
|
1,730,436 |
|
6,749,218 |
|
1,730,436 |
|
|
PSUs |
|
0 |
|
8,015,958 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Executive Severance |
|
0 |
|
0 |
|
0 |
|
1,843,474 |
|
0 |
|
0 |
|
|
TOTAL |
|
13,580,156 |
|
31,745,593 |
|
22,181,635 |
|
15,423,630 |
|
22,181,635 |
|
13,580,156 |
Sondra L. Barbour |
|
Supplemental Pension |
|
0 |
|
5,630,266 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
LTIP |
|
0 |
|
1,004,600 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Options |
|
0 |
|
973,260 |
|
973,260 |
|
0 |
|
973,260 |
|
0 |
|
|
RSUs |
|
0 |
|
3,405,662 |
|
3,405,662 |
|
470,005 |
|
3,405,662 |
|
0 |
|
|
PSUs |
|
0 |
|
5,215,299 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Executive Severance |
|
0 |
|
0 |
|
0 |
|
1,268,239 |
|
0 |
|
0 |
|
|
TOTAL |
|
0 |
|
16,229,087 |
|
4,378,922 |
|
1,738,244 |
|
4,378,922 |
|
0 |
Orlando P. Carvalho |
|
Supplemental Pension |
|
8,452,745 |
|
8,452,745 |
|
8,452,745 |
|
8,452,745 |
|
8,452,745 |
|
8,452,745 |
|
|
LTIP |
|
0 |
|
1,080,300 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Options |
|
0 |
|
1,094,876 |
|
1,094,876 |
|
0 |
|
1,094,876 |
|
0 |
|
|
RSUs |
|
528,790 |
|
3,370,934 |
|
3,370,934 |
|
528,790 |
|
3,370,934 |
|
528,790 |
|
|
PSUs |
|
0 |
|
2,459,304 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Executive Severance |
|
0 |
|
0 |
|
0 |
|
1,444,968 |
|
0 |
|
0 |
|
|
TOTAL |
|
8,981,535 |
|
16,458,159 |
|
12,918,555 |
|
10,426,503 |
|
12,918,555 |
|
8,981,535 |
Maryanne R. Lavan |
|
Supplemental Pension |
|
7,237,874 |
|
7,237,874 |
|
7,237,874 |
|
7,237,874 |
|
7,237,874 |
|
7,237,874 |
|
|
LTIP |
|
0 |
|
1,495,000 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Options |
|
0 |
|
2,122,973 |
|
2,122,973 |
|
0 |
|
2,122,973 |
|
0 |
|
|
RSUs |
|
1,025,428 |
|
5,351,016 |
|
5,351,016 |
|
1,025,428 |
|
5,351,016 |
|
1,025,428 |
|
|
PSUs |
|
0 |
|
2,545,699 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Executive Severance |
|
0 |
|
0 |
|
0 |
|
1,402,630 |
|
0 |
|
0 |
|
|
TOTAL |
|
8,263,302 |
|
18,752,562 |
|
14,711,863 |
|
9,665,932 |
|
14,711,863 |
|
8,263,302 |
Resignation by executives
who are eligible for retirement, for purposes of this table, is treated as
retirement. Ms. Barbour was not eligible for retirement on December 31, 2014;
Ms. Hewson, Mr. Tanner, Mr. Carvalho, and Ms. Lavan were eligible for retirement
as of that date.
64 www.lockheedmartin.com/investor
Table of Contents
Executive
Compensation
The Supplemental Pension
lump sum value was calculated using plan assumptions and age of the executive as
of December 31, 2014. Payments under the Supplemental Pension do not commence
prior to age 55, except in the case of a change in control. Ms. Barbour had not
attained age 55 by December 31, 2014, and would have been eligible for an
immediate lump sum for a termination only in the event of a change in control.
The lump sum payable upon change in control has been reduced to reflect early
payment. The Supplemental Pension
assumptions in effect for December 31, 2014, are a 4.00% discount rate (2.00%
for benefits earned prior to 2005) and use of the 1983 Group Annuity Mortality
table. The Supplemental Pension assumptions are set forth in the plan document
and are different than the assumptions used to calculate the accrued benefit
reported in the 2014 Pension Benefits or Summary Compensation tables or for
financial reporting. In the event of any other termination, Ms. Barbours
accrued pension benefit would be payable at age 55.
Long-Term Incentive Performance
Awards |
The table shows an amount
payable only in the event of a change in control trigger event for the
2013-2015 and 2014-2016 LTIP performance
periods. For a trigger event based upon death, disability, retirement (or
resignation after satisfying the requirements for retirement), layoff or
divestitures on December 31, 2014, amounts (if any) for the 2013-2015
and 2014-2016
LTIP performance periods would not be payable until after the end of the
performance period. The table does not include amounts for the 2012-2014
cycle or mandatory deferrals for the 2010-2012 cycle to the extent
these amounts became payable on December 31, 2014 independent of the occurrence
of any of the listed trigger events.
The value attributable to
the vesting of stock options was based upon the number of unvested stock options
multiplied by the difference between the closing price of our stock on December
31, 2014 ($192.57) and the option exercise price. As of December 31, 2014,
portions of stock option grants made in 2012 were unvested. See Outstanding
Equity Awards at 2014 Fiscal Year-End table for terms of option grants. We did
not grant stock options in 2013 or 2014.
The table includes the
portion of RSUs granted in 2012 that vest on a prorated basis for a retirement
or layoff occurring on December 31, 2014. All 2013 and 2014 RSUs would continue
to vest for retirement or layoff occurring on December 31, 2014, and would not
become payable until January 2016 and January 2017, respectively, and are not included in the table.
For a change of control (assuming satisfaction of the double trigger), death,
disability or divestiture, the reported value of the RSUs was based upon the
closing price of our stock on December 31, 2014 ($192.57) plus accrued dividend
equivalents.
The table shows an amount
payable only in the event of a change in control trigger event for the 20132015
and 2014-2016 performance periods. The amount shown for the
PSUs upon a change in control is the target level of the shares valued using the
closing price of our stock on December 31, 2014 ($192.57) plus accrued dividend
equivalents. The table assumes the double trigger occurred. For a trigger event based upon death, disability,
retirement (or resignation after satisfying the requirements for retirement),
layoff or divestitures on December 31, 2014, amounts (if any) for the 20132015
and 2014-2016 PSU performance periods would not be payable
until after at the end of the applicable performance period.
The total amounts projected
for severance payments due to layoff are based on the plan approved by the Board
in 2008. It includes payment for salary and target annual incentive equivalent
to one-years payment (2.99 years for Ms. Hewson), estimated costs for benefits
continuation for one year, outplacement services, and relocation assistance (if
required under the plan terms).
2015 Proxy
Statement |
|
|
|
65 |
Table of Contents
DIRECTOR
COMPENSATION
2014
Annual Directors Compensation (Non-Employee
Directors) |
Annual Cash Retainer |
$130,000 |
Annual Equity Retainer 1 |
$130,000 |
Audit Committee Chairman Fees |
$25,000 |
Management Development and Compensation |
$20,000 |
Committee Chairman Fees |
|
Other Committee Chairman Fees |
$15,000 |
Lead
Director Fees |
$25,000 |
Deferred Compensation Plan |
Deferral plan for |
|
cash retainer |
Stock Ownership Guidelines Ownership in common stock or stock
units with a value equivalent to five times the annual cash retainer
within five years of joining the Board 2 |
Travel Accident Insurance |
$1,000,000 |
Director Education |
Reimbursed for |
|
costs
and expenses |
(1) |
Payable
under the Lockheed Martin Corporation 2009 Directors Equity Plan
(Directors Equity Plan). |
(2) |
Each
non-employee director has exceeded the stock ownership
guidelines. |
The non-employee director
annual retainer of $260,000 (not including Lead Director or committee chairmen
fees) is paid 50% in cash and 50% in equity. The cash portion of the
non-employee director retainer is paid quarterly. The Directors Equity Plan
governs the equity portion of the non-employee director retainer. For 2014, each
non-employee director had the opportunity to elect to receive:
● |
A number of stock
units with an aggregate grant date fair value of $130,000 on January 27,
2014; or |
|
|
● |
Options to purchase a
number of shares of Lockheed Martin common stock, which options had an
aggregate grant date fair value equal to $130,000 on January 27, 2014;
or |
|
|
● |
A combination of
stock units with an aggregate grant date fair value equal to $65,000 and
options to purchase a number of shares of Lockheed Martin common stock,
which options had an aggregate grant date fair value equal to $65,000 on
January 27, 2014. |
In June 2014, the Board
resolved that each non-employee director would elect to receive the equity
portion of the retainer in the form of stock units for each year beginning with
2015 and would not elect options to purchase shares unless the Board resolution
is further amended or revoked.
In 2014, the Board reviewed
publicly available data for the companies in our peer group relating to
committee fees. It determined that the Corporations committee chairman fees
were lower than the peer group median. Based on this information, the Board
approved an increase in the annual rate for each committee chairman beginning
July 1, 2014 to the rate set forth in
the chart with the increase to be effective on a pro rata basis with half of the
increase applicable to the period from July 1, 2014 to December 31,
2014.
The Directors Equity Plan
provides that a director eligible for retirement at the next Annual Meeting
receives a prorated grant (one-third) for the four months of service prior to
the Annual Meeting. Except in certain circumstances, options and stock units
vest 50% on June 30 and 50% on December 31 following the grant date. Upon a
change in control or a directors retirement, death, or disability, the
directors stock units and outstanding options become fully vested, and the
director has the right to exercise the options. Upon a directors termination of
service from our Board, we distribute the vested stock units, at the directors
election, in whole shares of stock or in cash, in a lump sum, or in annual
installments over a period of up to 20 years. Prior to distribution, a director
has no voting, dividend, or other rights with respect to the stock units held
under the Directors Equity Plan, but is credited with additional stock units
representing dividend equivalents (converted to stock units based on the closing
price of our stock on the dividend payment dates). The options have a term of
ten years.
The Directors Equity Plan
provides that equity grants are made with respect to a calendar year on the
second business day following the later of (i) the date of the first regular
meeting of the Board in each calendar year, or (ii) the date on which the
Corporation publicly releases its financial results for the previous calendar
year; provided that if such date is later than February 15, the award date is
February 15 (or the next business day if February 15 is not a business day). The
exercise price (in the case of option grants) is the closing price of our stock
on the NYSE on the date of grant.
The Lockheed Martin
Corporation Directors Deferred Compensation Plan (Directors Deferred Compensation Plan) provides non-employee directors the
opportunity to defer up to 100% of the cash portion of their fees. Deferred
amounts earn interest at a rate that tracks the performance of: (i) the CAS 415
rate; (ii) the investment options available under the employee deferred
compensation plans; or (iii) our company stock (with dividends reinvested), at
the directors election. The CAS 415 rate option was closed to new deferrals on
July 1, 2009; amounts deferred before that date may continue to use the CAS 415
rate until such time as they are transferred to another available earnings
option under the plan. Deferred fees are distributed in a lump sum or in up to
15 annual installments commencing at a time designated by the director following
termination.
The following table
provides information on the compensation of our directors for the fiscal year
ended December 31, 2014. Ms. Hewson does not receive separate compensation for
service as a director of the Corporation.
66 www.lockheedmartin.com/investor
Table of Contents
Director
Compensation
2014
Director Compensation
Name |
Fees Earned or Paid in
Cash ($) |
|
Stock Awards ($) |
|
All
Other Compensation ($) |
|
Total ($) |
(a) |
(b) |
|
(c) |
|
(g) |
|
(h) |
Daniel F. Akerson |
107,500 |
|
108,333 |
|
0 |
|
215,833 |
Nolan D. Archibald |
143,750 |
|
130,000 |
|
10,000 |
|
283,750 |
Rosalind G. Brewer |
130,000 |
|
130,000 |
|
762 |
|
260,762 |
David B. Burritt |
152,500 |
|
130,000 |
|
1,163 |
|
283,663 |
James O. Ellis, Jr. |
143,750 |
|
130,000 |
|
4,116 |
|
277,866 |
Thomas J. Falk |
130,000 |
|
130,000 |
|
11,184 |
|
271,184 |
Gwendolyn S. King |
143,750 |
|
130,000 |
|
237 |
|
273,987 |
James M. Loy |
130,000 |
|
130,000 |
|
4,438 |
|
264,438 |
Douglas H. McCorkindale |
168,750 |
|
130,000 |
|
10,175 |
|
308,925 |
Joseph W. Ralston |
130,000 |
|
130,000 |
|
1,257 |
|
261,257 |
Anne Stevens |
146,250 |
|
130,000 |
|
1,374 |
|
277,624 |
Fees Earned or Paid in Cash
(Column (b)) |
Represents the aggregate
dollar amount of 2014 fees earned or paid in cash for services as a director,
including annual retainer fees, committee chairman fees, and Lead Director
fees.
Stock Awards (Column
(c)) |
Represents the aggregate
grant date fair value computed in accordance with ASC 718 for awards of stock
units in 2014 under the Directors Equity Plan. The grant date fair value is the
closing price of our stock on the date of grant (January 27, 2014) ($147.02).
