☐ | 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 under |
☒ | No fee required. | |||
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☐ | Fee paid previously with preliminary materials. | |||
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0-11. |
HUNTINGTON INGALLS INDUSTRIES NOTICE OF 2023 ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT
Letter to Our Stockholders
March 20, 2023 Dear Fellow Stockholders: On behalf of the Board of Directors and management team of Huntington Ingalls Industries, I would like to invite you to attend the 2023 Annual Meeting of Stockholders. We will hold our annual meeting virtually, exclusively by live webcast, on Tuesday, May 2, 2023, at 11:00 a.m., Eastern Daylight Time. You will be able to attend and participate in the annual meeting online, vote your shares electronically and submit your questions prior to and during the meeting. The accompanying Notice of
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Letter to Our Stockholders
March 20, 2018
Dear Fellow Stockholders:
On behalf of the Board of Directors and management team of Huntington Ingalls Industries, I would like to invite you to attend the 2018 Annual Meeting of Stockholders. We will meet on Wednesday, May 2, 2018, at 11:00 a.m. Eastern Daylight Time, at our corporate headquarters located at the Herbert H. Bateman Virginia Advanced Shipbuilding and Carrier Integration Center (VASCIC), 2401 West Avenue, Newport News, Virginia 23607. We are looking forward to your responses on the proposals included in the accompanying proxy statement.
The accompanying Notice of 2018 2023 Annual Meeting and Proxy Statement describe the matters on which you, as a stockholder, may vote at the annual meeting, and include details of the business to be conducted at the meeting.
As a way to conserve natural resources and reduce annual meeting costs, we are electronically distributing proxy materials as permitted under rules of the Securities and Exchange Commission. Many of you will receive a Notice of Internet Availability of Proxy Materials containing instructions on how to access the proxy materials via the Internet. You can also request mailed paper copies if preferred.you prefer. You can expedite delivery and reduce our mailing expenses by confirming in advance your preference for electronic delivery of future proxy materials. For more information on how to take advantage of this cost-saving service, please see page 1314 of the proxy statement.
If you plan to attend the annual meeting virtually via live webcast, you must follow the instructions contained in the Notice and on pages 11 (for record stockholders), 12 (for beneficial stockholders) and 101 of the proxy statement.
Your vote is very important. Whether or not you plan to attend the annual meeting, I encourage you to vote your shares in advance. Stockholders can submit their votes over the Internet at the web address included in the Notice of Internet Availability of Proxy Materials. If you received a proxy card, you can submit your votes over the Internet at the web address included in the proxy card, by telephone through the number included in the proxy card, or by signing and dating your proxy card and mailing it in the prepaid and addressed envelope.
Thank you for your interest in and support of Huntington Ingalls Industries. I look forward to seeing you at the annual meeting.HII.
Sincerely,
ADM Thomas B. FargoAdmiral Kirkland H. Donald
U.S. Navy (Ret.)
Chairman of the Board
Notice of 20182023 Annual Meeting of Stockholders
Huntington Ingalls Industries, Inc.
4101 Washington Avenue
Newport News, Virginia 23607
DATE AND TIME |
| |||
PLACE | Virtually at https://meetnow.global/MKKD465 There is no physical location for the annual meeting. | |||
ITEMS OF BUSINESS | •Elect | |||
•Approve the company’s executive compensation on an advisory basis | ||||
• | Ratify the appointment of Deloitte & Touche LLP as our independent auditors for | |||
•Consider a stockholder proposal | ||||
•Transact any other business that properly comes before the annual meeting | ||||
RECORD DATE
| Stockholders of record at the close of business on March 8, | |||
PROXY VOTING | It is important you vote your shares so they are counted at the annual meeting. You can vote your shares over the Internet at the web address included in the Notice of Internet Availability of Proxy Materials and included in the proxy card (if you received a proxy card), by telephone through the number included in the proxy card (if you received a proxy card), or by signing and dating your proxy card (if you received a proxy card) and mailing it in the prepaid and addressed envelope. |
Charles R. Monroe, Jr.
Corporate Vice President,
Associate General Counsel and Secretary
March 20, 20182023
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on May 2, 20182023: The Notice of 20182023 Annual Meeting and Proxy Statement, and 2017the 2022 Annual Report and the form of proxy card are available as of today’s date, March 20, 2018,2023, at www.envisionreports.com/HII.
Virtual Meeting Format: The 2023 annual meeting will be conducted virtually by live webcast. You will be able to attend the annual meeting, as well as vote and submit questions during the meeting, by visiting https://meetnow.global/MKKD465 and entering your control number. Please refer to the additional logistical details beginning on page 101 of the accompanying proxy statement for additional information on how to participate in the annual meeting.
The meeting will begin promptly at 11:00 a.m., Eastern Daylight Time. If you encounter difficulties accessing the virtual meeting, please call the technical support number 1-888-724-2416.
Huntington Ingalls Industries, Inc. | 2023 Notice and Proxy Statement | |
Proxy Statement—Table of Contents
i
20182023 Proxy Statement Summary
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all the information you should consider, and you should read the entire proxy statement carefully before voting.
Annual Meeting Information
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Date and Time: |
May 2, | |
Place: |
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Record Date: |
March 8, | |
Voting: |
Holders of our common stock are entitled to one vote per share | |
Admission: |
To attend the meeting, |
Items to be Voted at the Annual Meeting
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Board Vote Recommendation | Page Reference (for more information) | |||||||||||
Board Vote Recommendation | Page Reference (for more information) | |||||||||||
1.
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Elect ten directors
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FOR
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82
| Elect 11 directors | FOR | 94 | ||||||
2.
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Approve the company’s executive compensation on an advisory basis
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FOR
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83
| Approve the company’s executive compensation on an advisory basis | FOR | 95 | ||||||
3.
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Select the frequency of future advisory approvals of executive compensation on an advisory basis
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FOR ONE YEAR
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84
| Ratify the appointment of our independent auditors | FOR | 96 | ||||||
4.
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Ratify the appointment of our independent auditors
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FOR
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85
| Consider a stockholder proposal requesting that HII disclose on its website an annual report of HII’s direct and indirect lobbying activities and expenditures, if properly presented at the annual meeting | AGAINST | 97 | ||||||
5.
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Consider a stockholder proposal to enable stockholders to take action by written consent, if properly presented at the meeting
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AGAINST
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86
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2018 Notice and Proxy Statement 1
2023 Notice and Proxy Statement | 1 |
20182023 Proxy Statement Summary
Huntington Ingalls Industries, Inc. (“HII”, the “company”, “we”, “us” or “our”) is a global, all-domain defense partner, building and delivering the world’s most powerful, survivable naval ships and technologies that safeguard America’s seas, sky, land, space, and cyber. For more than a century, our Ingalls Shipbuilding segment in Mississippi and Newport News Shipbuilding segment in Virginia have built more ships in more ship classes than any other U.S. naval shipbuilder, making us America’s largest shipbuilder. Our Mission Technologies segment delivers high-value engineering and technology solutions to enable multi-domain distributed operations in the government and commercial markets. Our mission is to deliver the world’s most powerful ships and all domain solutions in service of the nation, creating the advantage for our customers to protect peace and freedom around the world.
In 2022, HII delivered stable execution in a challenging operating environment. We delivered or re-delivered four critical assets to the U.S. Navy, including the amphibious transport dock Fort Lauderdale (LPD 28), the delivery of guided-missile destroyer Lenah Sutcliffe Higbee (DDG 123), the delivery of Virginia-class submarine Montana (SSN 794) and the re-delivery of Los Angeles-class submarine USS Helena (SSN 725) after its completion of maintenance and modernization. While we executed on current program milestones, we also were awarded contracts for new work totaling $9.3 billion in 2022, resulting in backlog of $47.1 billion at year-end, representing years of future work. At Mission Technologies, the integration of Alion Science and Technology (“Alion”), acquired in 2021, is substantially complete, and the segment achieved significant programmatic wins that would not have been possible without the capabilities added from Alion. HII made meaningful progress in 2022 while aggressively managing through labor market shortages, accelerating inflation and continuing supply chain pressures.
Corporate Governance Highlights |
Huntington Ingalls Industries, Inc. (“HII” the “company,” “we,” “us” or “our”) is committed to high standards of corporate governance best practices, which we believe promote the long-term interests of stockholders, strengthen accountability of the Board of Directors (the “Board”) and management and build public trust in the company. Highlights of our corporate governance practices include:
Board
Structure and Governance | • | Diverse independent Board | ||
• | All standing Board committees comprised of independent directors | |||
• | ||||
• | Independentnon-executive Chairman of the Board | |||
• | ||||
• | Director term limits | |||
• | Mandatory director retirement age | |||
• | Limits on outside public company board service by directors to prevent overboarding | |||
• | Active stockholder outreach and engagement | |||
Stockholder Rights | • | Annual election of all directors | ||
• | ||||
• | Ability of eligible stockholders to include their own director nominees in our proxy materials (proxy access) | |||
• | Ability of stockholders to call a special meeting of stockholders | |||
• | No supermajority voting requirements | |||
• | Annual advisory vote on named executive officer compensation | |||
• | No stockholder rights plan (poison pill) | |||
Stock
Ownership | • | |||
• | Clawback policy for all performance-based compensation | |||
• | Prohibition on directors, executive officers and |
Stockholder Engagement |
We believe stockholder outreach and engagement is a corporate governance best practice. Accordingly, we actively engage with our investors so management and the Board can receive stockholder perspectives on matters that are important to stockholders and assess emerging issues
2 | Huntington Ingalls Industries, Inc. |
2023 Proxy Statement Summary
that may shape our governance practices and enhance our corporate disclosures. We strive for a collaborative approach to stockholder engagement is an essential elementand value the variety of strong corporate governance. Accordingly, managementstockholder perspectives we receive. Management and, in some cases, members of the Board actively engagesengage with our investors through telephonic meetings,in-person meetings and email to understand theirinvestor perspectives on our company, including our strategy, performance, corporate governance matterspractices and executive compensation. During 2017,2022 and early 2023, management requested meetings withcontacted the corporate governance teams of our largest institutional stockholders, and other interested stockholderscollectively representing approximately 50% of our outstanding shares, and met with those stockholders representing approximately 18% ofthat accepted our outstanding shares.meeting invitations. We are committed to understanding the perspectives of our stockholders and responding as appropriate.
2 Huntington Ingalls Industries, Inc.
2018 Proxy Statement Summary
The following sections of this proxy statement summary describe the matters on which our stockholders will vote at the 20182023 annual meeting of stockholders.
ELECT |
Director Nominees
The Board is asking you to elect, forone-year terms ending in 2019,2024, the ten11 nominees for director named below, each of whom is currently serving as a member of the Board. Detailed information about this proposal can be found beginning on page 94.
The following table provides summary information about the nominees for director, including their names, ages and occupations, whether they are independent directors under the regulations of the Securities and Exchange Commission, the corporate governance listing standards of the New York Stock Exchange (“NYSE”), and the Board committees on which they currently serve. The directorsEach director will be elected by a plurality vote, but any director who receives a greaterif the number of votes “withheld”shares voted in favor of such director exceeds the number of shares voted against such director.
Stephen R. Wilson, a current member of the Board and Chairman of the Audit Committee, will retire from his or her election than votes “for” such election must tenderthe Board effective at the time of the 2023 annual meeting.
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| Board Committees | |||||||||||||
Name | Age | Director Since | Principal Occupation | Independent Director | A | C | CS | F | GP | |||||||||
Augustus L. Collins | 65 | 2016 | Chief Executive Officer of MINACT, Inc. | ü | ü | ü | ||||||||||||
Leo P. Denault | 63 | 2022 | Retired Chairman and Chief Executive Officer of Entergy Corporation | ü | ü | ü | ||||||||||||
Kirkland H. Donald | 69 | 2017 | Chairman of the Board | ü |
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| ü | ü |
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Victoria D. Harker | 58 | 2012 | Executive Vice President and Chief Financial Officer of Tegna, Inc. | ü | CH | ü | ||||||||||||
Frank R. Jimenez | 58 | 2022 | General Counsel and Corporate Secretary, GE HealthCare | ü | ü | ü | ||||||||||||
Christopher D. Kastner | 59 | 2022 | President and Chief Executive Officer of Huntington Ingalls Industries, Inc. | |||||||||||||||
Anastasia D. Kelly | 73 | 2011 | Senior Advisor to the Chair and Executive Director of Client Relations of DLA Piper | ü | ü | ü | ||||||||||||
Tracy B. McKibben | 53 | 2018 | Founder and Chief Executive Officer of MAC Energy Advisors LLC | ü | ü | ü | ||||||||||||
Stephanie L. O’Sullivan | 63 | 2021 | Independent Business Consultant | ü |
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| CH | ü |
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Thomas C. Schievelbein | 69 | 2011 | Retired Chairman, President and Chief Executive Officer of The Brink’s Company | ü | ü | CH | ||||||||||||
John K. Welch | 73 | 2015 | Retired President and Chief Executive Officer of Centrus Energy Corp. | ü | ü | CH |
CH = Chairperson
A = Audit Committee
C = Compensation Committee
CS = Cybersecurity Committee
F = Finance Committee
GP = Governance and Policy Committee
2023 Notice and Proxy Statement | 3 |
2023 Proxy Statement Summary
Board Composition
Our Board continues to reflect a diverse and highly engaged group of directors with a wide range of skills, experiences, attributes and perspectives, which continue to evolve. Four of our 11 director nominees have joined the Board in the last five years. The following charts and graphs highlight the current composition of our Board:
4 | Huntington Ingalls Industries, Inc. |
2023 Proxy Statement Summary
Director Experience and Skills
As part of the Board’s continuous director succession process, implemented through the Governance and Policy Committee, the committee regularly assesses the experience, skills, qualifications and attributes of Board members relative to the appropriate mix of these qualities the committee believes the Board hisneeds to effectively oversee HII’s business and execution of its strategy. While each Board member possesses a broad range of experience and skills, the Board believes each director has particular strategic strengths that he or her offershe brings to the Board. The following table shows the experience, skills and knowledge constituting the strategic strengths of resignation.each of our 11 director nominees.
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Experience and Skills | Collins | Denault | Donald | Harker | Jimenez | Kastner | Kelly | McKibben | O’Sullivan | Schievelbein | Welch | |||||||||||||
| Chief Executive Leadership and Strategy Experience as Chief Executive Officer of a public company or Chief Executive Officer of a private organization |
· | · | · | · | · | · | · | · | |||||||||||||||
Chief Financial Officer and Accounting Experience as Chief Financial Officer of | · | · | · | · | · | |||||||||||||||||||
Investment Strategy, Corporate Development and M&A Experience in executive leadership of private equity, other strategic investment firm or investment bank; experience in corporate development function; or oversight leadership experience in corporate development and transactional M&A | · | · | · | · | · | · | · | |||||||||||||||||
Shipbuilding and Manufacturing Operations/Leadership Experience in executive leadership of shipyard operations or other manufacturing operations | · | · | · | |||||||||||||||||||||
Technical Services Executive Leadership Experience in executive leadership of technical services business organization or significant technical services leadership or customer experience | · | · | · | |||||||||||||||||||||
Military and Government Relations Experience as Admiral or other significant Naval career experience; significant federal government experience and relationships (e.g., Pentagon, Congress, White House); or significant military leadership role or leadership role in military associations | · | · | · | · | · | · | · | · | ||||||||||||||||
Corporate Governance Current member of multiple public company boards; experience as public company board chair or public company committee chair; prior member of multiple public company boards; or corporate secretary experience | · | · | · | · | · | · | · | · | · | · | ||||||||||||||
Aerospace & Defense Industry Knowledge Significant direct Naval industry experience or significant direct general aerospace & defense experience | · | · | · | · | · | · | · | |||||||||||||||||
Compliance, Legal and Regulatory Experience as General Counsel, Chief Legal Officer or Chief Compliance Officer of large business organization or other significant legal or regulatory experience | · | · | · | · | · | · | ||||||||||||||||||
| Nuclear Experience in Navy nuclear executive leadership; executive leadership of Naval nuclear shipyard operations; or oversight of nuclear operations | · | · | · | · | · | ||||||||||||||||||
Advanced Technology (Future Warfare) and Innovation Experience as Chief Technology Officer or equivalent of large aerospace & defense company; Chief Technology Officer or equivalent of other large organization; or engineering/technology/innovation functional lead | · | · | · | · | ||||||||||||||||||||
Cyber and IT Risk Management Experience as Chief Information Officer, Chief Information Security Officer or equivalent operational experience; management experience in cyber operations; or experience on a corporate cyber risk committee | · | · | · | · | ||||||||||||||||||||
Human Resources and Labor Relations Experience as Chief Human Resources Officer or equivalent of a large business organization or significant human resources or labor relations experience | · | · |
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2023 Notice and Proxy Statement |
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A = Audit Committee
C = Compensation Committee
F = Finance Committee
GP = Governance and Policy Committee
2018 Notice and Proxy Statement 3
20182023 Proxy Statement Summary
Board Composition, Qualifications and Diversity
We believe the Board is comprised of an effective mix of experience, skills and perspectives. The following charts and graphs highlight the current composition of our Board.
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Director Experience and Skills
4 Huntington Ingalls Industries, Inc.
VSenior Leadership Experience Finance, Accounting and Capital Markets Experience Industry Experience Manufacturing and Operations Experience Human Resources Experience Military and Government Experience Government Relations and Regulatory Experience Legal, Regulatory and Compliance Experience Technology Experience Risk Management Experience Corporate Development and Strategy Experience Global Experience
2018 Proxy Statement Summary
The Board, through the Governance and Policy Committee, considers Board succession on a continuous basis. The committee’s process includes evaluation of director attributes, including professional experience, skills, diversity, independence, tenure and age, to create a balanced Board that can effectively oversee the company’s business and execution of its business strategy.
APPROVE EXECUTIVE COMPENSATION ON AN ADVISORY BASIS |
The Board is asking you to approve, on an advisory basis, the compensation of our named executive officers for 2017.2022. Detailed information about this proposal can be found beginning on page 95.
Our stockholders have voted on our executive compensation, on an advisory basis, since 2012. We2012, and we have consistently received exceptionally strong stockholder support, as reflected insupport. The following table sets forth the following table:voting results for our “say-on-pay” proposal for the last five years:
Annual Meeting
| 2017
| 2016
| 2015
| 2014
| 2013
| 2012
| 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||||||||||||||
Votes Cast “FOR”Say-On-Pay Proposal
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98
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%
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99
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%
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99
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%
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99
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%
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99
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%
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84
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%
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Votes Cast “FOR” Say-On-Pay Proposal* |
| 97 | % |
| 97 | % |
| 98 | % |
| 98 | % |
| 99 | % |
* Excludes broker non-votes
Executive Compensation
We have designed our executive compensation program to attract, motivate and retain highly qualified executives, incentivize our executives to achieve business objectives, reward performance and align the interests of our executives with the interests of our stockholders and customers. The fundamental philosophy of our executive compensation program, set by the Compensation Committee of the Board, ispay-for-performance. We describehave included below our financial performance and stockholder returns in 2017.2022.
20172022 Financial Performance
StrongManaging through a challenging operating performanceenvironment in 20172022, we achieved operating successes and delivered solida consistent financial performance. TheWe have included in the following table includes several of our 20172022 financial highlights:
|
($ in millions, except per share data) | ||||
Contract Awards | 9,329 | ||||
Revenues | 10,676 | ||||
Operating Income | 565 | ||||
Operating Margin | | 5.3 | % | ||
Segment Operating Income* | 712 | ||||
| |||||
| 6.7 | % | |||
Net Earnings | |||||
| 579 | ||||
Diluted Earnings Per Share | 14.44 | ||||
| 766 | ||||
Free Cash Flow* |
| 494 |
Our full year revenues of $10.7 billion in 2022 increased 12.1% over 2021. Operating income was $565 million, 10.1% higher than 2021, and segment operating income* was $712 million, 4.2% higher than 2021. Diluted earnings per share of $14.44 increased 7.0% over 2021, and free cash flow* was 10.0% higher than 2021.
* | Non-GAAP financial measures. See Annex A for definitions of thesenon-GAAP financial measures and reconciliations to comparable GAAP financial measures. |
Our full year revenues of $7.4 billion in 2017 increased 5.3% over 2016. Operating income was $865 million and operating margin was 11.6%, compared to $858 million and 12.1%, respectively, in 2016. New contract awards in 2017 totaled $8.1 billion, resulting in a backlog of $21.4 billion at the end of the year.
2018 Notice and Proxy Statement 5
6 | Huntington Ingalls Industries, Inc. |
20182023 Proxy Statement Summary
20172022 Stockholder Returns
Our operating performance continues to drive significant returns for our stockholders. Adjusted diluted earnings per share remained constant at $12.14 per share from 2016 to 2017.HII’s total stockholder return in 2022 was 26.3%. We also increased dividends by 20%approximately 4%, from $2.10$4.60 per share in 20162021 to $2.52$4.78 per share in 2017,2022, and repurchased 1.4 million244,561 shares during 2017, continuing2022, returning $244 million to deliver on our commitment to return cash to stockholders.stockholders in 2022.
The following graph and chart show total stockholder return for HII in 20172022 compared to several benchmarksbenchmark total stockholder returns and total cash returned to stockholders in 2017,2022, respectively.
1-YEAR TOTAL STOCKHOLDER RETURN | RETURNED STOCKHOLDERS IN | |
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Elements of Our Executive Compensation Program
Our named executive officers (“NEOs”)compensation program for 2017 areeach of the individuals who served as our Chief Executive Officer, our Chief Financial Officer and our three other most highly-compensatedhighly compensated executive officers in 2017 who were serving as executive officers at the end of the year and another individual who was one of2022 (collectively, our three other most highly-compensated executive officers in 2017 but was not serving as an executive officer at the end of the year. Our compensation program for our NEOs“NEOs”) consisted primarily of the following direct compensation elements in 2017:elements:
• | Base salary, to provide a minimum fixed level of compensation. |
• | Annual incentive awards, generally paid in cash, under our Annual Incentive Plan (“AIP”), to motivate our executives to achieve pre-determined annual financial and operational targets that are aligned with our strategic goals. |
• | Long-term equity-based incentive awards, paid under our Long-Term Incentive Plan (“LTIP”), to promote achievement of pre-determined three-year performance goals aligned with long-term stockholder interests. |
Our executive compensation program is rounded out with certain perquisites and other executive benefits.
A significant portion of the potential compensation of our executives is at risk, and that risk increases with eachcorresponding increases in an executive’s level of responsibility. We have designed our compensation program to balance performance-based compensation over the short- and long-term to incentivize decisions and actions that promote stockholder value and focus our executives on performance that benefits our stockholders and customers, while discouraging inappropriate risk-taking behaviors.
6 Huntington Ingalls Industries, Inc.
*Includes $2 million subject to settlement as of December 31, 2017.
2023 Notice and Proxy Statement | 7 |
20182023 Proxy Statement Summary
20172022 Total Direct Compensation Mix
Thepay-for-performance philosophy of our executive compensation program is demonstrated by the compensation mix of our NEOs. Of the three primary elements of total direct compensation, our executive compensation is heavily weighted toward the variable, performance-based elements and toward the long-term and equity-based elements, as reflected in the following graphs,charts, which set forth the percentage of total compensation corresponding to each compensation element received by our CEO and by our other NEOs collectively in the aggregate in 2017.2022.
CEO Compensation Mix1
| Other
| |
(1) | Reflects the full-year compensation for Mr. Kastner, who served as Chief Operating Officer for the first two months of 2022 and as President and CEO beginning March 1, 2022. Total direct compensation does not include perquisites and other benefits. |
(2) | Includes the compensation of Mr. Petters, who served as President and CEO for the first two months of 2022 and then as Executive Vice Chairman of the Board for the remainder of 2022. Chart reflects average allocation for the NEOs other than |
Compensation Best Practices
We believe our compensation practices are aligned with and reinforce ourpay-for-performance philosophy and our related executive compensation principles.
What We Do the Following
✓ | Consideration of annual stockholder“say-on-pay” advisory vote on executive compensation. |
✓ | Pay for performance compensation program heavily weighted toward variable, performance-based elements and toward long-term and equity-based elements. |
✓ | Annual assessment of potential risk posed by our compensation programs. |
✓ | Executive compensation “clawback” policy. |
✓ | Targeted external compensation benchmarking. |
✓ | Independent compensation consultant engaged by Compensation Committee. |
✓ | Executive stock ownership guidelines based upon multiple of executive’s base salary. |
✓ | Executive stock holding requirements, which require executives to holdone-half of their equity awards for three additional years after they vest. |
What We Don’t Do the Following
✗ | No employment agreements for executives. |
✗ | Nochange-in-control agreements for executives or related executive taxgross-up benefits. |
✗ | Prohibitions against speculative transactions in our securities, pledging our securities as collateral and hedging transactions involving our securities. |
✗ | No dividends or dividend equivalents paid on restricted performance stock rights during performance period. |
2018 Notice and Proxy Statement 7
8 | Huntington Ingalls Industries, Inc. |
20182023 Proxy Statement Summary
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The Board is asking you to select the frequency of your future advisory votes on the company’s executive compensation on an advisory basis. The Board is recommending a vote in favor of future advisory approvals of executive compensation every year.
RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
|
The Board is asking you to ratify the selection of Deloitte & Touche LLP as our independent auditors for 2018. 2023. Detailed information about this proposal can be found beginning on page 96.
The following table contains summary information with respect to fees billed to us in 20172022 by Deloitte & Touche for professional services.
($ in thousands) | ||||
Fees Billed: | ||||
Audit Fees | 8,989 | |||
Audit-Related Fees | 524 | |||
Tax Fees | 395 | |||
All Other Fees | 2 | |||
Total | 9,910 |
CONSIDER A STOCKHOLDER PROPOSAL
|
You are being asked to consider a stockholder proposal requesting that the Board undertake steps to enable the company’s stockholders to take action by written consentHII disclose on its website an annual report of the stockholders.HII’s direct and indirect lobbying activities and expenditures. Detailed information about this proposal can be found beginning on page 97. The Board is recommending a vote against this proposal.
8 Huntington Ingalls Industries, Inc.
2023 Notice and Proxy Statement | 9 |
General Information About the Annual Meeting and Voting
The Board is providing you with these proxy materials in connection with its solicitation of proxies to be voted at our 2018 Annual Meeting2023 annual meeting of Stockholdersstockholders and at any postponement or adjournment of the annual meeting. In this proxy statement, Huntington Ingalls Industries, Inc. may also be referred to as “we,” “our,” “us,” “HII” or “the company.”
