UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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| ☐ | Preliminary Proxy Statement | |||||||
| ☐ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |||||||
| ☑ | Definitive Proxy Statement | |||||||
| ☐ | Definitive Additional Materials | |||||||
| ☐ | Soliciting Material Pursuant to Section 240.14a-12 | |||||||
Lockheed Martin Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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| Message from the Board of Directors |  | ||||
Dear Fellow Stockholders:
We are pleased to invite you to attend Lockheed Martin’s 2022 Annual Meeting of Stockholders on Thursday, April 21, 2022. At the meeting, you will have the chance to vote on the matters set forth in the accompanying Notice of 2022 Annual Meeting of Stockholders. There will also be time for your questions and comments.
Transforming our Business and Accelerating the Delivery of Enhanced Capabilities to Customers
The world has transformed over the past two years as it adapted to COVID-19 and Lockheed Martin has been no exception. As a board, we are deeply proud of how our employees have overcome, persevered, and innovated throughout the pandemic to continue to deliver on our customer commitments. As a company, we have made it a strategic priority to embrace new business processes, deploy new digital tools, and apply a OneLM mindset. By doing so, we can act with greater speed, agility, and insights to better serve our customers in meeting their cost, quality and capability requirements. We are also investing to accelerate the delivery of key technologies to enable Joint All-Domain Operations. Lockheed Martin’s more than 100-year legacy developing cutting-edge technologies has made our name synonymous with innovation. Our transformation efforts and our investments are positioning our company to uphold that legacy.
Environmental, Social and Governance Priorities
Our stockholders and other stakeholders are increasingly focused on environmental, social, and governance (ESG) matters. The board recognizes the importance of building a sustainable corporation so we are actively engaged in overseeing the company’s sustainability efforts. The feedback we get from our investors on the importance of these issues during our year-round engagement is integral to the Board’s decision-making process and helps to inform our policies practices and disclosures. This year, we took steps to enhance our ESG practices and disclosures in several areas:
•We enhanced transparency of our diversity and inclusion progress by publishing our EEO-1 report data, and disclosing our goals to increase representation of women and people of color in our workforce and increase the hiring of veterans and people with disabilities, as disclosed in detail in our Sustainability Management Plan.
•We published our first Human Rights Report to further enhance the availability and transparency of information related to our human rights policies, procedures, initiatives and approach.
•We published our fourth-generation Go Green goals, including an ambitious new goal to significantly reduce emissions by 2030, as we consider additional capital investments and initiatives to accelerate our decarbonization progress.
•We continued to provide stakeholders with ESG data by publishing our 10th annual Sustainability Report in accordance with the Global Reporting Initiative (GRI) framework and making available a Sustainability Accounting Standards Board (SASB) report and a Climate-Related Risk and Opportunity Assessment based on the Task Force on Climate-Related Financial Disclosures (TCFD).
•We have continued to focus on board diversity and on ensuring our Board composition and skills are aligned with our strategy, with the addition of Patricia Yarrington and John Donovan to the Board during 2021, building on other recent refreshments.
•We have added a new section in the proxy statement to provide additional transparency about the company’s political and public policy activities.
Shared Purpose
The challenges we have faced over the past year have underscored the importance of working with shared purpose. The foundation of our continued success will always be a commitment to our core values to – Do What’s Right, Respect Others, and Perform with Excellence. These core values advance our mission to help our customers keep people safe.
We are grateful to serve on your behalf and thank you for your investments in Lockheed Martin. Your vote is important. We encourage you to promptly cast your vote in accordance with the Board’s recommendations.
Sincerely, The Lockheed Martin Board of Directors
* From left to right: David B. Burritt, James O. Ellis, Jr., Vicki A. Hollub, Thomas J. Falk, Ilene S. Gordon, Daniel F. Akerson, James D. Taiclet, Debra L. Reed-Klages, Bruce A. Carlson, Patricia E. Yarrington, Jeh C. Johnson, John M. Donovan and Joseph F. Dunford, Jr.
Notice of 2022 Annual Meeting of Stockholders
| Lockheed Martin Virtual Annual Meeting | |||||
When: Thursday, April 21, 2022, 9:00 a.m. EDT | Live Webcast Access: Online audio webcast at: www.meetnow.global/LMT2022 (You may begin to log in at 8:30 a.m. EDT.) | ||||
Who Can Vote: Stockholders of record at the close of business on February 25, 2022 are entitled to vote. Whether or not you plan to attend the Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described below. See pages 80-84 for additional information regarding accessing the Annual Meeting and how to vote your shares. | |||||
The 2022 Annual Meeting will be conducted online only through a live audio webcast via the Internet to facilitate stockholder attendance and to enable stockholders to participate fully and equally, regardless of size of holdings, resources, or physical location. We have enclosed our 2021 Annual Report to Stockholders. The report is not part of the proxy soliciting materials for the 2022 Annual Meeting. The Proxy Materials or a Notice of Internet Availability were first sent to stockholders on or about March 11, 2022.
We will consider the five proposals below and any other matters that may properly come before the meeting.
Voting Matters and Board Recommendations
| Proposal 1 | Proposal 2 | Proposal 3 | |||||||||||||||||||||
| Election of 13 Director Nominees | Ratification of the Appointment of Ernst & Young LLP as our Independent Auditors for 2022 | Advisory Vote to Approve the Compensation of our Named Executive Officers (Say-on-Pay) | |||||||||||||||||||||
 | See pages 7-15 for further information. | | See pages 33-34 for further information. | | See page 36 for further information. | ||||||||||||||||||
 | FOR each Director Nominee | | FOR | | FOR | ||||||||||||||||||
| Proposal 4 | Proposal 5 | ||||||||||||||||||||||
| Stockholder Proposal to Reduce Threshold for Calling Special Stockholder Meetings | Stockholder Proposal to Issue a Human Rights Impact Assessment Report | ||||||||||||||||||||||
 | See pages 74-75 for further information. | | See pages 76-78 for further information. | ||||||||||||||||||||
 | AGAINST | | AGAINST | ||||||||||||||||||||
How to Vote in Advance:
 | Via Internet: |  | By Telephone: |  | By Mail: | ||||||||||||||||||
| At the website listed on the proxy card or voting instruction form you received. | Call 1-800-652-8683 in the U.S., Canada and Puerto Rico, 1-781-575-2300 for other locations, or the numbers provided on your voting instruction form. | Mark, date and sign your proxy card or voting instruction form and return it in the accompanying postage prepaid envelope. | |||||||||||||||||||||
Your vote is extremely important. Please vote at your earliest convenience to ensure the presence of a quorum at the meeting. Promptly voting your shares in accordance with the instructions you receive will save the expense of additional solicitation.
Sincerely,
Maryanne R. Lavan
Senior Vice President, General Counsel and Corporate Secretary
March 11, 2022
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting To Be Held on April 21, 2022: The 2022 Proxy Statement and 2021 Annual Report are available at www.edocumentview.com/LMT. | ||
| www.lockheedmartin.com | 2022 Proxy Statement | 5 | ||||||
Table of Contents
Director Overboarding Policy and Oversight | |||||
STOCKHOLDER PROPOSALS 4-5 | |||||
Frequently Requested Information | |||||||||||
Lockheed Martin. Your Mission is Ours.®
Lockheed Martin Corporation (the Company) (NYSE: LMT) is a global security and aerospace company principally involved in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
| People | Footprint | |||||||
 | 114,000 Total Employees | 372 Facilities Globally  | ||||||
 | 7,500+ International Employees | |||||||
 | Nearly 60,000 Engineers, Scientists and Technologists | |||||||
 | More than one in five employees is a veteran | |||||||
2022 Strategic Objectives
Mission First: Enhance defense, security, and scientific discovery by delivering reliable, innovative, and affordable solutions for our customers’ most daunting challenges
Lead | Innovate | Drive | Grow | |||||||||||||||||
our industry with our customers to deliver superior 21st Century Security capability | to rapidly deliver capability through technology development, commercial technology application and new business models | operational excellence throughout the Company and efficiency throughout the industry | organically through franchise program captures, international expansion and through capital and acquisition investments that support our strategic goals | |||||||||||||||||
KEY ENABLERS | ||||||||
 | DISCRIMINATING TECHNOLOGY |  | DIGITAL TRANSFORMATION |  | STRATEGIC PARTNERSHIPS |  | FISCAL DISCIPLINE | ||||||||||||||||
1 | | ||||
Lockheed Martin. Your Mission is Ours.®
Financial Strength (2021 Results)
 |  | 62% Total Stockholder Return 2017-2021 | ||||||
 | 8% Increase to Annual Dividend | |||||||
 | $6.3B Net Earnings | |||||||
Industry Leading Portfolio
 |  |  |  | |||||||||||||||||||||||||||||
$26.7B AERONAUTICS | $16.8B ROTARY AND MISSION SYSTEMS | $11.7B MISSILES AND FIRE CONTROL | $11.8B SPACE | |||||||||||||||||||||||||||||
2022 Tech Priorities
To enable Joint All-Domain Operations in a complex 21st century threat environment, Lockheed Martin is pursuing a vision to enable our customers to make all-domain decisions — land, sea, air, space and cyber — through advanced and resilient communications at a speed our adversaries can’t match. To make this vision a reality, we are focusing our research and development investments and commercial relationships in areas that will give our customers a decisive advantage around the globe.
 |  |  |  |  | ||||||||||||||||||||||
ARTIFICIAL INTELLIGENCE AND AUTONOMY | HYPERSONICS | DIRECTED ENERGY | EDGE COMPUTING | SPECTRUM DOMINANCE | ||||||||||||||||||||||
Sustainability At Lockheed Martin, we foster innovation, integrity and security to protect the environment, strengthen communities and propel responsible growth. We integrate environmental, social and governance practices throughout our business and our employees actively strengthen the quality of life where we live and work. | ||||||||
Climate Stewardship
Our commitment to sustainability includes a responsibility to mitigate climate risk and safeguard valuable resources.
 | 47% Reduction in Carbon Emissions per $ Gross Profit 2015 baseline |  | 22% Of Electricity Use Matched with Renewable Energy | |||||||||||||||||
| www.lockheedmartin.com | 2022 Proxy Statement | 2 | ||||||
Proxy Statement Summary
Corporate Governance Highlights
The Board seeks to identify candidates with knowledge or experience that will expand or complement its existing expertise to ensure the Board is aligned to the Company’s future strategic challenges and opportunities.
| Name, Age, Independence, Position and Other Public Boards | Tenure | Committees |  | |||||||||||||||||||||||
 |  | James D. Taiclet, 61 Chairman, President & CEO, Lockheed Martin Corporation | 2018 | |||||||||||||||||||||||
 |  |  | Daniel F. Akerson, 73, Independent Lead Director Retired Chairman & CEO, General Motors Company | 2014 | N* | |||||||||||||||||||||
 | James O. Ellis, Jr., 74 Retired President & CEO, Institute of Nuclear Power Operations Director at Dominion Energy, Inc. (Finance & Risk Oversight; Audit Chair; Nominating & Governance) | 2004 | A C * | |||||||||||||||||||||||
 | Thomas J. Falk, 63 Retired Chairman & CEO, Kimberly-Clark Corporation | 2010 | A* M | |||||||||||||||||||||||
 | Ilene S. Gordon, 68 Retired Chairman & CEO, Ingredion Incorporated Director at International Paper Company (Presiding Director; Governance Chair; Executive; Management Development & Compensation); International Flavors & Fragrances, Inc. (Human Capital & Compensation) | 2016 | A M * | |||||||||||||||||||||||
 | David B. Burritt, 66 President & CEO, United States Steel Corporation (U.S. Steel) Director at U.S. Steel (Executive) | 2008 | A N | |||||||||||||||||||||||
 | Bruce A. Carlson, 72 Retired United States Air Force General | 2015 | C N | |||||||||||||||||||||||
 |  | John M. Donovan, 61 Retired CEO, AT&T Communications, LLC Palo Alto Networks (Lead Independent Director; Nominating & Governance Chair; Compensation and People; Security) | 2021 | C | ||||||||||||||||||||||
 | Joseph F. Dunford, Jr., 66 Senior Managing Director & Partner of Liberty Strategic Capital; Retired United States Marine Corps General; Former Chairman of the Joint Chiefs of Staff Director at Satellogic Inc. | 2020 | C N | |||||||||||||||||||||||
 | Vicki A. Hollub, 62 President & CEO, Occidental Petroleum Corporation Director at Occidental | 2018 | M N | |||||||||||||||||||||||
 | Jeh C. Johnson, 64 Partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP; Former Secretary of Homeland Security Director at U.S. Steel (Compensation & Organization; Corporate Governance & Sustainability) | 2018 | C N | |||||||||||||||||||||||
 | Debra L. Reed-Klages, 65 Retired Chairman, President & CEO, Sempra Energy Director at Chevron Corporation (Audit Chair); Caterpillar Inc. (Compensation & Human Resources) | 2019 | A M | |||||||||||||||||||||||
|  | Patricia E. Yarrington, 65 Retired Chief Financial Officer, Chevron Corporation | 2021 | A M | ||||||||||||||||||||||
| A | Audit | M | Management Development and Compensation | * | Chair | ||||||||||||
| C | Classified Business and Security | N | Nominating and Corporate Governance | ||||||||||||||
3 | | ||||
Proxy Statement Summary
Board Effectiveness
Our Board takes a multi-faceted approach to continually assess Board composition and evaluate effectiveness.