For 2014, each of the non-employee directors (with the exception of Mr. Akerson)
was credited with 884 stock units with an aggregate grant date fair value of
$130,000. Mr. Akerson joined the Board in February 2014 and was credited with
662 stock units. The grant date fair value on the date of the grant (March 3,
2014) was $163.55 per share with an aggregate fair value of $108,333. The
outstanding number of stock units credited to each director under the Directors Equity Plan (and the
comparable plan in place prior to January 1, 2009), as of December 31, 2014,
were Mr. Akerson 678; Mr. Archibald 20,419; Mrs. Brewer 5,066; Mr. Burritt
5,416; Mr. Ellis 15,546; Mr. Falk 6,487; Mrs. King 28,617; Mr. Loy 14,296; Mr.
McCorkindale 12,316; Mr. Ralston 18,805; and Ms. Stevens 17,401. The outstanding
number of stock units credited under the Lockheed Martin Corporation Directors
Deferred Stock Plan (Directors Deferred Stock Plan) as of December 31, 2014,
was 1,485 for Mrs. King. Effective May 1, 1999, no additional shares may be
awarded under the Directors Deferred Stock Plan.
All Other Compensation
(Column (g)) |
Perquisites and other
personal benefits provided to directors did not exceed $10,000. All other
compensation includes matching contributions made to eligible universities,
colleges, and other non-profit organizations under the Corporations matching
gift programs. The Corporations matching contribution includes the following
charitable contributions made in 2014 or to be made by the Corporation in 2015
to match a contribution or activity in the prior year: Mr. Archibald $10,000; Mr. Ellis $1,000; Mr. Falk
$10,000; Mr. Loy $3,880; and Mr. McCorkindale $10,000. The matching gift
programs are the same as the programs generally available to employees. Other
amounts include tax assistance on travel expenses for a spouse accompanying a
director while on business travel.
2015 Proxy
Statement |
|
|
|
67 |
Table of Contents
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS
Directors and Executive
Officers |
The following table shows
Lockheed Martin common stock beneficially owned by and stock units credited to
each NEO, director, nominee and all NEOs, directors, nominees, and other
executive officers as a group as of February 2, 2015. Except as otherwise noted,
the named individuals had sole voting and investment power with respect to such
securities. No director, nominee, or
NEO, individually or as a group, beneficially owned more than one percent of our
outstanding common stock. All amounts are rounded to the nearest whole share. No
shares have been pledged. The address of each director, nominee, and executive
officer is c/o Lockheed Martin Corporation, 6801 Rockledge Drive, Bethesda, MD
20817.
Name |
Common Stock 1,2 |
|
|
|
Stock Units* |
|
|
|
Total |
Daniel F. Akerson |
3,022 |
|
3 |
|
1,364 |
|
6 |
|
4,386 |
Nolan D. Archibald |
20,418 |
|
|
|
687 |
|
6 |
|
21,105 |
Sondra L. Barbour |
84,582 |
|
|
|
21,200 |
|
8,9,10 |
|
105,782 |
Rosalind G. Brewer |
5,066 |
|
|
|
2,969 |
|
6,7 |
|
8,035 |
David B. Burritt |
12,102 |
|
|
|
11,183 |
|
6,7 |
|
23,285 |
Orlando P. Carvalho |
97,308 |
|
|
|
18,444 |
|
8,10 |
|
115,752 |
James O. Ellis, Jr. |
15,746 |
|
|
|
687 |
|
6 |
|
16,432 |
Thomas J. Falk |
5,250 |
|
4 |
|
7,174 |
|
6 |
|
12,424 |
Marillyn A. Hewson |
199,676 |
|
|
|
84,509 |
|
8,9,10 |
|
284,185 |
Gwendolyn S. King |
725 |
|
5 |
|
30,788 |
|
6,11 |
|
31,513 |
Maryanne R. Lavan |
39,134 |
|
|
|
32,648 |
|
8,9,10 |
|
71,782 |
James M. Loy |
0 |
|
|
|
14,982 |
|
6 |
|
14,982 |
Douglas H. McCorkindale |
33,683 |
|
|
|
26,869 |
|
6,7 |
|
60,552 |
Joseph W. Ralston |
18,805 |
|
|
|
687 |
|
6 |
|
19,492 |
Anne
Stevens |
17,401 |
|
|
|
687 |
|
6 |
|
18,088 |
Bruce L. Tanner |
326,183 |
|
|
|
36,014 |
|
8,9,10 |
|
362,197 |
All directors, nominees and
executive officers as a group (22 individuals including those named
above) |
968,380 |
|
|
|
398,114 |
|
|
|
1,366,494 |
* |
Does not include
unvested PSUs. |
(1) |
Includes common
stock not currently owned but which could be acquired within 60 days
following February 2, 2015 through the exercise of stock options for Ms.
Barbour 75,860; Mr. Burritt 6,329; Mr. Carvalho 78,171; Ms. Hewson
188,069; Ms. Lavan 33,720; Mr. McCorkindale 31,511; and Mr. Tanner
298,444. Includes shares payable at termination with respect to vested
stock units credited under the Directors Equity Plan for which a director
has elected payment in stock for Mr. Archibald 20,418; Mrs. Brewer 5,066;
Mr. Ellis 15,546; Mr. Ralston 18,805; and Ms. Stevens 17,401. Units for
which a director has elected payment in cash are reported in the Stock
Units column. There are no voting rights associated with stock
units. |
(2) |
Includes shares
attributable to the participants account in the Lockheed Martin Salaried
Savings Plan for Ms. Barbour 933 (includes 894 shares attributable to
spouse as plan participant); Mr. Carvalho 9,738; Ms. Hewson 375; Ms. Lavan
578; and Mr. Tanner 2,239. Participants have voting power and investment
power over the shares. |
(3) |
Includes 22 shares
owned by Mr. Akersons spouses family trust. |
(4) |
Represents shares
beneficially owned by Mr. Falk and his spouse through a family limited
partnership. |
(5) |
Represents shares
held jointly by Mrs. King and her spouse with shared voting or investment
power. |
(6) |
Includes stock
units under the Directors Equity Plan for Mr. Akerson 1,364; Mr. Burritt
6,103; Mr. Falk 7,174; Mrs. King 29,304; Mr. Loy 14,982; and Mr.
McCorkindale 12,545 for which directors have elected to receive
distributions of units in the form of cash. Includes shares payable at
termination with respect to unvested stock units credited under the
Directors Equity Plan for which a director has elected payment in stock
for Mr. Archibald 687; Mrs. Brewer 687; Mr. Ellis 687; Mr. Ralston 687;
and Ms. Stevens 687. There are no voting rights associated with stock
units. |
(7) |
Includes stock
units under the Directors Deferred Compensation Plan representing deferred
cash compensation for Mrs. Brewer 2,282; Mr. Burritt 5,080; and Mr.
McCorkindale 14,324. The stock units (including dividend equivalents
credited as stock units) are distributed in the form of cash. There are no
voting rights associated with stock units. |
(8) |
Includes stock
units attributable to the participants account under the DMICP (including
units credited under the LTIP awards) for Ms. Barbour 2,461; Mr. Carvalho
911; Ms. Hewson 7,850; Ms. Lavan 7,972; and Mr. Tanner 5,667. Although
most of the units will be distributed following termination or retirement
in shares of stock, none of the units are convertible into shares of stock
within 60 days of February 2, 2015. There are no voting rights associated
with stock units. |
(9) |
Includes stock
units attributable to the participants account under the NQSSP for Ms.
Barbour 1,400; Ms. Hewson 2,179; Ms. Lavan 1,695; and Mr. Tanner 3,411.
Amounts credited to a participants account in the NQSSP are distributed
in cash following termination of employment. There are no voting rights
associated with stock units. |
(10) |
Includes unvested
RSUs for Ms. Barbour 17,340; Mr. Carvalho 17,533; Ms. Hewson 74,480; Ms.
Lavan 22,981; and Mr. Tanner 26,936. The RSUs represent a contingent right
to receive one share of common stock. There are no voting rights
associated with RSUs. |
(11) |
Includes stock
units under the Directors Deferred Stock Plan for Mrs. King. There are no
voting rights associated with stock units. |
68 www.lockheedmartin.com/investor
Table of Contents
Security Ownership of
Management and Certain Beneficial Owners
Security Ownership of
Certain Beneficial Owners |
The following table shows
information regarding each person known to be a beneficial owner of more than
5% of our common stock. For purposes of this table, beneficial ownership of
securities generally means the power to vote or dispose of securities, or the
right to acquire securities that may be voted or disposed of, regardless of any
economic interest in the securities. All information shown is based on
information reported by the filer on a Schedule 13G filed with the SEC on the
dates indicated in the footnotes to this table.
Name and
Address |
Amount of
Common Stock |
|
Percent of
Outstanding Shares |
State Street Corporation and State
Street |
54,880,993 |
|
17.4 |
Bank
and Trust Company 1 |
|
|
|
State Street Financial Center |
|
|
|
One
Lincoln Street |
|
|
|
Boston, MA 02111 |
|
|
|
Capital World Investors 2 |
28,660,937 |
|
9.0 |
333
South Hope Street |
|
|
|
Los
Angeles, CA 90071 |
|
|
|
BlackRock, Inc. 3 |
18,949,996 |
|
6.0 |
55
East 52nd Street |
|
|
|
New York, NY 10022 |
|
|
|
(1) |
As reported on a
Schedule 13G filed on February 12, 2015 by State Street Corporation
(State Street) and State Street Bank and Trust Company. State Street
Bank and Trust Company beneficially owns 48,226,351 of the 54,880,993
shares held by State Street and its direct and indirect subsidiaries,
acting in various capacities. Both State Street and State Street Bank and
Trust Company have sole voting power with respect to 1,900,147 shares.
State Street has shared voting power with respect to 52,980,846 shares,
and State Street Bank and Trust Company has shared voting power with
respect to 46,326,204 shares. State Street has shared dispositive power
with respect to 54,880,993 shares and State Street Bank and Trust Company
has shared dispositive power with respect to 48,226,351 shares. State
Street Bank and Trust Company holds 43,620,711 of its 48,226,351 shares as
trustee, independent fiduciary and/or investment manager for various
Lockheed Martin employee benefit plans. In this capacity, State Street
Bank and Trust Company has dispositive power and voting power over the
shares in certain circumstances. |
(2) |
As reported on a
Schedule 13G/A filed on February 13, 2015 by Capital World Investors
(Capital World), a division of Capital Research and Management Company
(Capital Research). Capital World had sole voting and dispositive power
with respect to such shares and is deemed to be the beneficial owner as a
result of Capital Research acting as an investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940. |
(3) |
As reported on a
Schedule 13G/A filed on February 9, 2015 by BlackRock, Inc. BlackRock,
Inc. and its subsidiaries had sole dispositive power with respect to
18,928,272 shares and sole voting power over 16,694,495
shares. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires that our executive
officers and directors (and persons who own more than 10% of our equity
securities) file reports of ownership and changes in ownership with the SEC, the
NYSE, and with us. Based solely on
our review of copies of forms and written representations from reporting
persons, we believe that all ownership filing requirements were timely met
during 2014.
2015 Proxy
Statement |
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69 |
Table of Contents
STOCKHOLDER PROPOSALS
The stockholders identified
below have submitted the following proposals to be voted upon at the Annual
Meeting. In accordance with SEC rules, we are reprinting the proposals and
supporting statements as they were submitted to us. The Corporation is not
responsible for the contents thereof or any inaccuracies the proposals may
contain.
Proposal 4: Stockholder Proposal
on Written Consent |
John Chevedden, 2215 Nelson
Avenue, No. 205, Redondo Beach, California 90278, the beneficial owner of no
less than 100 shares of common stock of the Corporation having a market value
greater than $2,000, has notified the Corporation that he intends to present the
following proposal at this years Annual Meeting:
Proposal 4 Right to Act
by Written Consent
Resolved, Shareholders
request that our board of directors undertake such steps as may be necessary to
permit written consent by shareholders entitled to cast the minimum number of
votes that would be necessary to authorize the action at a meeting at which all
shareholders entitled to vote thereon were present and voting. This written
consent is to be consistent with applicable law and consistent with giving
shareholders the fullest power to act by written consent consistent with
applicable law. This includes shareholder ability to initiate any topic for
written consent consistent with applicable law.
A shareholder right to act
by written consent and to call a special meeting are 2 complimentary ways to
bring an important matter to the attention of shareholders outside the annual
meeting cycle.
A shareholder right to act
by written consent is one method to equalize our limited provisions for
shareholders to call a special meeting. For instance it takes 25% of all
Lockheed shareholders to simply call a special meeting. Delaware law allows 10%
of shareholders to call a special meeting.
Our clearly improvable F-35
stealth fighter program as reported in a July 2014 Reuters Analysis &
Opinion article is an added incentive to vote for this proposal:
Pentagons big budget F-35
fighter cant turn, cant climb, cant run The U.S. military grounded all
F-35s after an F-35 caught fire on a runway in June 2014.