You will be able to attend the annual meeting, as well as vote and submit questions during the meeting, by following the instructions set forth under the headings “Record Date and Voting,” on pages 11 and 12, and “Attending the Annual Meeting,” beginning on page 101, of this proxy statement.
The virtual annual meeting is supported across browsers (MS Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Please note that Internet Explorer is not a supported browser. Participants should ensure that they have a strong internet connection wherever they intend to participate in the meeting. The meeting will begin promptly at 11:00 a.m., Eastern Daylight Time. If you encounter difficulties accessing the virtual meeting, please call the technical support number 1-888-724-2416 or International 1-781-575-2748.
ITEMS OF BUSINESS TO BE CONSIDERED AT THE ANNUAL MEETING
The Board is asking you to vote on the following items at the annual meeting:
• | elect 11 directors; |
• | approve the company’s executive compensation on an advisory basis; |
• | ratify the appointment of Deloitte & Touche LLP as our independent auditors; and |
• | consider a stockholder proposal requesting that HII disclose on its website an annual report of HII’s direct and indirect lobbying activities and expenditures, if properly presented at the annual meeting. |
The Board asks you to appoint Kellye L. WalkerChad N. Boudreaux and Charles R. Monroe, Jr. as your proxy holders to vote your shares at the annual meeting. You make this appointment by submitting your proxy using one of the voting methods described below.
If appointed by you, the proxy holders will vote your shares as you direct on the matters described in this proxy statement. If you received a proxy card and you complete and return the proxy card but do not provide voting directions, they will vote your shares as recommended by the Board on all of the matters described in this proxy statement that are brought beforepresented at the annual meeting.
The Board is not aware of any business that may properly be brought beforepresented at the annual meeting other than those matters described in this proxy statement. If any other matters are properly brought beforepresented at the annual meeting, your proxy gives discretionary authority to the proxy holders to vote the shares in their best judgment.
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
Pursuant to rules adopted by the Securities and Exchange Commission (“SEC”), we are permitted to furnish our proxy materials to our stockholders over the Internet by delivering a Notice of Internet
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General Information About the Annual Meeting and Voting
Availability of Proxy Materials. The Notice of Internet Availability of Proxy Materials instructs you on how to access and review the proxy statement and 20172022 Annual Report over the Internet. The Notice of Internet Availability of Proxy Materials also instructs you on how you may submit your proxy over the Internet. We believe thisThis e-proxy process expedites receipt of proxy materials by stockholders, while also lowering our costs and reducing the environmental impact of our annual meeting. We have used thise-proxy process to furnish proxy materials over the Internet to certain of our stockholders over the Internet.who have so elected.
If you received a Notice of Internet Availability of Proxy Materials in the mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting these materials provided in the Notice of Internet Availability of Proxy Materials.
2018 Notice and Proxy Statement 9
General Information About the Annual Meeting and Voting
Stockholders owning our common stock at the close of business on March 8, 2018,2023, the record date, or their legal proxy holders, are entitled to vote at the annual meeting. The Board strongly encourages you to vote. Your vote is important. Voting early helps ensure we receive a quorum of shares necessary to hold the annual meeting. ManyWhen stockholders do not vote, meaning the stockholders who do vote influence the outcome of the matters on which they vote in greater proportion than their percentage ownership of HII shares.
We have two types of stockholders: stockholders of record and “street name” stockholders. Stockholders of record are stockholders who own their shares in their own names on the company’s books. Street name stockholders are stockholders who own their shares through a bank, broker or other holder of record.
Voting by Stockholders of Record. If you are a stockholder of record, you have four voting options. You may vote:
• | over the Internet atwww.envisionreports.com/HII, the web address included in the Notice of Internet Availability of Proxy Materials and in the proxy card (if you received a proxy card); |
• | by telephone through the number included in the proxy card (if you received a proxy card); |
• | by signing and dating your proxy card (if you received a proxy card) and mailing it in the prepaid and addressed envelope; or |
• | by virtually attending the annual meeting and voting (there is no physical location for the annual meeting). |
If you have Internet access, we encourage you to vote over the Internet. It is convenient and it saves us significant postage and processing costs. In addition, when you vote by proxy over the Internet or by telephone prior to the meeting date, your proxy vote is recorded immediately, and there is noeliminating the risk that postal delays will cause your proxy vote to arrive late and therefore not be counted.
Internet and telephone voting facilities for stockholders of record are available 24 hours a day and will close at 11:59 p.m. Eastern Daylight Time on Tuesday, May 1, 2018.day. The Internet and telephone voting procedures verify you are a stockholder of record by use of a control number and enable you to confirm your voting instructions have been properly recorded. If you vote by Internet or telephone, you do not need to return your proxy card (if you received a proxy card).
You will also be able to attend, participate and vote your shares electronically at the annual meeting online by visiting: https://meetnow.global/MKKD465. If you are a stockholder of record (i.e., you hold your shares through our transfer agent, Computershare), you do not need to register to participate in the annual meeting virtually on the Internet. Please follow the instructions on the notice or proxy card that you received.
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General Information About the Annual Meeting and Voting
Whether or not you plan to attend the virtual annual meeting, and vote in person, we urge you to have your proxy vote recorded in advance of the meeting. If you attend the annual meeting and vote at the annual meeting, any prior proxy votes you submitted, whether by Internet, telephone or mail, will be superseded by the vote you cast at the annual meeting. Because it is not practical for most stockholders to attend the annual meeting, the Board recommends you vote using one of the other voting methods. In any event, the method by which you vote your proxy will not limit your right to vote at the annual meeting if you decide to attend in person.virtually attend.
Revoking Your Proxy for Stockholders of Record. If you are a stockholder of record and you vote by proxy using any method, you may later revoke your proxy later and change your vote at any time before the polls close at the annual meeting. You may do this by:
• | sending a written statement to that effect to Huntington Ingalls Industries, Inc., Attn: Corporate Secretary, 4101 Washington Avenue, Newport News, Virginia 23607, provided we receive your written statement before the annual meeting date; or |
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General Information About the Annual Meeting and Voting
• | voting again over the Internet or by telephone; or |
• | signing and returning another proxy card with a later date, provided we receive the later proxy card before the annual meeting date; or |
• | virtually attending the annual meeting and voting. |
Only the most recent proxy vote will be counted, and all others will be discarded regardless of the method of voting.
Voting by Street Name Stockholders. If your shares are held in “street name” through a broker, bank or other nominee, please refer to the instructions they provide regarding how to vote your shares or to revoke your voting instructions. The availability of telephone and Internet voting depends upon the voting processes of the broker, bank or other nominee.
If you are a street name stockholder, you must register with Computershare no later than 5:00 p.m., Eastern Daylight Time, on April 27, 2023, to participate in the annual meeting. To do so you must submit proof of your proxy power (legal proxy) reflecting your HII share holdings, along with your name and would likeemail address, to Computershare. Requests for registration must be labeled as “Legal Proxy.” You will receive a confirmation of your registration by email after we receive your registration materials. Requests for registration should be directed to us as follows:
By email: Forward the email from your broker, or attach an image of your legal proxy, to
legalproxy@computershare.com
By mail:
Computershare
Huntington Ingalls Industries, Inc. Legal Proxy
P.O. Box 43001
Providence, RI 02940-3001
Whether or not you plan to attend the virtual annual meeting, we urge you to have your proxy vote recorded in personadvance of the meeting. If you attend the annual meeting and vote at the annual meeting, any prior proxy votes you must obtain a proxy, executed in your favor, fromsubmitted, whether by Internet, telephone or mail, will be superseded by the bank, broker or other holder of record through whichvote you hold your shares. Because it is not practical for most stockholders to attendcast at the annual meeting, the Board recommends you vote using one of the other voting methods.meeting. In any event, the method by which you vote your proxy will not limit your right to vote at the annual meeting if you decide to attend in person.virtually attend.
Confidential Voting. We treat your vote as confidential to protect the privacy of our stockholders’stockholder votes. Proxies and voting instructions provided to banks, brokers and other holders of record are kept confidential. Only the proxy solicitor, the proxy tabulator and the inspector of elections have access to the proxies and voting instructions.
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General Information About the Annual Meeting and Voting
QUORUM, VOTE REQUIRED AND METHOD OF COUNTING
At the close of business on the record date, 44,767,11939,925,745 shares of our common stock were outstanding and entitled to vote at the annual meeting. Each outstanding share is entitled to one vote.
A quorum must be present to transact business at the annual meeting. A quorum will be present if a majority of the outstanding shares entitled to vote as of the record date are present, in person or by proxy. If you indicate an abstention as your voting preference on all matters, your shares will be counted toward a quorum but will not be voted on any matter. If you are a street name stockholder and do not vote your shares, your bank, broker or other holder of record may vote your shares on the proposal to ratify the appointment of our independent auditors, which is known as a routine matter. Votes by a bank, broker or other holder of record on any routine matter will count for purposes of determining a quorum. In the absence of a quorum, the chairperson of the meeting may adjourn the meeting, and, at any reconvened meeting following such an adjournment at which a quorum is present, any business may be transacted whichthat might have been transacted at the original meeting.meeting may be transacted.
If you are a street name stockholder and do not vote your shares, your bank, broker or other holder of record can vote your shares in its discretion only on Item 43 described in this proxy statement. If you do not give your bank, broker or other holder of record instructions on how to vote your shares on Items 1, 2 3 and 54 described in this proxy statement, your shares will not be voted on those matters. Such “broker non-votes” will have no impact on the results of the vote on Items 1, 2 and 4.
If you havehold shares inthrough an HII employee benefit plan, you cannot vote your shares directly. Instead, you can provide voting instructions to the plan trustee, who will vote the shares on your behalf. HII employee benefit plans that hold HII shares provide for pass-through voting to plan participants and designate that plan participants are “named fiduciaries” under the Employee Retirement Income Security Act of 1974 (“ERISA”) for purposes of voting their shares and those shares for which plan participants do not provide voting directions. If you are a plan participant and do not vote thoseyour shares, your trustee will vote your shares in accordance with the terms of the relevant plan. Accordingly,As such, your trustee may vote your shares in the same proportion as shares held by the plan for which voting instructions have been received from other participants, which are “named fiduciaries,” unless contrary to ERISA.
2018 Notice and Proxy Statement 11
General Information About the Annual Meeting and Voting
The required vote and method of calculation for the matters to be consideredpresented at the annual meeting are as follows:
Item 1—Proposal to Elect Directors
Directors will be elected by a pluralitymajority of the shares present in person or by proxy at the annual meeting or any adjournment thereof and entitled to vote on the election of directors. Plurality voting means the tenvotes cast—that is, a director nominees receiving the most votes will be elected toif the Board. If you do not want your shares to be voted with respect to a particular director nominee, you may “withhold” your vote with respect to that nominee. If a director nominee receives a greater number of votes “withheld” for his or her election than votes cast “for” his or her election,shares voted in favor of such nomineedirector exceeds the number of shares voted against such director. Abstentions will be required underhave no effect on the majority vote director resignation policy included in our Corporate Governance Guidelines to submit an offerresults of resignation to the Board for its consideration.vote. If you are a street name stockholder and do not vote your shares, your bank, broker or other holder of record cannot vote your shares on this item, and brokernon-votes will have no effect on the outcome of the vote.
Item 2—Proposal to Approve Executive Compensation on an Advisory Basis
The executive compensation of our NEOs will be approved as an advisory recommendation to the Board if the number of shares voted in favor exceeds the number of shares voted against. Abstentions will have no effect on the results of the vote. If you are a street name stockholder and do not vote your shares, your bank, broker or other holder of record cannot vote your shares on this item, and brokernon-votes will have no effect on the outcome of the vote. Although the vote on this item isnon-binding, the Compensation Committee will review the results of the vote, undertake to determine why stockholders voted against the company’s executive compensation and consider itthe reasons in making future decisions concerning executive compensation.
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General Information About the Annual Meeting and Voting
Item 3—Proposal to Select Frequency of Future Advisory Approvals of Executive Compensation on an Advisory Basis
The frequency of future stockholder advisory approvals (every year, every two years, or every three years) receiving the greatest number of votes will be considered the frequency recommended by stockholders. Abstentions will have no effect on the results of the vote. If you are a street name stockholder and do not vote your shares, your bank, broker or other holder of record cannot vote your shares on this item, and brokernon-votes will have no effect on the outcome of the vote. Although the vote on this item isnon-binding, the Board will review the results of the vote and consider the vote in adopting a policy concerning the frequency of such advisory votes in the future.
Item 4—Proposal to Ratify Appointment of Our Independent Auditors
Ratification of the appointment of Deloitte & Touche LLP as our independent auditors will be approved if the number of shares voted in favor exceeds the number of shares voted against. Abstentions will have no effect on the results of the vote. If you are a street name stockholder and do not vote your shares, your bank, broker or other holder of record can vote your shares at its discretion on this item.
Item 5—4—Stockholder Proposal to Enable Stockholders to Take Action by Written ConsentRequesting that HII Disclose on its Website an Annual Report of HII’s Direct and Indirect Lobbying Activities and Expenditures
The stockholder proposal to enable stockholders to take action by written consentrequesting that HII disclose on its website an annual report of HII’s direct and indirect lobbying activities and expenditures will be approved as an advisory recommendation to the Board if the number of shares voted in favor exceeds the number of shares voted against the proposal. Abstentions will have no effect on the results of the vote. If you are a street name stockholder and do not vote your shares, your bank, broker or other holder of record cannot vote your shares on this item, and brokernon-votes will have no effect on the outcome of the vote.
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General Information About the Annual Meeting and Voting
IMPORTANT REMINDER OF EFFECT OF NOT CASTING YOUR VOTE IF YOU ARE A STREET NAME STOCKHOLDER
If you are a street name stockholder, it is critical you vote your shares if you want your vote to count on Items 1, 2 3 and 5.4. Your bank, broker or other holder of record is not permitted to vote your shares on Items 1, 2 3 or 5,and 4, unless you instruct them how you wish to vote. Such “brokernon-votes” will have no impact on the results of the vote on Items 1, 2 3 or 5.and 4.
SOLICITING AND TABULATING VOTES
The Board has made these materials available to you in connection with its solicitation of proxies for use at our annual meeting. We will bear the costs of soliciting and tabulating your votes. OurIn addition to solicitation by mail, our directors, officers and employees may solicit proxies personally, by telephone, by email or otherwise,otherwise. These directors, officers and employees will not receive additional compensation for the solicitation, but may solicit your votes without additional compensation.be reimbursed for out-of-pocket expenses incurred in connection with the solicitation. In addition, we have retained MacKenzie Partners, Inc. to assist in the solicitation of proxies for the 20182023 annual meeting for a fee of $12,500,$15,000, plus associated costs and expenses.
Copies of solicitation materials will be furnished to brokerage firms, fiduciaries and other custodians that hold shares of our common stock of record for beneficial owners, for forwarding to such beneficial owners. We willmay also reimburse banks, brokers and other holders of record for reasonable,out-of-pocket expenses for forwarding these proxy materials to you, according to certain regulatory fee schedules. See “Electronic Access to Proxy Statement and Annual Report” below for information on how you can help reduce printing and mailing costs.
ELECTRONIC ACCESS TO PROXY STATEMENT AND ANNUAL REPORT
You can elect in advance to receive future proxy materials by email. If you choose to receive future proxy materials by email, you will receive an email with instructions containing a link to the website where those materials are available, as well as a link to the proxy voting website.
If you are a stockholder of record, you may enroll in the electronic delivery service by going directly to www.envisionreports.com/HII. You may revoke your electronic delivery election at this sitewebsite at any time and request a paper copy of the proxy statement and annual report.
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General Information About the Annual Meeting and Voting
If you are a street name stockholder, you may also have the opportunitybe able to receive copies of the proxy statement and annual report electronically. Please check the information provided in the proxy materials you received from your bank, broker or other holder of record concerning the availability of this service.
We have adopted a procedure called “householding.” Under this procedure, stockholders of record who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of the Notice of Internet Availability of Proxy Materials or the printed proxy materials, unless we have received contrary instructions from one or bothall of such stockholders. This procedure reduces our printing costs and postage fees and is environmentally friendly.
If you and another stockholder of record with whom you share an address are receiving multiple copies of the Notice of Internet Availability of Proxy Materials or the printed proxy materials, you can request to receive a single copy of the printed proxy materials in the future by calling our transfer agent, Computershare, at1-888-665-9610, or writing to usComputershare at www-us.computershare.com/Investor/ or HII at Investor Relations, 4101 Washington Avenue, Newport News, VA 23607. If you and another stockholder of record with whom you share an address wish to receive a separate Notice of Internet Availability of Proxy Materials or separate printed proxy materials, we will promptly deliver them to you if you request them by contacting Computershare by phone or Investor Relations in writing in the same manner as described above.
2018 Notice and Proxy Statement 13
General Information About the Annual Meeting and Voting
Stockholders who participate in householding and who receive printed proxy materials will continue to receive separate proxy cards. If you are a street name stockholder, you can request householding by contacting your bank, broker or other holder of record through which you hold your shares.
2023 Notice and Proxy Statement | 15 |
14 Huntington Ingalls Industries, Inc.
OVERVIEW OF CORPORATE GOVERNANCE
Corporate governance addresses the relationships among the Board, company management and the company’s stockholders, with the objectives of promoting the company’s long-term success, improving corporate performance, strengthening Board and management accountability and promoting the long-term interests of our stockholders. The Board and senior management are committed to high standards of corporate governance.governance best practices. We believe those high standardsgovernance best practices are important not only to our stockholders, but also to our customers, employees, suppliers and other stakeholders.stakeholders as well.
The following sections provide an overview of our corporate governance model and practices. Among other topics, we describe the responsibilities of the Board, how directors are selected and certain keyimportant aspects of Board operations.
RESPONSIBILITIES OF THE BOARD OF DIRECTORS
We believe the foundation for goodof sound corporate governance starts withis a board of directors whose independence, skills, experience and judgment will enable the board to effectively oversee management of the company and to provide constructive advice and counsel to management. TheIn addition to its general oversight of management, the Board and its committees perform a number of important functions for the company and its stockholders, including:
• | evaluating, approving and overseeing the company’s strategic plan developed by management; |
• | reviewing and approving operating, financial and other corporate plans; |
• | understanding and assessing the significant enterprise risks to which the company is subject and overseeing management of those enterprise risks; |
• | selecting our chief executive officer and evaluating the performance of the chief executive officer and other executive officers; |
• | overseeing succession plans for our CEO and other senior executives; |
• | monitoring and evaluating the performance of the company and management; |
• | evaluating and approving significant corporate transactions and commitments not entered into in the ordinary course; |
• | overseeing processes that protect the integrity of the company, including the integrity of the company’s financial statements, and compliance with legal requirements and the company’s ethics and business conduct standards; |
• | providing advice and counsel to management; and |
• | evaluating the effectiveness of the Board and its committees. |
The Board’s oversight role is also effected through the Board’s fourfive standing committees—the Audit Committee, the Compensation Committee, the Cybersecurity Committee, the Governance and Policy Committee and the Finance Committee. Each of these committees operates under a separate written charter to promote clarity in their responsibilities and to ensure the committees function in coordination with each other and with the full Board. Our committees are discussed in greater detail beginning on page 21 of this proxy statement.
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Governance of the Company
CRITERIA FOR BOARD MEMBERSHIP
The Board believes all director candidates must possess certain basicfundamental qualifications and that specialized skills and experiencesexperience should be contributed to the Board by individual directors. The
2018 Notice and Proxy Statement 15
Board and the Governance and Policy Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board’s collective skills and experiencesexperience measured against the current and future needs of the Board.
Qualifications for All Directors. The Board believes all its members must possess the following basicfundamental qualifications:
• | high personal and professional integrity and ethical standards; |
• | significant educational, business, military or professional achievements in leading organizations; |
• | ability to represent the best interests of all stockholders; and |
• | demonstrated leadership ability and sound judgment. |
Prospective directors must also be willing to submit to a background check necessary for obtaining a security clearance.
Selection of Individual Candidates. In addition to the qualifications applicable to all director candidates, the Board and the Governance and Policy Committee consider, among other matters, a candidate’s knowledge ofexperience and experienceskills in such areas as:
• | executive leadership and strategy |
• | investment strategy, corporate development and mergers and acquisitions |
• | corporate governance |
• | advanced technology and innovation |
• | executive finance and accounting |
• | human resources and labor relations |
• | compliance, legal and regulatory |
• | shipbuilding and manufacturing operations |
• | nuclear |
• | military and government relations |
We
• | cyber and IT risk management |
• | technical services executive leadership |
• | aerospace and defense industries |
The Board also considerconsiders whether a candidate can commit sufficient time and attention to Board activities, andas well as any potential conflicts with the company’s interests. Our objective is to havefor the
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Governance of the Company
collective skills, experiences, attributes and perspectives thatof Board members to create an outstanding, dynamic and effective Board and strengthen the Board’s ability to oversee the company’s business, enhance its performance and represent the long-term interests of stockholders. All of ournon-employee directors are expected to serve on Board committees, supporting the Board’s mission by providing expertise to those committees, and the needsoversight responsibilities of those committees are considered when evaluating director candidates. The Board and the Governance and Policy Committee also consider other attributes, including diversity factors, when selecting director nominees, seeking representation of a range of experiences, backgrounds and perspectives.
Service on Other Boards. In accordance with our Corporate Governance Guidelines, the Board considers the number of boards of other public companies and audit committees of those boardsother public companies on which a director candidate serves. Under our Corporate Governance Guidelines, directors should not
16 Huntington Ingalls Industries, Inc.
serve on more than four boards of publicly-tradedpublicly traded companies, in addition toincluding our Board, and our directors who also serve as chief executive officers or in equivalent positions of other companies should not serve on more than twoone other boardsboard of publicly-traded companies,a publicly traded company, in each case without the approval of the chairmanChairman of our Governance and Policy Committee.the Board. A director who is a full-time employee of our company may not serve on the board of directors of more than two other publicly-tradedpublicly traded companies, unless approved by the Board. No member of our Audit Committee may serve on the audit committees of more than three publicly-tradedpublicly traded companies (including our company) without the approval of the Board, which must determine annually that such simultaneous service would not impair the ability of the member to effectively serve on our Audit Committee.
Retirement Policy. Under the retirement policy of our Corporate Governance Guidelines, a director will not bere-nominated at the annual meeting following the earlier of his or her 76th birthday or 15 years of service on the Board. Upon the recommendation of the Governance and Policy Committee, the Board may waive either of these requirements as to any director, if the Board deems a waiver to be in the best interests of the company. Stephen R. Wilson, the current Chairman of our Audit Committee, has turned 76 since our last annual meeting of stockholders and is therefore not standing for election at the 2023 annual meeting of stockholders.
In addition to our retirement policy, when a director’s principal occupation or business association changes substantially during his or her tenure as a director, the Board expects the affected director willto tender his or her resignation for consideration by the Governance and Policy Committee and the Board, as provided in our Corporate Governance Guidelines.
Conclusion.Conclusion. Satisfaction of the foregoing criteria for Board membership is implemented and assessedmonitored through a continuous consideration of director succession process administered by the Governance and Policy Committee and the Board, as well as through the Board’s self-evaluation process. The Board and the Governance and Policy Committee believe that, individually and collectively, the company’s current directors possess the necessary qualifications, skills, experience and attributes to provide effective oversight of the company’sHII’s business and contribute constructive advice and counsel to the company’s management.
The Governance and Policy Committee is responsible under its charter for recommending director nominees to the full Board director nominees for election by our stockholders and for identifying and recommending candidates to fill any vacancies that may occur on the Board. The Governance and Policy Committee may use a variety of sources to identify candidates. Candidates may be identified throughcandidates, including recommendations from independent directors or members of management, search firms, discussionscommunications with other persons who may know of suitable candidates to serve on the Board and stockholder recommendations.
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Governance of the Company
Evaluations of director candidates who would be new to the Board (other than nominees recommended by our stockholders, as described below) include considerationevaluations of the candidate’s background and qualifications by the Governance and Policy Committee, interviews with the Chairman of the Board, members of the Governance and Policy Committee and one or more other members of the Board members who so desire, to interview a candidate, and deliberations of the Governance and Policy Committee and the full Board. The Governance and Policy Committee then recommends the candidate(s) to the full Board, with the full Board selecting the candidate(s) to be nominated for election by our stockholders or to be elected by the Board to fill a vacancy.
In connection with its recommendations of director nominees to the Board of director nominees for election at each annual meeting, the Governance and Policy Committee considers the size of the Board and the criteria set forth above to recommend nominees who, individually and as a group and collectively with directors who will continueother director nominees, the committee believes comprise the skills, experience and qualifications the Board needs to serve onachieve its mission. Accordingly, in connection with the Board,annual meeting director nomination process, the Governance and Policy Committee believes satisfy the qualifications the Board needs. Accordingly, the Governance and Policy Committee annually reviews the composition of the Board as a whole and makes recommendations if necessary, to improve the Board to achieve what it believes is the optimal mix of experience, expertise, skills, specialized knowledge, diversity and other factors.
2018 Notice and Proxy Statement 17
Stockholders who wish to recommend director candidates for consideration by the Governance and Policy Committee must submit the name and relevant information about the candidate in writing to the Corporate Secretary. All director candidates recommended by stockholders are required to meet the criteria for directors described above, and candidates who meet thesuch criteria described above will be evaluated by the Governance and Policy Committee. In accordance with our Corporate Governance Guidelines, the Governance and Policy Committee will evaluate director candidates recommended by stockholders in the same manner as candidates identified through other means.
Stockholders who wish to nominate a person for election as a director at an annual meeting must follow the procedures set forth in our bylaws, andas described beginning on page 2630 of this proxy statement. Additionally, our bylaws include a proxy access right, which enables a stockholder or a group of up to 20 stockholders owning continuously for at least three years an amount of shares that constitutes 3% or more of our outstanding common stock as of the date of nomination to nominate and include in our proxy materials director candidates constituting up to the greater of 25% of the number of directors then in office or two directors, subject to the requirements specified in our bylaws. Stockholders who wish to nominate director candidates for inclusion in our proxy materials under our proxy access bylaw provisions must satisfy the requirements in our bylaws, as described under the heading “Communications and Company Documents—Future Stockholder Proposals and Nominations of Directors” of this proxy statement. The Board expects to evaluate any director candidates nominated through the proxy access process in athe same manner similar to that foras other director candidates.candidates are evaluated.