Practices contributing to board effectiveness  Identification of Diverse Board Candidates Rotation of Board Committee Assignments Annual Performance Assessments Robust Onboarding and Continuing Education Tenure and Overboarding Guidelines | Skills enhanced in the past 5 Years: | ||||||||||
 | Innovation, information technology and cybersecurity | ||||||||||
 | Industry and customer experience | ||||||||||
 | Environment, safety and sustainability expertise | ||||||||||
 | Enterprise risk management | ||||||||||
Meaningful Refreshment The Board has added 7 new directors in the past 5 years. | |||||||||||
 | Global organization experience | ||||||||||
Our Alignment with Governance Standards
In 2018, we signed on to the Commonsense Principles 2.0, which are intended to provide a basic framework for sound, long-term oriented governance. Our governance practices also comply with the Investor Stewardship Group (ISG) Corporate Governance Principles for U.S. Listed Companies. Below we identify each of the ISG’s governance principles and how our practices are aligned.
| Boards are accountable to stockholders | Boards should be responsive to stockholders and be proactive in order to understand their perspectives | ||||
| Annual election of directors Majority voting standard for uncontested director elections Directors not receiving majority support must tender resignation to Board for consideration Market-standard proxy access right for stockholders No poison pill Full disclosure on corporate governance and board practices | Proactive, year-round engagement with stockholders, including participation of independent Lead Director Engagement topics during 2021 included Board composition, diversity and refreshment, stockholder rights, climate risks and related climate change goals, workforce diversity and inclusion, executive compensation, human rights and our inaugural Human Rights Report, lobbying and political spending and other environmental, social and governance (ESG) matters | ||||
| Boards should adopt structures and practices that enhance their effectiveness | |||||
| 12 of 13 directors are independent Four directors are women; one is an African-American male Significant Board refreshment Directors reflect a diverse mix of skills and experience All Board committees are fully independent | Annual Board and committee self-assessments Board access to officers and employees 2021 Board attendance greater than 99% Overboarding policy enhanced in 2021 to further ensure Board members can devote sufficient time to the Company | ||||
| Boards should have strong, independent leadership | Stockholders should be entitled to voting rights in proportion to their economic interest | Boards should develop management incentive structures that are aligned with the long-term strategy of the company | ||||||
| Engaged independent Lead Director Annual review of Board leadership structure Independent chairs of all Board committees | One class of voting stock “One share, one vote” standard | Compensation programs actively reviewed by the Board and include short- and long-term goals tied to the long-range plan and that underpin our long-term strategy | ||||||
Stockholder Outreach In seeking stockholder perspectives, our senior management team offered during 2021 to engage with a cross section of stockholders representing over a majority of our outstanding shares and engaged with stockholders representing over 47% of our outstanding shares. Our consistent, active and year-round dialogue with stockholders, proxy advisory firms and other stakeholders enables our Board to consider a broad range of viewpoints in boardroom discussions. Please see the summary above of principal governance-related engagement topics during 2021. | Engagement Highlights 60+ Engagements 30+ Stockholders 47+% Outstanding Stock (as of December 31, 2021) | ||||
| www.lockheedmartin.com | 2022 Proxy Statement | 4 | ||||||
Proxy Statement Summary
Executive Compensation Highlights
A substantial portion of compensation paid to our named executive officers (NEOs) is performance-based. We use the 50th percentile of our comparator group to set target compensation but allow for payments to exceed or fall below the target level based upon actual performance. This outcome is consistent with our pay-for-performance philosophy to set pay and targets at market levels, but pay incentive compensation that reflects actual performance.
Our 2021 performance reflected achievements in a number of critical strategic and operational goals, while recognizing some financial headwinds we faced during 2021. Commensurately, our annual incentive plan paid out at 125% of target. Our 2019-2021 Long-Term Incentive (LTI) Plans paid out above target level reflecting our strong three-year performance, including significant cash generation and return on invested capital. The Board did not make any modifications to our compensation programs or any discretionary adjustments in response to COVID-19.
| 2021 CEO Target Opportunity Mix | 2021 Annual Incentive | |||||||
 | Component Weightings and Achievements | |||||||
 | ||||||||
| 2019-2021 LONG-TERM INCENTIVES | ||||||||
| Component Weightings and Achievements | ||||||||
 | ||||||||
*See Non-GAAP measures in Appendix A for an explanation of “Segment Operating Profit,” “Return on Invested Capital (ROIC),” and “Performance Cash” and our forward-looking statements concerning future performance or goals for future performance.
Compensation Best Practices
 | Best Practices in Our Programs |  | Practices We Do Not Engage In or Allow | |||||||||||
• Pay aligns with performance • Market-based (50th percentile) approach for determining NEO target pay levels • Caps on annual and long-term incentives, including when Total Stockholder Return (TSR) is negative • Enhanced clawback policy on variable pay • Double-trigger provisions for change in control • Robust stock ownership requirements • Low equity burn rate and dilution • No payment of dividends or dividend equivalents on unvested equity awards •Diversity and inclusion measures included in the strategic and operational goals under our Annual Incentive Plan | • No employment agreements • No option backdating, cash-out of underwater options or repricing (no employee options granted since 2012) • No excise tax assistance (gross-ups) upon a change in control • No tax gross-ups on personal use of corporate aircraft • 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 long-term incentives in pensions • No enhanced death benefits for executives • No hedging or pledging of Company stock | |||||||||||||
5 | | ||||
Proxy Statement Summary
Sustainability Sustainability Mission Our sustainability mission is to foster innovation, integrity and security to protect the environment, strengthen communities and propel responsible growth. Sustainability Governance Structure We take an integrated approach to managing corporate culture, ethics and business integrity, governance, and sustainability issues through a risk management lens. Oversight of ESG matters follows our formal sustainability governance structure. This structure includes our Nominating and Corporate Governance Committee (Governance Committee), the Sustainability Leadership Council and the Sustainability Management Team, that guide and implement our Sustainability Management Plan (SMP). The Governance Committee is chartered by the Board of Directors to lead its oversight responsibilities relating to the Company’s ethical conduct, human rights, environmental stewardship, corporate culture, philanthropy, workforce diversity, health and safety. Relevant Issues and Strategic Priorities Throughout 2021, we focused on four key sustainability priorities, which are set forth below. These four priorities include ESG topics that represent stakeholder priorities and drivers of long-term value creation. The independent directors who serve on the Governance Committee review performance against the SMP, a set of targets that correspond to objectives associated with our four core sustainability priorities. The Governance Committee also approves the Company’s Code of Conduct and annual Sustainability Report, which are available on our website. In April 2022, we will publish our first progress update on our 2025 SMP, which was publicly released in our 2020 Sustainability Report. The 2025 SMP follows our 2020 SMP and is comprised of new goals and key performance indicators (KPIs) that reflect the stakeholder feedback we received, internal and external trends, and the continued evolution of our business to create value well into the future. These metrics help focus our efforts in the areas that provide value to our stakeholders and our business. Details of our 2025 SMP and highlights of our 2021 progress are provided on page 31.  | Our Sustainability Governance Structure | |||||||||||||
 Board of Directors | Monitors the Company’s adherence to our Code of Ethics and Business Conduct and oversees performance in corporate sustainability, employee safety and health, ethical business practices and diversity and inclusion. | |||||||||||||
Chairman, President and CEO | Nominating and Corporate Governance Committee | |||||||||||||
 | ||||||||||||||
 Executive Leadership Team | Oversees the sustainability program and enables Business Areas and functions to pursue and implement opportunities and practices that support the sustainability policy. | |||||||||||||
| Chief Operating Officer | Chief Financial Officer | |||||||||||||
| SVP Business Functions | Executive VP Business Areas | |||||||||||||
| ||||||||||||||
 Sustainability Leadership Council Chair: SVP Ethics and Enterprise Assurance | Guides Lockheed Martin sustainability efforts and provides input to SMP execution. | |||||||||||||
| Vice President representatives of the Business Areas and Corporate Functions | ||||||||||||||
| ||||||||||||||
 Sustainability Management Team Chair: Senior Manager, Corporate Sustainability | Reviews SMP progress, reviews opportunities for program enhancement and shares internal and external insights and best practices. | |||||||||||||
| Directors and Senior Managers responsible for functions related to specific SMP Goals | ||||||||||||||
| www.lockheedmartin.com | 2022 Proxy Statement | 6 | ||||||
| PROPOSAL 1: ELECTION OF DIRECTORS |  | The Board unanimously recommends a vote FOR each of the director nominees. | |||||||||
Board Composition, Qualifications and Diversity
We have no agreements obligating the Company 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.
Commitment to Board Diversity At Lockheed Martin, we recognize diversity and inclusion as a business imperative and strategic asset to our investors. 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. Diversity in skills and backgrounds ensures that the widest range of options and viewpoints are expressed in the boardroom. To this end, the Board seeks to identify candidates with areas of knowledge or experience that will expand or complement the Board’s existing expertise in overseeing a technologically advanced global security and aerospace company. While the Company does not have a formal policy on Board diversity, our Corporate Governance Guidelines (Governance Guidelines) place an emphasis on diversity, and our Governance Committee actively considers diversity in the recruitment and nominations of director candidates. The current composition of our Board and recent refreshment reflects those efforts and the importance of diversity to our Board. We added seven new directors in the past five years, including three women and one African-American male. | ||
Our Director Tenure Guidelines | |||||
Our Board believes that a balance of director diversity and tenure is a strategic asset to our investors. The range of our Board’s tenure encompasses directors who have institutional knowledge of Lockheed Martin and the competitive environment, complemented by newer directors with varied backgrounds and skills and fresh perspectives. | |||||
| Mandatory Retirement Age | A director must retire at the annual meeting following their 75th birthday. | ||||
| Term Limits | We do not have term limits for directors as we believe implementing term limitations may prevent the Board from taking advantage of insight that longer tenure brings. | ||||
| Employment Change | Directors should expect to resign upon any significant change in principal employment or responsibilities. | ||||
| Failed Election | Directors must offer to resign as a result of a failed stockholder vote under majority voting policy. | ||||
Board Attendance
In 2021, the Board met a total of ten times. Directors are expected to attend all Board meetings and meetings of the committees on which they serve. All directors on the Board during 2021 attended more than 75 percent of the total Board and committee meetings to which they were assigned and overall attendance was greater than 99 percent. Board members are also encouraged to attend the annual meeting of stockholders and all director nominees for the 2021 annual meeting attended the 2021 annual meeting. | 99% | ||||||||||
Average attendance of directors as a group at Board and committee meetings during 2021 | |||||||||||
7 | | ||||
Proposal 1: Election of Directors
Summary of Director Nominees’ Core Competencies
The following chart summarizes the core competencies that the Board considers valuable to effective governance and successful oversight of our corporate strategy and illustrates how the current Board members individually and collectively represent these key competencies. The lack of an indicator for a particular item does not mean that the director does not possess that qualification, skill or experience, rather, the indicator represents that the item is a core competency of that director.