F-35s sitting idle could be
a preview of a future in which potentially thousands of the Pentagons
fighter-jets cant reliably fly. Theres real reason to worry. The June incident
might reflect serious design flaws that could render the F-35 unsuitable for
combat.
The Pentagon grounded F-35s
at least 13 times since 2007, mostly due to problems with its Pratt &
Whitney F135 engine, specifically the engine turbine blades. The repeated
problems with the same part of the engine may be indications of a serious design
and structural problem with the F-35 engine, said Johan Boeder, a Dutch
aerospace expert. Pratt & Whitney already totally redesigned the F135 in an
attempt to end its history of frequent failures. But theres only so much
engineers can do.
The F-35 is extraordinarily
heavy for a single-engine plane, up to 35 tons. By comparison, the F-15 fighter
weighs 40 tons. But it has two engines. Even with that 20 tons of thrust, the
new stealth fighter is still sluggish. The F-35 is a dog
overweight and
underpowered, according to Winslow Wheeler, director of the Straus Military
Reform Project.
Minor fixes might get the
F-35 flying again soon for a while. But fundamental design flaws could vex the
F-35 for decades to come, forcing the Pentagon to suspend flying far too often,
potentially jeopardizing U.S. national security.
Returning to the core topic
of this proposal from the context of our clearly improvable F-35 stealth fighter
program, please vote to protect shareholder value:
Right to Act by Written
Consent Proposal 4
Board of Directors Statement in
Opposition to Proposal 4 |
The proponent has submitted
the same written consent proposal in three of the last four years. Each time,
the proposal has failed to win majority support. In fact, a substantial majority
of the votes cast in each of those years has been against the
proposal.
After each vote, your Board
has reviewed the level of support for the written consent proposal and discussed
with key investors the advantages and disadvantages of written consent
provisions. Your Board recognizes that
stockholders want a way to initiate action between annual meetings. Based on its
review of written consent provisions generally, the fact that a significant
majority of the votes cast in recent years has been against the proposal and the
lack of safeguards in the proponents proposal, your Board recommends a vote
against the proposal. We believe our current special meeting
70 www.lockheedmartin.com/investor
Table of Contents
Stockholder
Proposals
provision strikes an
appropriate balance and ensures that all stockholders have a fair opportunity to
participate in matters being considered for action by our
stockholders.
The proposal asks that the
Corporation amend its governing documents to permit written consent by
stockholders entitled to cast the minimum number of votes that would be
necessary to authorize the action at a meeting at which all stockholders
entitled to vote thereon were present and voting.
As proposed, there is no
requirement that all stockholders receive notice of the written consent
proposal, be given adequate time to review the subject matter of the proposal
being considered by written consent, be given the opportunity to consider
alternative views on a proposal or be afforded the opportunity to debate the
merits of the proposal at an open meeting. The written consent proposal does not
impose any ownership requirements on the stockholders soliciting written consent
and, as a result, it could be initiated by a single stockholder holding a very
small number of shares, who in turn could sell those shares immediately after
initiating the written consent solicitation.
Requiring that all
stockholder business be acted upon at a meeting is an inherently more
structured, democratic and open process than the proposed arrangement and helps
to ensure the accuracy and completeness of information presented to all
stockholders for their consideration. The Board believes that matters which are
sufficiently important to require stockholder approval should be communicated in
advance, so that they can be considered and voted upon by all stockholders based
on appropriate and timely disclosure.
Stockholders have a number
of ways to communicate concerns and influence oversight of the
Corporation.
● |
All directors are
elected annually by our stockholders. |
● |
In uncontested
elections, directors must receive a majority of the votes cast to be
elected. |
● |
To ensure that
stockholders have an opportunity to raise important issues between annual
meetings, the Corporation engages directly with its largest stockholders
throughout the year to seek their views on important corporate governance
matters and executive compensation practices. All stockholders may contact
the Lead Director (at
Lead.Director@lmco.com) individually or the non-management directors as a group at any time
(see page 79). |
● |
The Corporation does
not have a Stockholder Rights Plan or so-called Poison Pill in place.
Your Board has stated that if it was to adopt a Stockholder Rights Plan,
we would seek stockholder ratification within 12
months. |
● |
Our Bylaws provide
that an individual stockholder beneficially owning shares entitled to cast
10% or more of the votes at a meeting, or a group of stockholders
beneficially owning shares entitled to cast 25% or more of such votes can
cause the Corporate Secretary to call a special
meeting. |
We impose no restrictions
on the timing of special meetings and the only restriction as to the subject
matter is that, unless requested by stockholders entitled to cast a majority of
all votes, a special meeting need not be held to consider a matter that is
substantially the same as a matter voted upon at any special meeting held within
the previous 12 months. Our Bylaws require minimum advance notice and
disclosures regarding the matters to be presented and voted upon at meetings, as
well as relevant information about the interests of the proponents of such
actions. Stockholder action through meetings in this manner provides the Board
with the opportunity to consider stockholder proposals carefully and to make
appropriate recommendations to stockholders regarding the proposals.
By contrast, allowing
stockholders to act by written consent circumvents the deliberative process and
allows stockholders to take action without complying with the procedural
safeguards inherent in the stockholder meeting process. The proposed arrangement
provides greater opportunity for abuse.
● |
It may encourage short-term stock ownership manipulation
by a small group of investors to advance a special agenda that may be
contrary to the long-term best interests of the Corporation and its
stockholders. |
● |
It may result in
frequent special interest demands or complaints relating to the ordinary
business of the Corporation that distract management and the Board and may
result in significant administrative burdens and
expense. |
● |
It may create
confusion because multiple groups of stockholders would be able to solicit
written consents simultaneously, some of which may be duplicative or
contradictory. |
● |
It deprives stockholders of (i) the opportunity to
deliberate in a transparent manner, or even to receive accurate and
complete information, (ii) the ability to present their own views on a
particular issue, and (iii) the benefit of hearing the views of other
stockholders and the Board on important
issues. |
Our approach limits the
potential abuse that is inherent in the written consent process by providing all
stockholders with the ability to participate in a meaningful, deliberative and
democratic process.
Your Board believes that
our current governance structure strikes an appropriate balance between
permitting stockholders to raise important matters at any time and ensuring that
all stockholders are afforded an opportunity for meaningful participation based
on accurate and complete public disclosure. The Board will continue to review
best corporate governance practices and adopt those practices that it believes,
in light of the circumstances, serve the best interests of the Corporation and
our stockholders.
The Board of Directors
recommends a vote AGAINST Proposal
4. |
2015 Proxy
Statement |
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71 |
Table of Contents
Stockholder
Proposals
Proposal 5: Stockholder Proposal
on Lobbying Expenditures |
The Congregation of Sisters
of St. Agnes, 320 County K, Fond du Lac, Wisconsin 54937, the beneficial owner
of 32 shares of common stock of the Corporation having a market value greater
than $2,000, has notified the Corporation that it intends to present the follow
proposal at this years Annual Meeting:
Whereas, corporate lobbying exposes our company to risks
that could adversely affect the companys stated goals, objectives, and
ultimately shareholder value, and
Whereas, we rely on the information provided by our
company to evaluate goals and, therefore, have a strong interest in full
disclosure of our companys lobbying to evaluate whether it is consistent with
our companys expressed goals and in the best interests of stockholders and
long-term value;
Resolved, the stockholders of Lockheed Martin Corporation
(Lockheed) request that the Board authorize the preparation of a report,
updated annually, disclosing:
1. |
Company policy and
procedures governing lobbying, both direct and indirect, and grassroots
lobbying communications. |
2. |
Payments by Lockheed
used for (a) direct or indirect lobbying or (b) grassroots lobbying
communications, in each case including the amount of the payment and the
recipient. |
3. |
Lockheeds membership
in and payments to any tax-exempt organization that writes and endorses
model legislation. |
4. |
Description of
managements and the Boards decision making process and oversight for
making payments described in sections 2 and 3
above. |
For purposes of this
proposal, a grassroots lobbying communication is a communication directed to
the general public that (a) refers to specific legislation or regulation, (b)
reflects a view on the legislation or regulation and (c) encourages the
recipient of the communication to take action with respect to the legislation or regulation. Indirect lobbying is
lobbying engaged in by a trade association or other organization of which
Lockheed is a member.
Both direct and indirect
lobbying and grassroots lobbying communications include efforts at the local,
state and federal levels.
The report shall be
presented to the Audit Committee or other relevant oversight committees and
posted on Lockheeds website.
Supporting Statement
As stockholders, we
encourage transparency and accountability in our companys use of corporate
funds to influence legislation and regulation. Lockheed is a member of the
Chamber of Commerce, which is characterized as by far the most muscular
business lobby group in Washington (Chamber of Secrets, Economist, April 21, 2012) and has spent over $1 billion on lobbying since 1998.
Lockheed does not comprehensively disclose its trade association memberships and
does not disclose its individual trade association payments. Lockheed does
disclose the dollar range amounts of its trade association dues that are
attributable to lobbying, but it is unclear whether this captures all payments
made to trade associations, leaving a potential loophole. Disclosing a dollar
range comprising only dues leaves open the possibility that there could be
additional payments to trade associations that are used for lobbying and are not
being disclosed.
Lockheed spent more than
$29.8 million in 2012 and 2013 on direct federal lobbying activities
(opensecrets.org). These figures do not include lobbying expenditures to
influence legislation in states, where Lockheed also lobbies. And Lockheed does
not disclose membership in or payments to tax-exempt organizations that write
and endorse model legislation, such as the American Legislative Exchange Council
(ALEC).
We urge stockholders to
vote for this proposal.
Board of Directors Statement in
Opposition to Proposal 5 |
This proposal is
substantially similar to the stockholder proposal that we received and responded
to in 2013. The 2013 proposal was sponsored by the Sisters of St. Francis of
Philadelphia and co-sponsored by the Congregation of St. Agnes. At that time, we
made significant enhancements to our Political Disclosures webpage, located
at: http://www.lockheedmartin.com/us/who-we-are/corporate-governance/political-disclosures.html, to provide more information about the
Corporations lobbying and political activities. Most of the information
requested in the 2014 version of this proposal already is disclosed on our
website and in various federal and state filings required by law.
The Ethics and
Sustainability Committee of the Board of Directors, which is composed entirely
of independent directors, oversees our advocacy efforts, government affairs
activities and political spending, receives reports from management on these
matters, supervises the relevant corporate policies and reviews the purposes and
benefits of these activities. The Corporations political activities are audited
on a regular basis in accordance with the Corporations established audit
schedule. Outside legal counsel provides regular guidance regarding compliance
with the laws and regulations applicable to our government relations
activities.
72
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Stockholder
Proposals
In response to the proposal
in 2013, we significantly increased our political and lobbying information
disclosure. For example, Lockheed Martin now publicly discloses:
● |
information about
corporate governance policies and procedures with respect to political
activities; |
● |
our policy governing
political expenditures from corporate funds (including an express
statement about independent expenditures);
and |
● |
expanded information
about the companys participation with trade
associations. |
To make the information
more readily accessible we also now include on our webpage a detailed listing of
Political Action Committee disbursements and Lobbying Reports (LD-2), rather
than links to the Federal Election Commission and House Clerks
websites.
Through the Lobbying
Disclosure Act at the federal level and similar state laws, the lobbying
activities of companies, including Lockheed Martin, are disclosed to the public
on an ongoing basis. These reports detail the issues the company lobbied on, the
houses of Congress and federal agencies lobbied and the total amounts expended
during each calendar quarter on lobbying activities. By law, the amount
disclosed must contain the portion of any trade association payments that are
used for lobbying. In addition, in response to another stockholder proposal in
2011, we agreed to disclose on our website all trade associations to which we
pay dues of $50,000 or more and the portion of those dues that is considered
non-deductible lobbying under the Internal Revenue Code. Because we use the more
expansive definition of lobbying contained in Section 162(e)(1) of the Internal
Revenue Code, rather than the Lobbying Disclosure Act definition, the
Corporations reported quarterly
lobbying amount already contains all payments for state lobbying activities as
well as grassroots lobbying efforts.
Lockheed Martins enhanced
disclosures are reflected in the increased score we received on the CPA-Zicklin
Index of Corporate Political Accountability and Disclosure. The CPA-Zicklin
Index is a tool used by investors to evaluate a companys disclosure and
accountability policies and practices related to political activities. Our total
score increased from 28 in 2012 to 78.6 in 2013. In 2014, CPA-Zicklin increased
the number of companies it evaluates from 200 to 299, and divided the pool of
companies into five tiers based on their scores. In 2014, Lockheed Martin
maintained its 78.6 score, placing it solidly in the upper ranks of the second
tier.
Your Board is dedicated to
being responsive to its stockholders and providing information to allow
stockholders to make informed decisions, but this repeat proposal would not
yield much more information than is available today on our website and/or
contained in certain of our state and federal disclosures. We believe our
current policies provide for an appropriate level of disclosure as well as a
timely disclosure of Lockheed Martins political expenditures.
Your Board does not believe
that additional detailed disclosure of these amounts as contemplated by this
proposal would be beneficial to our stockholders or potential investors.