MAJORITY VOTE DIRECTOR RESIGNATION POLICY
Our Corporate Governance Guidelines include a majority vote director resignation policy. Under such policy, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election (a “Majority Withhold Vote”) in an uncontested election of directors must tender to the Board his or her offer of resignation within five days following certification of the stockholder vote. The Governance and Policy Committee will promptly consider the resignation offer and make a recommendation to the Board to accept or reject the tendered offer of resignation. The Board will act on the Governance and Policy Committee’s recommendation within 90 days following certification of the stockholder vote. The Board will then promptly disclose its decision to accept or reject the director’s resignation offer, including its rationale, in a report furnished to or filed with the SEC.
The Governance and Policy Committee in making its recommendation, and the Board in making its decision, will consider the best interests of the company and our stockholders and may consider any other factors or other information that it considers appropriate and relevant, including but not limited to:
Any director who tenders his or her offer of resignation under our majority vote director resignation policy will not participate in the Governance and Policy Committee deliberation or recommendation or
18 Huntington Ingalls Industries, Inc.
Board deliberation or action to accept or reject the resignation offer. If a majority of the Governance and Policy Committee received a Majority Withhold Vote at the same election, then the independent directors (other than those who received a Majority Withhold Vote in that election) will instead appoint a committee among themselves to consider the resignation offers and recommend to the Board whether to accept them. If, however, the independent directors who did not receive a Majority Withhold Vote constitute two or fewer directors, all independent directors may participate in the action to accept or reject the resignation offers, except that each director who has tendered his or her offer of resignation will recuse himself or herself from the deliberations and voting with respect to his or her individual offer to resign.
If a director’s resignation offer is not accepted by the Board, that director will continue to serve for the term for which he or she was elected and until his or her successor is duly elected, or his or her earlier resignation or removal. If a director’s resignation offer is accepted by the Board, then the Board, in its sole discretion in accordance with our bylaws, may fill any resulting vacancy or may decrease the size of the Board.
STOCKHOLDERS RIGHT TO NOMINATE PROXY ACCESS NOMINEES
Our bylaws provide our stockholders proxy access rights. Under Section 2.15 of our bylaws, we are required to include in our proxy materials for an annual meeting any stockholder nominee who is nominated by an “Eligible Stockholder.” An “Eligible Stockholder” is any stockholder or group of up to 20 stockholders that has beneficially owned continuously for at least three years an amount of shares that constitutes 3% or more of our outstanding common stock as of the date of nomination. Eligible Stockholders must provide proof of ownership of the requisite amount of stock for the three-year time period and represent that the shares were acquired in the ordinary course of business and not to change or influence control of the company. Eligible Stockholders must also provide certain other written representations, warranties and agreements to the company, including an agreement to assume liability from any legal or regulatory violation arising out of the Eligible Stockholder’s communication with our stockholders and to comply with all applicable laws and regulations, as described in more detail in Section 2.15 of the bylaws.
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Governance of the Company
The maximum number of directors who can be nominated by Eligible Stockholders, referred to as “Stockholder Nominees,” at any annual meeting is the greater of 25% of the number of directors then in office or two directors. Section 2.15 of our bylaws includes procedures to prioritize nominations if the number of Stockholder Nominees exceeds the maximum number of Stockholder Nominees we are required to include in our proxy materials for any annual meeting. Stockholder Nominees must provide written notice to the company, which must include specific information, including information similar to the information required from stockholders to propose business and director nominations through the advance notice provisions included in Section 2.08 of our bylaws. As described in Section 2.15 of our bylaws, this notice must include an express consent to be named as a director nominee in our proxy materials and to serve as a director if elected, as well as required disclosures and information about, and representations, undertakings and consents by, the Stockholder Nominee to enable the Board to determine whether the Stockholder Nominee meets the independence and other general requirements for directors set forth in our bylaws and corporate governance guidelines.our Corporate Governance Guidelines.
Stockholders who would like to nominate candidates using proxy access should refer to Section 2.15 of our bylaws, which sets forth all the requirements for proxy access nominations. The Board may exclude any Stockholder Nominee from our proxy materials if the Stockholder Nominee or Eligible Stockholder(s) fail to meet the requirements or provide the undertakings set forth in our bylaws or corporate governance guidelinesCorporate Governance Guidelines and for other reasons set forth in our bylaws. See “Communications and Company Documents—Future Stockholder Proposals and Nominations of Directors.”
2018 Notice and Proxy Statement 19
The Board makes determinations regarding the independence of our directors on an annual basis, based upon the Governance and Policy Committee’s evaluation of director independence and related recommendations to the Board. Under our Corporate Governance Guidelines, to be considered independent: (i) a director must be independent as determined under Section 303(A).02(b) ofin accordance with the NYSE Listed Company Manual and (ii) in the Board’s judgment, the director must not have a material relationship with the company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company).
The Board has considered relevant relationships between the company and eachnon-employee director to determine compliance with NYSEthe independence requirements.requirements included in our Corporate Governance Guidelines. Based upon its review, the Board has determined that General Collins, Mr. Bilden, Gen. Collins, ADMDenault, Admiral Donald, ADM Fargo, Ms. Harker, Mr. Jimenez, Ms. Kelly, Ms. McKibben, Ms. O’Sullivan, Mr. Schievelbein, Mr. Welch and Mr. Wilson, who currently comprise the Board’snon-employee directors, are independent. The Board has also determined that each current member of the Audit Committee satisfies the additional SEC independence requirements of the SECapplicable to audit committee members, and that each current member of the Compensation Committee satisfies the enhanced independence requirements of the NYSE listing standards.
The Board also considered in 2017 relevant relationships between the company and ADM Paul D. Miller, who retired from the Board effective May 3, 2017. Based upon its review, the Board determined that ADM Miller was independent for purposes of serving on the Board and that ADM Miller satisfied the additional independence requirements for Compensation Committee members.
The Board understands thatbelieves one of its primary responsibilities is to evaluate and determine the optimal leadership structure for the Board from time to time the optimal Board leadership structure to facilitateprovide effective oversight of the company. Our bylaws establish the position of Chairman of the Board and ourdirect that the Board will designate the Chairman. Our Corporate Governance Guidelines stateprovide further that the Board believes it is in the best interests of the company and its stockholders for the Board to have the flexibility to determine the best director to serve as Chairman. The independent directors consider this matter onaddress the Chairman role at least an annual basis. This consideration includesannually, comparing the advantages and disadvantages of a combined chairman and chief executive officer role and separate chairman and chief executive officer roles in the context of our operating and governance environment over time, with the goal of achieving the optimal model for the Board’s effective oversighttime.
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Governance of the company’s affairs.Company
Non-Executive Chairman. The Board has considered the Board leadership matter and determined an independent,non-executive chairman is the optimal model for the companyHII at this time. This structureA non-executive chairman provides the Board with independent leadership and allowsfacilitates the chief executive officer toofficer’s focus on the company’s business operations. The independent directors appointed ADM FargoBoard elected Admiral Donald as ournon-executive Chairman of the Board at the time the company was spun off in 2011,April 2020, and he has served as Chairmancontinued to elect him on annual basis since that time.
Ournon-executive Chairman has the following responsibilities under our Corporate Governance Guidelines:
• | chair all Board and stockholder meetings, including executive sessions of the independent directors; |
• | serve as a liaison between the chief executive officer and the independent directors; |
• | ensure the quality, quantity and timeliness of the flow of information from management to the Board (although management is responsible for the preparation of materials for the Board, the non-executive Chairman may specifically request the inclusion of certain materials); |
20 Huntington Ingalls Industries, Inc.
• | prepare the agendas of the Board meetings and assist the chairperson of each standing committee with preparation of agendas for the respective committee meetings, taking into account the requests of other Board and committee members; |
• | set an appropriate schedule for Board meetings to assure there is sufficient time for discussion of all agenda items; |
• | along with the chairman of the Governance and Policy Committee, interview all Board candidates and make recommendations to the Governance and Policy Committee and the Board; |
• | have the authority to call meetings of the Board and meetings of the independent directors; and |
• | if requested by the chief executive officer, be available for consultation and direct communication with stockholders. |
Conclusion.Conclusion. All of our directors play an active role in overseeing the company’s businessHII at both the Board and committee levels. The Board is currently comprised of 11 independent directors and onenon-independent director, who serves as our Chief Executive Officer and nine independent directors.Officer. Our independent directors are skilled and experienced leaders in business, industry, the military and the military.government. Our independent directors are effective in collaboratingeffectively collaborate with management and thoroughly consideringevaluate management proposals, made by management, and an independent Board leader supportsfacilitates this relationship. We therefore believe anon-executive Chairman of the Board, along with eight10 other strong independent directors, is an appropriate and effective structuremodel at this time to oversee the company’s affairsmanagement of HII and to provide advice and counsel to the Chief Executive Officer and other seniorexecutive management of the company.
BOARD COMMITTEE FUNCTIONS AND MEMBERSHIP
The Board has fourfive standing committees: Audit, Compensation, Cybersecurity, Governance and Policy and Finance. Each of the Audit, Compensation and Governance and Policy Committees is constituted and operated in accordance with SEC requirements and the NYSE’s corporate governance listing standards;standards. The Cybersecurity Committee and Finance Committee are not required by the Finance Company isSEC or the NYSE listing standards and are therefore not subject to any such requirements or standards. Each Board committee is governed by a written charter, which sets forth the responsibilities of the committee, including the responsibilities described in this section. Each charter can be viewed on our website at www.huntingtoningalls.com www.hii.com and is available in print to any stockholder requesting a copy. All members of each Board committee are independent, as determined under the corporate governance listing standards of the NYSE.
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Governance of the Company
Audit Committee. The Audit Committee’s responsibilities include meeting periodically with management and with each of our independent auditor and our Vice President of Internal Audit to review audit results and the adequacy of and compliance with our system of internal controls. In addition, the Audit Committee appoints and discharges our independent auditor, evaluates proposed audit and permissiblenon-audit services from the independent auditor for their impact on the independence of the auditor and, if appropriate, approves such services.include:
• | Overseeing HII’s relationship with its independent auditor, including (i) reviewing and pre-approving each service and related fees considered to be auditing services and non-prohibited non-audit services and (ii) meeting with the independent auditor to review, among other things, all critical accounting policies, all material alternative accounting treatments discussed with management, and all material written communications with management |
• | Overseeing our internal audit function |
• | Overseeing financial statement and disclosure matters, including meeting with management, the internal auditors and the independent auditor to review and discuss the content of our periodic reports, including financial information, and management’s assessment of internal control over financial reporting |
• | Reviewing and overseeing HII’s policies and practices relating to corporate sustainability matters relative to environmental stewardship |
• | Overseeing other matters, including our major financial risk exposures and our compliance program |
The current members of the Audit Committee are Mr. Wilson (chair)(chairman), Gen.General Collins, Mr. Denault, Mr. Schievelbein and Mr. Welch. Mr. Wilson will be retiring from the Board effective upon the election of directors at the 2023 annual meeting. Mr. Denault was appointed to the Audit Committee in December 2022 upon his election to the Board. The Board has determined, in accordance with NYSE requirements, that each member of the Audit Committee is financially literate and that Mr.each of Messrs. Wilson and Denault possesses accounting or related financial management expertise. The Board has also determined that Mr.each of Messrs. Wilson and Denault qualifies as an “audit committee financial expert,” as defined under applicable SEC rules.
Compensation Committee. The Compensation Committee’s responsibilities include:
• | Establishing annual and long-term performance goals and objectives for the Chief Executive Officer and all other elected officers, and evaluating those officers against their goals and objectives |
• | Reviewing, approving and submitting for ratification by the independent members of the Board the Chief Executive Officer’s compensation |
• | Reviewing and approving the direct and indirect compensation of all other elected officers |
• | Reviewing and recommending to the Board matters concerning compensation of Board members |
• | Reviewing the succession of qualified executive management |
• | Identifying, in consultation with management, the appropriate peer group for competitive comparisons and relative position of pay levels versus peers |
• | Overseeing our policy regarding the recovery of performance-based short- or long-term cash or equity incentive compensation payments in certain circumstances |
• | Reviewing and overseeing HII’s policies and practices relating to its human capital management function |
Delegation: The Compensation Committee oversees alldoes not delegate its responsibilities with respect to compensation that is specific to the executive officers. For other employees and benefit programs and makesfor broad-based compensation decisions that affect our elected officers. Theplans, the Compensation Committee also provides strategic direction for our overall compensation structure, policies and programs and reviews senior management succession plans. Themay delegate authority to a subcommittee consisting of not less than two members of the Compensation Committee considers and makes recommendations to the Board regarding the compensation of directors.Committee.
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2018 Notice and Proxy Statement 21
The current members of the Compensation Committee are Ms. Harker (chair)(chairwoman), Mr. Bilden, ADM DonaldJimenez and Ms. Kelly. Ms. Kelly and Mr.Philip M. Bilden were appointed towas a member of the Compensation Committee until he resigned from the Board in May 2017 and November 2017, respectively.July 2022. The Board has determined that each member of the Compensation Committee qualifies as anon-employee director under SEC Rule16b-3 and as an outside director for purposes of Section 162(m) (“Section 162(m)”)16b-3.
Cybersecurity Committee. The Cybersecurity Committee’s responsibilities include:
• | Reviewing the company’s enterprise cybersecurity strategy and framework, including the company’s assessment of cybersecurity threats and risk, data security programs and the company’s management and mitigation of cybersecurity and information technology risks and potential breach incidents |
• | Reviewing any significant cybersecurity incident that has occurred, reports to or from regulators with respect thereto and steps that have been taken to mitigate against reoccurrence |
• | Evaluating the effectiveness of the company’s cyber risk management and data security programs measured against the company’s cybersecurity threat landscape |
• | Assessing the effectiveness of the company’s data breach incident response plan |
• | Reviewing and assessing the company’s information technology disaster recovery capabilities |
• | Reviewing the company’s assessment of cybersecurity threats and risk associated with the company’s supply chain and actions the company is taking to address such threats and risks |
The current members of the Internal Revenue Code of 1986 (“IRC”). None of our executive officers served as a memberCybersecurity Committee are Ms. O’Sullivan (chairwoman), General Collins, Admiral Donald and Mr. Wilson. Mr. Bilden was the Chairman of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of ourCybersecurity Committee until he resigned from the Board or our Compensation Committee. Accordingly, no interlocks with other companies, within the meaning of the SEC’s proxy rules, existed during 2017.in July 2022.
Governance and Policy Committee. The Governance and Policy Committee is responsible for developing and recommending to the Board criteria for Board membership; identifying, and reviewing the qualifications of, director candidates; and assessing the contributions and independence of incumbent directors in determining whether to recommend them for reelection to the Board. Committee’s responsibilities include:
• | Identifying candidates qualified to serve on the Board and recommending nominees for election to the Board |
• | Identifying and recommending committee member appointments to the Board |
• | Reviewing stockholder proposals and recommending any Board responses |
• | Reviewing and overseeing HII’s policies and practices with respect to significant public policy and corporate citizenship and responsibility matters |
• | Reviewing and overseeing HII’s policies and practices relating to significant corporate sustainability matters other than human capital matters and energy management matters |
• | Overseeing the company’s policies and procedures for related party transactions and reviewing and overseeing related party transactions for potential conflicts of interest |
• | Overseeing the evaluation of the Board |
• | Generally monitoring the Board’s oversight of risk management |
The Governance and Policy Committee also considers and makes recommendations to the Board regarding transactions with related persons and corporate governance matters generally and oversees the evaluation of the Board. Thecurrent members of the Governance and Policy Committee are Ms.Mr. Welch (chairman), Mr. Jimenez and Mses. Kelly (chair), Gen. Collins, ADM Fargo and Mr. Welch.McKibben.
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Governance of the Company
Finance Committee. The Finance Committee oversees and reviews our financial affairs, strategies and policies. Committee’s responsibilities include:
• | Overseeing and reviewing our financial affairs, strategies and policies |
• | Reviewing and making recommendations to the Board regarding: |
• | our financial policies and strategies, capital structure and financial condition |
• | our issuances of debt and equity securities and significant borrowing transactions |
• | strategic transactions |
• | employee benefit plan assets |
• | our dividend policy and stock repurchase programs |
• | significant capital expenditures |
• | Providing oversight to ensure that our financial policies and strategies are consistent with our capital budget, annual operating plan and strategic plan |
• | Overseeing discrete operational matters that could have a significant impact on the company |
The Finance Committee is responsible for reviewing and making recommendations to the Board regarding: our financial policies and strategies, capital structure and financial condition, our issuances of debt and equity securities and significant borrowing transactions, strategic transactions, our dividend policy and stock repurchase programs and significant capital expenditures. The Finance Committee also provides oversight to ensure that our financial policies and strategies are consistent with our capital budget, annual operating plan and strategic plan. Thecurrent members of the Finance Committee are Mr. Schievelbein (chair)(chairman), Mr. Bilden, ADMDenault, Admiral Donald and Ms. Harker.Mses. Harker, McKibben and O’Sullivan. Mr. BildenDenault was appointed to the Finance Committee in November 2017.
We amended our certificate of incorporation in 2015December 2022 upon his election to phase out the classificationBoard. Mr. Bilden was a member of the Finance Committee until he resigned from the Board beginning within July 2022.
BOARD STRUCTURE
HII directors serve one-year terms. Accordingly, the terms of the 11 directors nominated to stand for election at our 2023 annual meeting held in 2016 and ending with ourwill expire at the 2024 annual meeting held in 2018. With thephase-outof the Board classification complete, all ten of our directors will be voted upon at our 2018 annual meeting to serveone-year terms.stockholders.
EXECUTIVE SESSIONS OFNON-EMPLOYEE DIRECTORS
In accordance with our Corporate Governance Guidelines, our directors, with no members of management present (including directors who are also officers of the company), have the opportunity to meet in executive session at each regularly scheduled Board meeting. In addition, our Corporate Governance Guidelines provide that at least one executive session of independent directors will be held each year. In 2017,2022, all of our directors, other than our Chief Executive Officer and the Executive Vice Chairman of the Board, were independent under NYSE corporate governance listing standards. The independent directors met in executive session at each of theall six regular Board meetings during the year. TheOur non-executive Chairman, presidesAdmiral Donald, presided over the executive sessions.
The Audit Committee routinely meets at each of its regular meetings in separate executive sessions with management, with our independent auditor, with our Vice President of Internal Audit and with only committee members only.present. The Compensation Committee, the Cybersecurity Committee, the Governance and Policy Committee and the Finance Committee also meet in executive session on a routine basis, with only members of the committee and other attending Board members present.
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THE BOARD’S ROLE IN RISK OVERSIGHT
The Board’s responsibilities include oversight of risk management, which includes overseeing our system of financial and operational internal controls, our compliance with applicable laws and regulations, data and cyber securitycybersecurity risks and our processes for identifying, assessing and mitigating
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Governance of the Company
other significant risks that may affect the company. The full Board oversees our enterprise risk associated with data and cyber security, and the Governance and Policy Committee oversees the internal governance of data and cyber security.
HII. To discharge its risk oversightthese responsibilities, the Board must understand the significant risks to which the company is subject. RisksWhile risks are an inherent in virtually everyelement of business decision,operations and our business strategy creates risks. Therisk, the Board understands it is neither possible nor prudent to eliminate all risk. Indeed, purposeful, appropriate and managed risk-taking is essential for the companyHII to be competitive and profitable and successfully execute its business strategy. The Board’s objective in overseeing risk management oversight objective is to satisfy itself thatconfirm management is identifying and appropriately assessingmanaging and mitigating our significant risks.
Management has implemented a robust enterprise risk management (“ERM”) program, which includes annual risk assessments, risk analyses, the development of risk plans for each enterprise risks,risk, which include risk mitigation activities, risk monitoring of enterprisefor both existing and emerging risks, and routineperiodic reports on individual enterprise risks and ERM program activities to seniorexecutive management and the Board. Our ERM process is managed by an Enterprise Risk Committee, comprised of management from across business units and programmatic and functional disciplines within the company. The Enterprise Risk Committee is responsible for developingoverseeing the enterprise risk assessments, developingassessment process, overseeing development of, and monitoring, enterprise risk mitigation plans, for our enterprise risks,assessing risk correlations, monitoring emerging and evolving risks and generating data and reports to facilitate management decision makingdecision-making and the Board’s risk oversight function. While the Board and its committees oversee risk management, management is responsible for identifying, assessing, managing and mitigating risks.
The Board and its committees are responsible for understanding and evaluating the company’sHII’s ERM processes and determiningto determine whether they are achieving their objectives. Management briefs the Board on an annual basis on the company’s overall ERM program, which includes a report on the results of the company’s annual enterprise risk assessment process, a review of the company’s latest roster of enterprise risks and assessments of the probabilities of such risks occurring and their potential severity, andas well as assessments of management’s capability of mitigating individual enterprise risks. Management also briefs the Board or a Board committee on a periodic basis on individual significant individual risks, which includes a report on the risk byfrom management’s risk owner and the related risk mitigation plan. Management seeks to brief the Board on each Tier 1 enterprise risk on an annual basis, except those Tier 1 risks that are relatively static (like the risk of hurricane impact and recovery), which are briefed on a biennial basis. The Board is updated on an interim basis on any changes to the company’sHII’s enterprise risk roster and any other material developments affecting the company’s ERM program.
The Governance and Policy Committee is responsible under its charter for developing and recommending to the full Board a methodologyregimen for the Board’s oversight of risk management and for monitoring the Board’s oversight of risk management. In connection with this responsibility, the Governance and Policy Committee evaluates the enterprise risk roster developed by company management,generated from the company’s enterprise risk assessment, allocates oversight responsibilities among the full Board and individual standing Board committees and develops a risk briefing schedule based upon management’s relative prioritization of enterprise risks.
OversightRisks are inherent in the company’s operations and pursuit of its strategy, and oversight of risk management is a continuous process and inherent in the company’s strategic decisions.process. The Board and its committees facilitate open communication between management and the directors and foster an appropriate culture of integrity and risk awareness. The Board and its committees engage in communications throughout the year with management regarding enterprise risk, assessment and risk management, and directors are encouraged to and do communicate directly with senior management.
2018 Notice and Proxy Statement 23
management, which they do on a routine basis.
While the full Board has ultimate responsibility for the oversight of risk management, Board committees oversee certain individual enterprise risks relating to matters within the scopes of their respective responsibilities and report to the full Board with respect to this oversight. All five standing Board
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Governance of the Company
committees playalso oversee specific enterprise risks for which they have been assigned oversight responsibility. Board oversight of certain significant rolesrisks arising from the business and activities of HII is allocated generally among the Board and its committees as follows:
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Governance of the Company
BOARD AND COMMITTEE OVERSIGHT OF CYBERSECURITY
In December 2019, in the risk management oversight function.
The Audit Committee oversees risks relatingresponse to the company’s financial statements,increasing risk exposure presented by data and cybersecurity, the financial reporting processBoard formed a standing Cybersecurity Committee of the Board. The Board believes that dedication of a standing committee to cybersecurity facilitates a deeper Board understanding of HII’s data and accountingcybersecurity risk exposure; the opportunity for committee members to have a deeper data and legal matters. The Audit Committee also oversees the internalcybersecurity knowledge base; and external audit functionscloser Board oversight of HII’s management and compliance with our Codemitigation of Ethicsdata and Business Conduct. The Audit Committee meets in executive sessions with our Vice President of Internal Audit and with representatives of our independent auditing firm to discuss our significant financial exposures and management’s processes for monitoring and managing such exposures.
The Compensation Committee evaluates the risks associated with our compensation principles and practices. As discussed in more detail under Compensation Discussion and Analysis beginning on page 38 of this proxy statement, the Compensation Committee evaluates and approves compensation programs designed to discourage inappropriate risk taking without diminishing the incentive elements of our compensation programs. The Compensation Committee also considers management’s processes for identifying and mitigating potential compensationcybersecurity risks. In addition to the Compensationoversight responsibilities set forth in the table above, the Cybersecurity Committee oversees our seniorparticipates with management succession planning process.at least annually in a “tabletop” exercise to test HII’s cybersecurity incident response plan. The committee also meets jointly twice a year with management’s Executive Cybersecurity and IT Steering Committee.
BOARD AND COMMITTEE OVERSIGHT OF SUSTAINABILITY
In connection with HII’s appointment of a Chief Sustainability Officer and formalization of its sustainability program in 2022, the Board refined its oversight of the company’s sustainability program. The Board allocated oversight responsibility among the Board and several committees for each of HII’s nine sustainability focus areas identified through a materiality assessment. The Governance and Policy Committee monitors potential risks toretains general oversight responsibility for the effectivenessoverall sustainability program, as well as four focus areas: ethical conduct, community relations, employee health and safety and environmental compliance. The Compensation Committee has general oversight responsibility for human capital resources, including the specific sustainability focus areas of the Board,diversity and inclusion, and employee engagement. The Audit Committee has oversight responsibility for energy management, including director succession and committee composition,greenhouse gas emissions, and the principal policies that guide the company’s governance. The Governance and Policy Committee also considers risks relating to the company’s policies and practices with respect to significant public policy and corporate responsibility matters.
The Finance Committee oversees management of risks associated with proposed strategic transactions. The Finance Committee also monitors our financial policies and strategies to ensure their consistency with our capital budget, annual operating plan and strategic plan. In addition, the FinanceCybersecurity Committee is responsible for monitoringoverseeing cybersecurity. The full Board retains oversight responsibility for product safety and overseeingquality and supply chain management, of risks relating to our capital structure and financial condition, securities issuances, significant borrowing transactions and significant capital expenditures.which the Board already oversees as enterprise risks.
BOARD AND COMMITTEE EVALUATIONS
In accordance with our Corporate Governance Guidelines, the Board (under the oversight of the Governance and Policy Committee) conducts an annual assessmentevaluation of the performance of the full Board and delegates to the chairpersons of the individual Board committees the responsibility to conduct evaluations of the performance of the respective committees. The Board evaluation results are reviewedand committees utilize a mix of self-evaluation processes from year to year, ranging from written narrative responses to written questions regarding Board and committee matters to individual interviews with directors conducted by the Chairman of the Board and the respective committee evaluation resultschairpersons to director assessments of their fellow Board members. In 2022, the Board engaged a third party to conduct a Board peer assessment whereby each member of the Board assessed on a confidential basis each of his or her Board peers. The peer assessments were shared with the Board Chairman and HII’s Chief Executive Officer, and the Chairman engaged with each Board member individually regarding his or her assessment results.