SKILLS AND EXPERIENCE |  |  |  |  |  |  |  |  |  |  |  |  |  | |||||||||||||||||||||||||||||||
 | CEO LEADERSHIP EXPERIENCE CEO public company leadership that contributes to the understanding and oversight of large complex organizations | |||||||||||||||||||||||||||||||||||||||||||
 | | | | | | | ||||||||||||||||||||||||||||||||||||||
 | ENVIRONMENTAL, SAFETY & SUSTAINABILITY Strengthens the Board’s oversight of climate risks and our environmental, safety and sustainability initiatives | |||||||||||||||||||||||||||||||||||||||||||
| | | | | | |||||||||||||||||||||||||||||||||||||||
 | HUMAN CAPITAL MANAGEMENT Contributes to our strategy to attract, motivate and retain a highly qualified workforce, including executives | |||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
 | FINANCIAL EXPERT Meets the Securities and Exchange Commission’s (SEC) criteria as an independent “audit committee financial expert” | |||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | ||||||||||||||||||||||||||||||||||||
 | MANUFACTURING Contributes to the understanding of the challenges of complex manufacturing | |||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | |||||||||||||||||||||||||||||||||||
 | GOVERNMENT / MILITARY EXPERIENCE Contributes to the understanding of our customers and the relevant policy issues | |||||||||||||||||||||||||||||||||||||||||||
| | | | | | |||||||||||||||||||||||||||||||||||||||
 | GLOBAL EXPERIENCE Contributes to the understanding of operations and business strategy abroad | |||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
 | ENGINEERING, TECHNOLOGY & INNOVATION Contributes to the understanding of key technology imperatives | |||||||||||||||||||||||||||||||||||||||||||
| | | | | | |||||||||||||||||||||||||||||||||||||||
 | RISK MANAGEMENT Contributes to the identification, assessment and mitigation of risks facing the Company | |||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
 | CYBERSECURITY / INFORMATION TECHNOLOGY Contributes to the understanding and oversight of cybersecurity threats and digital transformation | |||||||||||||||||||||||||||||||||||||||||||
| | | | | ||||||||||||||||||||||||||||||||||||||||
| OTHER BOARD DEMOGRAPHICS | ||||||||||||||||||||||||||||||||||||||||||||
| Caucasian/White | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
| African American/Black | | |||||||||||||||||||||||||||||||||||||||||||
| Veterans of the U.S. Armed Forces | | | | | | |||||||||||||||||||||||||||||||||||||||
| Gender (Male/Female) | M | M | M | M | M | M | M | F | F | M | F | M | F | |||||||||||||||||||||||||||||||
| Age | 73 | 66 | 72 | 61 | 66 | 74 | 63 | 68 | 62 | 64 | 65 | 61 | 65 | |||||||||||||||||||||||||||||||
| Tenure (rounded years) | 8 | 14 | 7 | 0 | 2 | 17 | 12 | 6 | 4 | 4 | 2 | 4 | 1 | |||||||||||||||||||||||||||||||
| www.lockheedmartin.com | 2022 Proxy Statement | 8 | ||||||
Director Nominees
 | Biography Vice Chairman of The Carlyle Group from March 2014 to December 2015. 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. Prior to joining General Motors, 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 previously served as Chairman of the U.S. Naval Academy Foundation from 2015 until 2021 and served on the board of directors of KLDiscovery Inc. from December 2019 until January 2020 and CommScope Holding Company, Inc. from April 2019 until December 2020. Skills, Qualifications and Core Competencies •Core leadership skills and experience with the demands and challenges of the global marketplace •Extensive operating, marketing and senior management experience in a succession of major companies in challenging, highly competitive industries •Enterprise risk management, financial, investment and mergers and acquisitions expertise | ||||||||||||||||||||||||||||
Daniel F. Akerson Age 73 Director since 2014 Independent Lead Director Committees Nominating and Corporate Governance, Chair Other Current Boards None | |||||||||||||||||||||||||||||
 | CEO Leadership Experience |  | Human Capital Management |  | Financial Expert | ||||||||||||||||||||||||
 | Manufacturing |  | Government/Military Experience |  | Global Experience | ||||||||||||||||||||||||
 | Risk Management | ||||||||||||||||||||||||||||
 | Biography President and Chief Executive Officer of United States Steel Corporation (U.S. Steel) since May 2017. Mr. Burritt also was named to U.S. Steel’s board of directors at that time. Mr. Burritt previously served as President and Chief Operating Officer of U.S. Steel from February 2017 to May 2017; Chief Financial Officer from September 2013 to May 2017; and Executive Vice President from September 2013 to February 2017. Prior to joining U.S. Steel, Mr. Burritt served as Chief Financial Officer of Caterpillar Inc. until his retirement in 2010, after more than 32 years with the company. Skills, Qualifications and Core Competencies •Expertise in public company accounting, risk management, disclosure, financial system management, manufacturing and commercial operations and business transformation from roles as CEO and CFO at U.S. Steel and CFO and Controller at Caterpillar Inc. •Over 40 years’ experience with the demands and challenges of the global marketplace from his positions at U.S. Steel and Caterpillar Inc. | ||||||||||||||||||||||||||||
David B. Burritt Age 66 Director since 2008 Independent Director Committees Audit; Nominating and Corporate Governance Other Current Boards* U.S. Steel | |||||||||||||||||||||||||||||
| CEO Leadership Experience |  | Environmental, Safety & Sustainability | | Human Capital Management | ||||||||||||||||||||||||
| Financial Expert | | Manufacturing | | Global Experience | ||||||||||||||||||||||||
| Risk Management | ||||||||||||||||||||||||||||
* Outside public board committees are listed in the Proxy Summary on page 3.
9 | | ||||
Proposal 1: Election of Directors
 | Biography Retired U.S. Air Force General, Mr. Carlson has been chairman of Utah State University’s Space Dynamics Laboratory Guidance Council since June 2013 and chairman of its board of directors since 2018. Previously, Mr. Carlson served as the 17th Director of the National Reconnaissance Office from 2009 until 2012. He retired from the U.S. Air Force in 2009 after more than 37 years of service, including service as Commander, Air Force Materiel Command at Wright-Patterson AFB, Ohio, Commander, Eighth Air Force at Barksdale AFB, Louisiana; and Director for Force Structure, Resources and Assessment (J-8) for the Joint Staff. Mr. Carlson previously served on the board of directors of Benchmark Electronics Inc. from July 2017 until October 2021. Skills, Qualifications and Core Competencies •Industry-specific expertise and knowledge of our core customer, including aircraft and satellite development and acquisition experience from his service in senior leadership positions with the military •Experience with the demands and challenges associated with managing large organizations from his service as a Commander and Joint Staff Director of the Joint Chiefs and the National Reconnaissance Office •Skilled in executive management, logistics and military procurement | ||||||||||||||||||||||||||||
Bruce A. Carlson Age 72 Director since 2015 Independent Director Committees Classified Business and Security; Nominating and Corporate Governance Other Current Boards None | |||||||||||||||||||||||||||||
| Human Capital Management | | Manufacturing | | Government/Military Experience | ||||||||||||||||||||||||
| Global Experience | | Risk Management | ||||||||||||||||||||||||||
 | Biography Retired Chief Executive Officer of AT&T Communications, LLC, a wholly-owned subsidiary of AT&T Inc. Mr. Donovan served as CEO from August 2017 until his retirement in October 2019. He was Chief Strategy Officer and Group President of AT&T Technology and Operations from January 2012 through August 2017, and Chief Technology Officer of AT&T Inc. from April 2008 through January 2012. He is chair of the President’s National Security Telecommunications Advisory Committee. Skills, Qualifications and Core Competencies •Expertise in technology and innovation, including the transition to 5G networks •Skilled in overseeing global information, software development, supply chain, network operations and big data organizations •Experience in cybersecurity, artificial intelligence and machine learning | ||||||||||||||||||||||||||||
John M. Donovan Age 61 Director since 2021 Independent Director Committees Classified Business and Security Other Current Boards* Palo Alto Networks | |||||||||||||||||||||||||||||
| Human Capital Management | | Financial Expert | | Manufacturing | ||||||||||||||||||||||||
| Global Experience |  | Engineering, Technology & Innovation | | Risk Management | ||||||||||||||||||||||||
 | Cybersecurity/Information Technology | ||||||||||||||||||||||||||||
* Outside public board committees are listed in the Proxy Summary on page 3.
| www.lockheedmartin.com | 2022 Proxy Statement | 10 | ||||||
 | Biography Retired U.S. Marine Corps General, Mr. Dunford has served as a senior managing director and partner of Liberty Strategic Capital and as a member of the firm’s investment committee since February 2022. Previously, he served as the 19th Chairman of the Joint Chiefs of Staff from 2015 until his retirement in September 2019. His previous assignments include serving as the 36th Commandant of the Marine Corps and the Commander of all U.S. and NATO Forces in Afghanistan. He is a Senior Fellow at the Belfer Center, Harvard University, and Chairman of the Board of the Semper Fi and America’s Fund. Skills, Qualifications and Core Competencies •Industry-specific expertise and knowledge of our core customer from his service in senior leadership positions with the military •Experience with the demands and challenges associated with managing large organizations from his service as a Commander and Chairman of the Joint Chiefs of Staff •Skilled in executive management, logistics, military procurement and cybersecurity threats | ||||||||||||||||||||||||||||
Joseph F. Dunford, Jr. Age 66 Director since 2020 Independent Director Committees Classified Business and Security; Nominating and Corporate Governance Other Current Boards Satellogic Inc. | |||||||||||||||||||||||||||||
| Human Capital Management | | Government/Military Experience | | Global Experience | ||||||||||||||||||||||||
| Risk Management | | Cybersecurity/Information Technology | ||||||||||||||||||||||||||
 | Biography Retired U.S. Navy Admiral, Mr. Ellis has served as an Annenberg Distinguished Fellow at the Hoover Institution at Stanford University since 2014. Previously, he served as President and Chief Executive Officer of the 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. He formerly served as a director of Level 3 Communications, Inc. from March 2005 to November 2017. Skills, Qualifications and Core Competencies •Industry-specific expertise and knowledge of our core customers from his service in senior leadership positions with the military and the private sector •Expertise in aeronautical and aerospace engineering, information technology and emerging energy issues •Skilled in enterprise risk management •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 | ||||||||||||||||||||||||||||
James O. Ellis, Jr. Age 74 Director since 2004 Independent Director Committees Audit; Classified Business and Security, Chair Other Current Boards* Dominion Energy, Inc. | |||||||||||||||||||||||||||||
| Human Capital Management | | Government/Military Experience | | Global Experience | ||||||||||||||||||||||||
| Engineering, Technology & Innovation | | Risk Management | | Cybersecurity/Information Technology | ||||||||||||||||||||||||
* Outside public board committees are listed in the Proxy Summary on page 3.
11 | | ||||
Proposal 1: Election of Directors
 | Biography Executive Chairman of Kimberly-Clark Corporation from January 2019 through December 2019. Having served 36 years at Kimberly-Clark Corporation, Mr. Falk was Chairman of the Board and Chief Executive Officer from 2003 until December 2018; Chief Executive Officer from 2002 and President and Chief Operating Officer from 1999 to 2002. Skills, Qualifications and Core Competencies •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 •Manufacturing, human capital management, compensation, governance and public company board experience | ||||||||||||||||||||||||||||
Thomas J. Falk Age 63 Director since 2010 Independent Director Committees Audit, Chair; Management Development and Compensation Other Current Boards None | |||||||||||||||||||||||||||||
| CEO Leadership Experience | | Environmental, Safety & Sustainability | | Human Capital Management | ||||||||||||||||||||||||
| Financial Expert | | Manufacturing | | Global Experience | ||||||||||||||||||||||||
| Risk Management | ||||||||||||||||||||||||||||
 | Biography Executive Chairman of the Board of Ingredion Incorporated from January 2018 through July 2018. Previously, Ms. Gordon was Chairman of the Board, President and Chief Executive Officer of Ingredion Incorporated from May 2009 through December 2017. Ingredion Incorporated is a publicly traded corporation manufacturing food ingredients globally. Skills, Qualifications and Core Competencies •Experience with the demands and challenges associated with managing global organizations from her experience as Chairman, President and Chief Executive Officer of Ingredion Incorporated •Knowledge of financial system management, public company accounting, disclosure requirements and financial markets •Marketing, human capital management, compensation, governance and public company board experience | ||||||||||||||||||||||||||||
Ilene S. Gordon Age 68 Director since 2016 Independent Director Committees Audit; Management Development and Compensation, Chair Other Current Boards* International Paper Company; International Flavors & Fragrances, Inc. | |||||||||||||||||||||||||||||
| CEO Leadership Experience | | Environmental, Safety & Sustainability | | Human Capital Management | ||||||||||||||||||||||||
| Financial Expert | | Manufacturing | | Global Experience | ||||||||||||||||||||||||
| Engineering, Technology & Innovation | | Risk Management | ||||||||||||||||||||||||||
* Outside public board committees are listed in the Proxy Summary on page 3.
| www.lockheedmartin.com | 2022 Proxy Statement | 12 | ||||||
 | Biography President and Chief Executive Officer of Occidental Petroleum Corporation (Occidental), an international oil and gas exploration and production company, since April 2016. Having served more than 30 years at Occidental, Ms. Hollub served as President and Chief Operating Officer from 2015 to 2016; Senior Executive Vice President, Occidental and President, Oxy Oil and Gas - Americas from 2014 to 2015, and Executive Vice President, Occidental and Executive Vice President, U.S. Operations and Oxy Oil and Gas from 2013 to 2014. Skills, Qualifications and Core Competencies •Broad insight and experience with the demands and challenges associated with managing global organizations from her experience as President and Chief Executive Officer of Occidental and more than three decades in executive and operational roles •Expertise in the Middle East region and Latin America •Skilled in enterprise risk management, environmental, safety and sustainability | ||||||||||||||||||||||||||||
Vicki A. Hollub Age 62 Director since 2018 Independent Director Committees Management Development and Compensation; Nominating and Corporate Governance Other Current Boards Occidental | |||||||||||||||||||||||||||||
| CEO Leadership Experience | | Environmental, Safety & Sustainability | | Human Capital Management | ||||||||||||||||||||||||
| Financial Expert | | Manufacturing | | Global Experience | ||||||||||||||||||||||||
| Engineering, Technology & Innovation | | Risk Management | ||||||||||||||||||||||||||
 | Biography Partner at the international law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP since January 2017. Previously, Mr. Johnson served as U.S. Secretary of Homeland Security from December 2013 to January 2017; and as General Counsel of the U.S. Department of Defense and as General Counsel of the U.S. Department of the Air Force. Mr. Johnson is presently a director of the Council on Foreign Relations, and formerly served as a director of PG&E Corporation from May 2017 to March 2018. Skills, Qualifications and Core Competencies •Expertise in national security, leadership development and organizational preparedness from his service as U.S. Secretary of Homeland Security •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, cybersecurity, and financial requirements, as well as reputational risks | ||||||||||||||||||||||||||||
Jeh C. Johnson Age 64 Director since 2018 Independent Director Committees Classified Business and Security; Nominating and Corporate Governance Other Current Boards* U.S. Steel | |||||||||||||||||||||||||||||
| Human Capital Management | | Government/Military Experience | | Global Experience | ||||||||||||||||||||||||
| Risk Management | | Cybersecurity/Information Technology | ||||||||||||||||||||||||||
* Outside public board committees are listed in the Proxy Summary on page 3.