Adoption of this proposal would result in additional administrative burdens and
would cause us to expend resources creating additional reports disclosing
lobbying expenditures, which would duplicate reports that already are publicly
available.
The Board of Directors
recommends a vote AGAINST Proposal
5. |
2015 Proxy
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Table of Contents
QUESTIONS AND ANSWERS ABOUT THE ANNUAL
MEETING
Do I need an admission ticket to attend the
Annual Meeting? |
Yes. You must present both
an admission ticket and valid, government-issued photographic identification to
attend the Annual Meeting. Please follow the advance registration instructions
on page 80. If you do not have an admission ticket and valid, government-issued
photographic identification, you will not be admitted into the Annual Meeting.
For security reasons, all hand-carried items will be subject to inspection, and
all bags, briefcases, and packages must be checked. Cameras, cell phones, and
other electronic devices will not be allowed in the meeting room.
Who is entitled to vote at the Annual
Meeting? |
Holders of our common stock
at the close of business on February 27, 2015 (the Record Date) are entitled
to vote their shares at the Annual Meeting. As of the Record Date, there were
316,281,567 shares outstanding. Each share outstanding on the Record Date is
entitled to one vote on each proposal presented at the Annual Meeting. This includes shares held
through Direct Invest, our dividend reinvestment and stock purchase plan, or
through our employee benefit plans. Your proxy card shows the number of shares
held in your account(s).
What is the difference between holding shares
as a registered stockholder and as a beneficial
owner? |
If your shares are
registered directly in your name with our transfer agent, Computershare Trust
Company, N.A. (Computershare), you are considered the registered stockholder
of those shares. We mail the Proxy Materials and our Annual Report to you
directly.
If your shares are held in
a stock brokerage account or by a bank or other nominee (street name), you are
considered the beneficial owner of the shares that are registered in street
name. In this case, the Proxy Materials and our Annual Report were forwarded to
you by your broker, bank, or other nominee. As the beneficial owner,
you have the right to direct your
broker, bank, or other nominee how to vote your shares by following the voting
instructions included in the mailing.
Employees with shares
allocated in an employee benefit plan account will vote shares allocated to
their benefit plan account electronically and will not receive a paper mailing
for those shares. Employees should review the information on procedures for
voting by Plan Participants on page 76.
What am I voting on and what are the Board
voting recommendations? |
Our stockholders will be
voting on the following proposals:
Proposal
|
Description |
Board Voting
Recommendations |
1 |
Election of Directors |
FOR DIRECTOR-NOMINEES |
2 |
Ratification of Appointment of Independent
Auditors |
FOR |
3 |
Advisory Vote to Approve the Compensation of
our NEOs (Say-on-Pay) |
FOR |
4 |
Stockholder Proposal on Written
Consent |
AGAINST |
5 |
Stockholder Proposal on Lobbying
Expenditures |
AGAINST |
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Table of Contents
Questions and Answers
About the Annual Meeting
Can other matters be decided at
the Annual Meeting? |
At the time this Proxy
Statement went to press, we were not aware of any other matters to be presented
at the Annual Meeting. If other matters are properly presented for consideration
at the Annual Meeting, the proxy holders appointed by our Board (who are named
on your proxy card if you are a registered stockholder) will have the discretion to vote on those matters in
accordance with their best judgment on behalf of stockholders who provide a
valid proxy by Internet, by telephone, by mail, or by scanning the QR code with
a mobile device.
What is the procedure for
voting? |
● |
If your shares are
registered in your name, you can vote using any of the methods described
below. |
● |
If your shares are
held in the name of a broker, bank, or other nominee, your nominee will
provide you with instructions on the procedure for voting your shares.
Employees with shares allocated in an employee benefit plan account should
review the information on procedures for voting by employees on page
76. |
● |
If you hold shares in
multiple accounts, you may receive multiple proxy material packages
(electronically and/or by mail). Please be sure to vote all of your
Lockheed Martin shares in each of your accounts in accordance with the
voting instructions you
receive. |
By Internet, QR Code, or Telephone
You can vote your shares
via the Internet at http://www.investorvote.com or by scanning your QR code with your mobile device. Please have your
proxy card in hand when you go online. You will have an opportunity to confirm
your voting selections before your vote is recorded.
You can vote your shares by
telephone by calling toll free 1-800-652-8683 within the U.S., Canada, and
Puerto Rico, or 1-781-575-2300 from outside the U.S. Please have your proxy card
in hand when you call. You will have an opportunity to confirm your voting
selections before your vote is recorded.
Internet (including QR code
access) and telephone voting facilities for registered stockholders will be
available 24 hours a day until 1:00 a.m., Eastern Daylight Savings Time, on
April 23, 2015. If you vote your shares on the Internet or by telephone, you do
not have to return your proxy card.
The availability of
Internet and telephone voting for beneficial owners will depend on the voting
processes of your broker, bank, or other nominee. You should follow the voting
instructions in the materials that you received from your nominee.
By Mail
Mark, date, and sign the
proxy card and return it in the postage prepaid envelope provided. If voting
instructions are provided, shares represented by the proxy card will be voted in
accordance with the voting instructions.
If you want to vote in
accordance with the Boards recommendations, sign, date, and return the proxy
card. The named proxy holders will vote signed but unmarked proxy cards in
accordance with the Boards recommendations.
If you are a registered
stockholder, and the postage prepaid envelope is missing, please mail your
completed proxy card to Lockheed Martin Corporation, c/o Computershare Investor
Services, P.O. Box 43116, Providence, RI 02940.
In Person at the Annual Meeting
All registered stockholders
can vote in person at the Annual Meeting. Voting your proxy electronically via
the Internet, by telephone, by mail, or by scanning the QR code with a mobile
device does not limit your right to vote at the Annual Meeting. You also can
choose to be represented by another person at the Annual Meeting by executing a
legally valid proxy designating that person to vote on your behalf. You must
properly pre-register your designee by following the instructions on page 80. If
you are a beneficial owner of shares, you must obtain a legally valid proxy from
your broker, bank, or other nominee and present it to the inspectors of election
with your ballot to be able to vote at the Annual Meeting. A legal proxy is an
authorization from your broker, bank, or other nominee to vote the shares held
in the nominees name that satisfies Maryland law and the SEC requirements for
proxies.
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Table of Contents
Questions and Answers
About the Annual Meeting
Can I
change my proxy vote? |
Yes. If you are a
registered stockholder, you can change your proxy vote or revoke your proxy at
any time before the Annual Meeting by:
● |
Returning a signed
proxy card with a later date. |
|
|
● |
Authorizing a new
vote electronically through the Internet, by telephone, or by scanning the QR code with a
mobile device. |
|
|
● |
Delivering a written
revocation of your proxy to the Senior Vice President, General Counsel and Corporate Secretary at Lockheed Martin Corporation, 6801
Rockledge Drive, Bethesda, MD
20817 before your original proxy is voted at the Annual Meeting. |
|
|
● |
Submitting a written
ballot at the Annual Meeting. |
If you are a beneficial
owner of shares, you can submit new voting instructions by contacting your
broker, bank, or other nominee. You also can vote in person at the Annual
Meeting if you obtain a legal proxy from your bank, broker or other nominee (the
registered stockholder) as described in the answer to the previous
question.
Your personal attendance at
the Annual Meeting does not revoke your proxy. Unless you vote at the Annual
Meeting, your last valid proxy prior to or at the Annual Meeting will be used to
cast your vote.
What if
I return my proxy card but do not provide voting
instructions? |
Proxies that are signed and
returned but do not contain voting instructions will be voted:
● |
FOR the election of
11 director-nominees listed in Proposal 1. |
|
|
● |
FOR the ratification
of the appointment of Ernst & Young LLP, an independent registered public accounting
firm, as independent auditors
for the 2015 fiscal year (Proposal 2). |
|
|
● |
FOR the advisory vote
to approve the compensation of our NEOs (Proposal 3). |
|
|
● |
AGAINST the
stockholder proposals (Proposals 4 and 5). |
|
|
● |
In the best judgment
of the named proxy holders if any other matters are properly brought before the
Annual Meeting. |
How do I
vote if I participate in one of the Corporations 401(k) or defined
contribution plans? |
As a participant in one of
our employee 401(k) or defined contribution plans, you can direct the plan
trustees how to vote shares allocated to your account(s) on a proxy voting
direction or instruction card, electronically through the Internet, by
telephone, or by scanning the QR code with a mobile device. Most active
employees who participate in these benefit plans will receive an email
notification announcing Internet availability of the Proxy Materials and how to
submit voting directions.
If you do not provide
timely directions to the plan trustee, shares allocated to your account(s) will
be voted by the plan trustee depending on the terms of your plan or other legal
requirements.
Plan participants may
attend the Annual Meeting, but may not vote plan shares at the Annual Meeting.
If you wish to vote, whether you plan to attend the Annual Meeting or not, you
should direct the trustee of your plan(s) how you wish to vote your plan shares
no later than 11:59 p.m., Eastern Daylight Savings Time, on April 20,
2015.
How many
shares must be present to hold the Annual
Meeting? |
In order for us to lawfully
conduct business at our Annual Meeting, a majority of the shares outstanding and
entitled to vote as of February 27, 2015, must be present in person or by proxy.
This is referred to as a quorum. Your shares are counted as present at the
Annual Meeting if you attend the Annual Meeting and vote in person or abstain from voting, or if you properly
return a proxy by Internet, by telephone, by mail, or scan the QR code with a
mobile device in advance of the Annual Meeting and do not revoke the
proxy.
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Table of Contents
Questions and Answers
About the Annual Meeting
Will my
shares be voted if I dont provide my proxy or instruction
card? |
Registered
Stockholders
If your shares are
registered in your name, your shares will not be voted unless you provide a
proxy by Internet, by telephone, by mail, by scanning the QR code with a mobile
device, or vote in person at the Annual Meeting.
Plan
Participants
If you are a participant in
one of our employee 401(k) or defined contribution plans and you do not provide
timely directions to the plan trustee, shares allocated to your account(s) will
be voted by the plan trustee depending on the terms of your plan and other legal
requirements.
Beneficial
Owners
If you hold shares through
an account with a broker and you do not provide voting instructions, under NYSE
rules, your broker may vote your
shares on routine matters only. The ratification of the appointment of Ernst
& Young LLP (Proposal 2) is considered a routine matter, and your nominee
can therefore vote your shares on that Proposal even if you do not provide
voting instructions. Proposals 1, 3, 4, and 5 are not considered routine
matters, and your nominee cannot vote your shares on those Proposals unless you
provide voting instructions. Votes withheld by brokers in the absence of voting
instructions from a beneficial owner are referred to as broker
non-votes.
Multiple
Forms of Ownership
The Corporation cannot
provide a single proxy or instruction card for stockholders who own shares as
registered stockholders, plan participants or beneficial owners. As a result, if
your shares are held in multiple types of accounts, you must submit your votes
for each type of account in accordance with the instructions you receive for
that account.
What is
the vote required for each proposal? |
For Proposal 1, the votes
that stockholders cast FOR a director-nominee must exceed the votes that
stockholders cast AGAINST a director-nominee to approve the election of each
director-nominee. For each of Proposals 2, 3, 4, and 5, the affirmative vote of
a majority of the votes cast is required to approve the proposal.
Proposals 2, 3, 4, and 5 are advisory and non-binding. The Board will review the
voting results on these proposals and take the results into account when making
future decisions regarding these matters. Votes cast exclude abstentions and
broker non-votes.
What is
the effect of an abstention? |
A stockholder who abstains
on some or all matters is considered present for purposes of determining if a
quorum is present at the Annual Meeting, but an abstention is not counted as a
vote cast. An abstention has no effect for the vote on any proposal.
What is
the effect of a broker non-vote? |
If a broker casts a vote on
Proposal 2 (Ratification of Auditors), the vote will be included in determining
whether a quorum exists for holding the meeting. The broker does not have
authority to vote on the other proposals absent directions from the beneficial
owner.
As a result, if the
beneficial owner does not vote on Proposals 1, 3, 4, or 5 so that there is a
broker non-vote on those items, the broker non-votes do not count as votes
cast for that proposal and have no effect on the
proposal. Thus, a broker non-vote will not impact our ability to obtain a
quorum, will not affect the outcome with respect to the election of directors,
and will not otherwise affect the outcome of the vote on a proposal that
requires the affirmative vote of a majority of the votes cast on the
proposal.
Who will
count the votes? |
Representatives of
Computershare will tabulate the votes and act as inspectors of election for the
Annual Meeting.
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Table of Contents
Questions and Answers
About the Annual Meeting
Where
can I find the voting results of the Annual
Meeting? |
The preliminary voting
results will be announced at the Annual Meeting. The final voting results will
be tallied by the inspectors of election and disclosed by the Corporation in a
Current Report on Form 8-K filed with the SEC within four business days
following the Annual Meeting.
What is
householding and how does it affect me? |
We have adopted a procedure
approved by the SEC called householding. Under this procedure, we send only
one Annual Report and Proxy Statement to eligible stockholders who share a
single address, unless we have received instructions to the contrary from any
stockholder at that address. This practice is designed to reduce our printing
and postage costs. Stockholders who participate in householding will continue to
receive separate proxy cards. We do not use householding for any other
stockholder mailings, such as dividend checks, Forms 1099, or account
statements.