DIRECTOR EDUCATION
Our Corporate Governance Guidelines provide that all directors are reviewedencouraged to periodically attend director continuing education programs, and the Board has adopted an informal policy encouraging each director to attend at least one external director education program on a biennial basis. We make available to the Board a roster of continuing director education programs offered by leading director education organizations, facilitate registrations for directors to attend such programs and reimburse directors for expenses incurred to attend such programs.
In addition to encouraging director attendance at external programs, the related committee.Board incorporates a “Board Development” topic into Board meeting agendas on a routine basis. The Board Development topics are
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Governance of the Company
generally presented by internal counsel, external counsel or other experts from outside the company. We track the education programs, both external and internal, that individual directors attend, and the Governance and Policy Committee reviews those reports on at least an annual basis.
POLICY AGAINST HEDGING AND PLEDGING COMPANY SECURITIES
Our insider trading policy prohibits Board members, officers, directorsdirector-level employees and certain other designated employees from engaging in any of the following transactions for their own account: speculative transactions in company securities, pledges of company securities as collateral for a loan or other transaction or hedging transactions involving company securities, including zero cost collar transactions and forward sale contracts.transactions:
• | speculative transactions in company securities (including trades in puts, calls or other derivative securities or short sales of company securities), |
• | holding company securities in a margin account or pledging company securities as collateral for a loan or other transaction, or |
• | hedging transactions involving company securities (including zero cost collar transactions and forward sale contracts). |
CODE OF ETHICS AND BUSINESS CONDUCT
Our Board of Directors has adopted a Code of Ethics and Business Conduct, which applies to our directors, officers and employees. This code providesidentifies core values, standards and behaviors that guide our officers, directors and employees with guidelines for making ethical decisions while conducting businessin the discharge of their duties and responsibilities on behalf of HII andHII. The code also includes the commitments the company has made to its employees, customers, stockholders, communities and suppliers. The
24 Huntington Ingalls Industries, Inc.
code provides guidance on,addresses, among other matters, conflicts of interest, corporate opportunities, trading in company securities, political contributions and confidential information. Employees are required to report any conduct they believe in good faith is an actual or apparent violation of the code. The Code of Ethics and Business Conduct includes provisions applicable to our senior financial officers, as required by SEC rules.
Our Code of Ethics and Business Conduct is available on our website at www.huntingtoningalls.com www.hii.com and is available in print to any stockholder requesting a copy. We will post any amendments to our Code of Ethics and Business Conduct on our website.website and/or disclose the amendments in a filing with the SEC. If we waive a provision of the Code of Ethics and Business Conduct with respect to our chief executive officer, chief financial officer or principal accounting officer, we will post information about the waiver at the same location on our website.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or our Compensation Committee. Accordingly, no interlocks with other companies, within the meaning of the SEC’s proxy rules, existed during 2017.
The Board held six meetings in 2017,2022, including five regular meetings and eachone special meetings. All of the regularly scheduled meetings included an executive session of independent directors. In addition, the Board held 2127 committee meetings, comprised of six Audit Committee, five Compensation Committee, six Cybersecurity Committee, five Governance and Policy Committee and five Finance Committee meetings. Each director attended 75% or more of the meetings of the Board and the committees on which he or she served during 2017.2022.
Our Corporate Governance Guidelines establishinclude an expectation that all directors will attend our annual meetings of stockholders. All of our directors who were directors or nominees at the time of the 20172022 annual meeting of stockholders attended the annual meeting, except for Ms. Harker, who had a scheduling conflict.meeting.
We indemnify our directors and our elected officers to the fullest extent permitted by law, so they can be free from undue concern about personal liability in connection with their service to HII. Our bylaws require this indemnification, and we have also entered into agreements with each director and elected officer contractually obligating us to provide this indemnification to him or her.
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2018 Notice and Proxy Statement 25
Communications and Company Documents
We welcome communications from our stockholders and other interested parties,stakeholders, and we make information we believe is important to our stockholders and interested partiesother stakeholders available on our website. The following sections describe: how stockholders and other interested partiesstakeholders can communicate with the Board; the information we make available to our stockholders and other interested partiesstakeholders and where you can find that information; and the procedures that stockholders must follow to propose matters for consideration at our annual meetings or to nominate persons for election as directors at our annual meetings.
COMMUNICATIONS AND COMPANY DOCUMENTS
Stockholders and other interested partiesstakeholders can communicate with the Board, ournon-executive Chairman, our independent directors as a group, individual directors or any of the standing Board committees in care of the Corporate Secretary, Huntington Ingalls Industries, Inc., 4101 Washington Avenue, Newport News, Virginia 23607. At the direction of the Board, all mail received may be opened and screened for security purposes.
Communications from stockholders and other interested partiesstakeholders are distributed to the Board, athe applicable Board committee or an individual director or directors, as appropriate, depending on the facts and circumstances of the communication. The Board has requested that certain items unrelated to the duties and responsibilities of the Board be excluded or redirected, as appropriate, such as: business solicitations or advertisements; junk mail and mass mailings; resumes and other forms of job inquiries; and surveys. In addition, communications that are unduly hostile, threatening or similarly unsuitable will be excluded. Notwithstanding the foregoing, any communication will be made available to any director upon his or her request.
Our website contains our Restated Certificate of Incorporation, Certificates of Amendment of Restated Certificate of Incorporation, Restated Bylaws, Corporate Governance Guidelines, standing Board committee charters and Code of Ethics and Business Conduct. To view these documents, go to www.huntingtoningalls.com www.hii.com, click on “Investor Relations,“Investors,” the “Company Information”“Company” drop-down box and then “Leadership &“Corporate Governance.” We will post any amendments to our Code of Ethics and Business Conduct on our website.website and/or disclose the amendments in a filing with the SEC. If we waive a provision of the Code of Ethics and Business Conduct with respect to our chief executive officer, chief financial officer or principal accounting officer, we will post information about the waiver at the same location on our website. To view our SEC filings and Forms 3, 4 and 5 filed by our directors and executive officers, go to www.huntingtoningalls.com www.hii.com, click on “Investor Relations,“Investors,” the “Financial Information”“Financials” drop-down box and then “SEC Filings.”
We will promptly deliver free of charge to any requesting stockholder a copy of our Annual Report on Form10-K for the year ended December 31, 20172022 (without exhibits), Corporate Governance Guidelines, standing Board committee charters and Code of Ethics and Business Conduct. Requests should be directed to: Corporate Secretary, Huntington Ingalls Industries, Inc., 4101 Washington Avenue, Newport News, Virginia 23607.
You can also print copies of these documents from our website at www.huntingtoningalls.com www.hii.com. We include our website address in the proxy statement only as an inactive textual reference and do not intend it to be an active link to our website. The information on our website is not a part of this proxy statement.
FUTURE STOCKHOLDER PROPOSALS AND NOMINATIONS OF DIRECTORS
Stockholders may present proposals for consideration at a future meeting of stockholders only if they comply with the requirements of the proxy rules established by the SEC and the requirements of our bylaws.
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26 Huntington Ingalls Industries, Inc.
Communications and Company Documents
Under SEC Rule14a-8, if a stockholder wants us to include a proposal in our proxy statement and form of proxy for presentation at our 20192024 annual meeting of stockholders, the proposal must be received by us by November 20, 2018,21, 2023, at our principal executive offices located at Huntington Ingalls Industries, Inc., 4101 Washington Avenue, Newport News, Virginia 23607. The proposal should be sent to the attention of the Corporate Secretary.
Article II, Section 2.08 of our bylaws contains the procedures that a stockholder must follow to nominate persons for election as directors or to introduce an item of business at an annual meeting of stockholders outside of SEC Rule14a-8. Assuming that our 20192024 annual meeting is held within 30 days before or after the anniversary of the 20182023 annual meeting (May 2, 2018)2023), we must receive the notice of your intention to introduce a nomination or to propose an item of business at our 20192024 annual meeting not less than 90 days nor more than 120 days in advance of the anniversary of the date on which we first mailed the proxy materials for our 20182023 annual meeting (March 20, 2018)2023), or between November 20, 201821, 2023 and December 20, 2018.21, 2023.
The notice must be submitted in writing to our principal executive offices located at Huntington Ingalls Industries, Inc., 4101 Washington Avenue, Newport News, Virginia 23607. The notice should be sent to the attention of the Corporate Secretary. Our bylaws specify the information that must be contained in the notice. Our bylaws are posted on our website, www.huntingtoningalls.com www.hii.com, and can be accessed by clicking “Investor Relations,“Investors,” the “Company Information”“Company” drop-down box and then “Leadership &“Corporate Governance.”
Article II, Section 2.15 of our bylaws contains the procedures eligible stockholders must follow to nominate persons for election as directors and to have those candidates included in our proxy materials (proxy access). Assuming that our 20192024 annual meeting of stockholders is held within 30 days before or after the anniversary of the 20182023 annual meeting (May 2, 2018)2023), we must receive the notice of your intention to make a proxy access nomination not less than 120 days nor more than 150 days in advance of the anniversary of the date on which we first mailed the proxy materials for our 20182023 annual meeting (March 20, 2018)2023), or between October 21, 201822, 2023 and November 20, 2018.21, 2023.
30 | Huntington Ingalls Industries, Inc. |
Sustainability
2018 Notice
HII’s mission is to deliver the world’s most powerful ships and Proxy Statement 27
On March 31, 2011, HII formed as an independent, publicly-traded company when two legacy shipyards joined forces to become the nation’s largest shipbuilder. Since then, HII’s portfolio has expanded further with the establishment of a third division that delivers all-domain technology solutions to civil, commercial and defense customers both domestically and internationally. HII is the largest industrial employer in both Virginia, where the company is headquartered, and in Mississippi.
At HII, the mission is always the primary focus and point of convergence. Since its inception, HII has articulated its commitment to being a responsible corporation that prioritizes operating in a manner that is consistent with its values—integrity, safety, respect, engagement, responsibility and performance.
Board Oversight
The Board and its committees seek to ensure that environmental, social and governance (“ESG”) principles are integrated into our business strategy in ways that optimize opportunities to make positive impacts while advancing long-term goals. We are committed to conducting our business in a safe, environmentally responsible and sustainable manner, and in a way that reflects our responsibilities to our stakeholders.
In 2022, we formalized our sustainability commitment to our stakeholders and appointed our first-ever chief sustainability officer to develop and execute an enterprise-wide sustainability strategy, in which ESG issues converge. The chief sustainability officer chairs HII’s Corporate Sustainability Committee, and is supported on a day-to-day basis by a director-level and cross-functional Sustainability Management Team. The chief sustainability officer is a member of the company’s senior leadership team and reports directly to HII’s CEO on sustainability program performance.
Key Stakeholders
Our key stakeholders are our employees, customers, stockholders, communities and suppliers, and our commitment to key stakeholders is articulated in our sustainability strategy.
Employees – Today, HII is a global, all-domain defense provider with a contract backlog of more than $47 billion and approximately 43,000 employees. HII is committed to a values-driven culture of ethics that puts employees’ safety and well-being first. HII is committed to building a diverse and inclusive environment, offering opportunities for training and career growth, where the least empowered person in the room feels free to speak up. HII is committed to a safe and respectful culture for all employees, united in the company’s mission of service.
Customers – HII supports its highly-valued and ever-growing customer base by seeking to ensure the company meets or exceeds customer interests, delivering quality products and services on time, and always fostering continuous improvement.
Stockholders – HII sustains long-term value and growth in the company through improved performance and intense focus on delivering excellent results.
Communities – HII strives to be an active, visible and positive corporate citizen in every community in which it does business, because its employees make up those communities.
2023 Notice and Proxy Statement | 31 |
Suppliers – HII engages with its suppliers in a transparent and respectful manner, recognizing that suppliers are an integral part the HII team—essential to the company’s ability to achieve its business objectives.
Because of and through these commitments, sustainability at HII is more than a buzzword; it describes HII’s values-based business model and reflects HII’s long and distinguished history of corporate responsibility, including corporate citizenship and corporate sustainability. Grounded in the company’s mission, values and purpose (together known as “MVP”), HII’s MVP approach to sustainability guides its strategy, structural polices and programming, and animates its culture of service and ethics. These principles come to life in HII’s daily decision-making and behaviors, and in its formal frameworks and processes. With HII’s values as its north star, the company’s sustainability strategy is optimized to yield long-term competitive advantages, stockholder value, and positive impact for its people, facilities, communities and environment – all in service of its mission. To carry true meaning, HII’s sustainability strategy relies on public reporting standards widely recognized as ESG. Given this usage, HII refers to ESG as its framework for reporting on the initiatives it undertakes as a company, the goals it sets and the progress it has made. HII’s values-based approach connects its performance in priority areas to who it is as a company.
Sustainability Focus Areas
Through interviews, surveys and intensive document and resource reviews, together referred to as “HII’s priority assessment,” the following sustainability focus areas emerged:
➣ | Diversity and inclusion, including Board of Directors and workforce diversity, supplier diversity and company culture. |
➣ | Energy management, including the management of GHG emissions, efficiencies focused on current energy use, renewable energy deployment and the types and ways that fuel is consumed. |
➣ | Supply chain management, including how HII engages with its suppliers through a Supplier Code of Conduct and supplier standards, supply chain transparency, risk assessments and audits, as well as how we maintain supply chain continuity and resiliency. |
➣ | Ethical conduct, including ethics guidelines and Code of Ethics and Business Conduct training, compliance with regulations and laws, grievance and whistleblower mechanisms, and anti-corruption, anti-bribery and anti-money laundering policies and risk analysis. |
➣ | Product quality and safety, including product lifecycle management, improper product usage, environmental impact considerations of products, efforts to ensure product safety, compliance with product safety laws and regulations and product end-of-life management. |
➣ | Cybersecurity, including cybersecurity investments, compliance, risk assessments and awareness (such as phishing, social engineering and advanced cyber tactics), as well as the company’s responses to cyber-attacks and degradation. |
➣ | Community relations, including how we engage with and support the communities in which we operate through employee volunteering, relationship-building with local communities, local economic impact, philanthropy, future workforce development and community education programming. |
➣ | Employee engagement, including company culture, employee turnover, recruitment and retention, compensation and benefits and employee satisfaction. |
➣ | Health and safety, including occupational health and safety initiatives, policies and training, as well as adherence to safety laws and regulations, health and wellness programs and workplace culture. |
32 | Huntington Ingalls Industries, Inc. |
Sustainability
➣ | Environmental compliance, including how HII supports and engages with its regulators, efforts to ensure compliance, and adherence to environmental laws and regulations. |
HII’s sustainability strategy further enhances the company’s longstanding commitment to performing with integrity. HII’s award-winning ethics and compliance program ensures adequate controls are in place to reduce the opportunity for misconduct. Furthermore, HII is committed to working with suppliers who share the company’s values and conduct their business in a legal and ethical manner. HII expects its suppliers to comply with the company’s guidelines and Code of Ethics and Business Conduct, and suppliers are expected to comply with applicable laws and regulations, including those relating to labor and employment practices, health and safety, and environmental protection.
HII uses the concept of “responsible sourcing” in supply chain management. This approach reflects HII’s voluntary commitment to account for social and environmental risks when managing relationships with its suppliers. When contracting with a supplier, HII is explicit in expressing its expectation that the supplier will comply with all applicable laws and regulations, specifically including labor and environmental laws. HII has implemented and maintains several policies in these areas of supply chain risk, including: conflict minerals (HII’s policy mandates that supplier terms and conditions require suppliers to disclose information about any conflict minerals contained in components or items purchased by HII for inclusion in HII’s products sold to third parties, and ensures the collection and maintenance of product information from suppliers and vendors); human trafficking (HII recognizes slavery in the supply chain can take many forms, including human trafficking, child labor and debt bondage. It is HII policy to support unequivocally the elimination of human trafficking and slavery. HII is also committed to complying with the U.K. Modern Slavery Act of 2015 and the Australian Commonwealth Modern Slavery Act of 2018); and diversity of suppliers (HII uses best efforts to enhance subcontracting opportunities for specially defined classes of small business as subcontractors, in compliance with all laws and regulations, as stated in the Small Business Act, Federal Acquisition Regulations (FAR), Public Laws 95-507, 105-35, 106-50, and 15 U.S.C § 631, et. seq.).
Consistent with HII’s commitment to provide stakeholders with transparency into its sustainability objectives, performance and progress, HII’s 2022 Sustainability Reportreferences to Global Reporting Initiative (“GRI”) Standards, including a GRI Standards Index, as well as the Sustainability Accounting Standards Board (SASB) Standard framework. HII will consider other reporting standards and frameworks in the future, as its sustainability program continues to mature.
For more detailed information on HII’s sustainability program and HII’s 2022 Sustainability Report and other ESG-related resources, go to hii.com, click on the “Company” drop-down box and then “Sustainability.”
2023 Notice and Proxy Statement | 33 |
The Board of Directors
We believe the qualifications, skills, experience and experiencesattributes of our directors are consistent with our criteria for the selection of directors and that, collectively, our directors have functioned effectively overseeing the businessmanagement of the companyHII over the last year.
Mr. BildenDenault was elected by the Board on November 7, 2017, to fill a vacancy created when the Board increased its size to ten directors.December 5, 2022. He was recommended as a candidate for director by anon-management director. The remaining nine10 directors nominated to stand for election at our 2023 annual meeting have served on the Board since our last annual meeting. All 11 director nominees, if elected, will serve one-year terms expiring at our 2024 annual meeting.
We amended our certificate of incorporation in 2015 to phase out the classificationOur former CEO, C. Michael Petters, retired from his position as Executive Vice Chairman of the Board beginning at our annual meeting held in 2016effective January 1, 2023, and ending at our annual meeting held in 2018. Withphase-outStephen R. Wilson, a current member of the Board classification complete, all tenand Chairman of ourthe Audit Committee, will retire from the Board effective at the time directors will be voted upon at our 2018 annual meeting, and all directorsare elected at our 2018the 2023 annual meeting will serveone-year terms.meeting.
20182022 DIRECTOR NOMINEES
|
|
|
|
28 Huntington Ingalls Industries, Inc.
AUGUSTUS L. COLLINS Chief Executive Officer of MINACT, Inc. Director since November 2016 | |
Current Public Company Directorships: General Collins serves on the board of directors of Trustmark Corporation, a bank holding company, and is a member of its Audit Committee, Enterprise Risk Committee and Human Resources Committee. Other Directorships and Memberships and Education:
| |
Experience, Qualifications, |
34 | Huntington Ingalls Industries, Inc. |
The Board of Directors
LEO P. DENAULT Retired Chairman and Chief Executive Officer of Entergy Corporation Director since December 2022 | Business Experience: From February 2013 until November 2022, Mr. Denault served as Chairman of the Board and Chief Executive Officer of Entergy Corporation. From February 2004 until January 2013, he served as Executive Vice President and Chief Financial Officer of Entergy Corporation. Mr. Denault served as Vice President, Corporate Development for Entergy Corporation from March 1999 until February 2004. Prior to that, he was Vice President, Corporate Development for Cinergy Corporation (now Duke Energy), an energy company. Other Directorships and Memberships and Education: Mr. Denault currently serves on the board of directors of Jobs for America’s Graduates. He received a B.S. from Ball State University and a M.B.A. from Indiana University. Experience, Qualifications, Attributes and Skills: We believe Mr. Denault is qualified to serve as a director based upon his chief executive leadership of a Fortune 500 public company for nearly ten years, as well as his executive experience in the chief financial officer role and, before that, the corporate development role of the same company. We believe Mr. Denault’s multiple executive leadership roles in a public company will add valuable experience and skills to the Board. We also expect his public company chief financial officer experience will be an asset as the Audit Committee transitions to a new chairperson upon the retirement of Mr. Wilson later in 2023. | |
KIRKLAND H. DONALD Chairman of the Board of HII Director since January 2017 | ||
Current Public Company Directorships:
Other Directorships and Memberships and Education:
| ||
Experience, Qualifications, | ||
2023 Notice and Proxy Statement | 35 |
2018 Notice and Proxy Statement 29
|
|
|
VICTORIA D. HARKER Executive Vice President and Chief Financial Officer of Tegna, Inc. Director since August 2012 | ||
Business Experience:Ms. Harker
| ||
Current Public Company Directorships:Ms. Harker serves on the board of directors of Xylem, Inc. (formerly
| ||
Prior Public Company
| ||
Other Directorships and Memberships and Education:Ms. Harker is a member of the University of Virginia’s Board of Visitors, where she chairs the Finance Committee and serves as a member of the Executive Committee, the Special Committee on Governance and the Committee on the University of Virginia’s College at Wise. She is a trustee of the University of Virginia Alumni Association’s $250M Jefferson Trust and participates as an emeritus society member of the Board of Wolf Trap Foundation for the Performing Arts. Ms. Harker received a B.A. from the University of Virginia and an M.B.A. from American University.
| ||
Experience, Qualifications, | ||
FRANK R. JIMENEZ General Counsel and Corporate Secretary of GE HealthCare Director since January 2022 | Business Experience: Mr. Jimenez has served as General Counsel of GE HealthCare, a medical device manufacturing and pharmaceuticals company, since February 2022 and additionally as Corporate Secretary since January 2023 following GE HealthCare’s spin-off from the General Electric Company. From April 2020 until he assumed his current position, Mr. Jimenez served as Executive Vice President and General Counsel (April 2020 to December 2021) and Special Advisor to the Chairman and CEO (December 2021 to February 2022) of Raytheon Technologies Corporation. From January 2015 until its merger with United Technologies Corporation in April 2020, he served as Vice President, General Counsel and Corporate Secretary of Raytheon Company. From July 2012 until January 2015, Mr. Jimenez served as General Counsel, Secretary and Managing Director, Corporate Affairs of Bunge Limited, an agribusiness and food company. Previously, he served as Vice President and General Counsel of ITT Corporation and as Senior Vice President, General Counsel and Corporate Secretary of Xylem Inc., a spin-off of ITT Corporation. In prior public service, Mr. Jimenez served as the 21st General Counsel of the Navy, Deputy General Counsel (Legal Counsel) for the U.S. Department of Defense, Principal Deputy General Counsel of the Navy, Chief of Staff at the U.S. Department of Housing and Urban Development for Secretary Mel Martinez, and Deputy Chief of Staff and Acting General Counsel for Florida Governor Jeb Bush. Before entering government service, Mr. Jimenez was a litigation partner at Steel Hector and Davis LLP (now Squire Patton Boggs LLP). He began his legal career with a clerkship in the chambers of Judge Pamela Ann Rymer of the U.S. Court of Appeals for the Ninth Circuit in Pasadena, California. Other Directorships and Memberships and Education: Mr. Jimenez’s past and present civic service includes membership on the boards of the University of Miami, Equal Justice Works, the Pro Bono Partnership, the Atlantic Legal Foundation, the Columbia University Mailman School of Public Health, the Yale Law School Fund, the Yale Law School Association, the Yale Law School Center for the Study of Corporate Law, PioneerLegal and the Miami Christian School. Mr. Jimenez received a B.S. from the University of Miami and a J.D. from Yale Law School. He also received an M.B.A. in finance and strategic management from the University of Pennsylvania’s Wharton School and an M.A. in national security and strategic studies from the U.S. Naval War College, with an emphasis in the law of armed conflict. Mr. Jimenez is admitted to the bars of Florida, the District of Columbia, New York and the U.S. Supreme Court. Experience, Qualifications, Attributes and Skills: We believe Mr. Jimenez is qualified to serve as a director based upon his experience as the most senior legal officer of one of the largest aerospace and defense companies in the United States, as well as the most senior legal officer of three other S&P 500 companies. We believe Mr. Jimenez will also add skills and experience to the Board as a result of his significant experience inside the federal government, including his service as General Counsel of the Navy, our largest customer, and Deputy General Counsel for the Department of Defense. |
36 | Huntington Ingalls Industries, Inc. |
30 Huntington Ingalls Industries, Inc.
CHRISTOPHER D. KASTNER President and Chief Executive Officer of Huntington Ingalls Industries, Inc. Director since March 2022 | Business Experience: Mr. Kastner was elected President and Chief Executive Officer of HII effective March 1, 2022. Prior to that, he was Executive Vice President and Chief Operating Officer from February 2021. In that role, he oversaw operations at HII’s three business segments and worked closely with segment management to drive execution on the company’s historic backlog. Mr. Kastner served as Executive Vice President and Chief Financial Officer from March 2016 to February 2021. In that role, he was responsible for directing the business strategy and processes in support of business growth and profitability goals. Mr. Kastner also had responsibility for corporate business management functions, including investor relations, treasury, internal audit, contracts, accounting, financial reporting, planning and analysis, rates and budgets and mergers and acquisitions. He also provided oversight for segment business management, contracts and estimating and pricing. From August 2012 until he became Chief Financial Officer of HII, Mr. Kastner served as Corporate Vice President and General Manager, Corporate Development, responsible for strategy and development activities, including the development and integration of strategic planning efforts, as well as the analysis and entrance into new adjacent markets. Prior to that and from March 2011, he served as Vice President and Chief Financial Officer of our Ingalls Shipbuilding segment. Before that and from 2008, Mr. Kastner served as Vice President, Business Management and Chief Financial Officer of Northrop Grumman Shipbuilding, Gulf Coast, and served as Vice President, Contracts and Risk Management of Northrop Grumman Ship Systems from 2006 to 2008. Prior to that, he held several positions at other Northrop Grumman businesses, including Corporate Director of Strategic Transactions. Other Directorships and Memberships and Education: Mr. Kastner holds a B.A. in Political Science from the University of California at Santa Barbara and an M.B.A. from Pepperdine University. He serves on the board of directors of WHRO, the only public broadcasting station in the United States owned by a collaboration of 19 local public school districts, and on the board of trustees for Eastern Virginia Medical School. Experience, Qualifications, Attributes and Skills: We believe Mr. Kastner is qualified to serve as a director based upon his experience as HII’s Chief Operating Officer, Chief Financial Officer and head of corporate strategy and development, as well as his experience in operations at our Ingalls Shipbuilding segment and its predecessor company as Chief Financial Officer and, before that, Vice President, Contracts and Risk Management. | |
ANASTASIA D. KELLY Senior Advisor to the Chair and Executive Director of Client Relations of DLA Piper Director since March 2011 | ||
Business Experience:Ms. Kelly
Other Directorships and Memberships and Education:Ms. Kelly serves on the boards of numerous philanthropic
| ||
Experience, Qualifications, |
| 2023 Notice and Proxy Statement | 37 |
The Board of Directors
TRACY B. MCKIBBEN Founder & Chief Executive Officer of Director since December 2018 | Business Experience: Ms. McKibben is the founder and has served as the Chief Executive Officer since 2010 of MAC Energy Advisors LLC, an investment and consulting company that provides integrated energy solutions for investments and strategic opportunities across a global platform. She is an international energy and environmental technology expert with more than 20 years of experience in
Other Directorships and Memberships and Education: Ms. McKibben serves on the Board of | |
Harvard Law School.