13 | | ||||
Proposal 1: Election of Directors
 | Biography Retired in December 2018 as Executive Chairman of Sempra Energy. She served as Chairman, President and Chief Executive Officer of Sempra Energy from March 2017 to May 2018, Chairman and Chief Executive Officer of Sempra Energy from December 2012 to March 2017 and Chief Executive Officer of Sempra Energy from June 2011 to December 2012. Previously, Ms. Reed-Klages served as an Executive Vice President of Sempra Energy and as President and Chief Executive Officer of SDG&E and SoCalGas, Sempra Energy’s regulated California utilities. She was also previously President, Chief Operating Officer and CFO of SDG&E and SoCalGas. She previously served on the boards of directors of Halliburton Company from January 2001 to September 2018 and Oncor Electric Delivery Company LLC during 2018. Skills, Qualifications and Core Competencies •Experience with the demands and challenges associated with managing global organizations from her experience as Chairman, President and Chief Executive Officer of Sempra Energy •Skilled in enterprise risk management, environmental, safety and sustainability •Knowledge of financial system management, compensation, governance and public company board experience | ||||||||||||||||||||||||||||
Debra L. Reed-Klages Age 65 Director since 2019 Independent Director Committees Audit; Management Development and Compensation Other Current Boards* Chevron Corporation Caterpillar Inc. | |||||||||||||||||||||||||||||
| CEO Leadership Experience | | Environmental, Safety & Sustainability | | Human Capital Management | ||||||||||||||||||||||||
| Financial Expert | | Manufacturing | | Global Experience | ||||||||||||||||||||||||
| Engineering, Technology & Innovation | | Risk Management | ||||||||||||||||||||||||||
 | Biography Chairman since March 2021 and President and Chief Executive Officer of Lockheed Martin since June 2020. Previously, Mr. Taiclet served as Chairman, President and Chief Executive Officer of American Tower Corporation from February 2004 until March 2020 and Executive Chairman from March 2020 to May 2020. Previously, Mr. Taiclet served as President of Honeywell Aerospace Services, a unit of Honeywell International and Vice President, Engine Services at Pratt & Whitney, a unit of United Technologies Corporation. Skills, Qualifications and Core Competencies •Effective leadership and executive experience as Chairman, President and CEO of American Tower Corporation •Expertise in management at large-scale, multinational corporations, including regulatory compliance, corporate governance, capital markets and financing, strategic planning and investor relations •Industry-specific expertise from service as a U.S. Air Force officer and pilot and as an executive at Honeywell Aerospace Services and Pratt & Whitney | ||||||||||||||||||||||||||||
James D. Taiclet Age 61 Director since 2018 Chairman, President and CEO Committees None Other Current Boards None | |||||||||||||||||||||||||||||
| CEO Leadership Experience | | Human Capital Management | | Financial Expert | ||||||||||||||||||||||||
| Manufacturing | | Government/Military Experience | | Global Experience | ||||||||||||||||||||||||
| Engineering, Technology & Innovation | | Risk Management | | Cybersecurity/Information Technology | ||||||||||||||||||||||||
* Outside public board committees are listed in the Proxy Summary on page 3.
| www.lockheedmartin.com | 2022 Proxy Statement | 14 | ||||||
 | Biography Retired Vice President and Chief Financial Officer of Chevron Corporation, one of the world’s leading integrated energy companies. Ms. Yarrington served as CFO of Chevron from January 2009 until her retirement in March 2019. During her 38 years at Chevron, she also served as Vice President and Treasurer from 2007 through 2008, Vice President of Policy, Government and Public Affairs from 2002 to 2007 and Vice President of Strategic Planning from 2000 to 2002. Previously, Ms. Yarrington served on the boards of directors of Chevron Phillips Chemical Company LLC (a 50-50 joint venture with Phillips 66) and the Federal Reserve Bank of San Francisco, serving as the Chairman of the Bank’s board from 2013 to 2014. Skills, Qualifications and Core Competencies •Expertise in public company accounting, risk management, disclosure, and financial system management from her role as CFO at Chevron •Over 38 years’ experience with the demands and challenges of the global marketplace from her positions at Chevron | ||||||||||||||||||||||||||||
Patricia E. Yarrington Age 65 Director since 2021 Independent Director Committees Audit; Management Development and Compensation Other Current Boards None | |||||||||||||||||||||||||||||
| Environmental, Safety & Sustainability | | Human Capital Management | | Financial Expert | ||||||||||||||||||||||||
| Manufacturing | | Global Experience | | Risk Management | ||||||||||||||||||||||||
15 | | ||||
Proposal 1: Election of Directors
Board Effectiveness, Evaluations and Refreshment
Our Board seeks to operate with the highest degree of effectiveness, supporting a dynamic boardroom culture that encourages diverse, independent thought and intelligent debate on critical matters to achieve a higher level of success for the Company and its stockholders. We take a comprehensive, year-round view of our Board composition. Having the right mix of people who bring diverse perspectives, business and professional experiences and competencies as well as professional integrity, sound judgment and collegiality, provides a foundation for robust dialogue, informed advice and collaboration in the boardroom.
Governance Committee Review of Board Candidates The Board seeks a diverse group of candidates who, at a minimum, possess the background, skills, expertise, competencies and time to make a significant contribution to the Board. Our Governance Guidelines (available at www.lockheedmartin.com/corporate-governance) list criteria against which candidates may be judged. In addition, the Governance Committee considers, among other things: •input from the Board’s self-assessment process to prioritize areas of expertise that were identified; •investor feedback and perceptions; •alignment of the candidates’ skills and competencies to the Company’s future strategic challenges and opportunities; •the needs of the Board in light of expected Board retirements or resignations; and •a balance between public company and government customer-related experience. When identifying and selecting director nominees, the Governance Committee screens and recommends candidates for nomination by the full Board. The Governance Committee uses a variety of methods to help identify potential board candidates with the desired skills and background needed for the Company’s business, including informal networks, internal resources and other channels. The Governance Committee considers both the short- and long-term strategies of the Company to determine what current and future skills and experience are required of the Board in exercising its oversight function and in the context of our strategic priorities. Our internal executive search team compiles a list of prospective director candidates reflecting the Board’s criteria, qualifications and experience, keeping in mind its commitment to diversity. Candidates (including Ms. Yarrington and Mr. Donovan) are identified from this source pool by the Chairman and the Governance Committee and may be interviewed by the Chairman and independent Lead Director, who chairs the Governance Committee. | Board Refreshment | ||||||||||||||||
Since 2018: | |||||||||||||||||
7 new directors, including 3 women directors and 1 African-American director | l | 2018 | |||||||||||||||
3 new directors | |||||||||||||||||
| l | 2019 | ||||||||||||||||
1 new director | |||||||||||||||||
| l | 2020 | ||||||||||||||||
1 new director | |||||||||||||||||
| l | 2021 | ||||||||||||||||
2 new directors | |||||||||||||||||
For incumbent directors, the Governance Committee also considers attendance, past performance on the Board, the director’s other time commitments, and contributions to the Board and their respective committees. The Bylaws currently provide that the size of the Board may range from 10 to 14 members.
Director candidates also may be identified by stockholders and will be evaluated under the same criteria applied to other director nominees and considered by the Governance Committee. Information on the process and requirements for stockholder nominees may be found in Sections 1.10 and 1.11 of our Bylaws (available at www.lockheedmartin.com/corporate-governance).
Board Committee Assignments
In February of each year, the Governance Committee reviews the membership, tenure, leadership and commitments of each of the committees and considers possible changes given the qualifications and skill sets of members on the Board or a desire for committee rotation or refreshment. The Governance Committee also takes into consideration the membership requirements and responsibilities set forth in each of the respective committee charters and the 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. The Governance Committee also reviews the operation of the Board generally, and based on its recommendations and based on Board feedback, we have reduced the number of committees from seven to four since 2018. In making these changes, the Board considered survey data which showed that four standing committees is most prevalent among our peer companies.
| www.lockheedmartin.com | 2022 Proxy Statement | 16 | ||||||
Annual Performance Assessment The Board conducts a self-assessment of its performance and effectiveness as well as that of its committees on an annual basis. The self-assessment helps the Governance Committee to track progress in certain areas targeted for improvement from year-to-year and to identify ways to enhance the Board’s and its committees’ effectiveness. The evaluation process includes the following steps: | |||||||||||||||||
| 1 | Annual Written Questionnaire | Open-ended questions to solicit candid feedback. Topics covered include: •Board meeting content and virtual format; •Board culture; •Board leadership structure; •Board composition, selection and diversity; •Potential skills gaps for identifying board candidates; •Committee effectiveness; •Evaluation of risks, including COVID-19 response; and •Peer assessment to elicit feedback on the performance of individual directors. | |||||||||||||||
| 2 | One-on-One Discussions with Independent Lead Director | The independent Lead Director conducts separate, one-on-one discussions with each director to discuss any additional feedback or perspectives. | |||||||||||||||
| 3 | Committee/Board Private Sessions | The Governance Committee and each other committee and the full Board review the results of the evaluations in private session. The Board discussion is led by the independent Lead Director. Apart from the annual discussion, an executive session is scheduled at each meeting and any feedback from the independent directors is communicated to the Chairman by the Lead Director. | |||||||||||||||
| 4 | Feedback Incorporated | •Prioritization of Board discussion time with continued use of executive sessions •Incorporate virtual meeting opportunities into the future Board schedule •Added additional classified program reviews •Added additional directors with financial and capital allocation, environmental and sustainability, risk management, cybersecurity, technology and innovation experience | |||||||||||||||
Onboarding and Continuing Education New directors are provided a comprehensive orientation about the Company, including our business operations, strategy and governance. New directors have one-on-one sessions with the CEO, other directors and other members of senior management. Members of our senior management regularly review with the Board the operating plan of each of our business segments and the Company as a whole. The Board also conducts periodic site visits to our facilities as part of its regularly scheduled Board meetings and directors are encouraged to visit sites on an ad hoc basis and meet one-on-one with members of senior management and other employees. Directors are encouraged to 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. | |||||||||||||||||
17 | | ||||
Corporate Governance
Good governance is integral to achieving long-term stockholder value. The Board’s primary role is to oversee management and represent the interests of stockholders. Directors attend Board and committee meetings and between meetings interact with the CEO, the independent Lead Director and other members of management and are available to provide advice and counsel to management.
Board Leadership Structure | |||||||||||||||||||||||
The Board believes that the independent Board members should have the flexibility to respond to changing circumstances and choose the board leadership structure that best fits the then-current situation. As a result, the roles of the Chairman and the CEO have been split from time to time to facilitate leadership transitions, while at other times the roles have been combined. The independent directors elected Mr. Taiclet as Chairman in March 2021. Prior to that, the roles were separated while Ms. Hewson served as Executive Chairman to assist in the transition. As it does annually, in January 2022, the Board of Directors reviewed the Company’s leadership structure, including benchmarking data of the leadership structure of other large companies and industry peers and stockholder proposal trends for separating the roles. At present, the Board believes that the combination of the roles, along with the robust authority given to the experienced independent Lead Director, effectively maintains independent oversight of management. The Board consists entirely of independent directors, other than Mr. Taiclet, and exercises a strong, independent oversight function through frequent executive sessions, independent Board committees and having a strong independent Lead Director with clearly delineated and comprehensive duties. The Board believes there is value in presenting a single face to our customers through the combined Chairman and CEO role and that this structure of having the Board and management operate under the unified leadership of the highly experienced Mr. Taiclet best positions the Company to successfully implement its strategy. The independent directors will continue to review the leadership structure on an ongoing basis, at least annually, to provide effective risk management and to ensure that it continues to meet the needs of the Company and supports the generation of stockholder value over the long-term. Independent Lead Director’s Role The Board has structured the role of the independent Lead Director to further enhance the functioning of the Board and with sufficient authority to serve as a counterbalance to management, as specified in the Bylaws to include: • Leadership of independent directors — preside as chair at Board meetings while in executive sessions of the non-management directors or executive sessions of the independent directors or if the Chairman is not present; determine the frequency and timing of executive sessions of non-management directors; • Board meeting agendas and schedules — consult with the Chairman 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 (in addition to each committee chair) and provide input to management on the scope and quality of information sent to the Board; • Board refreshment — assist with recruitment of director candidates and, along with the Chairman, extend invitations to potential directors to join the Board; • Board committees — act as liaison between the Board and management and among the directors and the committees of the Board; serve as an ex-officio member of each committee if not otherwise a member of the committee; • Stockholder communication — serve as the point of contact for stockholders and others to communicate with the Board; • Board consultants — recommend to the Board and committees the retention of advisors and consultants who report directly to the Board; and • Board special meetings — call a special meeting of the Board or of the independent directors at any time, at any place and for any purpose. | |||||||||||||||||||||||
| |||||||||||||||||||||||
CHAIRMAN, PRESIDENT AND CEO James D. Taiclet | |||||||||||||||||||||||
LEAD DIRECTOR AND GOVERNANCE COMMITTEE CHAIR Daniel F. Akerson Elected by independent directors. | |||||||||||||||||||||||
| | |||||||||||||||||||||||
OTHER COMMITTEE CHAIRS Thomas J. Falk (Audit) James O. Ellis, Jr. (CBS) Ilene S. Gordon (Compensation) All committees are independent | |||||||||||||||||||||||
| CONSIDERATIONS IN SELECTING CURRENT LEAD DIRECTOR | |||||||||||||||||||||||
Mr. Akerson has served as the independent Lead Director since April 2019. The Board believes that having a strong, independent Lead Director role is important to sound corporate governance. 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. Stockholders and other interested parties may communicate with the Lead Director at Lead.Director@lmco.com | |||||||||||||||||||||||
| www.lockheedmartin.com | 2022 Proxy Statement | 18 | ||||||
Corporate Governance
Executive Sessions
Generally, each meeting agenda of the Board and each committee includes an executive session of the non-management directors, who are all independent. The Governance Guidelines require that at least three Board meetings per year will include an executive session of the non-management directors. In each case, these sessions include a discussion of the performance of the CEO. The independent Lead Director presides during the executive sessions of the Board, and will report the results to the Chairman and CEO on all relevant matters, or invite the Chairman and CEO to join the executive session for further discussion, as appropriate. The respective chairman of each committee presides during the committee executive sessions.