If you are eligible for
householding, but received multiple copies of the Annual Report and Proxy
Statement and prefer to receive only a single copy of each of these documents
for your household, please contact Computershare, Shareholder Relations,
P.O. Box 30170, College Station, TX
77842-3170, or call 1-877-498-8861. If you are a registered stockholder residing
at an address with other registered stockholders and wish to receive a separate
Annual Report or Proxy Statement at this time or in the future, we will provide
you with a separate copy. To obtain this copy, please contact Computershare as
indicated above. If you own shares through a broker, bank, or other nominee, you
should contact the nominee concerning householding procedures.
To vote all of your shares,
you must submit a proxy or voting instruction card for each
account (employee benefit plan shares, registered shares,
and beneficially-owned shares). Accordingly, you will receive a separate
solicitation and proxy for each type of account in which shares are
held.
Can I
receive a copy of the Annual Report? |
Yes. We will provide a copy
of our Annual Report without charge, upon written request, to any registered or
beneficial owner of common stock entitled to vote at the Annual Meeting.
Requests should be made in writing addressed to Investor Relations, Lockheed Martin Corporation, 6801 Rockledge Drive,
Bethesda, MD 20817, by calling Lockheed Martin Stockholder Direct at
1-800-568-9758, or by accessing the Corporations website at http://www.lockheedmartin.com/investor.
Can I
view the Proxy Statement and Annual Report on the
Internet? |
Yes. The Proxy Statement
and Annual Report are available on the Internet at http://www.lockheedmartin.com/investor. Subject to the householding procedures above,
all stockholders will receive paper copies of the Proxy Statement, proxy card,
and Annual Report by mail unless the stockholder has consented to electronic delivery or is an employee with shares
allocated in an employee benefit plan. The SEC also maintains a website at
http://www.sec.gov that contains reports, proxy statements, and
other information regarding Lockheed Martin.
Can I
choose to receive the Proxy Statement and Annual Report on the Internet
instead of receiving them by mail? |
Yes. If you are a
registered stockholder or beneficial owner, you can elect to receive future
Annual Reports and Proxy Statements on the Internet only and not receive copies
in the mail by visiting Shareholder Services at http://www.lockheedmartin.com/investor and completing the online consent form. Your
request for electronic transmission will remain in effect for all future Annual
Reports and Proxy Statements, unless withdrawn. Withdrawal procedures also are
at this website.
Most active employees who
participate in the Corporations 401(k) and defined contribution plans will
receive an email notification announcing Internet availability of the Proxy
Materials. A paper copy will not be provided unless requested by the employee
following the instruction in the email notification.
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Table of Contents
Questions and Answers
About the Annual Meeting
Who pays
the cost of this proxy solicitation? |
The Corporation pays the
cost of soliciting proxies on behalf of the Board for the Annual Meeting. We may
solicit proxies by Internet, by telephone, by mail, by scanning the QR code with
a mobile device, or in person. We may make arrangements with brokerage houses
and other custodians, nominees, and fiduciaries to send Proxy Materials to
beneficial owners on our behalf. We reimburse them for their reasonable
expenses. We have retained Morrow & Co., LLC, 470
West Avenue, Stamford, CT 06902 to aid in the solicitation of proxies and to
verify related records at a fee of $45,000, plus expenses. To the extent
necessary to ensure sufficient representation at the Annual Meeting, we may
request the return of proxies by mail, express delivery, courier, telephone,
Internet, or other means. Stockholders are requested to return their proxies
without delay.
How do I
submit a proposal for the Annual Meeting of Stockholders in
2016? |
Any stockholder who wishes
to submit a proposal or nominate a director for consideration at the 2016 Annual
Meeting and for inclusion in the 2016 Proxy Statement should send their proposal
to Lockheed Martin Corporation, Attention: Senior Vice President, General
Counsel and Corporate Secretary, 6801 Rockledge Drive, Bethesda, MD
20817.
Proposals must be received
no later than November 14, 2015, and satisfy the requirements under applicable
SEC Rules (including SEC Rule 14a-8) to be included in the Proxy Statement and
on the proxy card that will be used for solicitation of proxies by the Board for
the 2016 Annual Meeting.
Our Bylaws also require
advance notice of any proposal by a stockholder to be presented at the 2016
Annual Meeting that is not included in our Proxy Statement and on the proxy
card, including any proposal for the nomination of a director for
election.
To be properly brought
before the 2016 Annual Meeting, written nominations for directors or other
business to be introduced by a stockholder must be received between the dates of
October 15, 2015 and November 14, 2015, inclusive. A notice of a stockholder
proposal must contain the information required by our Bylaws about the matter to
be brought before the annual meeting and about the stockholder proponent and
persons associated with the stockholder through control, ownership of the
shares, agreement, or coordinated activity. We reserve the right to reject
proposals that do not comply with these requirements. A list of the information
which is required to be included with a stockholder proposal may be found in
Section 1.10 of our Bylaws at http://www.lockheedmartin.com/corporate-governance.
How can
I contact the Corporations non-management
directors? |
Stockholders and all
interested parties may communicate with the Lead Director or with the
non-management directors as a group. If you wish to raise a question or concern
to the Lead Director or the non-management directors as a group, you may do so
by writing to the Lead Director by email at Lead.Director@lmco.com. You also may write to the Lead Director or
Non-Management Directors, c/o Senior Vice President, General Counsel and
Corporate Secretary, Lockheed Martin Corporation, 6801 Rockledge Drive,
Bethesda, MD 20817.
Our Senior Vice President,
General Counsel and Corporate Secretary or her delegate reviews all
correspondence sent to the Board. The Board has authorized our Senior Vice
President, General Counsel and
Corporate Secretary or her delegate to respond to correspondence regarding
routine stockholder matters and services (e.g., stock transfers, dividends,
etc.). Correspondence from stockholders relating to accounting, internal
controls, or auditing matters are brought to the attention of the Audit
Committee. All other correspondence is forwarded to the Lead Director who
determines whether distribution to a Board committee or to the full Board for
review is appropriate. Any director may, at any time, review a log of all
correspondence addressed to the Board and request copies of such
correspondence.
Can I
find additional information on the Corporations
website? |
Yes. Although the
information contained on our website is not part of this Proxy Statement, you
will find information about the Corporation and our corporate governance
practices at http://www.lockheedmartin.com/corporate-governance. Our website contains information about our
Board, Board committees, Charter, Bylaws, Code of Conduct, Governance Guidelines, and information about
insider transactions. Stockholders may obtain, without charge, hard copies of
the above documents by writing to Investor Relations, Lockheed Martin
Corporation, 6801 Rockledge Drive, Bethesda, MD 20817.
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Table of Contents
ATTENDING THE ANNUAL MEETING
Lockheed Martin
Center for Leadership Excellence Auditorium 6777 Rockledge
Drive Bethesda, Maryland 20817 |
|
Parking
Garage 6720-C Rockledge
Drive Bethesda, Maryland 20817 (Parking will be validated and shuttles will
transport stockholders to the
Auditorium.) |
No parking is available at
the Center for Leadership Excellence. If you plan to drive, proceed to the
parking garage and a shuttle will take you to the Auditorium. Please plan
additional time in your schedule for the shuttle. Shuttle service will begin at
7:15 a.m. The Annual Meeting will begin promptly at 8:00 a.m.
Admission to the Annual
Meeting |
Attendance at the Annual
Meeting is limited to Lockheed Martin stockholders as of February 27, 2015 (or a
named representative), and one family member. We reserve the right to limit the
number of representatives who may attend the Annual Meeting. All attendees must
pre-register. An admission ticket will be mailed to you.
Security
Check
For security reasons, an
admission ticket and valid, government-issued photographic identification (such
as a drivers license or passport) are required to enter the Annual Meeting. You
also will be required to enter through a security check point before being
granted access into the Annual Meeting. Cameras, cell phones, and other electronic devices will not be permitted
in the Annual Meeting. All hand-carried items will be subject to inspection and
all bags, briefcases, and packages will be checked. The Corporation may
implement additional security procedures to ensure the safety of the meeting
attendees.
Registration
Deadline
If you would like to attend
the Annual Meeting, please follow the instructions below to pre-register. Your
request to pre-register must be received by Friday, April 17, 2015. An admission
ticket will be mailed to you.
Advance
Registration Instructions |
● |
Registered Stockholders. If you are a registered stockholder (your shares are held in your name), you may
pre-register and obtain an
admission ticket by: (i) checking the appropriate box on the Internet voting site, (ii)
following the prompts on the
telephone voting site, or (iii) marking the appropriate box on your proxy card. If a family member is
attending with you, please
indicate that when you pre-register and provide his or her name and address. |
|
|
● |
401(k)
Participants. If you are a
participant in the Lockheed Martin 401(k) or defined contribution plans, and you
received a notice of internet
availability of Proxy Materials or you received your Proxy Materials by email, you may pre-register
to attend the Annual Meeting (but may
not vote plan shares at the
meeting). You may pre-register and obtain an admission ticket by (i) checking the appropriate box
on the Internet voting site,
(ii) following the prompts on the telephone voting site, or (iii) marking the appropriate box
on your proxy voting direction card. If a family member is attending with
you, please indicate that when you pre-register and provide his or her
name and address. |
|
|
● |
Beneficial Owners.
If you are a beneficial owner (your
shares are held through a
broker or bank), you may pre-register and obtain an admission ticket by contacting the
Corporation at: Lockheed Martin
Corporation, Office of the Corporate Secretary, Mail Point 700, 6801 Rockledge Drive,
Bethesda, MD 20817, or
faxing a request to (301) 897-6960. Provide your name, mailing address, and evidence of your stock
ownership as of February 27,
2015. A copy of your brokerage or bank statement will suffice as evidence of ownership, or
you can obtain a letter from
your broker or bank. If a family member is attending with you, please indicate that when you
pre-register and provide his or
her name and address. |
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Table of Contents
ADDITIONAL INFORMATION AND OTHER MATTERS
Appendix A: |
Definition of Non-GAAP (Generally
Accepted Accounting
Principles) Measures |
This Proxy Statement
contains non-GAAP financial measures (as defined by SEC Regulation G). While we
believe that these non-GAAP financial measures may be useful in evaluating
Lockheed Martin, this information should be considered supplemental and is
not a substitute for financial
information prepared in accordance with GAAP. In addition, our definitions for
non-GAAP measures may differ from similarly titled measures used by other
companies or analysts.
Segment Operating Profit
represents the total earnings from our Business Segments before unallocated
income and expense, interest expense, other non-operating income and expense,
and income tax expense. This measure is used by our senior management in
evaluating the performance of our
Business Segments. The caption Total Unallocated Items reconciles Segment
Operating Profit to Consolidated Operating Profit. We use Segment Operating
Profit as a performance goal in the annual incentive plan.
|
2014 |
|
($M) |
Profit |
|
Segment Operating Profit |
$ |
5,588 |
|
Total Unallocated Items |
|
4 |
|
Consolidated
Operating Profit |
$ |
5,592 |
|
Return
on Invested Capital |
ROIC is defined as net
earnings plus after-tax interest expense divided by average invested capital
(stockholders equity plus debt) after adjusting stockholders equity by adding
back adjustments related to the Corporations post-retirement benefit plans. We
use ROIC as a performance measure for LTIP and PSUs.
|
|
Three-Year |
ROIC Calculation
($M) |
|
20122014 |
Net Earnings
(a) |
|
$ |
3,113 |
|
Interest Expense (multiplied by 65%)
(a)(b) |
|
|
233 |
|
Return |
|
$ |
3,346 |
|
Average Debt (c)(d) |
|
$ |
6,272 |
|
Average Equity
(d)(e) |
|
|
2,340 |
|
Average Benefit Plan Adjustments
(d)(f) |
|
|
11,545 |
|
Average Invested Capital |
|
$ |
20,157 |
|
|
|
|
|
|
ROIC |
|
|
16.6 |
% |
|
|
|
|
|
(a) |
|
Three-year 20122014 values for
Net Earnings and Interest Expense reflect average values over the
period. |
(b) |
|
Represents after-tax interest expense utilizing the federal
statutory rate of 35 percent. Interest expense is added back to net
earnings as it represents the return to debt holders. Debt is included as
a component of average invested capital. |
(c) |
|
Debt
consists of long-term debt, including current maturities, and short-term
borrowings (if any). |
(d) |
|
The
three-year averages are calculated using balances at the start of the
three-year period and at the end of each year. |
(e) |
|
Equity
includes non-cash adjustments, primarily to recognize the funded/unfunded
status of the Corporations benefit plans. |
(f) |
|
Average
Benefit Plan Adjustments reflect the cumulative value of entries
identified in the Corporations Consolidated Statements of Stockholders
Equity. |
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Table of Contents
Additional Information
and Other Matters
Performance Cash represents
the Corporations cash from operations adjusted to exclude: (1) the difference
between actual and planned pension funding under the Corporations Long-Range
Plan and (2) unplanned tax payments or benefits on divestitures of business units. This
definition is used in our annual incentive plan for performance limitation
testing and in our award agreements for RSUs, LTIP, and PSUs. The performance
limitation is described on page 38. To illustrate, we calculate Performance Cash
as follows:
Cash Flow
($M) |
|
2014 |
|
|
|
20122014 |
|
Cash from Operations |
|
$
|
3,866 |
|
|
|
$
|
9,973 |
|
|
Pension Funding Adjustment |
|
|
|
|
|
|
|
|
|
Actual Pension Funding |
|
|
2,078 |
|
|
|
|
8,156 |
|
Planned Pension Funding |
|
|
1,000 |
|
|
|
|
6,250 |
|
Delta |
|
|
1,078 |
|
|
|
|
1,906 |
|
Adjustment for Unplanned Tax Payments /
(Benefits) on Divestitures |
|
|
0 |
|
|
|
|
(100 |
) |
Net Adjusting Items |
|
$ |
1,078 |
|
|
|
$ |
1,806 |
|
Performance Cash |
|
$ |
4,944 |
|
|
|
$ |
11,779 |
|
|
|
|
|
|
|
|
|
|
|
Disclosure Regarding Forward-Looking
Statements |
This Proxy Statement
contains statements that, to the extent they are not recitations of historical
fact, constitute forward-looking statements within the meaning of the federal
securities laws, and are based on Lockheed Martins current expectations and
assumptions. The words believe, estimate, anticipate, project, intend,
expect, plan, outlook, scheduled, forecast and similar expressions are
intended to identify forward-looking statements. These statements are not
guarantees of future performance and are subject to risks and uncertainties.