Experience, Qualifications, | ||
STEPHANIE L. O’SULLIVAN Independent Business Consultant Director since January 2021 | Business Experience: Ms. O’Sullivan has served as an independent business consultant since January 2017. Prior to serving as an independent business consultant, Ms. O’Sullivan served as Principal Deputy Director of the Office of National Intelligence from February 2011 until January 2017. In that position, she assisted the Director of National Intelligence in the management of day-to-dayoperations Other Directorships and Memberships and Education: Ms. O’Sullivan currently serves on the boards of directors of The Aerospace Corporation, Battelle Memorial Institute and HRL Laboratories (formerly Hughes Research Laboratories), the board of trustees of IQT (In-Q-Tel), the Accenture Federal Services proxy board and the CIA Officers Memorial Foundation board of directors. She has also served on advisory boards at Google, Adobe Inc., Oak Ridge National Laboratory, Noblis, Peraton and Booz Allen Hamilton Inc. Ms. O’Sullivan has been an adjunct faculty member at Georgetown University’s Center for Security and Emerging Technology and continues to support study activities for the Department of Defense, Office of the Director of National Intelligence and the CIA. She was elected a member of the National Academy of Engineering in 2019. Ms. Sullivan received a B.S. in Civil Engineering from Missouri Science and Technology University. Experience, Qualifications, Attributes and Skills: We believe Ms. O’Sullivan is qualified to serve as a director based upon her extensive experience with our primary customer as a long-served senior civilian in the U.S. government and her highly successful career culminating in assignments in the most senior levels of government. We believe she also adds to the Board broad experience in the fields of command, control and intelligence for the U.S. government, which are areas of importance to our Defense and Federal Solutions business unit in our growing Technical Solutions business segment. In addition, Ms. O’Sullivan is a demonstrated governance professional based upon her experience in the board environment of private organizations. |
38 | Huntington Ingalls Industries, Inc. |
2018 Notice and Proxy Statement 31
THOMAS C. SCHIEVELBEIN Retired Chairman, President and Chief Executive Officer of The Brink’s Company Director since March 2011 | ||
Business Experience:Mr. Schievelbein
Current Public Company Directorships:Mr. Schievelbein has served on the board of directors of New York Life Insurance Co. since 2006 and currently serves as
Prior Public Company
Other Directorships and Memberships and Education:Mr. Schievelbein is a past member of the Secretary of the Navy’s Advisory Panel and was a director of the U.S. Naval Academy Foundation from 2004 through 2012. He received a B.S. in Marine Engineering from the U.S. Naval Academy and a Master’s Degree in Nuclear Engineering from the University of Virginia.
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Experience, Qualifications, |
JOHN K. WELCH Retired President and Chief Executive Officer of Centrus Energy Corp. Director since February 2015 | ||
Business Experience:Mr. Welch
Prior Public Company
Other Directorships and Memberships and Education:Mr. Welch is retired Chairman of the Board of Battelle Memorial Institute and serves on the boards of Novawall Systems Incorporated and Mount St. Joseph High School. He received a B.S. in Aerospace Engineering from the U.S. Naval Academy, a Master’s Degree in Aeronautical Engineering from the Naval Postgraduate School and an M.B.A. from Loyola College.
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Experience, Qualifications,
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Additional Information. Mr. Welch is the retired President and Chief Executive Officer of Centrus Energy Corp. (formerly USEC Inc.). Centrus Energy filed a voluntary petition under Chapter 11 of the federal bankruptcy code on March 5, 2014. On September 30, 2014, Centrus Energy emerged from Chapter 11, prior to Mr. Welch’s retirement from the company. |
32 Huntington Ingalls Industries, Inc.
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| 2023 Notice and
| |||||
| 39 |
2018 Notice and Proxy Statement 33
Compensation elements for the Board of Directors are designed to:
• | promote alignment with long-term stockholder interests; |
• | enable us to attract and retain outstanding directors who meet the criteria described under “Governance of the Company” above; |
• | recognize the substantial time commitments necessary to oversee HII’s business; and |
• | support the independence of thought and action expected of directors. |
Non-employee director compensation is evaluated annually by the Compensation Committee, which makes recommendations to the full Board for consideration and approval. In its 20172022, the Compensation Committee’s independent compensation consultant, Exequity LLP (“Exequity”), conducted an assessment of the competitive market with respect to outside director compensation, the Compensation Committee’s independent compensation consultant, Exequity LLP (“Exequity”),compensation. Exequity’s assessment considered the following director compensation elements: board-related pay, committee-related pay, equity pay, total director compensation and chairman of the board compensation. Based upon an analysis of the 1514 companies that comprise the peer group for our 20172022 NEO compensation analysis, as well as supplemental general industry data gathered from Fortune 500 companies, Exequity concluded that HII’s outside director total compensation trailed the median of our peer group.
In response to the results of the director compensation analysis, Exequity proposed increasing the equity compensation of Board members and cash retainers for chairs and members of the standing Board committees, to align HII’s director compensation with the median of our compensation peer group. The Compensation Committee accepted the recommendations of Exequity and recommended that the Board approve an amended and restated directors’ compensation policy, which the Board approved. The following section sets forth the director compensation under the amended and restated policy.is competitive within its market. Our CEO is not paid additional compensation for his service on ourthe Board.
Our director compensation program fornon-employee directors is comprised of both cash retainers and equity awards in the form of either restricted stock units or shares of our common stock, in each case granted under our 20122022 Long-Term Incentive Stock Plan.
Non-employee directors receive an annual cash retainer of $100,000. Ournon-executive Chairman ofThe following table sets forth the Board receives an additional annual cash retainer of $250,000. The additional annual cash retainers for serving as chairs of our standing Board committees are: $25,000 for Audit; $20,000 for Compensation; $20,000 for Governance and Policy; and $20,000 for Finance. The additionalmembers:
Annual Cash Retainer* | |||||
Non-employee Directors | $ | 100,000 | |||
Non-Executive Chairman of the Board | $ | 350,000 | |||
Chairpersons of our Standing Board Committees | |||||
Audit | $ | 25,000 | |||
Compensation | $ | 20,000 | |||
Cybersecurity | $ | 20,000 | |||
Governance and Policy | $ | 20,000 | |||
Finance | $ | 20,000 | |||
Other Members of our Standing Board Committees | |||||
Audit | $ | 17,500 | |||
Compensation | $ | 7,500 | |||
Cybersecurity | $ | 7,500 | |||
Governance and Policy | $ | 7,500 | |||
Finance | $ | 7,500 |
* | Cash retainers are paid on a quarterly basis at the end of each quarter in arrears. |
Non-employee directors may elect to receive their annual cash retainers for serving as members (but not as chairs)in the form of stock units payable upon termination of the Board committees are: $17,500director’s board service. Non-employee directors who elect to receive their annual cash retainers in the form of stock units and own shares of our common stock having a value at least five times the director’s annual cash retainer may elect to receive for Audit; $7,500 for Compensation; $7,500 for Governance and Policy; and $7,500 for Finance. Cash retainersthe following calendar year either shares of our common stock or stock units that are paidpayable in the fifth calendar
40 | Huntington Ingalls Industries, Inc. |
Director Compensation
year after the year in which the stock units are earned (or, if earlier, upon termination of the director’s board service). The common stock or stock units are fully vested on a quarterly basis at the enddate of each quarter in arrears.grant.
Non-employee directors also receive an annual equity award of restricted stock units or shares of our common stock, valued at $130,000.$160,000. On the first trading day of each quarter, eachnon-employee director is granted a number of restricted stock units or shares determined by dividing $32,500$40,000 by the per share closing price of our common stock on the NYSE on the date of grant, rounded down to the nearest whole unit or share.
Restricted stock unit awards are fully vested at date of grant but do not generally become payable until 30 days following the date anon-employee director ceases to serve on the Board.Non-employee
34 Huntington Ingalls Industries, Inc.
directors receive dividend equivalents on their outstanding and unpaid restricted stock units. Dividend equivalents are paid in the form of a credit of additional restricted stock units and are subject to the same vesting, payment and other provisions as the underlying restricted stock units.
If anon-employee director owns shares of our common stock having a value at least five times the director’s annual cash retainer, the director may elect to receive his or her annual equity award in the form of either shares of our common stock or stock units that are payable in the fifth calendar year after the year in which the annual equity award is earned (or, if earlier, upon termination of the director’s board service). The common stock or stock units are fully vested on the date of grant.
20172022 DIRECTOR COMPENSATION TABLE
The following table sets forth the compensation for the year ended December 31, 2017,2022, of ournon-employee directors who served during any part of 2017.2022.
Name
|
Fees
| Stock
| All Other
| Total ($)
| Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | ||||||||||||||||||||||||||
Philip M. Bilden*
|
|
17,187
|
|
|
—
|
|
—
|
|
17,187
|
| ||||||||||||||||||||||||
Philip M. Bilden | — | (3) | 187,159 | (4) |
| — | 187,159 | |||||||||||||||||||||||||||
Augustus L. Collins
|
|
120,747
|
|
|
99,514
|
|
—
|
|
220,261
|
|
| — | (3) | 284,350 | (5) |
| — | 284,350 | ||||||||||||||||
Kirkland H. Donald**
|
|
110,747
|
|
|
99,514
|
|
—
|
|
210,261
|
| ||||||||||||||||||||||||
Thomas B. Fargo
|
|
350,000
|
|
|
99,514
|
|
—
|
|
449,514
|
| ||||||||||||||||||||||||
Leo P. Denault | 9,171 | — |
| — | 9,171 | |||||||||||||||||||||||||||||
Kirkland H. Donald | 350,000 | 159,876 |
| — | 509,876 | |||||||||||||||||||||||||||||
Victoria D. Harker
|
|
117,714
|
|
|
99,514
|
|
—
|
|
217,228
|
|
| 127,500 | 159,876 |
| — | 287,376 | ||||||||||||||||||
Frank R. Jimenez | 106,693 | 159,825 |
| — | 266,518 | |||||||||||||||||||||||||||||
Anastasia D. Kelly
|
|
119,417
|
|
|
99,514
|
|
—
|
|
218,931
|
| 115,000 | 159,876 |
| — | 274,876 | |||||||||||||||||||
Paul D. Miller***
|
|
40,879
|
|
|
49,781
|
|
—
|
|
90,660
|
| ||||||||||||||||||||||||
Tracy B. McKibben |
| 115,000 | 159,876 |
| — | 274,876 | ||||||||||||||||||||||||||||
Stephanie L. O’Sullivan | 120,196 | 159,876 |
| — | 280,072 | |||||||||||||||||||||||||||||
Thomas C. Schievelbein
|
|
131,120
|
|
|
99,514
|
|
—
|
|
230,634
|
|
| 137,500 | 159,876 |
| 4,849 | 302,225 | ||||||||||||||||||
John K. Welch
|
|
120,747
|
|
|
99,514
|
|
—
|
|
220,261
|
| 137,500 | 159,876 |
| — | 297,376 | |||||||||||||||||||
Stephen R. Wilson
|
|
120,747
|
|
|
99,514
|
|
—
|
|
220,261
|
| 132,500 | 159,876 |
| — | 292,376 |
(1) | The values for stock awards represent the grant date fair values of restricted stock units or shares of common stock granted in |
(2) | Represents value of spousal travel to board- or company-related events. |
2018 Notice and Proxy Statement 35
(3) | Mr. Bilden and Gen. Collins elected to receive their 2022 cash retainers in the form of common stock and stock units, respectively. |
(4) | $67,249 of this amount represents common stock issued to Mr. Bilden in lieu of his 2022 cash retainers. |
(5) | $124,474 of this amount represents stock units issued to Gen. Collins in lieu of his 2022 cash retainers. |
2023 Notice and Proxy Statement | 41 |
INTRODUCTION
This section provides information about our executive compensation program with respect to the 20172022 compensation of each of the individuals who served as our Principal Executive Officer, our Chief Financial Officer and our three other most highly-compensatedhighly compensated executive officers who were serving as executive officers at the end of 2017 and another individual who was one of our three other most highly-compensated executive officers but was not serving as an executive officer at the end of 2017in 2022 (our “NEOs”). C. Michael Petters served as Chief Executive Officer until March 1, 2022, when his retirement from that position and his appointment as Executive Vice Chairman of the Board became effective. Christopher D. Kastner served as our Chief Operating Officer until March 1, 2022, when his election to Chief Executive Officer became effective. This section includes biographies of our NEOs, the Compensation Discussion and Analysis, which explains how and why the Compensation Committee made its compensation decisions for the NEOs, the Report of our Compensation Committee, and the detailed executive compensation tables required by the SEC, with related narrative disclosure.
NAMED EXECUTIVE OFFICER BIOGRAPHIES
The following biographies provide information regarding the experience and education of our NEOs.
C. Michael Petters,Christopher D. Kastner, President and Chief Executive Officer (formerly Chief Operating Officer)
Mr. Petters isKastner, age 59, was elected President and Chief Executive Officer, of HII. He assumed this roleeffective March 1, 2022, after serving as Executive Vice President and Chief Operating Officer beginning February 2021. As Chief Operating Officer, Mr. Kastner oversaw HII’s three operating segments and worked closely with the segment presidents to drive execution on March 31, 2011, when Northrop Grumman Shipbuilding began operatingHII’s historic backlog. Prior to serving as the newly-formed and publicly-owned Huntington Ingalls Industries following aspin-off from Northrop Grumman Corporation. Mr. Petters is also a member of our Board.
Mr. Petters is responsible for leading the design, construction and overhaul of conventionally-powered surface combatants, amphibious and auxiliary ships and nuclear-powered submarines and aircraft carriers, as well as business opportunities in adjacent markets. From 2008 until he assumed his current position,Chief Operating Officer, he served as president of Northrop Grumman Shipbuilding. Prior to that, he served as president of the Newport News sector of Northrop Grumman Corporation.
Mr. Petters joined Newport News Shipbuilding in 1987 in the Los Angeles-class submarine construction division. He subsequently held a number of positions of increasing responsibility throughout the organization, including production supervisor for submarines, marketing manager for submarines and carriers, vice president for aircraft carrier programs, vice president for contracts and pricing, and vice president for human resources.
A native of Florida, Mr. Petters earned a B.S. in Physics from the U.S. Naval Academy in 1982, served aboard the nuclear-powered submarine USS George Bancroft and spent five years in the Naval Reserve. He earned an M.B.A. from the College of William and Mary.
Mr. Petters serves on the board of directors of the U.S. Naval Academy Foundation, the National Bureau of Asian Research and the Virginia Community College Foundation. He serves on the Board of Advisors to the Center for a New American Security and The Executive Committee of the Aerospace Industries Association, and is Chairman of the Virginia Business Council.
Christopher D. Kastner, Executive Vice President Business Management and Chief Financial Officer
Mr. Kastner was elected Executive Vice President, Business Management and Chief Financial Officer effectivefrom March 2016. In thisthat role, he isMr. Kastner was responsible for directing the business strategy and processes in support of business growth and profitability goals. Mr. KastnerHe also hashad responsibility for corporate business management functions, including investor relations, treasury, internal audit, contracts,
36 Huntington Ingalls Industries, Inc.
accounting, financial reporting, planning and analysis, rates and budgets and mergers and acquisitions. HeMr. Kastner also providesprovided oversight for segment business management, contracts and estimating and pricing.
From August 2012 until he assumed his current position,became Chief Financial Officer of HII, Mr. Kastner served as Corporate Vice President and General Manager, Corporate Development, responsible for strategy and development activities, including the development and integration of strategic planning efforts, as well as the analysis and entrance into new adjacent markets. Prior to that and from March 2011, he served as Vice President and Chief Financial Officer of our Ingalls Shipbuilding segment. Before that and from 2008, Mr. Kastner served as Vice President, Business Management and Chief Financial Officer of Northrop Grumman Shipbuilding, Gulf Coast, and served as Vice President, Contracts and Risk Management of Northrop Grumman Ship Systems from 2006 to 2008. Prior to that, he held several positions at other Northrop Grumman businesses, including Corporate Director of Strategic Transactions.
Mr. Kastner holds a B.A. in Political Science from the University of California at Santa Barbara and an M.B.AM.B.A. from Pepperdine University. He serves on the board of directors of WHRO, the only public broadcasting station in the United States owned by a collaboration of 19 local public school districts, and on the board of trustees for Eastern Virginia Medical School.
Kellye L. Walker,C. Michael Petters, Executive Vice Chairman of the Board (formerly President and Chief Executive Officer)
Mr. Petters, age 63, served as President and Chief Executive Officer of HII from March 2011, when Huntington Ingalls Industries began operating as a stand-alone public company following a spin-off
42 | Huntington Ingalls Industries, Inc. |
Executive Compensation
from Northrop Grumman Corporation, until March 1, 2022, when he retired as President and CEO. He was appointed Executive Vice Chairman of the Board effective March 1, 2022, and retired from that position effective January 1, 2023.
Thomas E. Stiehle, Executive Vice President and Chief Financial Officer
Mr. Stiehle, age 57, was elected Executive Vice President and Chief Financial Officer effective February 2021. In this role, he is responsible for directing HII’s processes in support of business growth and profitability goals. Mr. Stiehle also has responsibility for corporate business management functions, including investor relations, treasury, internal audit, contracts, accounting, financial reporting, planning and analysis, rates and budgets and mergers and acquisitions.
From October 2012 until Mr. Stiehle assumed his current position, he served as Vice President and Chief Financial Officer of our Ingalls Shipbuilding segment. Prior to that, he served as Vice President, Contracts and Pricing, for Ingalls Shipbuilding. Prior to joining HII in 2011, Mr. Stiehle worked for Northrop Grumman, Aerospace Sector, for 24 years. He holds a B.S. in Mechanical Engineering from Hofstra University, an M.B.A. from Adelphi University and a Master’s Degree in Acquisition and Contract Management from Florida Institute of Technology.
Chad N. Boudreaux, Executive Vice President and Chief Legal Officer
Ms. Walker has served asMr. Boudreaux, age 49, was appointed Executive Vice President and Chief Legal Officer since joining HII in January 2015.effective April 2020. In this position, shehe has overall leadership responsibility for our law department and outside counsel, which provide a broad range of legal advice and support for the company’sour business activities.
activities, including corporate governance matters, compliance, litigation management, and mergers and acquisitions. Prior to joining us, Ms. Walker was with American Water Works Company, Inc., the country’s largest investor-owned waterhis current position, Mr. Boudreaux managed our litigation docket and wastewater utility company, where she servedoversaw our nationally recognized compliance program as Seniorour first chief compliance officer. He joined HII in 2011 as Corporate Vice President General Counselfor Litigation, Investigations and Secretary from January 2010 to January 2015. During her tenureCompliance.
Before joining HII, Mr. Boudreaux practiced law at American Water, she also served as Chief Administrative Officer from September 2010 through May 2014. From February 2007 to June 2009, Ms. Walker served as Senior Vice PresidentBaker Botts LLP, where he established the law firm’s Global Security and General Counsel of Diageo North America, Inc., the largest operating company of Diageo plc. From February 2003 to December 2006, she served as Senior Vice President, General Counsel and Secretary of BJ’s Wholesale Club, Inc., a leading warehouse club operator.Corporate Risk Counseling practice group. Prior to that, Ms. Walker served ashe held various high-ranking positions in the U.S. government, including deputy chief of staff of the U.S. Department of Homeland Security and leadership positions at the U.S. Department of Justice. Mr. Boudreaux earned a corporate partner in major law firms in Boston, Massachusetts and in New Orleans, Louisiana.
Ms. Walker’s professional affiliations include the American Bar Association, the Association of Corporate Counsel (former board member) and the Executive Leadership Council. She also serves on the Board of Visitors of Christopher Newport University. Ms. Walker received a B.S. in Business Administration, MarketingB.A. from Louisiana TechBaylor University and a J.D. from Emorythe University of Memphis School of Law. He is a recipient of the U.S. Justice Department’s Special Commendation for Outstanding Service for his work on high-stakes litigation for the United States.
Brian J. Cuccias,Kara R. Wilkinson, Executive Vice President and President, Ingalls Shipbuilding
Mr. CucciasMs. Wilkinson, age 48, has served as Executive Vice President and President, of Ingalls Shipbuilding, since April 2014. He is responsible for all programs and operations at Ingalls, including U.S. Navy destroyers, amphibious assault and surface combatant programs, and the U.S. Coast Guard cutter program.1, 2021.
Prior to hisFrom May 2016 until she assumed her current position, and from February 2011, Mr. Cuccias served in several different positions at our Ingalls Shipbuilding segment, including vice president, program management, vice president, amphibious ship programs, and vice president, large deck amphibious ships. From 2008 to February 2011, he was vice president, surface combatants for Northrop Grumman Shipbuilding. After joining a
2018 Notice and Proxy Statement 37
predecessor of Northrop Grumman in 1979, he held a variety of positions, including assistant to the group vice president of Avondale Industries, sector vice president, material, for Northrop Grumman Ship Systems, and DDG(X) and DDG 1000 program manager and vice president.
Mr. Cuccias earned a B.S. in Accounting from the University of South Alabama and has attended executive education programs at Harvard Business School and the University of Pennsylvania’s Wharton School. He is a member of the Executive Committee of the Mississippi Gulf Coast Business Council and serves on the boards of directors of the Mississippi Economic Council (the state’s chamber of commerce), the Jackson County Economic Development Foundation and the Salvation Army of Mobile.
Edgar A. Green III, Executive Vice President and President, Technical Solutions
Mr. Green was appointed Executive Vice President and President, Technical Solutions in December 2016. He is responsible for HII’s services businesses, which include training systems, logistics support, information technology, fleet maintenance and modernization, unmanned undersea systems, nuclear engineering and fabrication, and oil and gas engineering.
Prior to assuming his current position and from January 2015, Mr. Green served as Corporate Vice President, Corporate Development, responsible for all of HII’s corporate development activities related to shipbuilding and marine technical services. From January 2013 to January 2015, he served as Vice President, Component Manufacturing, for Newport News Shipbuilding, where he directed the manufacture of major components used in the construction of U.S. Navy aircraft carriers and submarines. From March 2011 to January 2013, Mr. Green served as Corporate Vice President, Investor Relations, of HII, where he was primarily responsible for the company’s relationships and communications with Wall Street research analysts and shareholders. Prior to joining HII in 2011, Mr. GreenMs. Wilkinson served as Vice President of Investor RelationsProgram Management at Celanese Corp. BeforeIngalls Shipbuilding. Prior to that, he was an investment bankershe held various positions in Business Development and research analystEngineering at Wells Fargo, where he covered the defense and aerospace industry, andIngalls Shipbuilding, after beginning her career at Ingalls Shipbuilding in 1996 as a manufacturing plant engineer and maintenance manager at Eaton Corp.’s Truck Components Division.naval architect.
Mr. Green is a former U.S. Navy nuclear submarine officer. During his naval service, he successfully completed the U.S. Navy’s nuclear power program, including prototype training at the S1C reactor, and served as an officer aboard the ballistic missile submarine USSTecumseh (SSBN 628), qualifying submarines, Poseidon C3 strategic weapons systems officer and S5W engineer. Mr. GreenMs. Wilkinson holds a B.S. in SystemsNaval Architecture and Marine Engineering from the U.S. Naval AcademyUniversity of Michigan and an M.B.A. from DukeTemple University.
Matthew J. Mulherin,Jennifer R. Boykin, Executive Vice President and President, Newport News Shipbuilding (Retired)
Mr. MulherinMs. Boykin, age 58, has served as Executive Vice President and President, of Newport News Shipbuilding, from March 2011 through June 30, 2017, preceding his retirementsince July 2017.
2023 Notice and Proxy Statement | 43 |
Executive Compensation
From 2012 until she assumed her current position, Ms. Boykin was Vice President, Engineering and Design for Newport News Shipbuilding. Since joining Newport News Shipbuilding in the Nuclear Division in 1987, Ms. Boykin has had a variety of responsibilities, including serving as Vice President of Quality and Process Excellence, Director of Facilities and Waterfront Support, and program manager for the Nuclear Engineering Division. Ms. Boykin also served as a construction superintendent for the aircraft carrier program during construction of USS John C. Stennis and USS Harry S. Truman.
Ms. Boykin holds a B.S. in Marine Engineering from the company.U.S. Merchant Marine Academy and a Master’s Degree in Engineering Management from The George Washington University.
COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis, or CD&A, provides information relevant to understanding the 20172022 compensation of our Named Executive Officers.
Huntington Ingalls IndustriesHII is a global, all-domain defense partner, building and delivering the world’s most powerful, survivable naval ships and technologies that safeguard America’s largest military shipbuilding companyseas, sky, land, space and a provider of professional services to partners in government and industry.cyber. For more than a century, HII’s Newport News and Ingalls shipbuilding segmentsShipbuilding segment in Virginia and Ingalls Shipbuilding segment in Mississippi have built more ships in more ship classes than any other U.S. naval shipbuilder. HII’s Technical SolutionsOur Mission Technologies segment provides a wide range of professional services through its Fleet Support, Integrated Missions Solutions, Nucleardelivers high-value engineering and Environmental,technology solutions to enable multi-domain distributed operations in the government and Oil and Gas groups.commercial markets. Headquartered in Newport News, Virginia, HII employs nearly
38 Huntington Ingalls Industries, Inc.
38,000approximately 43,000 people operating both domestically and internationally. The goal of our executive compensation program is to support apay-for-performance culture by implementing compensation programs that are market competitive, customer-focused and fair to our stockholders.