Committees of the Board of Directors
The Board has four standing committees: Audit, Classified Business and Security (CBS Committee), Management Development and Compensation (Compensation Committee) and Nominating and Corporate Governance (Governance Committee). Charters for each committee are available on the Company’s website at www.lockheedmartin.com/corporate-governance. In addition to these committees, the Board may establish other standing or special committees as may be necessary to carry out its responsibilities.
Audit Committee
 Thomas J. Falk, Chair David B. Burritt James O. Ellis, Jr. Ilene S. Gordon Debra L. Reed-Klages Patricia E. Yarrington 1 All Audit Committee members are independent within the meaning of the NYSE listing standards, applicable SEC regulations and our Governance Guidelines. Each has accounting and related financial management expertise sufficient to be considered financially literate within the meaning of the NYSE listing standards. The Board has determined that all Committee members except Mr. Ellis meet the SEC’s criteria as audit committee financial experts. | 2021 Focus Areas | Meetings in 2021: 6 | |||||||||||||||
•Oversight of Capital Allocation and Dividend Policy •Enterprise Risk Management and 2021 Audit Plan •Critical Audit Matters Related to Revenue Recognition and Pension Estimates; Pension De-Risking Strategy | |||||||||||||||||
Roles and Responsibilities of the Committee The Audit Committee assists the Board in fulfilling its oversight responsibilities relating to the financial condition of the Company, the integrity of the financial statements and compliance with legal and regulatory requirements. The Audit Committee has oversight of the Company’s internal audit plan and reviews risks and opportunities to management's long-term strategy as identified by the Company's enterprise risk management processes. It is directly responsible for the appointment, compensation, retention, oversight and termination of the Company's independent auditors, Ernst & Young LLP (Ernst & Young). The Audit Committee also reviews the allocation of resources, the Company’s financial condition and capital structure and policies regarding derivatives. The Audit Committee meets privately with management, internal audit, and Ernst & Young. The functions of the Audit Committee are further described in the “Audit Committee Report” on page 35. | |||||||||||||||||
1 Ms. Yarrington joined in June 2021. | |||||||||||||||||
19 | | ||||
Corporate Governance
Classified Business and Security Committee
 James O. Ellis, Jr., Chair Bruce A. Carlson John M. Donovan 1 Joseph F. Dunford, Jr. Jeh C. Johnson All members of the CBS Committee are independent within the meaning of the NYSE listing standards and our Governance Guidelines and hold high-level security clearances. | 2021 Focus Areas | Meetings in 2021: 3 | |||||||||||||||
•Classified Program Risk Oversight and Alignment with Company’s Strategy •Support to Supply Chain Risk Management •Security of Personnel, Facilities and Data (including classified cybersecurity matters) | |||||||||||||||||
Roles and Responsibilities of the Committee The CBS Committee assists the Board in fulfilling its oversight responsibilities relating to the Company’s classified business activities and the security of personnel, facilities and data (including classified cybersecurity matters). The CBS Committee consists of directors who possess the appropriate security clearance credentials, at least one of whom must be a member of the Audit Committee, none of whom are officers or employees of the Company and all of whom 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. | |||||||||||||||||
1 Mr. Donovan joined in October 2021. | |||||||||||||||||
Management Development and Compensation Committee
 Ilene S. Gordon, Chair Thomas J. Falk Vicki A. Hollub Debra L. Reed-Klages Patricia E. Yarrington 1 All members of the Compensation Committee are independent within the meaning of the NYSE listing standards, applicable SEC regulations and our Governance Guidelines. | 2021 Focus Areas | Meetings in 2021: 3 | |||||||||||||||
•Chairman Transition and Other Leadership Changes •Talent Management and Succession Planning •Human Capital Governance and Workforce Diversity | |||||||||||||||||
Roles and Responsibilities of the Committee The Compensation Committee reviews and approves the corporate goals and objectives relevant to the compensation of the CEO and other executive officers, 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 executive officers. The Compensation Committee does not delegate its responsibilities with respect to compensation that is specific to the executive officers. For other employees and for broad-based compensation plans, the Compensation Committee may delegate authority to the CEO or the Senior Vice President and Chief Human Resources Officer, subject to certain annual limits. 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 36, “Compensation Discussion and Analysis (CD&A)” beginning on page 37 and “Other Compensation Matters” on page 51. | |||||||||||||||||
1 Ms. Yarrington joined in June 2021. | |||||||||||||||||
| www.lockheedmartin.com | 2022 Proxy Statement | 20 | ||||||
Corporate Governance
Nominating and Corporate Governance Committee
 Daniel F. Akerson, Chair David B. Burritt Bruce A. Carlson Joseph F. Dunford, Jr. Vicki A. Hollub Jeh C. Johnson All members of the Governance Committee are independent within the meaning of the NYSE listing standards, applicable SEC regulations and our Governance Guidelines. | 2021 Focus Areas | Meetings in 2021: 4 | |||||||||||||||
•Board Recruitment and Refreshment •2025 Sustainability Management Plan Goals and Progress, Including Climate Goals •Continued COVID-19 Business Continuity and Employee Safety and Health Efforts •Published Inaugural Human Rights Report | |||||||||||||||||
Roles and Responsibilities of the Committee The Governance Committee develops and implements 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 overseeing the annual evaluation of the Board and its committees. The Governance Committee reviews and recommends to the Board the compensation of directors. Our executive officers do not play a role in determining director pay. The Governance Committee assists the Board in fulfilling its oversight efforts in corporate responsibility, corporate culture, human rights, environmental stewardship, political contributions, ethical business practices, community outreach, philanthropy, diversity, inclusion and equal opportunity, sustainability, and safety programs. The Governance Committee monitors compliance and recommends changes to our Code of Conduct. The Governance Committee also has oversight over the Company’s policies and processes for the safety of the Company’s products and services. | |||||||||||||||||
Board Role and Responsibilities
Board Role in Strategic Planning
The Board is involved in strategic planning and review throughout the year. Every September the Board meets in a half-day session dedicated to a discussion of the Company’s strategy, one-year plan and three-year long-range plan. The President and CEO regularly reviews developments against the Company’s strategic framework at Board meetings and provides updates between regularly scheduled sessions as necessary. This schedule corresponds to management’s annual schedule for developing the long-range plan and provides the Board with the opportunity to provide input while the long-range plan is being developed and to monitor progress on the plan. In addition:
•the Board (or the appropriate committee) reviews the progress and challenges to the Company’s strategy and approves specific initiatives, including acquisitions and divestitures over a certain monetary threshold;
•the Board (or the appropriate committee) reviews trends identified as significant risks and topical items of strategic interest such as human capital strategy and cybersecurity on a regular basis;
•the Board’s annual schedule includes at least one meeting per year at a different Company facility where directors can tour the operations and engage directly with employees and experience first-hand the Company’s culture; and
•each business segment executive vice president presents an operations review to the Board and each business segment financial officer presents a financial review to the Audit Committee on a rotating basis.
Enterprise Risk Management
A prominent oversight responsibility of the Board is the management of corporate risk-appetite to achieve strategic objectives and the ongoing monitoring of risk mitigation effectiveness. The Board and its committees receive risk management updates throughout the year. Executive management provides updates on risks managed at the enterprise level. Business segment management provides updates on risks to individual business segment objectives. The Audit Committee reviews the state of enterprise risk governance, as
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Corporate Governance
well as the assessments of risks that may impact the Company’s ability to achieve strategic business objectives. Other Board committees also supervise management’s execution of additional programs and functions and associated risk elements and compliance with laws and regulations. The following table summarizes the risk mitigation roles of each Board committee.
| Risk Governance | ||
| Board Committee | Risk Mitigation Role | ||||
| AUDIT | Financial and compliance risks and risk identification process; risks related to business strategy and identified enterprise risk | ||||
| CLASSIFIED BUSINESS AND SECURITY | Classified programs and security of personnel, facilities and data-related risks including classified cybersecurity, security of suppliers and the global supply chain within the classified business | ||||
| NOMINATING AND CORPORATE GOVERNANCE | Board composition, corporate governance, safety, ethical conduct, human rights, political activities, corporate culture, human capital, and climate and other environmental risks | ||||
| MANAGEMENT DEVELOPMENT AND COMPENSATION | Talent, workforce and incentive compensation risks | ||||
Our enterprise risk management process involves providing the Board with regular, periodic reports on:
•a clear governance structure guiding our risk management process across the Company;
•the risks the Company faces, including drivers posing potential impacts to meeting strategic objectives or compliance standards;
•areas where compliance risk topics pose vulnerability to the Company;
•a clear framework for accountability that illustrates mitigating measures and action plans, and how the CEO and the executive leadership team are involved in reviewing and executing such activities;
•the ways in which enterprise risks are measured, the setting of aggregate and subject-specific risk indicators, and related policies and procedures in place to control risks; and
•the analysis underpinning the prioritization of key risks and the tools for risk observation that management can utilize to ensure that new or shifting risks are readily identified and addressed.
Cybersecurity
•Board Oversight. Cybersecurity is included in the Company’s enterprise risk management process and is overseen by the Board. The Board receives a briefing from senior leadership on cybersecurity and information security twice a year or more frequently as needed (either orally or in writing). The Classified Business and Security Committee also is briefed by senior management on the security of classified cyber data and information and the security of suppliers and the global supply chain within the Company’s classified business.
•Cybersecurity Protections. We have an extensive global security organization whose mission is to protect our systems and data, including a Computer Incident Response Team (CIRT) to defend against cyber attacks and annual training for our employees on the protection of sensitive information, including testing intended to prevent the success of “phishing” attacks. Additionally, we partner with our defense industrial base peers, government agencies and cyber associations to share intelligence to further defend against cyber attacks. We also have a corporate-wide counterintelligence and insider threat detection program to proactively identify external and internal threats and mitigate these threats in a timely manner.
•Third-Party Certifications. Lockheed Martin maintains an enterprise ISO 27001 certification that undergoes annual surveillance auditing and recertification every three years. Lockheed Martin also maintains a Defense Industrial Base Cybersecurity Assessment Center (DIBCAC) High assessment from the Defense Contract Management Agency (DCMA), which demonstrates our compliance with the regulatory requirements to protect U.S. Department of Defense (DoD) Controlled Unclassified Information (CUI). We have collaborated extensively with the DoD and across the Defense Industrial Base on the Cybersecurity Maturity Model Certification (CMMC), the future model for data protection from the DoD, and believe we are well positioned to meet the requirements of CMMC.
| www.lockheedmartin.com | 2022 Proxy Statement | 22 | ||||||
Corporate Governance
Political and Public Policy Activities
•Board Oversight. Lockheed Martin’s political and public policy activities, including its advocacy efforts, government affairs activities and political spending is overseen by the Governance Committee. The Governance Committee supervises the policies related to these activities to ensure the intended purposes of the activities and their related benefits are well-aligned with the Company's strategy and driving long-term value. The Governance Committee receives regular reports from management on these matters and, in turn, supports accountability, transparency and public disclosure of corporate political expenditures and lobbying activities. To that end, the Company provides extensive information on its website about its political and public policy activities well beyond what is required by law.
•What we do. Lockheed Martin is committed to participating in the political and public policy process in a responsible and ethical way that serves the best interests of our stockholders and customers. We operate in the highly regulated global security industry, and our operations are affected by the actions of elected and appointed officials at many levels of government. Our public policy activities include advocacy efforts at the federal and state levels, thought leadership regarding global security trends, and other important issues impacting us and our customers, educational outreach and promotion, and other related activities. We only engage in political activities directly related to our core business interests, such as national defense, space exploration, alternative energy technologies, corporate taxes, export policy and international trade.
•How we do it. All decisions regarding corporate political and public policy activities are managed by the Senior Vice President, Lockheed Martin Government Affairs, following coordination with individual Lockheed Martin elements in accordance with established policies and procedures and are ultimately overseen by the Governance Committee. Any political or other public policy activity in which we engage, including political expenditures, comply with all internal policies and procedures, are made solely based upon the best interests of the company and its stockholders, and are not based on personal agendas of individual directors, officers, or employees. We comply with all applicable laws and regulations in connection with our political and public policy activities. Our political activities are audited on a regular basis in accordance with our established audit schedule and outside counsel provides regular guidance regarding compliance with applicable laws and regulation of political activities.