Actual results may differ materially due to factors such as:
● |
the availability of funding for our products
and services both domestically
and internationally due to general economic conditions, performance, cost or other
factors; |
|
|
● |
our dependence on U.S. Government contracts
(e.g., the F-35 program); |
|
|
● |
changes in U.S. domestic and international
customer priorities and
requirements (including declining budgets resulting from general economic conditions; affordability
initiatives; the potential for deferral or termination of awards; the implementation of automatic sequestration under the
Budget Control Act of 2011 or
Congressional actions intended to replace sequestration; or U.S. Government operations under a
continuing resolution) and the
success of our strategy to mitigate some of these risks by focusing on expanding into adjacent markets
close to our core capabilities
and growing international sales; |
|
|
● |
lower demand for our services due to
improved product field
performance requiring less service support; lower in-theater support as troop levels are drawn
down; and increased re-competition on existing contracts coupled with the fragmentation of large contracts into
multiple smaller contracts that
are awarded primarily on the basis of price; |
|
|
● |
the accuracy of our estimates and
assumptions including those as
to schedule, cost, technical and performance issues under our contracts, cash flow, actual returns (or
losses) on pension plan assets,
movements in interest rates and other changes that may affect pension plan assumptions;
|
|
|
● |
the ability to implement, pace and effect
capitalization changes such as
share repurchase activity and accelerated pension funding and the effect of stock option
exercises or debt levels; |
|
|
● |
difficulties in developing and producing
operationally advanced technology systems, cyber security or other security
threats, information technology
failures, natural disasters, public health crises or other disruptions; |
|
|
● |
the timing and customer acceptance of
product deliveries; |
|
|
● |
materials availability and the performance
of key suppliers, teammates,
venture partners, subcontractors and customers; |
|
|
● |
charges from any future impairment reviews
that may result in the
recognition of losses and a reduction in the book value of goodwill or other long-term assets;
|
82 www.lockheedmartin.com/investor
Table of Contents
Additional Information
and Other Matters
● |
the future
effect of legislation, rulemaking and changes in accounting, tax, defense procurement,
changes in policy, interpretations, or challenges to the allowability and
recovery of costs incurred
under government cost accounting standards, export policy, changes in contracting policy
and contract mix; |
|
|
● |
the future
impact of acquisitions or divestitures, ventures, teaming arrangements or internal
reorganizations; |
|
|
● |
compliance
with laws and regulations, the outcome of legal proceedings and other contingencies
(including lawsuits, government
investigations or audits, and the cost of completing environmental remediation efforts), and U.S.
Government identification of
deficiencies in our business systems; |
|
|
● |
the
competitive environment for our products and services, export policies, and potential for delays in
procurement due to bid
protests; |
|
|
● |
our
efforts to increase the efficiency of our operations and improve the affordability of our products
and services including difficulties associated with moving or consolidating
operations; providing for the
orderly transition of management; attracting and retaining key personnel or the transfer
of critical knowledge to the
extent we lose key personnel through wage competition, normal attrition (including retirement) and
specific actions such as
workforce reductions; and supply chain management; and |
|
|
● |
economic,
business and political conditions domestically and internationally (including potential impacts
resulting from the continuing
tension between the international community and Russia over Ukraine) and our increased
reliance on securing international and adjacent business. |
These are only some of the
factors that may affect the forward-looking statements contained in this Proxy
Statement. For a discussion identifying additional important factors that could
cause actual results to vary materially from those anticipated in the
forward-looking statements, see the Corporations filings with the SEC
including, but not limited to, Managements Discussion and Analysis of
Financial Condition and Results of Operations and Risk Factors in the
Corporations Annual Report on Form 10-K for the year ended December 31, 2014,
which may be accessed through the Investor Relations page of our website,
http://www.lockheedmartin.com/investor, or through the website maintained by the SEC at
http://www.sec.gov.
Our actual financial
results likely will be different from those projected due to the inherent nature
of projections. Given these uncertainties, forward-looking statements should not
be relied on in making investment decisions. The forward-looking statements
contained in this Proxy Statement speak only as of the date of its filing.
Except where required by applicable law, we expressly disclaim a duty to provide
updates to forward-looking statements after the date of this Proxy Statement to
reflect subsequent events, changed circumstances, changes in expectations, or
the estimates and assumptions associated with them. The forward-looking
statements in this Proxy Statement are intended to be subject to the safe harbor
protection provided by the federal securities laws.
2015 Proxy
Statement |
|
|
|
83 |
Table of Contents
ETHICS AND SUSTAINABILITY PROGRAM
RECOGNITION
Our Ethics and
Sustainability Program was recognized for a number of significant
accomplishments and named to several prestigious indices:
INDEX Recognition |
|
●Added as a Top
10 industry leader by Sustainalytics for ability to manage key
environmental, social and governance exposures
●Named to the
2014 Dow Jones Sustainability World Index
●Qualified for
inclusion in RobecoSAMs 2015 Sustainability Yearbook and received the
Bronze Class distinction for excellent sustainability
performance
●Named one of the
top companies worldwide on the CDP S&P 500 Climate Disclosure
Leadership Index and S&P 500 Climate Performance Leadership
Index |
|
|
|
SUSTAINABILITY Recognition |
|
●Named #14 on
Corporate Responsibility (CR) Magazines 100 Best Corporate
Citizens
●Recognized by
Ethical Corporation as a Best Supplier Engagement Award
Nominee
●Recognized by
Fortune Most Admired Companies #1 in Social Responsibility in Aerospace
& Defense Industry
●Named #45 by
Newsweek in Americas Greenest Companies
●Rated by Center
for Political AccountabilityZicklin Index (rating the transparency of 300
companies political spending activities) with a score of 78.6, placing
the Corporation in the upper ranks of the second highest tier
●Received fourth
consecutive Outstanding Rating from U.S. Government for our U.S.
Department of Defense Small Business Program
●Earned Cyber
Incident Response Accreditation (CIRA) from the U.S. National Security
Agency, which makes Lockheed Martin one of the first federally-recognized
companies accredited to help organizations respond to attacks on their
networks |
|
|
|
CITIZENSHIP Recognition |
|
●Earned a perfect
score of 100 on the U.S. Business Leadership Network and American
Association of People with Disabilities pilot Disability Equality
Index
●Recipient of the
Catalyst Award, the prestigious annual award honoring innovative
initiatives that expand opportunities for women and business
●Named as the #1
supporter of Historically Black Colleges and Universities engineering
programs by Career Communications
Group |
Scan these QR codes
to access these sites with your mobile device. Some smartphones will
require the installation of a reader to scan the code. Please visit the
app menu on your device for instructions on how to download the
software. |
Annual Report |
Proxy Statement
|
Table of Contents
|
|
|
|
|
|
|
IMPORTANT ANNUAL MEETING INFORMATION |
|
|
Using a black
ink pen, mark your votes with an X as shown in this example.
Please do not write outside the designated areas. |
☒
|
|
Electronic Voting
Instructions |
Available 24 hours a
day, 7 days a week! |
Instead
of mailing your proxy, you may choose one of
the voting methods outlined below to vote your
proxy. |
VALIDATION DETAILS ARE
LOCATED BELOW IN THE TITLE BAR. |
Proxy votes submitted
by Internet or telephone must be received by 1:00 a.m., Eastern Daylight
Savings Time, on April 23, 2015 (except as otherwise set forth on the
reverse of this card). |
|
Vote by
Internet |
● Go to
www.investorvote.com |
● Or scan the QR Code
with your smartphone. |
● Follow the steps
outlined on the secure website. |
Vote by
telephone
● |
Call toll free
1-800-652-VOTE (8683) within the U.S., U.S. territories & Canada any
time on a touch tone telephone. There is NO CHARGE to you for the
call. |
|
|
● |
Or dial
1-781-575-2300 from outside the U.S. |
|
|
● |
Follow the
instructions provided by the recorded
message. |
Annual Meeting Proxy Card |
|
▼ IF YOU HAVE NOT
VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH
AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE. ▼ |
A |
Proposal: Election of Directors (see
below): The Board of Directors recommends a vote
FOR all the nominees. |
|
|
1. Nominees: |
|
For |
|
Against |
|
Abstain |
|
|
|
For |
|
Against |
|
Abstain |
|
|
|
For |
|
Against |
|
Abstain |
|
|
|
01 -
Daniel F. Akerson |
|
☐ |
|
☐ |
|
☐ |
|
05 -
James O. Ellis, Jr. |
|
☐ |
|
☐ |
|
☐ |
|
09 -
James M. Loy |
|
☐ |
|
☐ |
|
☐ |
|
02 -
Nolan D. Archibald |
|
☐ |
|
☐ |
|
☐ |
|
06 -
Thomas J. Falk |
|
☐ |
|
☐ |
|
☐ |
|
10 -
Joseph W. Ralston |
|
☐ |
|
☐ |
|
☐ |
|
|
|
03 -
Rosalind G. Brewer |
|
☐ |
|
☐ |
|
☐ |
|
07 -
Marillyn A. Hewson |
|
☐ |
|
☐ |
|
☐ |
|
11 -
Anne Stevens |
|
☐ |
|
☐ |
|
☐ |
|
|
|
04 -
David B. Burritt |
|
☐ |
|
☐ |
|
☐ |
|
08 -
Gwendolyn S. King |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
B |
Proposals: The Board of Directors
recommends a vote FOR Proposals 2 and
3. |
|
|
|
For |
|
Against |
|
Abstain |
2. |
Ratification of Appointment of Ernst & Young LLP as
Independent Auditors for 2015 |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
3. |
Advisory Vote to Approve the Compensation of our Named
Executive Officers (Say-on-Pay) |
|
☐ |
|
☐ |
|
☐ |
The Board of Directors recommends a vote AGAINST Proposals 4 and 5. |
|
|
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstain |
4. |
Stockholder Proposal on Written Consent |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
5. |
Stockholder Proposal on Lobbying Expenditures |
|
☐ |
|
☐ |
|
☐ |
Change of Address Please print your new
address below. |
|
Comments Please print your comments
below. |
|
|
|
Meeting
Attendance Check this
box to pre-register and request an admission ticket. If a family member
will accompany you, provide his/her name and address in the Comments
Box. |
|
☐ |
<STOCK#> 01ZCMF
Table of Contents
Admission to the Annual
Meeting
Whether or not you plan to
attend the Annual Meeting, you can be sure that your shares are represented at
the meeting by promptly voting your shares via the Internet, by telephone or
mail as described on the other side of this form.
If you plan to attend the
Annual Meeting on Thursday, April 23, 2015 at 8:00 a.m. (Eastern Daylight
Savings Time), we must receive your request for an admission ticket no later
than Friday, April 17, 2015. All attendees will be required to present valid,
government-issued photographic identification with the admission ticket and
enter through a security check point. Cameras, cell phones, and other electronic
devices will not be permitted.
