Lockheed Martin
Annual meeting: April 25, 2020
Compensation for Lockheed Martin Chairman, President and CEO Marilyn Hewson for 2019 was $30,913,982. This represents an increase of 43% (almost $9.4 million dollars) over last year’s compensation of $21,516,613.
Approximately 90% of Lockheed Martin’s revenue comes from its role as a government contractor, so this is essentially money from taxpayers.
The company released its proxy statement on March 11th. The next day the board met and selected a new CEO. Effective June 15, board member James D. Taiclet, Jr., who was on the committee in charge of succession planning, will become CEO and President.
Hewson will become Executive Chairman. Taiclet’s annual base salary will be $1.7 million and his target bonus will be 175% of salary. He will also be eligible to receive a long-term incentive play equity grant of $14 million. Taiclet is currently CEO of American Tower Corporation, a Real Estate Investment Trust.
The full extent of Taiclet’s new-hire package will not be available until next year. The supplemental proxy statement notes that “Mr. Taiclet also may be nominated to receive a one-time award of restricted stock units or other long-term incentives to offset forfeited unvested incentives from his current employer.” Many of the unvested incentives from American Tower are performance-based and the calculation of the value may include subjective decisions.
Likewise, investors do not know what separation package may be provided for Hewson. However, we do have insight into Hewson’s pension. The accumulated value of her two pensions is $54,297,134. Guaranteed pensions were designed to support workers in their retirement. However, at this level, Hewson’s pension is simply a vehicle for intergenerational wealth transfer.
Generous benefits and perquisites have been issues that inspired shareholders to vote against compensation packages at Lockheed Martin in the past. Unfortunately, it appears these unpopular compensation practices will continue. The company notes that “Consistent with past practice, as CEO, Mr. Taiclet will be required to use a corporate jet for business and personal use and the Corporation will provide personal security (and a related tax gross-up) based on assessed risk to Mr. Taiclet. Mr. Taiclet will also be eligible to receive relocation assistance benefits.” Tax gross-ups – in which a component of pay is increased to cover the tax on it – are increasingly out of favor among investors who believe that compensation is more than adequate to cover taxes. In 2019, Hewson’s tax assistance was $99,460.
When shareholders vote on such issues it is not typically a matter of the dollar amount itself, but rather, what it indicates about the board and compensation in general. At Lockheed Martin, these benefits, like many other features of the compensation, indicate a more indulgent board than a prudent one.
Despite a very high median pay of $154,000, the pay ratio at Lockheed Martin is 200:1.