Talent Management and Succession Planning
Management conducts regular talent reviews, including three in 2021. During these reviews, the executive leadership team discusses succession plans for key positions and identifies top talent for development in future leadership roles. Our Board is actively engaged in management succession planning. CEO succession planning discussions are led by the independent Lead Director and the Board members have direct access to and interaction with members of senior management and high potential future leaders as part of this succession planning. This includes informal and one-on-one settings to enable directors to personally assess potential candidates and cultivate future leaders. The Board of Directors maintains a succession plan for the CEO and other key members of management and has a contingency plan if the CEO were to depart unexpectedly.
The Company has a corporate policy imposing a mandatory retirement age of 65 for all executive officers other than the CEO. The CEO’s tenure is at the discretion of the Board, which is free to consider all relevant factors.
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Corporate Governance
| Board Oversight of People Strategy | ||
The Board of Directors is actively engaged in the oversight of human capital management and strategy. Our human capital management strategy, which we refer to as our people strategy, is tightly aligned with our business needs and technology strategy. In order to ensure that we achieve our human capital objectives, we regularly conduct an employee engagement survey to gauge employee satisfaction and to understand the effectiveness of our employee and compensation programs. The Board reviews these survey results. The Senior Vice President and Chief Human Resources Officer updates the Board on the Company’s people strategy on an annual basis. Board members also are active partners in the development of our workforce, engaging and spending time with our high-potential leaders at Board meetings and other events. Annually, the Board meets to review our succession strategy and leadership pipeline for key roles, including the CEO, taking into account the Company’s long-term corporate strategy. More broadly, the Board is regularly informed of key talent indicators for the overall workforce, including performance against diversity metrics with respect to representation, hiring, promotions and leadership. Talent management and workforce diversity and inclusion metrics and goals are included in the strategic and operational performance measures in management’s annual incentive program. | ||
Our People Strategy Human capital is a critical business asset at Lockheed Martin. Due to the specialized nature of our business, our performance depends on identifying, attracting, developing, motivating, and retaining a highly skilled workforce in multiple areas, including: engineering, science, manufacturing, information technology, cybersecurity, business development and strategy and management. During 2021, our human capital efforts were focused on continuing to accelerate the transformation of our technology for workforce management through investments in upgraded systems and processes, and continuing to increase our agility to meet the quickly changing needs of the business, all while maintaining a respectful, challenging, supportive and inclusive working environment. We use a variety of human capital measures in managing our business, including: workforce demographics; hiring metrics; talent management metrics, including retention rates of top talent; and diversity metrics with respect to representation, attrition, hiring, promotions and leadership. Our people strategy focuses on three key priorities: Maximize Talent; Advance Technology; and Optimize Culture. In 2022 and beyond, we will continue to execute on the Lockheed Martin people strategy and its three strategic imperatives to accelerate transformation. | ||
 | MAXIMIZE TALENT |  | ADVANCE TECHNOLOGY |  | OPTIMIZE CULTURE | |||||||||||||||||||||||||||
•Acquire and Retain Top Diverse Talent at All Levels •Elevate Technical Talent to Match Strategy and the Digital Future of Work •Increase Executive Successor Pipeline and Leader Readiness •Deliver Agile Employee Development and Competitive Total Rewards Solutions | •Modernize Systems to Enable Human Resource Process Transformation •Transform Hiring with Artificial Intelligence and the New Employee Experience Process •Enable People Analytics and Data Driven Solutions •Advance the Secured Collaboration Tools and Facilities for Classified Programs | •Strengthen Inclusive Engagement, Diversity and Belonging •LMForward the Workplace (a multi-faceted initiative for long-term work solutions for the future) •Drive Process Cost Efficiency to Meet Business Needs •Utilize multi-media employee communications to reinforce mission, culture and retention | ||||||||||||||||||||||||||||||
| www.lockheedmartin.com | 2022 Proxy Statement | 24 | ||||||
Corporate Governance
Workforce Diversity and Inclusion
At Lockheed Martin, diversity and inclusion (D&I) is foundational to our culture and reflects our core values to – Do What’s Right, Respect Others, and Perform with Excellence. To actively attract, develop, and retain a diverse workforce and evolve our inclusive culture, we support a robust D&I enterprise strategy, provide tailored education and engagement programs, and maintain dedicated resources in all our Business Areas, domestically and internationally.
Our Business Resource Groups (BRG) continue to be a strategic enabler of our D&I strategy. Our BRGs are voluntary, employee-led groups that are open to all employees while focusing on workplace issues specific to racial/ethnic, gender, sexual orientation/gender identity, disability or veteran status. The BRGs foster a diverse and inclusive workplace aligned with our organizational mission, values, goals and business practices and drive awareness and change within our organization. Our commitment to the BRG program is demonstrated through our assignment of executive sponsors, our investments in programming, and the formal policies and management we have established to support their governance.
We also strive to be inclusive in our recruitment process by working to attract and create pathways for diverse talent by partnering with Historically Black Colleges and Universities (HBCUs) and Minority Serving Institutions (MSIs), strengthening STEM pipelines and providing our recruiters with tools to recruit inclusively and equitably.
Through these and other focused efforts, we have improved the diversity of our overall U.S. workforce and within leadership positions, specifically in the representation of women, people of color and people with disabilities. Additionally, our representation of veterans remains outstanding, at almost four times the current annual national percentage of veterans in the civilian workforce.
Employee Profile (as of December 31, 2021):
Women(a) | People of Color(a) | Veterans(a) | People with Disabilities(a) | |||||||||||||||||||||||
| Overall | 23% | 29% | 21% | 10% | ||||||||||||||||||||||
Executives(b) | 23% | 15% | 20% | 11% | ||||||||||||||||||||||
(a) Based on employees who self-identify. Includes only U.S. employees and expatriates except for women, which also includes local country nationals. Excludes casual workers, interns/co-ops and employees of certain subsidiaries and joint ventures.
(b) Executive is defined as director-level (one level below vice president) or higher.
In addition to these diversity metrics, in September 2021, we published our 2020 EEO-1 report data on our website and expect to do so annually. Publication of our EEO-1 data increases transparency and demonstrates our responsiveness to investors. Our 2021 diversity and inclusion achievements include:
 | RECRUITING TOP TALENT: |  | FOSTERING AN INCLUSIVE WORKPLACE: |  | SUPPORTING STEM EDUCATION: | |||||||||||||||||||||||||||
• Improved the diversity of the workforce, specifically in the representation of women and People of Color, more actively expanding Minority Serving Institution (MSI) recruiting to areas beyond STEM, such as Finance • Selected #1 among Top Supporters of Historically Black College & University (HBCU) Engineering Institutions for 7th consecutive year | • Embracing digital platforms for D&I initiatives led to record attendance for BRG Leadership Forums and opened new levels of accessibility for employees with disabilities • Recognized as a Best Place to Work for LGBT Equality on the Human Rights Campaign’s Corporate Equality Index for 12th consecutive year • Ranked #1 Top 50 Employers in Women Engineer Magazine • Selected Top 10 Military Friendly Company | • Invested $17.38 million into nonprofit programs focused on STEM career readiness and access, particularly for those groups historically underrepresented in STEM • $1.99 million contributed to MSIs in 2021 to support programs enhancing student retention and success, such as mentoring, curriculum development and summer bridge programs | ||||||||||||||||||||||||||||||
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Corporate Governance
Our Stockholder Engagement Program
Board’s Commitment to Engagement. We conduct extensive governance reviews and stockholder outreach throughout the year in addition to our engagements through Investor Relations on financial and business topics. Our integrated engagement team is led by our Corporate Secretary’s office and includes representatives from Ethics and Enterprise Assurance, Sustainability, Executive Compensation and Human Resources. Depending on the circumstance, our independent Lead Director may engage in these conversations with stockholders. The Governance Committee oversees our stockholder engagement efforts on behalf of the Board. We recognize the value of building informed and meaningful relationships with our investors that promote increased transparency and accountability. Our Governance Guidelines outline our stockholder engagement program.
Responsiveness to Stockholders. Accountability to our stockholders continues to be an important component of the Company’s success. In 2021, we received an advisory proposal to adopt action by written consent which, although a majority of stockholders supported the Board’s recommendation and preferred that we not implement a change, did receive a high level of stockholder support. We take accountability seriously and have sought out feedback through stockholder engagement to understand investor views and preferences. Ultimately, the majority of our stockholders continued to express support for our current approach on this issue given the existing channels available to stockholders to express their views. We look forward to continued engagement and dialogue, to ensure our stockholder rights continue to meet the needs and expectations of our wide range of investors.
Investor Priorities. Stockholders’ views are communicated to the Board throughout the year and are instrumental in the development of our governance, compensation and environmental and social policies and inform our business strategy. The Board recognizes the importance of ESG topics to our stockholders and continues to seek stockholder input on a range of ESG issues and practices in furtherance of enhancing long-term stockholder value. Below are some of the investor priorities discussed during 2021:
•Board Composition: continued focus on Board refreshment, racial/ethnic and gender diversity, and adding directors with relevant experience and skill sets that align with our long-term strategy;
•Climate and Environmental Stewardship: assessment of our long-term strategy and shift to a low-carbon future, with a focus on environmental impacts of our products and operations; how we determine our sustainability priorities and measure progress within various reporting frameworks (SASB, TCFD and GRI); and how sustainability and diversity goals are linked to our annual incentive program with pre-set metrics and goals;
•Human Rights: human rights policies as detailed in our inaugural Human Rights Report published in October 2021 in response to stockholder engagement; and
•Human Capital Management: focus on efforts to recruit, develop and retain a diverse workforce.
These investor discussions and annual meeting results yielded valuable feedback that was incorporated into the Board’s deliberations.
| Stockholder Engagement Cycle | ||
Topic Highlights •Climate/Environmental Stewardship •Board diversity and refreshment •Workforce diversity and inclusion •Human rights risks •Executive compensation •Lobbying and political spending •Stockholder Proposals Key Participants •Independent Lead Director •Executive Leadership •Senior Management •Subject Matter Experts (sustainability, executive compensation, diversity & inclusion) Methods of Engagement •Telephone/video conferences •Written correspondence & surveys •Annual meeting of stockholders •Investor meetings and conferences •2021 Virtual “Investor Day” •Quarterly earnings calls | ||||||||||||||
•Solicit feedback on governance best practices and trends, executive compensation, human capital management, ESG matters and other topics of interest to stockholders •Discuss stockholder proposals with proponents •Respond to investor inquiries and requests for information or engagement | •Publish Annual Report, Proxy Statement and Sustainability Report •Specific engagements with stockholders about the voting matters to be addressed at the annual meeting in April •Receive and publish voting results for management and stockholder proposals | |||||||||||||
 | ||||||||||||||
•Board responds, as appropriate, with continued discussions with stockholders and enhancements to policies, practices and disclosures •Board uses stockholder feedback to enhance our disclosures, governance practices, environmental and social policies and compensation programs | •Discuss and evaluate voting results from annual meeting of stockholders •Stockholder input informs our Board’s ongoing process of continually enhancing governance and other practices | |||||||||||||
| www.lockheedmartin.com | 2022 Proxy Statement | 26 | ||||||
Corporate Governance
Board Policies and Processes
Corporate Governance Guidelines
The Board has adopted Governance Guidelines that describe the framework within which the Board and its committees oversee the governance of the Company. The current Governance Guidelines are available on the Company’s website at www.lockheedmartin.com/corporate-governance.
The Governance Committee regularly assesses our governance practices considering emerging trends and practices and 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 independent 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; • Director overboarding limits; • Policies for the review, approval and ratification of related person transactions; • Director orientation and continuing education; • Review by the Governance Committee of any change in job responsibilities of directors; | • Procedures for annual performance evaluations of the Board and its committees; • Director stock ownership guidelines; • Clawback policy for executive incentive compensation; • Policy prohibiting hedging and pledging of Company stock; • Majority voting for the election of directors and resignation procedures for directors who fail to receive a majority vote; • Process for director compensation review, specifically use of competitive data and input from independent compensation consultant; and • Stockholder engagement program; our independent Lead Director will consider requests to speak to investors and will designate (in consultation with the Corporate Secretary) a director to engage with the requesting investors, if appropriate. | ||||
Director Overboarding Policy and Oversight
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 are able to dedicate sufficient time to their service on the Company’s Board. In 2021, the Board reviewed its overboarding policy, considering major investors’ overboarding policies, and amended its Governance Guidelines to reduce the number of boards a director could serve on (including Lockheed Martin) from five to four and from three to two if the director is currently serving as a CEO or equivalent position of another public company. All incumbent directors are in compliance with the amended policy. Directors must notify the CEO, independent 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. The Governance Committee reviews and determines whether the position would affect the director’s ability to serve on the Company’s Board. The Governance Guidelines provide that, without obtaining the approval of the Governance Committee:
DIRECTORS A director may not serve on the boards of more than 4 public companies (including Lockheed Martin) | PUBLIC COMPANY CEO Active CEOs or equivalent may not serve on the boards of more than 2 public companies (including Lockheed Martin) | AUDIT COMMITTEE Audit Committee members may not serve on more than 3 public company audit committees (including Lockheed Martin) | ||||||||||||
The Governance Committee also has oversight for reviewing new commitments or changes in responsibility that could interfere with a director’s ability to perform its duties and responsibilities as a member of the Board (including potential conflicts of interest, independence or related person transactions, regulatory issues, and time commitments).