Meeting Location |
Parking Garage |
Lockheed Martin Center for Leadership Excellence
Auditorium
|
6720-C Rockledge Drive |
6777
Rockledge Drive |
Bethesda, Maryland 20817 |
Bethesda, Maryland 20817 |
(Parking will be validated and shuttles will
transport |
|
stockholders to the
Auditorium) |
▼ IF YOU HAVE NOT VOTED
VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND
RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼ |
LOCKHEED MARTIN CORPORATION |
|
|
Proxy Card
For 2015 Annual Meeting of Stockholders |
The undersigned hereby
appoints Nolan D. Archibald, David B. Burritt, and Thomas J. Falk, each of them
proxies (Proxies) of the undersigned with respect to common stock of Lockheed
Martin Corporation (the Corporation) owned by the undersigned, with full power
of substitution, to vote and act for the undersigned at the Annual Meeting of
Stockholders (the Annual Meeting) of the Corporation to be held at 8:00 a.m.,
Eastern Daylight Savings Time, on April 23, 2015, at Lockheed Martin Center for
Leadership Excellence Auditorium, 6777 Rockledge Drive, Bethesda, Maryland
20817, and at any adjournments or postponements thereof. The Proxies shall vote
in accordance with the instructions indicated on this card, and are authorized
to vote in their discretion on other business that may properly come before the
meeting and any adjournments or postponements. The Proxies will vote as the Board of Directors
recommends where a choice is not specified.
If the undersigned is a
participant in a 401(k) or defined contribution plan(s) with a Lockheed Martin
stock account for which State Street Bank and Trust Company is not a Trustee,
the undersigned hereby instructs the Trustee of that plan(s) to vote such shares
of stock in accordance with the instructions on the reverse side of this card.
Plan shares must be voted no later than 11:59 p.m. Eastern Daylight Savings Time
on April 20, 2015.
Please mark, date, and sign
this card and return it promptly in the enclosed envelope. To vote by Internet
or telephone, see the instructions on the reverse side. This proxy is solicited on behalf of the
Corporations Board of Directors.
To vote in accordance with the
Board of Directors recommendations, please sign and date below; no boxes need
to be checked.
D |
Authorized Signatures Date and Sign Below. This section must be completed for your vote to be
counted. |
Please sign this proxy as name
appears hereon. When shares are held by joint tenants, both should sign. When
signing as attorney, administrator, trustee or guardian, please give full title
as such. The signer hereby revokes all previous proxies given by the signer to
vote at the Annual Meeting or any adjournments thereof.
Date
(mm/dd/yyyy) Please print date below. |
|
Signature 1 Please keep signature within the box. |
|
Signature 2 Please keep signature within the
box. |
/ / |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table of
Contents
|
|
|
|
|
|
|
IMPORTANT ANNUAL
MEETING INFORMATION |
|
|
Using a black
ink pen, mark your votes with an X as shown in this
example. Please do not write outside the designated areas. |
☒ |
|
Electronic Voting
Instructions |
Available 24 hours a
day, 7 days a week! |
Instead
of mailing your proxy, you may choose one of
the voting methods outlined below to vote your proxy. |
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE
BAR. |
Voting directions submitted by Internet or telephone must be
received by 11:59 p.m., Eastern Daylight Savings Time, on April 20, 2015
for participants in one of the Corporations 401(k) or defined
contribution plans with Lockheed Martin common stock allocated to his or
her account(s). |
|
Vote by Internet |
● Go to www.investorvote.com |
● Or scan the QR Code with your
smartphone. |
● Follow the steps outlined on the
secure website. |
Vote by telephone
● |
Call
toll free 1-800-652-VOTE (8683) within the U.S., U.S. territories &
Canada any time on a touch tone telephone. There is NO CHARGE to you for
the call. |
|
|
● |
Or dial
1-781-575-2300 from outside the U.S. |
|
|
● |
Follow
the instructions provided by the recorded
message. |
Annual Meeting Proxy Voting Direction
Card |
|
▼ IF YOU HAVE
NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE. ▼ |
A |
Proposal: Election of Directors (see
below): The
Board of Directors recommends a vote FOR all the
nominees. |
|
|
1. Nominees: |
|
For |
|
Against |
|
Abstain |
|
|
|
For |
|
Against |
|
Abstain |
|
|
|
For |
|
Against |
|
Abstain |
|
|
|
01 -
Daniel F. Akerson |
|
☐ |
|
☐ |
|
☐ |
|
05 -
James O. Ellis, Jr. |
|
☐ |
|
☐ |
|
☐ |
|
09 -
James M. Loy |
|
☐ |
|
☐ |
|
☐ |
|
02 -
Nolan D. Archibald |
|
☐ |
|
☐ |
|
☐ |
|
06 -
Thomas J. Falk |
|
☐ |
|
☐ |
|
☐ |
|
10 -
Joseph W. Ralston |
|
☐ |
|
☐ |
|
☐ |
|
|
|
03 -
Rosalind G. Brewer |
|
☐ |
|
☐ |
|
☐ |
|
07 -
Marillyn A. Hewson |
|
☐ |
|
☐ |
|
☐ |
|
11 -
Anne Stevens |
|
☐ |
|
☐ |
|
☐ |
|
|
|
04 -
David B. Burritt |
|
☐ |
|
☐ |
|
☐ |
|
08 -
Gwendolyn S. King |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
B |
Proposals: The Board of Directors recommends a vote
FOR Proposals 2 and 3. |
|
|
|
For |
|
Against |
|
Abstain |
2. |
Ratification of Appointment of Ernst & Young LLP as Independent
Auditors for 2015 |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
3. |
Advisory Vote to Approve the Compensation of our Named Executive
Officers (Say-on-Pay) |
|
☐ |
|
☐ |
|
☐ |
The Board of
Directors recommends a vote AGAINST Proposals 4 and
5. |
|
|
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstain |
4. |
Stockholder Proposal on Written Consent |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
5. |
Stockholder Proposal on Lobbying Expenditures |
|
☐ |
|
☐ |
|
☐ |
Change of
Address Please print your
new address below. |
|
Comments
Please print your comments
below. |
|
|
|
Meeting
Attendance Check this
box to pre-register and request an admission ticket. If a family member
will accompany you, provide his/her name and address in the Comments
Box. |
|
☐ |
<STOCK#> 01ZCOG
Table of
Contents
Admission to the Annual
Meeting
Whether or
not you plan to attend the Annual Meeting, you can be sure that your shares are
represented at the meeting by promptly voting your shares via the Internet, by
telephone or mail as described on the other side of this form.
If you plan
to attend the Annual Meeting on Thursday, April 23, 2015 at 8:00 a.m. (Eastern
Daylight Savings Time), we must receive your request for an admission ticket no
later than Friday, April 17, 2015. All attendees will be required to present
valid, government-issued photographic identification with the admission ticket
and enter through a security check point. Cameras, cell phones, and other
electronic devices will not be permitted.
Meeting Location |
Parking Garage |
Lockheed Martin Center for Leadership Excellence
Auditorium
|
6720-C Rockledge Drive |
6777
Rockledge Drive |
Bethesda, Maryland 20817 |
Bethesda, Maryland 20817 |
(Parking will be validated and shuttles will
transport |
|
stockholders to the Auditorium) |
|
|
IMPORTANT NOTICE TO
PARTICIPANTS WITH LOCKHEED MARTIN CORPORATION COMMON STOCK ALLOCATED TO THEIR
ACCOUNTS IN CERTAIN COMPANY SPONSORED SAVINGS PLANS
Dear Plan
Participant:
State Street Bank and Trust
Company ("State Street") is the Trustee with respect to the Lockheed Martin
Corporation common stock held in the following plans:
Lockheed Martin Corporation
Salaried Savings Plan
Lockheed Martin Corporation Hourly Employee Savings
Plan Plus
Lockheed Martin Corporation Capital Accumulation Plan
Lockheed
Martin Corporation Capital Accumulation Plan for Hourly Employees
Lockheed
Martin Corporation Operations Support Savings Plan
Lockheed Martin
Corporation Performance Sharing Plan for Bargaining Employees
Lockheed Martin
Corporation Basic Benefit Plan for Hourly Employees
This voting direction card is
used for the purpose of providing confidential voting directions to State Street
with respect to the shares held in the plans listed above. All matters to be
voted upon at the Annual Meeting of Stockholders are extremely important and are
described in the Proxy Statement.
Sincerely,
State Street Bank and Trust
Company, Trustee
▼ IF YOU HAVE NOT VOTED VIA THE
INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND
RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼
|
LOCKHEED MARTIN CORPORATION |
|
|
Proxy
Voting Direction Card For 2015 Annual Meeting of
Stockholders |
State Street Bank and Trust Company, as Trustee of
the plans listed above, is directed to vote the shares of Lockheed Martin
Corporation (the Corporation) common stock allocated to my account(s) in one
or more of the plans listed above, at the Annual Meeting of Stockholders of the
Corporation to be held at 8:00 a.m., Eastern Daylight Savings Time, on April 23,
2015, at Lockheed Martin Center for Leadership Excellence Auditorium, 6777
Rockledge Drive, Bethesda, Maryland 20817, with respect to the election of
directors and the proposals and at any adjournments or postponements. State
Street will vote in accordance with the directions indicated on this card.
State Street will vote signed
cards that are returned in accordance with recommendations of the Board of
Directors where voting directions are not specified. If no voting direction is received or if this
proxy voting direction card is returned unsigned, the shares allocated to my
account(s) will be voted by State Street in proportion to those shares allocated
to accounts of participants for which timely directions were received, unless
contrary to ERISA. Plan Participants are requested to mark, date, and sign this
card and return it promptly in the enclosed envelope. To vote by Internet or
telephone, see instructions on the reverse side. This proxy is solicited on behalf of the
Corporations Board of Directors.
D |
Authorized
Signatures Date and Sign Below. This section must be completed for your vote to be
counted. |
Please sign this proxy voting direction card as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, administrator, trustee or guardian,
please give full title as such. The signer hereby revokes all previous proxies given by the signer to vote at the Annual Meeting or any adjournments thereof.
Date (mm/dd/yyyy) Please print date
below. |
|
Signature 1 Please keep signature within
the box. |
|
Signature 2 Please keep signature within
the box. |
/ / |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table of Contents
|
IMPORTANT ANNUAL MEETING
INFORMATION |
Using a black
ink pen, mark your votes with an X as shown
in this example. Please do not write outside the designated
areas. |
X |
Annual Meeting Proxy
Card |
▼ PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM
PORTION IN THE ENCLOSED ENVELOPE. ▼ |
A |
Proposal: Election of Directors (see
below): The Board of Directors recommends a vote
FOR all the nominees. |
|
|
1. Nominees: |
|
For |
|
Against |
|
Abstain |
|
|
|
For |
|
Against |
|
Abstain |
|
|
|
For |
|
Against |
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Abstain |
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01 -
Daniel F. Akerson |
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05 -
James O. Ellis, Jr. |
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09 -
James M. Loy |
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☐ |
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02 -
Nolan D. Archibald |
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06 -
Thomas J. Falk |
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10 -
Joseph W. Ralston |
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☐ |
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☐ |
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03 -
Rosalind G. Brewer |
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07 -
Marillyn A. Hewson |
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11 -
Anne Stevens |
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04 -
David B. Burritt |
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08 -
Gwendolyn S. King |
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B |
Proposals: The Board of Directors
recommends a vote FOR Proposals 2 and
3. |
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For |
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Against |
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Abstain |
2. |
Ratification of Appointment of Ernst & Young LLP as
Independent Auditors for 2015 |
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3. |
Advisory Vote to Approve the Compensation of our Named
Executive Officers (Say-on-Pay) |
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The Board of Directors recommends a vote AGAINST Proposals 4 and 5. |
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For |
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Against |
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Abstain |
4. |
Stockholder Proposal on Written Consent |
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5. |
Stockholder Proposal on Lobbying Expenditures |
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Table of Contents
LOCKHEED MARTIN CORPORATION |
|
Proxy Card
For 2015 Annual Meeting of Stockholders |
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The undersigned hereby
appoints Nolan D. Archibald, David B. Burritt, and Thomas J. Falk, each of them
proxies (Proxies) of the undersigned with respect to common stock of Lockheed
Martin Corporation (the Corporation) owned by the undersigned, with full power
of substitution, to vote and act for the undersigned at the Annual Meeting of
Stockholders (the Annual Meeting) of the Corporation to be held at 8:00 a.m.,
Eastern Daylight Savings Time, on April 23, 2015, at Lockheed Martin Center for
Leadership Excellence Auditorium, 6777 Rockledge Drive, Bethesda, Maryland
20817, and at any adjournments or postponements thereof. The Proxies shall vote
in accordance with the instructions indicated on this card, and are authorized
to vote in their discretion on other business that may properly come before the
meeting and any adjournments or postponements. The Proxies will vote as the Board of Directors
recommends where a choice is not specified.
If the undersigned is a
participant in a 401(k) or defined contribution plan(s) with a Lockheed Martin
stock account for which State Street Bank and Trust Company is not a
Trustee, the undersigned hereby instructs the Trustee of that plan(s) to
vote such shares of stock in accordance with the instructions on the reverse
side of this card. Plan shares must be voted no later than 11:59 p.m. Eastern
Daylight Savings Time on April 20, 2015.
Please mark, date, and sign
this card and return it promptly in the enclosed envelope. This proxy is solicited on behalf of the
Corporations Board of Directors.
To vote in accordance with
the Board of Directors recommendations, please sign and date below; no boxes
need to be checked.