Our 2017 Named Executive Officers (“NEOs”)2022 NEOs are:
• Christopher D. Kastner | President and Chief Executive Officer (formerly Executive Vice President and Chief Operating Officer) | |
•C. Michael Petters | Executive Vice Chairman of the Board (formerly President and Chief Executive | |
Executive Vice President | ||
Executive Vice President and Chief Legal Officer | ||
• Kara R. Wilkinson | Executive Vice President and President, Ingalls Shipbuilding | |
| ||
| ||
Executive Vice President and President, Newport News Shipbuilding |
Executive Summary
Our executive compensation program and practices are described in detail over the following pages. We have designed our executive compensation program to attract, motivate and retain highly qualified executives, incentivize our executives to achieve business objectives, reward performance and align the interests of our executives with the interests of our stockholders and customers. The fundamental philosophy of our executive compensation program, set by the Compensation Committee of the Board, is pay for performance. We have also designed our compensation program to balance performance-based compensation over the short-short-term and long-term to incentivize decisions and actions that promote stockholder value and focus our executives on performance that benefits our stockholders and customers, while discouraging inappropriate risk-taking behaviors.
Thepay-for-performance philosophy of our executive compensation program is demonstrated by the compensation mix of our NEOs. Of the three primary elements of total direct compensation, our executive compensation is heavily weighted toward the variable, performance-based elements, and
44 | Huntington Ingalls Industries, Inc. |
Executive Compensation
toward the long-term and equity-based elements, as reflected in the following graphs,charts, which set forth the percentage of total compensation corresponding to each compensation element received by our CEO and by our other NEOs collectively in the aggregate in 2017.2022.
CEO1 | Other NEOs2 | |
|
|
(1) | Reflects the full-year compensation for Mr. Kastner, who served as Chief Operating Officer for the first two months of 2022 and as President and CEO beginning March 1, 2022. Total direct compensation does not include perquisites and other benefits. |
(2) | Includes the compensation of Mr. Petters, who served as President and CEO for the first two months of 2022 and then as Executive Vice Chairman of the Board for the remainder of 2022. Chart reflects average allocation for the NEOs other than |
100%78% of Mr. Petters’Kastner’s total direct compensation in 20172022 was directly linked to our performance through his annual and long-term incentive awards. Approximately 84%An average of 75% of the total direct compensation of our other NEOs was comprised of performance-based incentive awards.
2018 Notice and Proxy Statement 39
Our underlying philosophy of pay for performance focuses us consistentlyincentivizes our constant focus on achieving our financial and operational goals. Above all, these goals are customer-focused, rewarding safety, quality, cost and schedule performance, and stockholder-friendly, rewarding consistent achievement of strong financial results and increasingcreation of long-term sustainable stockholder value.
20172022 Business Highlights
20172022 was another successfula year for HIIof stable execution in the face of broader operating environment challenges. In 2022 we delivered or re-delivered four critical assets to the U.S. Navy, including the delivery of amphibious transport dock Fort Lauderdale (LPD 28), the delivery of guided-missile destroyer Lenah Sutcliffe Higbee (DDG 123), the re-delivery of Los Angeles-class submarine USS Helena (SSN 725) and our employees asthe delivery of Virginia-class submarine Montana (SSN 794). While we executed on current program milestones, we also were awarded new contracts totaling $9.3 billion in 2022, resulting in backlog of $47.1 billion at year-end, representing many years of future work. At Mission Technologies, the integration of Alion is substantially complete, and the segment achieved significant programmatic wins that would not have been possible without the capabilities added from Alion. 2022 successes were achieved while we aggressively managed through a difficult environment, including a challenging labor market, accelerating inflation and continued to achieve performance objectives consistent with our strategic plan. supply chain pressures.
Our financial accomplishmentsachievements in 2017 included:
Our operational accomplishments in 20172022 included:
• | $9.3 billion in new contract awards. |
• | $10.7 billion in revenues, a 12.1% increase over the |
• | $14.44 diluted earnings per share, compared to $13.50 diluted earnings per share the |
2023 Notice and Proxy Statement | 45 |
Executive Compensation
• | $52 million of common stock repurchases and quarterly cash dividend increase of 5.1% to $1.24 per share in the |
Our operational achievements in 2022 included:
• | Delivering amphibious transport dock Fort Lauderdale (LPD 28) |
• | Launching |
• | Authenticating the keel of |
• | Christening guided missile destroyer Jack H. Lucas (DDG 125) |
• | Authenticating the keel of Ted Stevens (DDG 128) |
• | Launching and christening National Security Cutter Calhoun (NSC 10) |
• | Christening amphibious transport dock Richard M. McCool Jr. (LPD 29) |
• | Receiving an advanced procurement contract for LPD 32 |
• | Receiving a design engineering contract for the next-generation guided-missile destroyer |
• | Authenticating the keel of guided-missile destroyer Jeremiah Denton (DDG 129) |
• | Receiving a contract to begin combat systems availability for the Zumwalt-class destroyer, Lyndon B. Johnson (DDG 1002) |
• | Commencing fabrication of amphibious transport dock Pittsburgh (LPD 31) |
• | Receiving a $2.4 billion contract to build amphibious assault ship Fallujah (LHA 9) and beginning fabrication |
• | Successfully completing builder’s trials for Arleigh Burke-class destroyer Jack H. Lucas (DDG 125) |
• | Commencing fabrication of Arleigh Burke-class destroyer Sam Nunn (DDG 133) |
• | Successfully completing acceptance trials and delivering Arleigh Burke-class destroyer Lenah Sutcliffe Higbee (DDG 123) |
• | Delivering Virginia-class submarine Montana (SSN 794) |
• | Re-delivering USS Helena (SSN 725) |
• | Completing modernization period of USS Gerald R. Ford (CVN 78) |
• | Reaching five-year labor agreement with United Steelworkers |
• | Launching Virginia-class submarine New Jersey (SSN 796) |
• | Turning over 1,000th compartment of aircraft carrier John F. Kennedy (CVN 79) |
• | Achieving pressure hull complete on Virginia-class submarine Massachusetts (SSN 798) |
• | Celebrating the ceremonial keel laying of aircraft carrier Enterprise (CVN 80) |
• | Authenticating the keel of Virginia-class submarine Arkansas (SSN 800) |
46 | Huntington Ingalls Industries, Inc. |
Executive Compensation
• | Reaching approximate 98% completion of the refueling and complex overhaul of |
• | Reaching approximate 88% completion of |
40 Huntington Ingalls Industries, Inc.
Commitment to Compensation Best Practices
We highlight below certain executive compensation practices we have implemented to drive performance, as well as certain practices we have avoided inas not supportive of the belief they would not servelong-term interests of our customers’customers or stockholders’ long-term interests.stockholders.
WHAT WE DO
| ||
Consideration of Annual | The Compensation Committee considers the results of the annual stockholder“Say-on-Pay” advisory vote on executive compensation. | |
Pay for Performance | Our executive compensation program is heavily weighted toward variable, performance-based elements, and toward long-term and equity-based elements. Variable compensation is tied to the achievement of performance goals and includes annual cash incentive awards and long-term restricted performance stock rights, which are described in detail in this CD&A. | |
Compensation Risk | We assess the risk of our compensation programs on an annual basis both internally and with the engagement of the Compensation Committee’s independent compensation consultant. The Compensation Committee agreed with the consultant’s conclusion that there was no undue risk associated with the design or delivery of the programs in 2022. | |
Executive Compensation | Our executive compensation recoupment, or clawback, policy allows us to seek reimbursement in certain circumstances of all or a portion of any performance-based | |
Targeted Compensation Benchmarking | HII is a unique business with few direct competitors. The Compensation Committee therefore strikes a balance between internal equity and external benchmarking when setting executive pay levels. | |
Independent Compensation Consultant | The Compensation Committee engages an independent compensation consultant to assess the market for the determination of our executive compensation elements and performance targets on an annual and ongoing basis. |
2018 Notice and Proxy Statement 41
| ||
Executive Stock Ownership | Our stock ownership guidelines provide that each NEO must own a multiple of his or her annual base salary in our common stock, and we have instituted holding requirements prohibiting our NEOs from selling HII common stock received as compensation until their stock ownership requirements have been met. The holding requirements also require our NEOs to continue to holdone-half of their long-term incentive awards for three additional years after they vest. |
2023 Notice and Proxy Statement | 47 |
Executive Compensation
WHAT WE DO | ||
Director Stock Ownership | Although our directors do not have specific stock ownership guidelines, the restricted stock units ournon-employee directors receive do not become payable until a director ceases to serve on the Board.Non-employee directors who own shares of our common stock having a value at least five times the amount of their annual cash retainer may elect, on an annual basis, to receive their annual equity award directly in shares of our common stock or stock units that are payable in the fifth calendar year after the year in which the annual equity award is earned (or, if earlier, upon termination of the director’s board service). In addition, non-employee directors may elect to receive their annual cash retainers in the form of stock units or, in the case of directors who own shares of common stock having a value at least five times the amount of their annual cash retainer, common stock or stock units that are payable in the fifth calendar year after the year in which the annual cash retainer is earned (or, if earlier, upon termination of the director’s board service). |
WHAT WE DON’T DO
| ||
No Employment | None of our NEOs have employment agreements, so each NEO is employed by the company “at will.” We maintain a severance plan that provides for the payment of severance benefits in limited termination circumstances. | |
NoChange-in-Control | We have nochange-in-control agreements or related executive taxgross-up benefits. The onlychange-in-control provision in our compensation plans, which applies to all employees who hold equity awards, is the possible acceleration of equity vesting in certain limited circumstances within the parameters of achange-in-control transaction, as defined in the related plans. | |
No Hedging or Pledging by | Officers, directors and certain other employees are prohibited from engaging in speculative transactions in our securities, pledging our securities as collateral for a loan or other transaction or engaging in any hedging transactions involving our securities. | |
No Dividends or Dividend
| No dividends or dividend equivalents are paid out on restricted performance stock rights during the performance period. Dividend equivalent units are paid only at the time and to the extent that the underlying shares vest and are paid. |
42 Huntington Ingalls Industries, Inc.
Executive Compensation Principles
The Compensation Committee of the Board (which we refer to as the “Committee” in this CD&A) is comprised exclusively of independent directors, as determined under NYSE corporate governance listing standards, including the enhanced independence considerationsstandards applicable to members of the Committee. The Committee oversees all of our compensation and benefit programs that affect our NEOs, as well as other officers elected by the Board. The Committee also provides strategic direction for our overall compensation and benefits structure and oversees CEO and senior executive officer succession plans. In conducting oversight of theseour compensation and benefit programs, the Committee is guided by the following compensation principles it has approved.approved by the Committee:
• | Our compensation programs will be primarily customer-focused, rewarding safety, quality, cost and schedule performance, and stockholder friendly, rewarding consistent achievement of strong financial results and increasing stockholder value. |
48 | Huntington Ingalls Industries, Inc. |
2018 Notice and Proxy Statement 43
• | Compensation programs will be designed to influence outcomes and will provide a balance between short- and long-term performances. |
• | Compensation programs will be based on achievement of clear and measurable financial results and accountabilities, with an emphasis on performance-based compensation, and will be formula-based with appropriate levels of discretion for adjustments. |
• | Compensation and benefits will be competitive within the market. Alignment with peer companies will be considered when developing programs and goals, but measures oriented to promoting strong improvements in our own business results will be the predominant factor. |
• | Compensation will be disclosed and explained in a transparent and understandable manner. Clear and concise goals will be established to enable the assessment of performance by the Committee and by stockholders through the CD&A. |
• | Achievement of business goals through both annual operating performance and increased stockholder value will produce significant individual rewards; failure to achieve business goals will negatively affect the pay of our executives. |
• | To promote alignment of management and stockholder interests, elected officers will meet stock ownership guidelines in the following multiples of base salary: CEO and President, seven times; all other elected officers reporting to the CEO, three times. The Committee will monitor attainment of the ownership guidelines on an annual basis. The restricted stock units our non-employee directors receive do not become payable until a director ceases to serve on the Board. Non-employee directors who own shares of our common stock having a value at least five times the amount of their annual cash retainer may elect, on an annual basis, to receive their annual equity award directly in shares of our common stock or stock units that are payable in the fifth calendar year after the year in which the annual equity award is earned (or, if earlier, upon termination of the director’s board service). In addition, non-employee directors may elect to receive their annual cash retainers in the form of stock units or, in the case of directors who own shares of common stock having a value at least five times the amount of their annual cash retainer, common stock or stock units that are payable in the fifth calendar year after the year in which the annual cash retainer is earned (or, if earlier, upon termination of the director’s board service). |
• | The mix of long-term awards, selection of performance criteria and oversight of compensation programs, together with other features, such as our stock ownership guidelines and holding requirements, will be designed to discourage excessive risk taking by emphasizing a long-term focus on compensation and financial performance. |
• | Our NEO compensation strategy will be consistently applied for all incentive plan participants to promote proper alignment, accountability and line-of-sight regarding commitments and priorities. |
Pay for Performance
The fundamental philosophy of our executive compensation program is pay for performance. Ourpay-for-performance philosophy and compensation principles are designed to attract, motivate and retain highly-qualified executives, incentivize our executives to achieve business objectives, reward performance and align the interests of our executives with the interests of our stockholders and customers. As such, we provide significant reward opportunities to our NEOs linked to achievement of our financial and operational goals. Above all, these goals are customer-focused, rewarding achievement of safety, quality, cost and schedule goals, and stockholder-friendly, rewarding consistent achievement of strong financial results and building or increasing stockholder value. Performance-based compensation is balanced over the short-short-term and long-term to incentivize decisions and actions that promote stockholder value and focus our executives on performance that benefits our stockholders and customers, while discouraging inappropriate risk taking behaviors.
2023 Notice and Proxy Statement | 49 |
Executive Compensation
This focus on performance is demonstrated in the compensation mix of our NEOs. Our executive compensation is heavily weighted toward the variable, performance-based elements, and toward the long-term and equity-based elements, as reflected in the following charts, which set forth the percentage of total target compensation corresponding to each compensation element for each of our CEO and for our other NEOs who was employedcollectively for all of 2017.2022.
CEO Target Compensation Mix1 | Other NEOs Target Compensation Mix2 | |
(1) | Reflects the full-year compensation for Mr. Kastner, who served as Chief Operating Officer for the first two months of 2022 and as President and CEO beginning March 1, 2022. Total target compensation does not include perquisites and other benefits. |
(2) | Includes the compensation of Mr. Petters, who served as President and CEO for the first two months of 2022 and then as Executive Vice Chairman of the Board for the remainder of 2022. Chart reflects average allocation for the NEOs other than Mr. Kastner. Total target compensation does not include perquisites and other benefits. |
The design of our incentive compensation plans also supports ourpay-for-performance philosophy. A significant portion of the potential compensation of our executives is at risk, and that risk increasescorresponds with each executive’s level of responsibility. Exceeding our financial and operational targets can result in a payout of up to 200% of the original award target, while failure to meet our targets can result in no payouts of incentive compensation to NEOspayouts under our plans.
20172022 “Say-on-Pay” Advisory Vote on Executive Compensation
Consistent with our goal of supporting apay-for-performance philosophy by implementing compensation programs that reward performance, are market competitive and align the interests of our executives with the interests of our stockholders and customers, we seek the views of our stockholders annually on the design, effectiveness and results of our executive compensation program.
At our 20172022 Annual Meeting of Stockholders, our stockholders approved our executive compensation on an advisory basis with 98%97% of the votes cast.cast (excluding non-broker votes). This strong support, among other factors, resulted in the Committee not making significant changes tocontinuing our executive compensation program.program without significant changes.
Retention of Independent Compensation Consultant
The Committee continued in 20172022 to engage an independent compensation consultant, Exequity, LLP (“Exequity”), to assist the Committee in carrying out its responsibilities under its charter. Under the
44 Huntington Ingalls Industries, Inc.
Target Total Compensation Mix
terms of the agreement between the Committee and the consultant, the Committee has the exclusive right to select, retain and terminate Exequity, as well as to approve any fees, terms or other conditions of Exequity’s service. Exequity reports directly to the Committee. When directed to do so by the Committee, the consultant also works collaboratively with company management to develop analyses and proposals for presentations to the Committee. The Committee reviews the performance of the independent consultant on an annual basis and determines whether to continue the engagement.
50 | Huntington Ingalls Industries, Inc. |
Executive Compensation
Exequity attended several Committee meetings during 20172022 and presented analyses and key recommendations for Committee consideration, discussed emerging trends and technical issues and reviewed and commented on management proposals, as appropriate. In addition, the consultant responded to miscellaneous Committee requests.
Compensation Consultant Independence Assessment
In accordance with SEC rules and NYSE listing standards, the Committee requested and received information from Exequity relating to the consultant’s independence and potential conflicts of interest, including information regarding the following: (1) other services provided to us by the consultant; (2) fees paid by us as a percentage of the consulting firm’s total revenue; (3) policies or procedures maintained by the consulting firm designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the Committee; (5) any company stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement.
Based upon an assessment of these factors, including information gathered from our directors and executive officers relating to business or personal relationships with the consulting firm or the individual consultants, the Committee concluded that the consultant is independent and that the work of the consultant did not raise any conflict of interest.
Peer Group Development
The Committee believes our total compensation program (base salary, target annual cash incentive awards, target long-term incentive awards and benefits) should provide aggregate compensation at approximately the 50th percentile of the relevant market. Based upon an analysis conducted by Exequity and reviewed with the Committee, the Committee determined that our NEO base pay generally falls at or belowapproximates the median and long-term incentive compensation is generally in the third or fourth quartile among the peer companies. This compensation mix is consistent with both management’s and the Committee’s philosophy that a significant portion of an executive’s overall compensation package should be based on the performance of the company and therefore at risk.
2018 Notice and Proxy Statement 45
HII is a unique business with few directly comparable peer companies. As such, our current peer group is comprised of heavy manufacturing, engineering and defense companies withthat have annual revenues generally between $1$5 billion and $10$20 billion and that most closely match our company in terms of market cap, strategic interest, workforce similarities and/or business type. The median annual revenues for peer group companies was $5.8$6.2 billion, compared to our 20172022 revenues of $7.4$10.7 billion. The targeted peer group for our 20172022 NEO compensation analysis consisted of the following 1614 companies:
BWX Enterprises, Inc. | ||||||||||||||||||||||||||||||||||||
Oshkosh Corporation | ||||||||||||||||||||||||||||||||||||
Howmet Aerospace Inc. | Parker Hannifin Corporation | |||||||||||||||||||||||||||||||||||
Spirit AeroSystems Holdings, Inc. | ||||||||||||||||||||||||||||||||||||
KBR Inc. | Teledyne Technologies Incorporated | |||||||||||||||||||||||||||||||||||
L-3 Harris Technologies, Inc. | Textron Inc. | |||||||||||||||||||||||||||||||||||
Moog Inc. | TransDigm Group |
The Committee analyzed the business landscape in the markets in which HII operates and has decided to modify this peer group for 2023 by adding Leidos Holdings, Inc. and Dover Corporation and removing NRG Energy, Inc.
2023 Notice and Proxy Statement | ||||||||||||||||||||||||||||||||||||
51 |
Federal-Mogul was acquired by Icahn Enterprises Holdings in 2017. We expect all other peer companies to remain the same for 2018.
Executive Compensation
Compensation Risk Assessment
The Board actively oversees our overall risk profile, including the potential risk posed by our compensation programs. During the third quarter of 2017,2022, a risk assessment and analysis of our executive compensation programs was conducted by Exequity. Their findings confirmed that our executive compensation programs are designed to drive apay-for-performance philosophy and do not create risks that are likely to have a material adverse impact on the company. The Committee reviewedevaluated and discussed the risk analysis with Exequity and agreed with the consultant’s conclusions.
The following factors are key components of our executive compensation risk mitigation efforts:
• | Our stock ownership guidelines and additional stock holding requirement of three years from the date of payout, including any payout that occurs within one year of retirement, provide a strong risk mitigation tool; |
• | Our clawback policy applies to all employees at the level of vice president and above, allowing us to recoup incentive payments in the event of restated financial results; |
• | Our lack of employment agreements discourages management entrenchment and increases our flexibility to make management changes when appropriate; |
• | Our long-term incentive compensation plan includes a relative performance component, alleviating risk and inherent forecasting uncertainty of relying solely on budget-based goals; |
• | Long-term incentive compensation payouts are capped at 200%, preventing possible windfall awards resulting from unforeseen circumstances; and |
2017
• | Long-term incentive compensation awards are earned over a three-year performance period and reduce any incentive to engage in business tactics that improve short-term performance at the expense of long-term success. |
2022 Compensation Elements
The direct compensation elements for executives under our compensation program consist primarily of base salaries, annual incentive awards and long-term incentive awards. Annual base salary provides a fixed minimum level of compensation that is competitive within the relevant market and helps us attract and retain highly qualified executives. Annual incentive awards are generally paid in cash and intended
46 Huntington Ingalls Industries, Inc.
to motivate executives to achievepre-determined annual financial and operational goals that are aligned with our strategic goals. Long-term incentive awards are generally equity-based and intended to promote achievement ofpre-determined three-year financial performance goals aligned with long-term stockholder interests.
20172022 Key Compensation Decisions
Key compensation decisions for our NEOs for 20172022 included the following:
• | Performance-based merit increases were provided for all NEOs for 2022, with the exception of Mr. Petters. The base salaries for Messrs. Stiehle and Boudreaux and Ms. Wilkinson were also increased as a result of market adjustments. |
• | Upon Mr. Kastner’s election as President and Chief Executive Officer, his base salary was increased from $721,000 to $1,100,000 and his AIP target as a percentage of salary was increased from 90% to 125%. As a result, his AIP target value was prorated for 2022 based on the amount of time he served as Chief Operating Officer and as President and CEO during the year. In addition, his LTIP |
52 | Huntington Ingalls Industries, Inc. |
ROIC is a measure of our ability to use cash flows to generate returns. ROIC is calculated as Adjusted Free Cash Flow divided by Invested Capital. Adjusted Free Cash Flow represents cash flow available to HII’s equity and debt stakeholders, calculated as Free Cash Flow (cash from operations less capital expenditures net of related grant proceeds) plusafter-tax interest. Invested Capital is equal to total debt, plus equity, less goodwill and the impact of any Accumulated Other Comprehensive Income/Loss.
EBITDAP is a key indicator of our financial performance. EBITDAP is calculated as Net Earnings, plus interest, taxes, depreciation and amortization, less Net Pension/Post Retirement Benefit Expense.
Base Salaries
The base salaries of Messrs. Cuccias and Kastner and Ms. Walker increased in 2017, and the base salaries for our other NEOs were unchanged, effectively maintaining market competitiveness. Increases for Messrs. Cuccias and Kastner were based on management’s recommendation and an analysis of market and peer company data conducted by our independent compensation consultant. The increase for Ms. Walker was based on individual performance in the form of a merit increase.
2018 Notice and Proxy Statement 47
target value was increased from $2,000,000 to $4,400,000. The decision to increase these components of compensation was based on a market analysis for the position provided by Exequity and management recommendations. |
• | Upon Mr. Petters’ retirement as President and Chief Executive Officer and his appointment as Executive Vice Chairman of the Board, his base salary was increased from $1 to $770,000 as a result of his decision to receive a market salary rather than a $1 annual base salary he elected to receive as President and CEO, and his LTIP target value was decreased from $4,400,000 to $1,452,000. His AIP target as a percentage of salary remained the same at 125%. As a result of Mr. Petters’ base salary increase, his AIP target value was prorated for 2022 based on the amount of time he served as President and CEO and as Executive Vice Chairman of the Board during the year. The decision to adjust these components of compensation was based on a market analysis for the position provided by Exequity and management recommendations. |
• | Targets as a percentage of base salary for annual incentive awards for 2022 under our AIP were increased from 2021 for all NEOs with the exception of Mr. Petters. Based on our performance for 2022, as well as the individual performances of our NEOs, payout awards were approved at levels that ranged from 112% to 155% of targets. |
• | Targets for long-term incentive awards for 2022 were increased from 2021 for Messrs. Kastner, Stiehle and Boudreaux. The target for Mr. Petters was decreased as a result of his retirement from the position of President and CEO. All long-term incentive awards were in the form of restricted performance stock rights, which vest only upon achievement of performance metrics. |
Base Salaries
Base salaries for our NEOs for 20172022 were as follows:
Name
| Title |
|
($) | ||||||||
|
President and Chief Executive Officer (formerly Executive Vice President and Chief Operating Officer)
|
|
|
| |||||||
|
Executive Vice Chairman of the Board (formerly President
|
|
| ||||||||
Thomas E. Stiehle | Executive Vice President and Chief Financial Officer |
| 575,000 | ||||||||
| Executive Vice President and Chief Legal Officer | 570,000 | |||||||||
Kara R. Wilkinson
|
Executive Vice President and President, Ingalls Shipbuilding
|
| |||||||||
|
|
|
|
| |||||||
|
|
| |||||||||
|
Executive Vice President and President, Newport News Shipbuilding
|
|
|
|
* | Upon Mr. Kastner’s election as President and CEO, his |
** | Mr. Petters |
Creation of Annual Incentive Plan (AIP)(“AIP”) and Long-Term Incentive Stock Plan (LTIP)(“LTIP”) Goals
The Committee approved financial metric goals under our AIP for the corporate office, as well as a combination of financial and operational metric goals for each of our three operating divisions. The guiding principle behind all of our performance metrics is that they drive the desired outcomes to promote customer satisfaction and increase stockholder value.
2023 Notice and Proxy Statement | 53 |
Executive Compensation
Division operational goals based on clear and measurable results were developed collaboratively between division management and corporate management. OperationalShipbuilding division operational goals fall into the categories of safety, quality, cost, schedule, diversity and schedule, with a fifth category oriented to goals focused oninclusion, division-specific challenges and opportunities which may change from year to year.and cross-shipbuilding collaboration. Mission Technologies division operational goals fall into the categories of diversity and inclusion, cross business synergy, Sarbanes-Oxley Act (“SOX”) compliant integration, the integration of Alion and division-specific challenges.
The Committee approved financial goals for the LTIP to reward performance in three-year increments. The performance metrics for all participants under the LTIP for 20172022 were pension adjusted return on invested capital (“ROIC”), earnings before interest, taxes, depreciation, amortization and pension (“EBITDAP”) and relative EBITDAP growth over the performance period from January 1, 2022 through December 31, 2024.
ROIC is a measure of our ability to use cash flows to generate returns. ROIC is calculated as Adjusted Free Cash Flow divided by average Invested Capital. Adjusted Free Cash Flow represents cash flow available to HII’s equity and EBITDAP.debt stakeholders, calculated as Free Cash Flow (cash from operations less capital expenditures net of related grant proceeds) plus after-tax interest. Average Invested Capital is equal to total debt, plus equity, less goodwill and the impact of any Accumulated Other Comprehensive Income/Loss.