27 | | ||||
Corporate Governance
Director Independence
The Board has determined that all of our directors are independent under applicable NYSE listing standards, except Mr. Taiclet. 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 Company. The Governance Committee annually reviews the independence of all directors and reports its findings to the full Board. The Board has adopted director independence guidelines that are included in our Governance Guidelines, which are available on the Company’s website at www.lockheedmartin.com/corporate-governance. These guidelines set forth certain relationships between the Company and directors and their immediate family members or affiliated entities, which the Board, in its judgment, has deemed to be material or immaterial for purposes of assessing a director’s independence. If a director has a relationship with the Company 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, David B. Burritt, Bruce A. Carlson, John M. Donovan, Joseph F. Dunford, Jr., James O. Ellis, Jr., Thomas J. Falk, Ilene S. Gordon, Vicki A. Hollub, Jeh C. Johnson, Debra L. Reed-Klages, and Patricia E. Yarrington. James D. Taiclet as an employee of the Company is not independent under the NYSE listing standards or our Governance Guidelines. Marillyn A. Hewson was also determined by the Board not to be independent while she served as Executive Chairman of the Board in 2021. 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 29, each of which were determined to be immaterial to each individual’s independence. The Governance Committee and Board considered that the Company, 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 (Northrop Grumman Corporation (family member’s employer)); Mr. Burritt (National Safety Council); Mr. Carlson (Benchmark Electronics Inc. and the Charles Stark Draper Laboratory); Mr. Donovan (AT&T Inc. (family member's employer)); Mr. Dunford (K&L Gates LLP (family member’s employer)); Mr. Ellis (Blue Origin, LLC (family member’s employer), Dominion Energy Inc. and the Economist Group (family member’s employer)); Ms. Gordon (The Conference Board and International Paper Company); Mr. Johnson (Center for a New American Security) and Ms. Reed-Klages (The Boeing Company (family member’s employer), Caterpillar Inc. and the University of Southern California). 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 Company’s business relationships with those entities. 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 Company 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, Compensation and Governance Committees 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 and Compensation Committee. | |||||||||||
| DIRECTOR INDEPENDENCE | |||||||||||
| 92% | |||||||||||
| Independent | |||||||||||
 | |||||||||||
| www.lockheedmartin.com | 2022 Proxy Statement | 28 | ||||||
Corporate Governance
Related Person Transaction Policy
The Board has approved a written policy and procedures for the review, approval and ratification, if necessary, of transactions among the Company and its directors, executive officers and their related interests. A copy of the policy is available on the Company’s website at www.lockheedmartin.com/corporate-governance. Under the policy, the Governance Committee shall conduct a reasonable prior review and oversight of all related person transactions (as defined in the policy). The Governance Committee may approve related person transactions at its discretion if deemed fair and reasonable to the Company and not inconsistent with the interest of the Company and its stockholders. This may include situations where the Company provides products or services to related persons on an arm’s 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, except if approved by unanimous written consent. The Governance Committee will prohibit any related person transaction that it determines to be inconsistent with the interests of the Company and its stockholders.
Under the policy, and consistent with applicable SEC regulations and NYSE listing standards, a related person transaction is any transaction in which the Company 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 or director-nominee, any 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 Company’s voting securities, or an immediate family member of any person described above.
Our 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 Company of changes in that information. Based on that information, the Company maintains a master list of related persons for purposes of tracking and reporting related person transactions.
Although it is the policy that all related person transactions be pre-approved, the Governance Committee has the authority to ratify a transaction if identified after it has occurred or commenced using the same standards of review. The Governance Committee has also pre-approved certain categories of transactions or relationships as set forth in the policy. 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. We currently employ approximately 114,000 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 or executive officers. William J. Drennen, III, the brother-in-law of our chief accounting officer, is employed by the Company as a senior staff systems engineer. Mr. Drennen’s 2021 base salary was $174,562 and he received an annual cash incentive award of $13,965. His base salary was increased to $180,672 for 2022 and he is eligible to earn an incentive award applicable to employees at his level. Bruce Carlson’s son, Dr. Scott Carlson, is employed by the Company as a senior staff aeronautical engineer. Dr. Carlson’s 2021 base salary was $152,467 and he received an annual cash incentive award of $11,587. His base salary was increased to $160,803 for 2022 and he may be eligible to earn an incentive award applicable to employees at his level. Mr. Drennen and Dr. Carlson 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). Their respective compensation was established in accordance with the Company’s employment and compensation practices applicable to employees with equivalent qualifications, experience, and responsibilities and the Board and executive officers of the Company did not have any direct involvement in setting their individual compensation. Neither Mr. Drennen nor Dr. Carlson served as an executive officer of the Company during 2021.
From time to time, the Company has purchased services in the ordinary course of business from financial institutions that beneficially own five percent or more of our common stock. In 2021, the Company paid approximately $8,063,054 to State Street Company and its affiliates (including State Street Bank and Trust Company) (collectively, State Street) for investment management, custodial, benefit plan administration and credit facility fees; approximately $570,742 to BlackRock, Inc. and its affiliates for investment management fees; approximately $3,343,250 to Capital Guardian Trust Company, an affiliate of Capital World Investors, for investment management fees; and approximately $346,098 to The Vanguard Group, Inc., for investment management fees. A portion of the fees included in the amounts paid to State Street, BlackRock, Inc., Capital Guardian and The Vanguard Group are estimated based on a percentage of net asset value under management. Capital World Investors is no longer a five percent or more holder of our common stock.
29 | | ||||
Corporate Governance
Accountability to Stockholders
Majority Voting Policy for Director Elections
The Company’s 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.
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 SEC, or by other public announcement, including a posting on the Company’s website.
If a director’s 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 Company’s 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 Company’s Bylaws.
Stockholder Right to Amend Bylaws
Our Bylaws provide the Company’s stockholders the right to amend the Bylaws by the vote of a majority of the votes entitled to be cast. The authority of the stockholders and the Board to amend the Bylaws is subject to the provisions of the Company’s Charter and applicable statutes. Our Bylaws can be found on the Company’s website at www.lockheedmartin.com/corporate-governance.
Proxy Access
Our Bylaws permit a stockholder or a group of up to 20 stockholders who together have owned at least three percent of the Company’s outstanding common stock continuously for three years to nominate for election by the Company’s stockholders and include in the Company’s proxy solicitation materials for its annual meeting up to the greater of two directors or 20 percent of the number of directors in office at the time of the proxy access deadline described on page 86.
Stockholder Right to Call Special Meeting
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 brought before the stockholders. Our Bylaws do not restrict the timing of a request for a special meeting. The only subject matter restriction is that the Company is not required to call a special meeting to consider a matter that is substantially the same as a matter voted on at a special meeting within the preceding 12 months unless requested by stockholders entitled to cast a majority of the votes at the special meeting. (See additional information in the Board of Directors Vote Recommendation on Proposal 4 on page 75.)
No Poison Pill
The Company 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 and if it were to adopt a Stockholder Rights Plan, the Board would seek stockholder ratification within 12 months of the date of adoption.
| www.lockheedmartin.com | 2022 Proxy Statement | 30 | ||||||
Enterprise Risk and Sustainability
As a leader in developing and delivering innovative engineering solutions, Lockheed Martin helps to enable the growth, safety and resiliency of communities and economies around the world. The core sustainability issues we focus on and the corresponding actions we take are designed to address some of the most pressing ESG issues facing society today and in the future.
To build integrated assurance, enterprise risk and sustainability are managed under one department and mutually reinforced through the following processes:
•Risk Identification: We monitor a dynamic risk universe that includes, aside from strategic, financial and operational topics, ESG topics prevalent in voluntary frameworks, mandatory regulations and internally identified sources.
•Risk Assessment: We prioritize and evaluate assumptions from a diverse set of risk topics that are relevant to strategic and operational objectives. Additionally, we separately assess compliance with laws and regulations as well as risk topics related to ESG. This includes examining environmental and social factors applicable to risk topics in our business.
•Risk Controls and Mitigation: Through the Risk Audit Strategy Board (including a periodic, rigorous examination of the intersection between our enterprise risk matrix, our Sustainability core issues and our internal audit plan), we strive to mitigate risk related to several ESG factors, and we track, measure and report our performance for greater transparency. This process also informs how we evaluate the effectiveness of controls for risk elements identified through our enterprise risk assessments, corporate policies and internal audits.
2021 Progress on our Sustainability Priorities
The sustainability priorities set forth in the graphic below and each of their subsidiary core issues represent issues of key importance to stakeholders and drivers of long-term value creation. In 2020, we released our next generation of sustainability priorities in our 2025 Sustainability Management Plan (SMP). This year we are excited to report on our first year of work towards achieving the goals associated with each of our 13 core issues and additional sustainability priorities. For some of our goals, we are working to create baselines from which to build progress. For others, we made significant movement towards meeting our targets. Some highlights of our progress in 2021 include:
•We released our tenth annual Sustainability Report in April.
•We reduced our Scope 1 and 2 carbon emissions per dollar of gross profit by 47% against a 2015 baseline.
•We matched 22% of electricity use across Lockheed Martin global operations with electricity from renewable sources.
•We succeeded in having 100% of leaders complete our Leading Diverse Teams training.
•We established a comprehensive baseline of our existing sponsorships and charitable contributions addressing our priority areas of quality education, gender equality, affordable and clean energy and peace, justice and strong institutions. In 2021 we provided $12 million in support of these issues.
 | ADVANCING RESOURCE STEWARDSHIP •Counterfeit Parts Prevention •Energy Management •Total Cost of Ownership •Hazardous Chemicals and Materials •Resource and Substance Supply Vulnerability |  | ELEVATING DIGITAL RESPONSIBILITY •Data Privacy and Protection •Artificial Intelligence •Intellectual Property Rights | |||||||||||
 | FOSTERING WORKPLACE RESILIENCY •Workplace Safety •Inclusion and Equity •Harassment Free Workplace |  | MODELING BUSINESS INTEGRITY •Anti-Bribery and Corruption •Ethical Business Practices | |||||||||||
31 | | ||||
Enterprise Risk and Sustainability
| Climate & Environmental Stewardship | |||||||||||
At Lockheed Martin, climate risks and opportunities impact our long-term resiliency as a leader in global security and aerospace. It is our responsibility to understand, and actively address climate risks while leveraging opportunities to foster a strong business model for the future. In 2021, we operationalized two new solar projects with a third scheduled to come online this year which demonstrates our commitment to adapting our business to reduce climate risks.
Go Green Goals
Our approach to championing environmental stewardship through resource efficiency is called “Go Green” and it extends to our facilities across the world. Go Green drives operational improvements by reducing carbon emissions through energy efficiency and use of renewable energy, reducing facility water use, and reducing waste generation. Since the inception of Go Green in 2007, Lockheed Martin has reduced carbon emissions by 53%, energy consumption by 19%, and waste-to-landfill by 49%. Due to the COVID-19 pandemic, thousands of employees converted to full time telework in 2020 and 2021. As a result, we re-evaluated and revised our metrics in 2021 to account for these impacts.
 |  | |||||||||||||||||||||||||
| REDUCE CARBON EMISSIONS PER $ GROSS PROFIT BY | REDUCE ENERGY PER OCCUPANT BY | REDUCE WASTE PER OCCUPANT BY | ||||||||||||||||||||||||
70% 2015 baseline |  | 14% 2016 baseline |  | 11% 2016 baseline |  | |||||||||||||||||||||
 | | | ||||||||||||||||||||||||
| 2021 PERFORMANCE | 47% | 7% | 5% | |||||||||||||||||||||||
Climate Reporting
The Board recognizes that companies have a role in meeting the challenge of mitigating and adapting to climate change risks. Lockheed Martin has been recognized globally for our sustainability efforts and disclosures. We publish an annual Sustainability Report prepared in accordance with the Global Reporting Initiative (GRI) Standards, maintain a dedicated sustainability website and an ESG portal that serves as an online repository for our ESG-related disclosures, guidelines, policies and webpage links. In 2020, we published our first Sustainability Accounting Standards Board (SASB) report and issued our first Climate-Related Risk and Opportunity Assessment in alignment with Task Force on Climate-Related Financial Disclosure (TCFD) recommendations. We set our ambitious carbon emission reduction target using a methodology established by the Center for Sustainable Organizations (CSO) to exceed science-based target requirements. The Paris Agreement’s goal is to limit global warming by the end of the century to well below 2°C of pre-industrial levels and preferably to 1.5°C. Our carbon emissions target is expected to outperform the CSO’s model criteria for aligning with a 1.5°C outcome in the long-term.
| Supplier Engagement | |||||||||||
Lockheed Martin works closely with suppliers to strengthen our communities and foster responsible growth. Lockheed Martin’s efforts and accomplishments in these areas during the year-long measuring period ended September 30, 2021 included the following:
20.2 percent or $5.6 billion of supplier spend was awarded to 7,715 small businesses including: | Received an “Exceptional” rating from the Defense Contract Management Agency (DCMA) for the Company’s GFY 2021 small business performance on Department of Defense contracts |  | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
$1.05B awarded to woman-owned businesses (both large and small) | $631.2M awarded to veteran-owned businesses (both large and small) | $128M awarded to Alaskan Native and Tribally Owned Corporations | $351.7M awarded to 248 service-disabled veteran-owned small businesses | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Engaging with our suppliers and identifying improvement opportunities is one way to foster sustainable and responsible growth. In 2021, we reached out to approximately 1,700 suppliers to conduct a comprehensive assessment of their Model Based Enterprise (MBE) capabilities. MBE is an organizational approach that connects product data seamlessly, eliminating functional silos and limiting the usage of transactional systems. MBE contributes to sustainability by facilitating reductions in energy consumption and waste generation, building resiliency and enabling disruption innovation and design. Participating suppliers received a benchmark report that serves as a tool to understand where they rank among their peers and help create a more sustainable supply chain.
| www.lockheedmartin.com | 2022 Proxy Statement | 32 | ||||||
Audit Matters
| PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS | | The Board unanimously recommends that you vote FOR the ratification of the appointment of Ernst & Young as independent auditors for 2022. | |||||||||
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 Company’s consolidated financial statements and internal control over financial reporting for the year ending December 31, 2022. The services provided to the Company by Ernst & Young for the last two fiscal years are described under the caption “Fees Paid to Independent Auditors” on the following page.