C |
Authorized Signatures Date
and Sign Below. This section must be
completed for your vote to be counted. |
Please sign this proxy as name appears
hereon. When shares are held by joint tenants, both should sign. When
signing as attorney, administrator, trustee or guardian, please give full
title as such. The signer hereby revokes all previous proxies given by the
signer to vote at the Annual Meeting or any adjournments
thereof. |
Date
(mm/dd/yyyy) Please print date below. |
|
Signature 1 Please keep signature within the
box. |
|
Signature 2 Please keep signature within the
box. |
/ / |
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Table of Contents
LOCKHEED MARTIN
CORPORATION
ANNUAL MEETING FOR HOLDERS AS OF 2/27/15
TO BE HELD ON
4/23/15
Your vote is important.
Thank you for voting.
Read
the Proxy Statement and have the voting instruction form below at hand.
Please note that the telephone and Internet voting turns off at 11:59 p.m.
ET the night before the meeting or cutoff date. |
|
Vote by Internet: |
|
www.proxyvote.com |
Vote by
Phone: |
|
1-800-454-8683 |
Vote by
Mail: |
|
Use the envelope
enclosed |
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
M85040-P60332 |
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder
Meeting. The following materials are available at www.proxyvote.com: 2015
Notice and Proxy Statement and 2014 Annual Report |
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PLEASE "X" HERE ONLY IF YOU PLAN TO ATTEND THE MEETING AND
VOTE THESE SHARES IN PERSON |
☐ |
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The Board of Directors recommends you vote FOR all the
director nominees: |
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1. |
Election of Directors |
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For |
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Against |
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Abstain |
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The Board of Directors recommends you vote FOR Proposals 2
and 3: |
For |
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Against |
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Abstain |
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Nominees: |
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1a. |
Daniel F. Akerson |
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☐ |
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☐ |
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☐ |
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2. |
Ratification of Appointment of Ernst & Young LLP as
Independent Auditors for 2015 |
☐ |
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☐ |
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☐ |
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1b. |
Nolan D. Archibald |
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☐ |
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☐ |
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☐ |
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3. |
Advisory Vote to Approve the Compensation of our Named
Executive Officers ("Say-on-Pay") |
☐ |
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☐ |
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☐ |
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1c. |
Rosalind G. Brewer |
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☐ |
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☐ |
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☐ |
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1d. |
David B. Burritt |
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☐ |
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☐ |
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☐ |
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The Board of Directors recommends you vote AGAINST Proposals 4 and 5: |
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1e. |
James O. Ellis, Jr. |
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☐ |
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☐ |
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☐ |
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4. |
Stockholder Proposal on Written Consent |
☐ |
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☐ |
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☐ |
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1f. |
Thomas J. Falk |
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☐ |
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☐ |
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☐ |
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5. |
Stockholder Proposal on Lobbying Expenditures |
☐ |
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☐ |
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☐ |
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1g. |
Marillyn A. Hewson |
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☐ |
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☐ |
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☐ |
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NOTE: Such other business as may
properly come before the meeting or any adjournment thereof. |
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1h. |
Gwendolyn S. King |
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☐ |
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☐ |
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☐ |
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1i. |
James M. Loy |
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☐ |
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☐ |
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☐ |
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1j. |
Joseph W. Ralston |
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☐ |
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☐ |
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☐ |
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1k. |
Anne
Stevens |
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☐ |
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☐ |
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☐ |
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Signature [PLEASE SIGN WITHIN BOX] |
Date |
Table of
Contents
[[company_logo]]
Lockheed Martin
Corporation
Annual Meeting of Stockholders
April 23, 2015 at 8:00 a.m. Eastern Daylight
Savings Time
Lockheed Martin Center for Leadership
Excellence
Auditorium
6777 Rockledge Drive
Bethesda, Maryland 20817
Control
Number:[[SingleControlNumber]]
To:
[[Registration]]
Lockheed Martin
Corporations 2015 Annual Meeting Materials including the 2014 Annual Report and
2015 Proxy Statement are now available online. You may also vote your shares
online for the Annual Stockholders Meeting.
To view the Proxy Statement
visit:
http:
To view the Annual Report
visit:
http:
To cast your vote, please
visit www.investorvote.com and follow the on-screen instructions.
You will be prompted to enter the Proxy Login Control Number above in this
e-mail to access this voting site. Note that votes submitted through this site
must be received by 1:00 a.m. Eastern Daylight Savings Time, April 23, 2015.
You may also vote your
shares by telephone by calling (800) 652-8683 within the U.S., Canada and Puerto
Rico and (781) 575-2300 from other countries. Follow the instructions provided
by the recorded message. You will need the Proxy Login Control Number above in
this e-mail for voting identification purposes.
Thank you for submitting
your very important vote.
Questions? For additional
assistance regarding your account please visit www.computershare.com/ContactUs
where you will find useful FAQs, phone numbers and our secure online contact
form.
Please do not reply to this
email. This mailbox is not monitored and you will not receive a
response.
|
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|
CERTAINTY |
INGENUITY |
ADVANTAGE |
Table of
Contents
EVERCORE TRUST COMPANY,
N.A.
IMPORTANT NOTICE TO
PARTICIPANTS WITH LOCKHEED
MARTIN CORPORATION COMMON STOCK
ALLOCATED
TO THEIR ACCOUNTS
IN CERTAIN
COMPANY SPONSORED PLANS
Dear Plan
Participant:
The enclosed 2015 proxy
materials have been prepared at the direction of the Board of Directors of
Lockheed Martin Corporation (Lockheed Martin) in connection with its
solicitation of proxies for the Annual Meeting of Stockholders to be held on
April 23, 2015.
Evercore Trust Company,
N.A. (EVERCORE), is the voting trustee with respect to the shares of Lockheed
Martin Corporation common stock (Common Stock) held in the SANDIA
CORPORATION SAVINGS AND INCOME PLAN (the Plan). The enclosed Annual
Meeting Proxy Card (the proxy card) is used for the purpose of giving voting
instructions to EVERCORE with respect to shares held in the Plan. This letter
provides information concerning the voting of Common Stock held in the
Plan.
The recommendations of the
Board of Directors with respect to matters to be voted upon at the Annual
Meeting of Stockholders are printed on the proxy card. If you want to follow the
Boards recommendations on all matters, you can do so by signing, dating and
returning the proxy card in the enclosed postage-paid envelope without checking
any of the boxes on the proxy card. You may also provide voting instructions
electronically by Internet or touch-tone telephone, as explained
below.
All matters to be voted
upon at this meeting are extremely important and are described in the enclosed
proxy materials. You should carefully read these materials and follow the
instructions below to complete and return the proxy card or provide voting
instructions electronically by Internet or telephone.
VOTING
DEADLINE
In order to ensure that
your voting instructions to EVERCORE are tabulated in a timely fashion, your
proxy card, Internet or telephone instructions must be received no later than
11:59 p.m. Eastern Daylight Savings Time on April 20, 2015.
If you wish to provide
voting instructions by returning the proxy card, you must complete, sign, date
and return your proxy card in the envelope provided in time for it to be
received by the voting deadline. Please return your proxy card in the envelope
provided which is addressed to Computershare Trust Company, N.A. the
confidential vote tabulator for EVERCORE.
Table of
Contents
EVERCORES
RESPONSIBILITIES
As the voting trustee with
respect to the Lockheed Martin Corporation Common Stock held in the SANDIA Plan,
EVERCOREs responsibilities include providing proxy materials to participants,
ensuring the confidentiality of participants voting instructions, voting shares
in accordance with participant instructions, and voting shares for which no
instructions are received from participants.
HOW TO GIVE VOTING
INSTRUCTIONS
These instructions explain
how you may give voting instructions to EVERCORE with respect to shares of
Lockheed Martin Corporation Common Stock held in the Plan.
Only EVERCORE can vote the
shares of Common Stock held by the Plan. However, under the terms of the Plan,
each participant is entitled to instruct EVERCORE on how to vote all shares
allocated to his or her account. You may instruct EVERCORE to vote
for or against any particular
matter or to abstain from voting on that matter. If you sign, date and return
the proxy card but do not check any boxes on the card, EVERCORE will vote the
shares in accordance with the Boards recommendations on the proxy
card.
You may also provide
voting instructions to EVERCORE by using the Internet or a touch-tone telephone.
Simply access www.investorvote.com on the Internet, scan the QR code included in
the proxy materials or dial 1-800-652-8683 on a touch-tone telephone and follow
the directions. You must have your proxy card available when you vote by
Internet or telephone. If you return the proxy card and also provide voting
instructions by Internet and/or telephone, EVERCORE will follow your latest
instructions. For this purpose, the date on your proxy card will be the date for
those instructions. If it is not possible to determine which voting instructions
are the latest, EVERCORE will follow your latest dated electronic voting
instructions.
Failure to Provide
Instructions
If you fail to sign, date
and return the proxy card or vote by Internet or telephone, EVERCORE will vote
shares allocated to your account in its sole discretion.
CONFIDENTIALITY
Your voting instructions to
EVERCORE are confidential. EVERCORE will not disclose how you voted or if you
voted, unless required to do so by law. You should feel free to instruct
EVERCORE to vote in the manner you think is best.
QUESTIONS
If you have any questions
about your voting rights under the Plans, the proxy card or the confidentiality
of your vote, please contact EVERCORE between the hours of 8:30 a.m. and 4:00
p.m. Pacific time at 1-888-296-2891.
EVERCORE TRUST COMPANY,
N.A.
VOTING TRUSTEE
Dated March
13, 2015
Table of
Contents
Memorandum
DATE: |
|
March 16, 2015 |
|
|
|
TO: |
|
Lockheed Martin Savings Plan Participants |
|
|
|
FROM: |
|
Maryanne R. Lavan, Senior Vice President, General Counsel and
Corporate Secretary |
|
|
|
SUBJECT: |
|
Important Notice Regarding Availability of Lockheed Martin
Proxy Materials |
Lockheed Martin employees
are the largest holders of our common stock (representing approximately 14% of
our outstanding shares). As a Lockheed Martin savings plan participant, you are
entitled to vote your shares held through the Lockheed Martin savings plans on
the matters to be voted upon at the Corporations Annual Meeting of Stockholders
on April 23, 2015.
Tomorrow, you will receive
an e-mail from Computershare Trust Company, N.A. (cpucommunications.com), our
independent registrar and transfer agent, with a subject line of Important
Notice Regarding Availability of Lockheed Martin Proxy Materials. The e-mail
will include a link to the Corporations 2014 Annual Report and 2015 Proxy
Statement (together, the Proxy Materials). It will also contain information on
how to vote your shares confidentially through the Internet or by
telephone.
Your vote is very
important. Please watch your
e-mail from Computershare and vote promptly. Note that you may receive multiple
proxy packages and voting instructions (electronically and/or by mail). These
materials may not be duplicates as you may hold shares of Lockheed Martin stock
in multiple accounts. Please be sure to vote all of your shares in each of your accounts in accordance with the
directions on the proxy card(s) and/or voting instruction form(s) you
receive.
A hard copy of the Proxy
Materials can be requested by calling 1-877-223-3863 (toll free) or
1-267-468-0767, if outside the U.S. Requests will be fulfilled until 3:00 p.m.
Eastern Daylight Savings Time on April 15, 2015.
Please note: Personal
computer settings vary and unknown e-mail addresses, such as those from
Computershare, may sometimes be directed to your Junk E-mail folder. These
items can be recovered by dragging and dropping the e-mail from your Junk
E-mail folder to your Inbox.
Table of
Contents
Form of Email to Employee
Plan Participants (to be sent
03/17/15)
Email Reminders to
Employee Plan Participants (to be
sent 04/01/15 and 04/09/15)
Subject: Important Notice
Regarding Availability of Lockheed Martin Proxy Materials
Annual Report, Proxy
Statement and Voting Instructions for the Lockheed Martin Corporation Annual
Meeting of Stockholders on April 23, 2015
Proxy Login Control Number:
[to be inserted]
To:
Lockheed Martin Corporation Savings Plan Participants
You are receiving this
e-mail because you are a participant in a Lockheed Martin Corporation savings
plan. Instead of receiving your 2014 Annual Report and 2015 Proxy Statement
(Proxy Materials) by mail, you can conveniently access your Proxy Materials
and vote online at www.investorvote.com. To view
the Proxy Materials and cast your vote, enter the Proxy Login Control Number
above (without any spaces) and follow the on-screen instructions.
To obtain a hard copy of
Proxy Materials (free of charge):
● |
Call toll free 1-877-223-3863 within the
U.S. |
● |
Call 1-267-468-0767 from outside the U.S. |
● |
Requests must be received by 3:00 p.m., Eastern Daylight Savings
Time, on April 15, 2015 |
Voting deadline:
● |
11:59 p.m., Eastern Daylight Savings Time, on Monday, April 20,
2015 |
Please note that you may
receive multiple proxy packages and voting instructions (electronically and/or
by mail). These materials may not be duplicates as you may hold shares of
Lockheed Martin stock in multiple accounts. Please be sure to vote
all of your shares in each of your accounts in accordance with the
directions on the proxy card(s) and/or voting instruction form(s) you
receive.
Please cast your vote
today!
Computershare Trust
Company, N.A.
Independent
Registrar and Transfer Agent for Lockheed Martin Corporation
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