EBITDAP is a key indicator of our financial performance and calculated as Net Earnings, plus interest, taxes, depreciation and amortization, less Net Pension/Post Retirement Benefit Expense.
Relative EBITDAP growth is defined as our EBITDAP ending balance less our EBITDAP beginning balance, divided by the EBITDAP beginning balance, measured against EBITDAP growth of the S&P Aerospace and Defense Select Index (SPSIAD), which consists of more than 30 companies.
Annual Incentive Compensation Awards
The Committee approves annual incentive compensation targets as a percentage of base salary for each NEO position. Targets vary with relevant benchmark market levels, individual job level, job scope and overall influence on our business results. The Committee considers both the recommendations of its compensation consultant and those of management in determining appropriate annual incentive target levelstargets for our NEOs. The target incentive award (“Target Bonus”) is based on a percentage of each NEO’s base salary and provides a basis upon which a final award amount is determined by the Committee based upon its assessment of performance againstpre-determined performance criteria after the year has ended. The annual incentive compensation targets for our NEOs expressed as a percentage of base salary tend to fall into the third quartile of the relevant market data.
20172022 Annual Incentive Plan
Annual incentive awards for Mr.Messrs. Petters, Mr.Stiehle, Kastner and Ms. WalkerBoudreaux for 20172022 were evaluated based upon Operating Margin (“OM”) and FreeOperating Cash Flow (“FCF”OCF”) for the entire enterprise and revenue for
48 Huntington Ingalls Industries, Inc.
the Technical Solutions division to arrive at a company performance factor (“CPF”), as well as an individual performance factor (“IPF”). OM is equal to segment operating income as a percentage of total revenues. Segment operating income is equal to operating income before the Operating FAS/CAS Adjustment andnon-current state income taxes. FCFOCF represents cash from operating activities lessbefore discretionary pension contributions, capital expenditures net of related grant proceeds.and excess cash flow.
54 | Huntington Ingalls Industries, Inc. |
Executive Compensation
Achievement of the maximum performance criteria results in a CPF factor of 2.0. If the CPF for the corporate office is less than 0.5, no annual incentive award is paid. The IPF can range from 0 to 1.5. No annual incentive award can exceed 200% of an individual’s Target Bonus. The annual incentive award formula for the corporate office for the 20172022 performance period was:
Base Salary x Target % = Target Bonus
Target Bonus x CPF x IPF = Final Bonus Award
2017Upon Mr. Kastner’s election as President and Chief Executive Officer, his base salary was increased from $721,000 to $1,100,000 and his AIP target as a percentage of salary was increased from 90% to 125%. As a result, his AIP target value was prorated for 2022 based on the amount of time he served as Chief Operating Officer and as President and CEO during the year.
Upon Mr. Petters’ retirement as President and Chief Executive Officer and his appointment as Executive Vice Chairman of the Board, his base salary was increased from $1 to $770,000. His AIP target as a percentage of salary remained the same at 125%. As President and Chief Executive Officer, Mr. Petters’ base salary used for incentive compensation purposes was $1,100,000. As a result of his base salary increase, his AIP target value was prorated for 2022 based on the amount of time he served as President and CEO and as Executive Vice Chairman of the Board during the year.
The 2022 annual incentive awards for Messrs. CucciasMs. Wilkinson and MulherinMs. Boykin were evaluated based on their respective division performance factors (“DPF”), which include division financial metric goals, consisting of OM and FCF for their respective divisions,OCF, and their respective divisionnon-financial goals, which include safety, quality, cost, schedule, diversity and schedule,inclusion, division management and cross-shipbuilding collaboration, as well as theiran individual IPFs. The 2017 annual incentive award for Mr. Green was evaluated based on the Technical Solutions DPF of OM, FCF and revenue, as well as his individual IPF.
Achievement of the maximum division performance criteria results in a factorDPF of 2.0. No2.0, and no annual incentive award is paid to division AIP participants if the CPF with reference to the corporate metrics is less than 0.5. The IPF can range from 0 to 1.5. No annual incentive award can exceed 200% of an individual’s Target Bonus. The annual incentive award formula for the operating divisions for the 20172022 performance period was:
Base Salary x Target % = Target Bonus
Target Bonus x DPF x IPF = Final Bonus Award
At the conclusion of each calendar year, our CEO conducts an annual performance evaluation for each NEO in order to recommendas a basis for recommending an IPF for each NEO. These evaluations are reviewed with the Committee. Each NEO’s individual performance is evaluated based upon consideration of the following factors:
• | Financial performance of our company as a whole and the division(s) (where applicable); |
• | Performance on non-financial goals, including enterprise-wide goals and division-specific operating goals; |
• | Strategic leadership and vision; |
• | Program execution and performance; |
• | Customer relationships; and |
• | Peer and employee relationships/engagement. |
2023 Notice and Proxy Statement | 55 |
Executive Compensation
The Committee reviews and considers the recommendations from the CEO and all performance information, including a comparison to the 20172022 peer group data. The Committee then approves annual incentive compensation awards for all NEOs, subject to ratification by the independent members of the Board with respect to the CEO’s compensation.
2018 Notice and Proxy Statement 49
Target Bonus Amounts
Based on analyses of relevant market benchmarks and peer group data, we did not increaseadjustments were made to annual incentive compensation targets as a percentage of base salary for our NEOs from 2016 to 2017.salary. The 20172022 Target Bonus amounts were as follows:
Name
|
Incentive Target as %
|
2017 Target Bonus
| ||||||||
C. Michael Petters (1)
|
|
125
|
|
|
1,187,500
|
| ||||
Christopher D. Kastner
|
|
70
|
|
|
367,500
|
| ||||
Brian J. Cuccias
|
|
70
|
|
|
385,000
|
| ||||
Kellye L. Walker
|
|
70
|
|
|
369,513
|
| ||||
Edgar A. Green III
|
|
70
|
|
|
280,000
|
| ||||
Matthew J. Mulherin, retired (2)
|
|
70
|
|
|
385,000
|
|
Name | Incentive Target as % of Base Salary (%) | 2022 Target Bonus ($) | ||
Christopher D. Kastner (1)
|
125
|
1,375,000
| ||
C. Michael Petters (2)
|
125
|
962,500
| ||
Thomas E. Stiehle (3)
|
80
|
460,000
| ||
Chad N. Boudreaux (3)
|
80
|
456,000
| ||
Kara R. Wilkinson (3)
|
80
|
412,000
| ||
Jennifer R. Boykin (3)
|
80
|
441,252
|
(1) | Mr. |
(2) | Mr. |
Plan Funding
(3) | AIP targets for Messrs. Stiehle and Boudreaux and Mses. Wilkinson and Boykin were increased from 75% of base salary to 80% of base salary. |
56 | Huntington Ingalls Industries, Inc. |
Executive Compensation
Our AIP was designed to comply with the performance-based compensation exception under Section 162(m) of the Internal Revenue Code (“IRC”). Effective January 1, 2018, the performance-based compensation exception to the $1 million deduction limitation of 162(m) was repealed as a result of enactment of the Tax Cuts and Jobs Act (“Tax Act”) on December 22, 2017. Because our 2017 AIP awards paid out in 2018 and were not grandfathered under the Tax Act, the performance-based compensation exception does not apply to the awards.
Prior to repeal of the performance-based compensation exception under IRC Section 162(m), the Committee established performance-based parameters for the payment of annual incentive compensation awards with approval of a bonus pool that appropriates an amount (“Tentative Appropriated Incentive Compensation”) not to exceed 2.5% of our Economic Earnings for the performance year. “Economic Earnings” is defined as income from continuing operations before federal and foreign income taxes and the cumulative effect of accounting changes and extraordinary items,less pension income (or plus pension expense)plus amortization and impairment of goodwill and other purchased intangible assetsplus restructuring or similar charges to the extent they are separately disclosed in the annual report. Our performance-based compensation policy provides that the maximum potential individual incentive compensation award for a performance year for an officer subject to IRC Section 162(m) will be limited to no more than 40% of the Tentative Appropriated Incentive Compensation for the CEO and 20% for each of the other covered NEOs other than our CFO.
20172022 Annual Incentive Plan Goals and Results
For Mr.Messrs. Kastner, Petters, Mr. KastnerStiehle and Ms. Walker, 2017Boudreaux, 2022 annual incentive compensation awards were based 80%entirely upon overall company performanceenterprise performance. For Ms. Wilkinson and 20% upon the performance of Technical Solutions. For Messrs. Cuccias, Green and Mulherin, 2017Ms. Boykin, 2022 annual incentive compensation awards were based upon the performance of the Ingalls division, the Technical SolutionsShipbuilding division and the Newport News Shipbuilding division, respectively.
The corporate AIP score iswas based 80%entirely upon our overall financial score, and 20% upon Technical Solutions revenue, as described below.
50 Huntington Ingalls Industries, Inc.
The respective Ingalls Shipbuilding division and the Newport News Shipbuilding division performance scores arewere based 50% on the respective division operational score and 50%scores, 40% on the respective division financial score.scores and 10% on the combined operating margins (“SOM”) of the two shipbuilding divisions. In determining the division performance factors for the AIP awards for Messrs. Cucciasthe two shipbuilding divisions, the performance criteria were weighted as follows:
Metric | Description | Individual Weight | Overall Weight | |||||
OPERATIONAL* | Safety | Measured by a combination of elements, including total case rate, lost total case rate and lost work days rate | 16% | 50% | ||||
Quality | Measured by integrating elements such as defect rates, process quality, planning quality and other appropriate criteria for program type and phase | 14% | ||||||
Cost | Measured using program-specific objectives related to achievement of cost factors that include Cost Performance Index and overhead rates | 14% | ||||||
Schedule | Measured using program-specific objectives related to achievement of quarterly schedule targets | 14% | ||||||
Cross-Shipbuilding Collaboration | Measured based on five areas (program management, supply chain management, planning, engineering and operations) | 14% | ||||||
Diversity and Inclusion | Measured using a combination of the following elements: hiring, promotional and developmental opportunities and placements for diverse candidates | 14% | ||||||
Division Management | Focused on operational or financial goals or goals relating to environmental, human capital or any other area in which our CEO desires to drive performance. Goals recommended by our CEO and approved by the Committee at the beginning of the performance year are specific to each division’s opportunities and challenges | 14% | ||||||
FINANCIAL | Return on Sales | Measured as division OM before other post- employment retirement benefits and FAS/CAS net pension expense | 50% | 40% | ||||
Operating Cash Flow | Measured as division OCF before discretionary pension contributions, capital expenditures and excess cash flow | 50% | ||||||
OPERATING MARGIN | Combined Shipbuilding Operating Margin | Measured as the combined OM of the shipbuilding divisions | 100% | 10% |
* | The operational criteria, which are specific to the respective divisions, were recommended by our CEO and approved by the Committee at the beginning of the performance year. |
2023 Notice and Proxy Statement | 57 |
Executive Compensation
The Mission Technologies division performance score was based 40% on the division operational score and Mulherin,60% on the performancedivision financial score. Performance criteria are weighted as follows:
Metric | Description | Individual Weight | Overall Weight | |||||
OPERATIONAL* | Growth/Division Specific | Focused on operational or financial goals or goals relating to winning contracts or any other area in which our CEO desires to drive performance. Goals are recommended by our CEO and approved by the Committee at the beginning of the performance year and are specific to the division’s opportunities and challenges | 38% | 40% | ||||
Alion Integration | Measured by a successful integration in the following areas: capability of payroll, HRIS, benefits, travel and cost | 15% | ||||||
Diversity and Inclusion | Measured using program-specific objectives related to the creation of development plans and placements for diverse candidates | 15% | ||||||
Cross Business Synergy | Measured using program-specific objectives related to winning new synergy business pursuits | 8% | ||||||
SOX Compliant Integration | Measured based on the integration of Alion into SOX compliant policies | 25% | ||||||
FINANCIAL | Revenue | Measured as division total sales | 33% | 60% | ||||
EBITDA | Measured as division operating income before interest, taxes, depreciation and amortization | 33% | ||||||
Operating Cash Flow | Measured as division OCF before capital expenditures | 34% |
*The division operational criteria consist of the following five performance metrics, which are weighted equally (i.e., eachsub-metric comprises 20% of the division operational criteria). These criteria, which are specific to the respective divisions, arewere recommended by our CEO and approved by the Committee at the beginning of the performance year.
The Technical Solutions division performance score is based 100% on the division financial score. In determining the division performance factors for the AIP award for Mr. Green, the performance criteria are weighted as follows:
2018 Notice and Proxy Statement 51
All of the AIP goals for our NEOs are recommended by our CEO and then approved by the Committee.
AIP goals are plan-based, with minimum and maximum limits based on clear targets connected to our strategic goals.annual operating plan. The AIP goals are based upon metrics that are customer focused and stockholder friendly with clearline-of-sight financial and operational metrics. Final AIP performance metrics for 2017,2022, as determined by the Committee, were as follows:
Corporate 20172022 Metrics for Mr.Messrs. Kastner, Petters, Mr. KastnerStiehle and Ms. WalkerBoudreaux
Corporate 2017 Metrics
|
Goals @
|
Goals @
|
Goals @
|
Actual
|
Points
|
Weighting
|
Final AIP
| |||||||||||||||||||||
OM—Performance (%)
|
|
7.69
|
|
|
8.13
|
|
| 8.66
|
|
| 901
|
|
|
200
|
|
|
40%
|
|
|
80
|
| |||||||
FCF—Performance ($M)
|
|
491
|
|
|
548
|
|
| 618
|
|
| 636
|
|
|
200
|
|
|
40%
|
|
|
80
|
| |||||||
TS Revenue ($M)
|
|
892
|
|
|
992
|
|
| 1,091
|
|
| 952
|
|
|
60
|
|
|
20%
|
|
|
12
|
| |||||||
Total Performance (CPF)
|
|
Total AIP Score
|
|
|
172
|
|
Ingalls Shipbuilding 2017 Metrics for Mr. Cuccias
Corporate 2022 Metrics | Goals @ 0% | Goals @ 100% | Goals @ 200% | Performance Results | Points Earned | Weighting | Final AIP Points | ||||||||||||||||||||||||||||
OM—Performance (%) |
| 5.69 |
| 6.71 |
| 7.22 |
| 6.68 |
| 98 |
| 50% |
|
| 49 | ||||||||||||||||||||
OCF—Performance ($M) |
| 721 |
| 860 |
| 922 |
| 938 |
| 200 |
| 50% |
|
| 100 | ||||||||||||||||||||
Total Performance (CPF) |
| Total AIP Score |
| 149 |
Ingalls 2017 Metrics
|
Goals @
|
Goals @
|
Goals @
|
Actual
|
Points
|
Weighting
|
Final AIP
| |||||||||||||||||||||
Operational Metrics
| ||||||||||||||||||||||||||||
Operational Performance (Safety, Quality, Cost, Schedule, Site President Specific)
|
|
0
|
|
|
100
|
|
|
200
|
|
|
167
|
|
|
167
|
|
|
50%
|
|
|
84
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Financial Metrics
| ||||||||||||||||||||||||||||
OM—Performance (%)
|
|
8.40
|
|
|
9.20
|
|
|
10.20
|
|
|
12.60
|
|
|
100
|
|
|
50%
|
|
|
50
|
| |||||||
FCF—Performance ($M)
|
|
138
|
|
|
174
|
|
|
223
|
|
|
373
|
|
|
100
|
|
|
50%
|
|
|
50
|
| |||||||
|
|
|
| |||||||||||||||||||||||||
Financial Performance
|
|
50%
|
|
|
100
|
| ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Total Performance
|
|
Total AIP Score
|
|
|
184
|
|
58 | Huntington Ingalls Industries, Inc. |
Technical Solutions 2017 Metrics for Mr. Green
TS 2017 Metrics
|
Goals @
|
Goals @
|
Goals @
|
Actual
|
Points
|
Weighting
|
Final AIP
| |||||||||||||||||||||
Revenue ($M)
|
|
892
|
|
|
992
|
|
|
1,091
|
|
|
952
|
|
|
18
|
|
|
30%
|
|
|
18
|
| |||||||
OM—Performance (%)
|
|
2.30
|
|
|
2.60
|
|
|
2.90
|
|
|
2.21
|
|
|
35
|
|
|
35%
|
|
|
0
|
| |||||||
FCF—Performance ($M)
|
|
9
|
|
|
10
|
|
|
11
|
|
|
44
|
|
|
70
|
|
|
35%
|
|
|
70
|
| |||||||
Total Performance
|
|
Total AIP Score
|
|
|
88
|
|
52 Huntington Ingalls Industries, Inc.
Ingalls Shipbuilding 2022 Metrics for Ms. Wilkinson
Ingalls 2022 Metrics | Goals @ 0% | Goals @ 100% | Goals @ 200% | Performance Results | Points Earned | Weighting | Final AIP Points | |||||||||||||||||||||
Operational Metrics
| ||||||||||||||||||||||||||||
Operational Performance (Safety, Quality, Cost, Schedule, Cross-Shipbuilding Collaboration, Diversity and Inclusion, President Specific) | 0 | 100 | 200 | 137 | 137 | 50% | 68 | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Financial Metrics | ||||||||||||||||||||||||||||
OM—Performance (%) | 9.00 | 10.00 | 11.00 | 11.36 | 100 | |||||||||||||||||||||||
OCF—Performance ($M) |
| 220 |
|
| 270 |
|
| 295 |
|
| 320 |
|
| 100 |
| |||||||||||||
|
| |||||||||||||||||||||||||||
Financial Performance |
| 200 |
|
| 40% |
|
| 80 |
| |||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Shipbuilding Operating Margin Metric | ||||||||||||||||||||||||||||
Combined Shipbuilding OM (%) |
| 7.00 |
|
| 8.00 |
|
| 9.00 |
|
| 7.70 |
|
| 70 |
|
| 10% |
|
| 7 |
| |||||||
|
| |||||||||||||||||||||||||||
Total Performance (DPF) |
| Total AIP Score |
|
| 155 |
|
Newport News Shipbuilding 20172022 Metrics for Mr. MulherinMs. Boykin
NNS 2017 Metrics
|
Goals @
|
Goals @
|
Goals @
|
Actual
|
Points
|
Weighting
|
Final AIP
| |||||||||||||||||||||||||||||||||||||||||||||||||
NNS 2022 Metrics | Goals @ 0% | Goals @ 100% | Goals @ 200% | Performance Results | Points Earned | Weighting | Final AIP Points | |||||||||||||||||||||||||||||||||||||||||||||||||
Operational Metrics
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operational Performance (Safety, Quality, Cost, Schedule, Site President Specific)
|
|
0
|
|
|
100
|
|
|
200
|
|
|
119
|
|
|
119
|
|
|
50%
|
|
|
59
|
| |||||||||||||||||||||||||||||||||||
Operational Performance (Safety, Quality, Cost, Schedule, Cross-Shipbuilding Collaboration, Diversity and Inclusion, President Specific) | 0 | 100 | 200 | 125 | 125 | 50% | 63 | |||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||
Financial Metrics
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OM—Performance (%)
|
|
8.40
|
|
|
8.80
|
|
|
9.25
|
|
|
8.50
|
|
|
11
|
|
|
50%
|
|
|
6
|
| 6.00 | 7.00 | 7.50 | 6.10 | 5 | ||||||||||||||||||||||||||||||
FCF—Performance ($M)
|
|
344
|
|
|
364
|
|
|
384
|
|
|
219
|
|
|
0
|
|
|
50%
|
|
|
0
|
| |||||||||||||||||||||||||||||||||||
OCF—Performance ($M) |
| 384 |
|
| 434 |
|
| 459 |
|
| 518 |
|
| 100 |
| |||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Performance
|
|
50%
|
|
|
6
|
|
| 105 |
|
| 40% |
|
| 42 |
| |||||||||||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Performance
|
|
Total AIP Score
|
|
|
65
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||
Shipbuilding Operating Margin Metric | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Combined Shipbuilding OM (%) |
| 7.00 |
|
| 8.00 |
|
| 9.00 |
|
| 7.70 |
|
| 70 |
|
| 10% |
|
| 7 |
| |||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Performance (DPF) |
| Total AIP Score |
|
| 112 |
|
Payouts to NEOs under the AIP could have ranged from 0% to 200% of each NEO’s Target Bonus. For 2017,2022, the Committee exercised discretion to adjust the DPFAIP scores for both the Technical SolutionsMission Technologies division and Newport News Shipbuilding divisions,the corporate office based upon certainon non-recurring items. The items for Mission Technologies, including significant unidentified new work challenges and integration activities with respect to several business units. Based on adjustments for Newport News Shipbuilding were based upon strategic business decisions made after the 2017 goals were approved, as well as continuing significant support provided to Technical Solutions to facilitate its business growth. For Technical Solutions, adjustments were based upon the net impact on Technical Solutions of the bankruptcy of Westinghouse, a significant customer.
Based upon these adjustmentsitems and a review of overall financial and operational performance, the Committee increased the Mission Technologies AIP score and approved final DPFsa corresponding reduction in the AIP score for the corporate office to 147, which represents the percentage of 135%, 100%target incentive compensation at which payments were made to the corporate office.
2022 AIP payouts for the NEOs at the Ingalls Shipbuilding and 176% for Technical Solutions, Newport News Shipbuilding divisions were made at the performance scores reflected in the tables above, and corporate, respectively.the performance scores represent the percentage of target incentive compensation at which payouts were made.
2018 Technical Solutions
2023 Notice and Proxy Statement | 59 |
Executive Compensation
2023 Annual Incentive Plan GoalsPerformance Metric Changes
For 2018, we have added an additional metric2023, the Committee approved a change to the metrics utilized to measure performance for the Technical Solutionscorporate office and division under our AIP. Theannual incentive awards. For AIP awards covering the performance scoreperiod of January 1, 2023 through December 31, 2023, a metric related to strategic leadership, comprised of leadership, sustainability, cybersecurity and compliance goals, will be based uponadded to the Technical Solutions division financial metrics described above, as well as division management goals to drive performance onnon-financial division objectives.AIP.
Long-Term Incentive Compensation Awards
Our long-term incentive compensation goals are intended to reward three-year performance increments based primarily onupon the achievement of financial metrics. Long-term incentive compensation for our NEOs is provided in the form of Restricted Performance Stock Rights (“RPSRs”). Each RPSR represents the right to receive one share of our common stock, or cash of equivalent value, subject to vesting as provided in the award. Vesting occurs oncewhen the Committee determines thatthe extent to which the applicable performance criteria for the performance period have been satisfied.achieved. Earned RPSRs may be paid out in shares of our common stock or, at the discretion of the Committee, cash. RPSRs include dividend equivalent units or DEUs,(“DEUs”) that are credited to the RPSRs following payment by the company of a cash dividend on our common stock. These DEUs remain subject to the terms and conditions of the underlying RPSR grants and are paid only to the extent the underlying RPSRs vest upon satisfaction of the applicable performance criteria.
The Committee determines long-term incentive compensation target values for our NEOs based upon a peer group analysis, applying value-based guidelines that focus on the award value, rather than the
2018 Notice and Proxy Statement 53
number of shares granted (share-based guidelines). The Committee believes value-based guidelines more effectively deliver long-term incentive compensation awards that are consistent with awards given toreceived by individuals holding comparable positions at peer companies.
20172022 Long-Term Incentive Compensation Awards
Long-term incentive compensation awards in 20172022 were granted under our stockholder-approved Huntington Ingalls Industries, Inc. 2012 Long Term Incentive Stock Plan (the “2012 Plan”). All long-term incentive compensation awards granted to our NEOs in 20172022 were in the form of RPSRs and coveredcover the performance period from 20172022 through 2019.2024. The Committee and management review and evaluate RPSR performance goals to ensure they are aligned with our long-term objectives. For the 20172022 grants, the Committee and management determined that performance for long-term incentive compensation awards to our NEOs would be measured solely in terms of overall company financial metrics: pension adjustedusing ROIC, EBITDAP and relative EBITDAP. The number of shares that ultimately vest and are issued to an NEO under an RPSR award can vary from 0% to 200% of the original number of shares granted.
Long-termFor 2022, the long-term incentive compensation targets as a percentage of base salarytarget values for our NEOs for 2017 were unchanged from the 2016 targets and were approved by the Committee as follows:
Name
|
Incentive Target as
|
2017 Long-Term Incentive Target ($)
|
Actual Award ($)
| |||||
C. Michael Petters (1)
|
400
|
3,800,000
|
|
3,799,904
|
| |||
Christopher D. Kastner
|
220
|
1,045,000
|
|
1,044,897
|
| |||
Brian J. Cuccias
|
210
|
1,081,500
|
|
1,081,329
|
| |||
Kellye L. Walker
|
175
|
901,250
|
|
901,144
|
| |||
Edgar A. Green III
|
210
|
840,000
|
|
839,912
|
| |||
Matthew J. Mulherin, retired
|
210
|
1,081,500
|
|
1,081,329
|
|
Name | 2022 Long-Term Incentive ($) | Actual Award ($) | ||||||||
Christopher D. Kastner |
| 4,400,000 |
| 4,399,840 |
| |||||
C. Michael Petters |
| 1,452,000 |
| 1,451,915 | ||||||
Thomas E. Stiehle |
| 1,500,000 |
| 1,499,890 | ||||||
Chad N. Boudreaux |
| 1,150,000 |
| 1,149,977 | ||||||
Kara R. Wilkinson |
| 1,150,000 |
| 1,149,977 | ||||||
Jennifer R. Boykin |
| 1,150,000 |
| 1,149,977 |
60 | Huntington Ingalls Industries, Inc. |
Executive Compensation
The target dollar amounts are grant date theoretical values and not based upon any actual calculation or estimate of payout. An NEO is not guaranteed to receive any payout as a result of the 20172022 grants.
2015-20172020-2022 Long-Term Incentive Plan Goals and Results
During the first quarter of each year, the Committee reviews our financial performance over the prior three years against approved long-term incentive compensation goals to determine payout multiples for RPSRs with a performance period that ended December 31 of the prior year.