The Audit Committee is directly responsible for the appointment, compensation, retention, oversight and termination of the Company’s independent auditors 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 and its Chairman are involved in the selection of Ernst & Young’s lead engagement partner. The Audit Committee regularly meets with Ernst & Young without management present.
Ernst & Young has served as the Company’s independent auditors since 1994. The Audit Committee reviews the engagement of Ernst & Young annually following completion of Ernst & Young’s audit of the prior year’s financial statements. The Audit Committee also conducts a mid-year assessment of the quality of Ernst & Young’s work. As part of its annual and mid-year assessment of Ernst & Young, the Audit Committee has considered:
•the materials on independence provided by Ernst & Young;
•work quality;
•management’s level of satisfaction with Ernst & Young’s services;
•the adequacy of Ernst & Young’s staffing;
•the breadth of knowledge, support and expertise of its national office;
•the length of time Ernst & Young has been engaged;
•external data regarding Ernst & Young’s audit quality and performance, including recent Public Company Accounting Oversight Board (PCAOB) reports on Ernst & Young and its peer firms;
•Ernst & Young’s institutional knowledge and expertise with respect to the Company’s business and government contracting practices, quality and cost-effective services;
•familiarity with the Company’s account;
•the potential impact of changing independent auditors;
•level of expertise in accounting issues relating to government contracts; and
•Ernst & Young’s performance in providing independent analysis of management positions.
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, and such representatives will be available to respond to appropriate questions and will have the opportunity to make a statement if they desire.
33 | | ||||
Audit Matters
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 has 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 or any member pre-approval authority with respect to permitted services up to $500,000, provided that the Committee Chairman or any committee member must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
Fees Paid to Independent Auditors
The following table sets forth the fees billed by Ernst & Young, the Company’s independent auditors, for audit services, audit-related services, tax services and all other services rendered for 2021 and 2020. All fees were pre-approved in accordance with the Audit Committee’s pre-approval policy. The Audit Committee considered and concluded that the provision of these services by Ernst & Young was compatible with the maintenance of the auditor’s independence.
| 2020 | 2021 | |||||||
| ($) | ($) | |||||||
Audit Fees(a) | 23,500,000 | 23,500,000 | ||||||
Audit-Related Fees(b) | 310,000 | 1,142,000 | ||||||
Tax Fees(c) | 2,600,000 | 2,100,000 | ||||||
| All Other Fees | — | — | ||||||
(a)Audit fees are for services related to the annual audit of the Company’s consolidated financial statements, including the audit of internal control over financial reporting, the interim reviews of the Company’s quarterly financial statements, statutory audits of the Company’s foreign subsidiaries and consultations on accounting matters.
(b)Audit-related fees are primarily related to audits of the Company’s employee benefit plans, due diligence services in connection with acquisitions and, for 2021, fees in connection with Service Organization Controls 2 (SOC2) readiness for one of the Company's customer contracts.
(c)Tax fees are for domestic and international tax compliance and advisory services. Tax compliance fees were $1.1 million and $1.7 million in 2021 and 2020, respectively, and fees for advisory services were $1.0 million and $0.9 million in 2021 and 2020, respectively.
| www.lockheedmartin.com | 2022 Proxy Statement | 34 | ||||||
Audit Matters
Audit Committee Report
The Audit Committee of the Board of Directors is responsible for overseeing the Company’s accounting, auditing and financial reporting process, financial risk assessment and management process and for monitoring compliance with certain legal and regulatory compliance matters and for reviewing certain strategic risks and opportunities, on behalf of the Board of Directors.
The Company’s management is responsible for preparing the quarterly and annual consolidated financial statements, the financial reporting process, and maintaining and evaluating disclosure controls and procedures and a system of internal control over financial reporting.
In addition to its oversight of the Company’s internal audit organization, the Audit Committee is directly responsible for the appointment, compensation, retention, oversight and termination of the Company’s independent auditors, Ernst & Young, an independent registered public accounting firm. The independent auditors are responsible for performing an independent audit of the Company’s annual consolidated financial statements and internal control over financial reporting and expressing an opinion on the material conformity of those consolidated financial statements with U.S. generally accepted accounting principles and on the effectiveness of the Company’s internal control over financial reporting.
In connection with the preparation of the Company’s consolidated financial statements as of and for the year ended December 31, 2021, the Audit Committee reviewed and discussed with management and Ernst & Young the Company’s audited consolidated financial statements, 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. The Audit Committee also discussed with Ernst & Young, with and without management, the quality of the financial statements, clarity of the related disclosures, effectiveness of internal control over financial reporting and other items required by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC. Additionally, the Audit Committee received and reviewed the written disclosures and letter from Ernst & Young required by applicable requirements of the PCAOB regarding Ernst & Young's communications with the Audit Committee concerning independence, and has discussed with Ernst & Young its independence.
Based on the Audit Committee’s reviews and discussions described in this report, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements as of and for the year ended December 31, 2021 be included in Lockheed Martin Company’s Annual Report on Form 10-K for 2021 for filing with the SEC. The Audit Committee also reappointed Ernst & Young to serve as the Company’s independent auditors for 2022, and requested that this appointment be submitted to the Company’s stockholders for ratification at the Annual Meeting. The Board of Directors approved the Audit Committee’s recommendations.
|  | | |  |  | ||||||||||||
Thomas J. Falk Chairman | David B. Burritt | James O. Ellis, Jr. | Ilene S. Gordon | Debra L. Reed-Klages | Patricia E. Yarrington | ||||||||||||
35 | | ||||
Executive Compensation
| PROPOSAL 3: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NEOs (SAY-ON-PAY) | | The Board unanimously recommends that you vote FOR the advisory vote to approve the compensation of our named executive officers. | |||||||||
As required by Section 14A of the Securities Exchange Act of 1934, as amended, 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 of this Proxy Statement. This vote is commonly known as Say-on-Pay.
Stockholders should review the entire Proxy Statement and, in particular, the CD&A beginning on page 37 and the Executive Compensation Tables beginning on page 54, 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 2022 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 Company, 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 throughout the year.
Compensation Committee Report
The Management Development and Compensation Committee makes recommendations to the Board of Directors concerning the compensation of the Company’s NEOs. We have reviewed and discussed with management the Compensation Discussion and Analysis that will be included in the Company’s 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. The Board approved our recommendation.
| |  | | | ||||||||||
Ilene S. Gordon Chairman | Thomas J. Falk | Vicki A. Hollub | Debra L. Reed-Klages | Patricia E. Yarrington | ||||||||||
| www.lockheedmartin.com | 2022 Proxy Statement | 36 | ||||||
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 54.
2021-2022 Leadership Changes
In 2021 and early 2022, there were the following leadership changes affecting the NEOs:
•President and CEO James D. Taiclet was elected Chairman effective March 1, 2021, succeeding Marillyn A. Hewson, who was serving as Executive Chairman;
•Kenneth R. Possenriede retired effective August 3, 2021, after serving as Chief Financial Officer since February 11, 2019;
•John W. Mollard, Vice President and Treasurer, served as Acting Chief Financial Officer from August 3, 2021 until Jesus Malave was appointed as Chief Financial Officer on January 31, 2022;
•Richard F. Ambrose transitioned to an advisory role effective January 1, 2022 after serving as Executive Vice President, Space, since April 2013, and retired March 1, 2022. Robert M. Lightfoot, Jr., succeeded Mr. Ambrose effective January 1, 2022; and
•Marillyn A. Hewson served as Executive Chairman from June 15, 2020 to March 1, 2021 and Strategic Advisor to the CEO from March 1, 2021 through February 28, 2022.
| NEO | Title | Years of Service At End of 2021 (rounded) | ||||||
| James D. Taiclet | Chairman, President and Chief Executive Officer | 2 years | ||||||
| John W. Mollard | Vice President and Treasurer; Former Acting Chief Financial Officer | 39 years | ||||||
| Kenneth R. Possenriede | Former Chief Financial Officer | - | ||||||
| Frank A. St. John | Chief Operating Officer | 35 years | ||||||
| Richard F. Ambrose | Former Executive Vice President, Space | 21 years | ||||||
| Stephanie C. Hill | Executive Vice President, Rotary & Mission Systems | 35 years | ||||||
| Marillyn A. Hewson | Former Executive Chairman; Former President and CEO | 39 years | ||||||
To assist stockholders in finding important information in the CD&A, sections are highlighted as follows: | Page(s) | |||||||||||||
| 38 | Our 2021 Performance | |||||||||||||
| 39 | 2021 CEO Compensation | |||||||||||||
| 41 | 2021 Comparator Group Companies | |||||||||||||
| 43 | 2021 Compensation Elements | |||||||||||||
| 44-46 | 2021 Annual Incentive | |||||||||||||
| 47-50 | 2021 Long-Term Incentive Compensation | |||||||||||||
| 50 | 2019-2021 LTIP and PSU Awards | |||||||||||||
| 50-51 | 2022 Incentive Opportunities | |||||||||||||
| 51-53 | Other Compensation Matters | |||||||||||||
37 | | ||||
Executive Compensation
Executive Summary
2021 Say-on-Pay Vote
At our 2021 annual meeting, more than 92% of the votes cast by our stockholders approved our Say-on-Pay proposal. We meet with our key investors throughout the year to understand the topics that matter most to them as they relate to executive compensation. In these meetings, we seek the views of our stockholders with respect to our existing policies and practices. (Please see “Our Stockholder Engagement Program” on page 26 for more specific details). Investors we engaged with during 2021 reacted positively to our pay governance and executive compensation programs. These investors overall indicated that they appreciate our current compensation structure, including our pay mix, and transparency as manifested in our Proxy disclosures. We consider the input of our stockholders, along with emerging best practices, to ensure alignment with our executive pay programs. We welcome feedback regarding our executive compensation programs and will continue to engage with our stockholders in 2022. | 3-Year Say-on-Pay | |||||||||||||||||||
 | ||||||||||||||||||||
Our 2021 Performance
In 2021, Lockheed Martin built on our vision to transform the future of the defense enterprise. We continued to demonstrate agility and resilience despite the ongoing challenges presented by the effects of COVID-19. Financially, we delivered strong results across our key financial metrics, including sales of $67.0 billion, segment operating profit* of $7.4 billion and record cash from operations of $9.2 billion. While supply chain disruptions adversely affected our 2021 revenues, we took swift actions to address these challenges, and continued to accelerate payments to our suppliers, prioritizing small- and medium-sized businesses as well as large business that have been negatively affected by the pandemic. Orders and backlog in 2021 were also impacted by some delays in international orders; however, we ended 2021 with a year-end backlog of $135.4 billion. From a strategic and operational perspective, thanks to our team members’ dedication and resolve, we continued to produce world-class products and services across all business areas. Lockheed Martin’s largest program, the F-35 Lightning II, continued to mature and expand around the globe with the delivery of 142 aircraft. The F-35 program also celebrated several international milestones with Switzerland and Finland joining the program and several other nations expressing interest in joining as well. We also had strategic and operational accomplishments across our other business areas in 2021. In March, we were awarded a $3.7 billion contract to develop the Next Generation Interceptor (NGI) – America’s most advanced missile defense system. Also in March, the Army renewed their commitment to the Guided Multiple Launch Rocket System (GMLRS) program by awarding us a $1.12 billion contract. The CH-53K King Stallion heavy-lift helicopter continues to impress customers and in June, U.S. Naval Air Systems Command awarded us a contract for $878.7 million. Throughout the year we showed the power and potential of One Lockheed Martin, drawing upon the breadth and depth of our industry-leading portfolio to enable customers’ Joint All-Domain Operations. We also delivered more customer capabilities through our integration of emerging technologies such as autonomy, artificial intelligence, and directed energy. | 2021 Financial Performance | |||||||||||||||||||
Sales of $67.0B | ||||||||||||||||||||