At the February 20182023 meeting, the Committee reviewed performance for the January 1, 20152020 through December 31, 20172022 performance period. PayoutsThe performance score for the 20152020 LTIP equity grants, based upon actual performance, wereas approved by the Committee, was calculated as follows:
HII 2020-2022 Goals | Actual Performance (Adj.) | |||||||||||||||||||||||||||||||||||||||||||||||||
HII 2015-2017 Goals |
Actual Performance (Adj.) | |||||||||||||||||||||||||||||||||||||||||||||||||
@ 0%
|
@ 100%
|
@ 200%
|
Actual
|
Score
|
Weighting
|
CPF
|
Goals @ 0%
|
Goals @ 100%
|
Goals @ 200%
|
Performance
| Score
| Weighting
| CPF
| |||||||||||||||||||||||||||||||||||||
EBITDAP ($M) (1)
|
|
2,304
|
|
|
2,484
|
|
|
2,709
|
|
|
2,565
|
|
|
136
|
|
50%
|
|
68
|
%
|
| 2,952 |
|
| 3,102 |
|
| 3,252 |
| 2,860 |
| 0 |
| 40% |
| 0 |
| ||||||||||||||
ROIC (%) (2)
|
|
37.60
|
|
|
40.60
|
|
|
44.40
|
|
|
63.00
|
|
|
200
|
|
50%
|
|
100
|
%
|
| 53.03 |
|
| 56.65 |
|
| 60.26 |
| 64.89 |
| 200 |
| 40% |
| 80 |
| ||||||||||||||
Relative EBITDAP (%) (3) |
| 25.00 |
|
| 55.00 |
|
| 75.00 |
| 87.50 |
| 200 |
| 20% |
| 40 |
| |||||||||||||||||||||||||||||||||
Total
|
|
Total LTIP Score
|
|
168
|
%
| Total LTIP Score |
| 120 |
|
(1) | Net Earnings before interest, taxes, depreciation, amortization and Net Pension/Post Retirement Expense. |
(2) | Cumulative FCF divided by average invested |
54 Huntington Ingalls Industries, Inc.
(3) | HII EBITDAP ending balance less HII EBITDAP beginning balance, divided by the EBITDAP beginning balance, measured against EBITDAP growth of the S&P Aerospace and Defense Select Index. |
The 20152020 LTIP awards were earnedpaid out at 168%120% of target, value, and the earned RPSRs were issued on February 27, 2018.28, 2023.
Additional Benefits
We provide additional benefits to our NEOs through various plans that are also available to some or all of our other employees. Although these plans are not directly overseen by the Committee, the Committee considers benefits under these plans when considering an executive’s total annual compensation and determining the annual and long-term compensation components. These benefits are not performance-related and are designed to provide a market competitive compensation package to attract, motivate and retain the executive talent we need to achieve our business objectives. The plans include broad-based retirement plans, as well as additional supplemental executive benefits we provide.benefits. These supplemental benefits include supplemental pension plans, enhanced health and welfare benefits (dental, life, AD&D and disability) and the Special Officers Retiree Medical Plan (“SORMP”) for our former CEO upon retirement.
Defined Benefit Retirement Plans. We maintaintax-qualified defined benefit pension plans that cover all but twoone of our NEOs and the majority of our workforce. These plans are structured to retain and reward employees for long service and to recognize higher performance levels through annual pay increases. Compensation, age and service factor into the amount of the benefits provided under the plans.
We also maintainnon-tax-qualified supplemental defined benefit pension plans that cover all but twoone of our NEOs. These plans provide benefits that would have been provided under thetax-qualified plans if no limits applied to such plans under the Internal Revenue Code.Code (“IRC”). These types of benefits are common in our industry.
2023 Notice and Proxy Statement | 61 |
Executive Compensation
Defined Contribution Savings Plans. We maintaintax-qualified defined contribution savings plans that cover our NEOs and the majority of our workforce. Participating employees contribute portions of their pay to the plans, and the company generally provides a matching contribution.
We also maintain twonon-tax-qualified supplemental savings plans that cover all eligible employees, including our NEOs. The Savings Excess Plan (“SEP”) allows eligible employees to defer compensation beyond the IRC limits of thetax-qualified plans and receive a matching company contribution. Eligibility begins when annual income, including base pay and bonuses, equals or exceeds $270,000,$305,000, the plan compensation limit under the Internal Revenue Code.IRC for 2022. Eligible employees under the IRC may participate in the plan in the calendar year after their total cash income meets or exceeds this limit.
The Officers Retirement Account Contribution Plan (“ORAC”) covers the majority of the company’s elected and appointed officers hired on or after July 1, 2008, who are not eligible for defined benefit pension plans. Enrollment is automatic, and the company contributes an amount equal to 4% of the officer’s eligible compensation.
Because they wereMr. Boudreaux was hired after June 30, 2008, Mr. Green and Ms. Walker arehe is not eligible to participate in the company’s qualified and nonqualified defined benefit pension plans, but they receivehe receives the SEP and ORAC benefits described above. Our other NEOs do not receive ORAC benefits. Additional information about the SEP and the ORAC is provided in the Nonqualified Deferred Compensation table.
Special Officer Retiree Medical Plan. Our President and Chief Executive Officer Mr. Petters is a participant in the SORMP and entitled to retiree medical benefits under the terms of the SORMP. Coverage under the SORMP is essentially a continuation of medical benefits into retirement, plus retiree life insurance. Additional information about the SORMP is provided below in the Retiree Medical Arrangement section of the Potential Payments upon Termination or Change of Control section and related tables.
2018 Notice and Proxy Statement 55
Perquisites. Our NEOs are eligible for certain executive perquisites, which include financial planning, dental coverage, physical exams, personal liability insurance and relocation benefits. These perquisites are common within our industry and comprise an important component of our total compensation package. Management and the Committee review perquisites and benefits on an annual basis to ensure they are appropriate.
Severance Benefits. Management and the Committee believe severance benefits are appropriate for a reasonable amount of time following certain terminations of employment, including a termination without cause. In addition to providing a severance plan for all employees, we maintain The Severance Plan for Elected and Appointed Officers of Huntington Ingalls Industries. Benefits under this plan for our NEOs include the following:
• | Lump Sum Cash Severance Payment—A lump sum equal to one and one half (1.5) times the sum of annual base salary and Target Bonus; |
• | Extension of Medical and Dental Benefits—The employer portion of medical and dental insurance premiums for a period of 18 months following the date of termination (concurrent with COBRA); |
• | Financial Planning Reimbursement—Eligible expenses incurred prior to the date of termination and eligible expenses incurred in the year in which the date of termination occurs up to a maximum of $15,000 ($30,000 for the CEO), and any fees incurred in the year following the year in which the date of termination occurs up to a maximum of $15,000 ($30,000 for the CEO); |
• | Executive Physical Reimbursement—Eligible expenses up to $2,000 incurred through the end of the year of termination; and |
• | Outplacement Services Reimbursement—Fees incurred within one year after the date of termination (limited to 15% of base salary as of the date of termination). |
62 | Huntington Ingalls Industries, Inc. |
Executive Compensation
Additional Compensation Policies
Total Compensation—Tally Sheet
Management provides the Committee with a total compensation and benefits perspective for each NEO, which includes a tally sheet that captures each element of total compensation and benefits. In conjunction with the Committee’s consideration of NEO compensation compared to the company’s peer group, this tally sheet ensures that compensation decisions are made within a total compensation framework. The tally sheet provides a broad perspective that covers basic annual compensation components, as well as an annualized value of the benefits and perquisites each NEO receives. Accordingly, the values of nonqualified deferred compensation, outstanding equity awards, health and welfare benefits, pension benefits and perquisites are included.
Tax Deductibility of Pay—SectionPay-Section 162(m)
Prior to January 1, 2018, Section 162(m) of the Internal Revenue Code generally limited the deductibility ofnon-performance based compensation to $1 million each for a public company’s CEO and next three highest-paid executive officers (other than the CFO). Among the provisions included in the Tax Cuts and Jobs Act areof 2017 (the “Tax Act”) were changes to Section 162(m). Effective January 1, 2018, the performance-basedperformance based compensation exception to the $1 million deduction limitation was repealed and the employees subject to the $1 million limitation arewere revised to include the CEO, CFO and next three highest-paid executive officers. The only exceptionAIP awards and long-term incentive compensation awards in 2022, as well as payouts on 2022 AIP awards and payouts on 2020 long-term incentive compensation awards, to this rule is for compensation that is paid pursuantexecutives subject to a binding contract in effect on November 2, 2017 that would otherwise have been deductible under prior Section 162(m) rules. Accordingly, any compensation paid in the future pursuant162 (m) are subject to new compensation arrangements entered into after November 2, 2017, even if performance-based, will count toward the $1 million annual deduction limit if paid to an executive subject to 162(m). We have not yet completed an analysis of the binding contract requirements on our various compensation plans to determine the impact of the law change.limit.
56 Huntington Ingalls Industries, Inc.
Grant Date for Equity Compensation Awards
Our annual grant cycle for long-term incentive compensation equity awards occurs simultaneously with annual salary increases and annual incentive compensation awards. We expect this to occur in the first two andone-half months of each year. This timing allows management and the Committee to make decisions on all three compensation elements at the same time to promote a total compensation review.approach.
Stock Ownership Guidelines
To promote ownership of our common stock by our executives and alignment of management and stockholder interests, we have adopted stock ownership guidelines that prescribepre-determined stock ownership levels for certain executives, expressed as a multiple of the executive’s base salary. The stock ownership guidelines prescribe the following ownership levels:
• | President and CEO—7 times base salary; |
• | Elected officers reporting directly to the President and CEO—3 times base salary; and |
• | Other elected, appointed and other officers—1.5 times base salary. |
The ownership guidelines may be satisfied in one or more of the following ways:
• | Direct ownership of our common stock; |
• | Restricted Stock Rights (“RSRs”) (vested or unvested) granted in the form of restricted stock units and issued as part of a long-term incentive compensation award; |
• | Equivalent shares held in our savings plan (401(k) plan); or |
• | Equivalent shares held in our Savings Excess Plan. |
2023 Notice and Proxy Statement | 63 |
Executive Compensation
As of February 28, 2018,2023, the percentage of stock ownership target attained by each NEO was as follows:
Name
| Target
|
% of Target Attained
| |||||
Christopher D. Kastner | 7 x salary | 184% | |||||
C. Michael Petters | 3 x salary | 6011% | |||||
Thomas E. Stiehle |
| ||||||
3 x salary | 182% | ||||||
Chad N. Boudreaux | 3 x salary | 238% | |||||
Kara R. Wilkinson |
| ||||||
3 x salary | 47% | ||||||
Jennifer R. Boykin | 3 x salary |
| |||||
|
|
| |||||
|
|
| |||||
|
|
210% |
Stock Holding Requirement
To supplement our stock ownership guidelines, we adopted stock holding requirements for our NEOs.NEOs and other officers. Under the holding requirements, our NEOs and other officers must hold at least 50% of the total number of shares of our common stock received as compensation until the earlier of (a) the third anniversary of the date such shares are issued or (b) the date that employment terminates due to death or disability. The holding requirement continues upon termination or retirement for aone-year period after separation from the company and applies to any equity compensation award vesting in thatone-year period. Any equity compensation award vesting or stock options exercised after theone-year anniversary of retirement or termination are not subject to the holding requirement.
2018 Notice and Proxy Statement 57
Executive Compensation Recoupment
The Committee has adopted the Policy Regarding the Recoupment of Certain Performance-Based Compensation Payments (“clawback policy”), which requires reimbursement of all or a portion of any performance-based short-short-term or long-term cash or equity incentive compensation payments to an employee at the vice president or more senior position level, when (i) restatement of financial results is necessitated by noncompliance with any financial reporting requirement under the securities laws and (ii) payment of such amounts was received by the employee during the12-month period following the first public issuance or filing of the financial results that were subsequently restated. The clawback policy is in addition to any rights to repayment we may have under Section 304 of the Sarbanes Oxley Act and other applicable laws and does not limit other available remedies, including dismissing an employee or initiating other disciplinary actions.
Trading Restrictions and Policy Against Hedging and Pledging
Our insider trading policy prohibits directors, officers and employees from buying or selling securities of any company while aware of materialnon-public information about that company, subject to certain limited exceptions involvingpre-arranged trading plans, and from providing such materialnon-public information to any person who may trade on the basis of such information. This policy also prohibits directors, officers directors and certain other employees from engaging in speculative transactions in company securities, pledging company securities as collateral for a loan or other transaction or engaging in any hedging transactions involving company securities, including zero cost collar transactions and forward sale contracts. Directors, officers and certain other employees may engage in permitted transactions in our securities only during certain specified periods and after receiving authorization from our Office of the Chief Legal Officer.Corporate Secretary.
64 | Huntington Ingalls Industries, Inc. |
Executive Compensation
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management this Compensation Discussion and Analysis and, based on such review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Annual Report on Form10-K for the year ended December 31, 2017.2022.
Submitted by members of the Compensation Committee:
Victoria D. Harker, ChairChairwoman
Philip M. Bilden
Kirkland H. DonaldFrank R. Jimenez
Anastasia D. Kelly
2023 Notice and Proxy Statement | 65 |
58 Huntington Ingalls Industries, Inc.
20172022 Summary Compensation Table
The following table summarizes the compensation for our 20172022 NEOs over the last three years.
Summary Compensation Table
Name & Principal Position
| Year
| Salary ($) (1)
| Bonus ($) (2)
| Stock ($) (3)
|
Non-Equity
| Change in ($) (5)
| All Other
| Total ($)
| ||||||||||||||||||||||||||||||||
C. Michael Petters, President and Chief
|
|
2017 |
|
|
1 |
|
|
3,799,904 |
|
|
1,922,800 |
|
|
2,194,062 |
|
|
57,412 |
|
|
7,974,179 |
| |||||||||||||||||||
2016 | 328,847 | 3,799,960 | 2,018,750 | 1,000,696 | 57,983 | 7,206,236 | ||||||||||||||||||||||||||||||||||
| 2015
|
|
| 986,538
|
|
| 3,799,926
|
|
| 2,102,736
|
|
| 1,239,275
|
|
| 30,483
|
|
| 8,158,958
|
| ||||||||||||||||||||
Christopher D. Kastner, Executive Vice President, |
|
2017 |
|
|
517,308 |
|
|
1,044,897 |
|
|
646,800 |
|
|
1,565,930 |
|
|
57,286 |
|
|
3,832,220 |
| |||||||||||||||||||
| 2016
|
|
| 463,462
|
|
| 1,044,949
|
|
| 565,250
|
|
| 1,065,316
|
|
| 56,323
|
|
| 3,195,300
|
| ||||||||||||||||||||
Brian Cuccias, Executive Vice President
|
|
2017 |
|
|
545,290 |
|
|
1,081,329 |
|
|
708,400 |
|
|
1,803,460 |
|
|
51,231 |
|
|
4,189,710 |
| |||||||||||||||||||
2016 | 514,906 | 944,943 | 630,877 | 1,511,713 | 50,322 | 3,652,761 | ||||||||||||||||||||||||||||||||||
2015 | 442,309 | 839,934 | 613,463 | 826,841 | 42,907 | 2,765,454 | ||||||||||||||||||||||||||||||||||
Kellye L. Walker, Executive Vice President
|
|
2017 |
|
|
525,894 |
|
|
901,144 |
|
|
650,342 |
|
|
— |
|
|
168,475 |
|
|
2,245,855 |
| |||||||||||||||||||
2016 | 505,096 | 901,249 | 612,850 | — | 151,352 | 2,170,547 | ||||||||||||||||||||||||||||||||||
| 2015
|
|
| 491,231
|
|
| 220,000
|
|
| 1,251,251
|
|
| 721,000
|
|
| —
|
|
| 166,630
|
|
| 2,850,112
|
| |||||||||||||||||
Edgar Green III, Executive Vice President
|
|
2017 |
|
|
400,000 |
|
|
839,912 |
|
|
378,000 |
|
|
— |
|
|
88,498 |
|
|
1,706,410 |
| |||||||||||||||||||
Matthew J. Mulherin, Executive Vice President |
|
2017 |
|
|
309,000 |
|
|
1,081,329 |
|
|
224,671 |
|
|
1,503,791 |
|
|
43,098 |
|
|
3,161,889 |
| |||||||||||||||||||
2016 | 515,000 | 1,081,472 | 540,750 | 163,722 | 32,012 | 2,332,956 | ||||||||||||||||||||||||||||||||||
| 2015
|
|
| 534,808
|
|
| 1,081,462
|
|
| 470,453
|
|
| (486,616
| )
|
| 59,643
|
|
| 1,659,749
|
| ||||||||||||||||||||
Name & Principal Position
| Year
| Salary ($) (1)
| Stock Awards ($) (2)
| Non-Equity Incentive Plan Compensation ($) (3)
|
Change in Pension Value and Non-Qualified Deferred Compensation Earnings (4)
| All Other Compensation ($) (5)
| Total ($)
| |||||||||
Christopher D. Kastner, | 2022 | 1,023,077 | 4,399,840 | 1,832,443 |
| 363,888 |
| 123,018 | 7,742,266 | |||||||
President and Chief | 2021 | 683,424 | 1,999,976 | 1,260,000 |
| — |
| 54,552 | 3,997,952 | |||||||
Executive Officer | 2020 | 589,597 | 1,499,923 | 346,467 |
| 658,779 |
| 55,127 | 3,149,893 | |||||||
C. Michael Petters, | 2022 | 621,924 | 1,451,915 | 1,512,892 |
| — |
| 48,517 | 3,635,247 | |||||||
Executive Vice Chairman | 2021 | 1 | 4,399,947 | 2,750,000 | 503,926 | 60,192 | 7,714,067 | |||||||||
of the Board | 2020 | 1 | 4,399,962 | 1,072,500 | 915,344 | 52,610 | 6,440,417 | |||||||||
Thomas E. Stiehle, | 2022 | 571,154 | 1,499,890 | 676,200 |
| 664,774 |
| 108,586 | 3,520,604 | |||||||
Executive Vice President and | 2021 | 502,281 | 999,988 | 825,000 |
| 546,756 |
| 43,621 | 2,917,646 | |||||||
Chief Financial Officer (6) | ||||||||||||||||
Chad N. Boudreaux, | 2022 | 563,077 | 1,149,977 | 670,320 |
| — |
| 174,005 | 2,557,379 | |||||||
Executive Vice President and | 2021 | 520,385 | 949,855 | 787,500 |
| — |
| 108,903 | 2,366,643 | |||||||
Chief Legal Officer (6) | ||||||||||||||||
Kara R. Wilkinson, | 2022 | 512,314 | 1,149,977 | 638,600 |
| — |
| 48,735 | 2,349,626 | |||||||
Executive Vice President and President, Ingalls Shipbuilding (7) | ||||||||||||||||
Jennifer R. Boykin, | 2022 | 549,900 | 1,149,977 | 494,202 |
| — |
| 35,842 | 2,229,921 | |||||||
Executive Vice President | 2021 | 540,751 | 1,149,852 | 523,176 |
| 72,871 |
| 60,437 | 2,347,087 | |||||||
and President, Newport News Shipbuilding | 2020 | 538,327 | 1,149,777 | 247,393 |
| 1,719,315 |
| 22,488 | 3,677,300 |
(1) | The amounts in this column represent salary earned during the year and include amounts deferred under the savings and nonqualified deferred compensation plans. |
(2) |
The dollar values shown in this column are equal to the grant date fair values of equity awards made during the year, computed in accordance with FASB ASC Topic 718. Information about the assumptions used to value these awards can be found in Note |
The grant date values of |
Christopher D. Kastner |
| $ 8,799,680 |
|
| |
C. Michael Petters |
| $ 2,903,830 |
|
| |
Thomas E. Stiehle |
| $ 2,999,780 |
|
| |
Chad N. Boudreaux |
| $ 2,299,954 |
|
| |
Kara R. Wilkinson |
| $ 2,299,954 |
|
| |
Jennifer R. Boykin |
| $ 2,299,954 |
|
|
The amounts reported in this column are attributable to the AIP awards earned for |
66 | Huntington Ingalls Industries, Inc. |
2018 Notice and Proxy Statement 59
The amounts reported in this column represent the changes in actuarial present values of the accumulated benefits under defined benefit pension plans, determined by comparing the prior completedyear-end amount to the coveredyear-end amount. We do not have any deferred compensation plans that provide for above market or preferential earnings. |
Detailed information on the amounts reported in this column is included in the All Other Compensation table below. |
Messrs. Stiehle and |
(7) | Ms. Wilkinson first became |
20172022 CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of RegulationS-K promulgated under the Securities and Exchange Act of 1934, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K. There are Companies may apply a variety of different methodologies, assumptions, adjustments and estimates that companies may apply in compliance with Item 402(u) of RegulationS-K; as such, the information provided should not be used as a basis for comparisoncomparisons between different companies.
For 2017,2022, the annual total compensation of the median employee of our company was $132,546,$89,990, and the annual total compensation of our CEO, as reported in the Summary Compensation Table above, was $7,974,179.$7,742,266. Based onupon this information, the ratio of the annual total compensation of our CEO in 2022, Mr. Petters,Kastner, to the median of the annual total compensation of all employees was 6086 to 1.
Summary Total Compensation and |
CEO |
Median Employee |
Pay | |||
$7,974,179
|
$132,546
|
60
|
Summary Total Compensation and Pay Ratio | CEO | Median Employee | Pay Ratio | |||
$7,742,266
|
$89,990
|
86
|
In order to identifyOur process for identifying the median of the annual total compensation of all our employees, as well as to determinedetermining the annual total compensation of our median employee and our CEO, we took the following steps:was as follows:
We determined that, as of December 31, 2017,2022, our employee population consisted of approximately 38,92945,982 individuals. For purposes of determining our median employee, we excluded 73116 employees located in Canada, 9 employees in TrinidadEurope, Asia and 14 employees in the U.K. for aAustralia. The remaining workforce of 38,832 (excluding our CEO). was 45,865 employees. This population consisted of our full-time, part-time, temporary and seasonal employees.
Our practice is to perform the median employee analysis each year. December 31, 2017,2022, was selected as the date upon which we would identify the “median employee,” because it allowed us to identify our median employee in a reasonably efficient and economical manner.
To identify the median employee, we compared 20172022 W-2 taxable Medicare wages (Box 5) as reported to the Internal Revenue Service. This compensation measure was consistently applied to all employees included in the calculation. As a result of our analysis, we identified a new median employee for 2022.
Once we identified the median employee, was identified, we calculated annual total compensation for such employee using the same methodology we use for reporting compensation of our NEOs as reported inon the 20172022 Summary Compensation Table above. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of the table.
2023 Notice and Proxy Statement | 67 |
60 Huntington Ingalls Industries, Inc.
All Other Compensation
Name
|
Non- Qualified
| Qualified
| Health and
| Executive
| Financial
| Personal
| Total All Other ($)
| |||||||||||||||||||||||||||||||||
C. Michael Petters
|
|
2017
|
|
|
10,800
|
|
|
13,247
|
|
|
2,000
|
|
|
30,000
|
|
|
1,365
|
|
|
57,412
|
| |||||||||||||||||||
Christopher D. Kastner
|
|
2017
|
|
|
32,502
|
|
|
10,800
|
|
|
12,775
|
|
|
545
|
|
|
664
|
|
|
57,286
|
| |||||||||||||||||||
Brian J. Cuccias
|
|
2017
|
|
|
29,450
|
|
|
8,100
|
|
|
13,016
|
|
|
664
|
|
|
51,231
|
| ||||||||||||||||||||||
Kellye L. Walker
|
|
2017
|
|
|
121,565
|
|
|
24,300
|
|
|
12,855
|
|
|
2,000
|
|
|
7,092
|
|
|
664
|
|
|
168,475
|
| ||||||||||||||||
Edgar A. Green III
|
|
2017
|
|
|
55,777
|
|
|
20,303
|
|
|
11,755
|
|
|
664
|
|
|
88,498
|
| ||||||||||||||||||||||
Matthew J. Mulherin, ret.
|
|
2017
|
|
|
23,190
|
|
|
10,800
|
|
|
6,953
|
|
|
1,750
|
|
|
405
|
|
|
43,098
|
|
Name |
| Non- Qualified Plans Company Match ($) | Qualified Plans Company Match ($) | Health and Welfare Contributions ($) | Executive Physical ($) | Financial Planning ($) | Personal Liability ($) | Corporate Aircraft ($) (1) | Relocation ($) | Other ($) (2) | Total All Other Compensation ($) | ||||||||||||||||||||||||||||||||||||||||||||
Christopher D. Kastner |
| 2022 |
| 79,123 |
| 12,200 |
| 11,365 |
| 2,000 |
| 12,263 |
| 6,067 |
| 0 |
| 0 |
| 0 |
| 123,018 | |||||||||||||||||||||||||||||||||
C. Michael Petters |
| 2022 |
| 0 |
| 12,200 |
| 10,506 |
| 2,000 |
| 20,585 |
| 3,226 |
| 0 |
| 0 |
| 0 |
| 48,517 | |||||||||||||||||||||||||||||||||
Thomas E. Stiehle |
| 2022 |
| 43,646 |
| 12,200 |
| 10,611 |
| 0 |
| 850 |
| 1,832 |
| 0 |
| 39,368 |
| 78 |
| 108,586 | |||||||||||||||||||||||||||||||||
Chad N. Boudreaux |
| 2022 |
| 138,958 |
| 22,657 |
| 10,558 |
| 0 |
| 0 |
| 1,832 |
| 0 |
| 0 |
| 0 |
| 174,005 | |||||||||||||||||||||||||||||||||
Kara R. Wilkinson |
| 2022 |
| 26,968 |
| 10,167 |
| 9,272 |
| 0 |
| 495 |
| 1,834 |
| 0 |
| 0 |
| 0 |
| 48,735 | |||||||||||||||||||||||||||||||||
Jennifer R. Boykin |
| 2022 |
| 0 |
| 12,200 |
| 9,571 |
| 0 |
| 0 |
| 1,832 |
| 12,239 |
| 0 |
| 0 |
| 35,842 |
2017
(1) | Ms. Boykin used a corporate aircraft for two non-business related trips in 2022. A family member of Mr. Kastner accompanied him to a Board meeting on a corporate aircraft at no aggregate incremental cost to the company, and a family member of Mr. Stiehle accompanied him to a Board meeting on a corporate aircraft at no aggregate incremental cost to the company. |
(2) | Mr. Stiehle received a gross-up payment for an expense he incurred as a result of the company’s failure to credit earnings on his non-qualified deferred compensation in 2022. |
2022 Grants of Plan Based Awards
The following table provides additional information about equity andnon-equity incentive compensation awards we granted to our NEOs during the year ended December 31, 2017.2022.
20172022 Grants of Plan Based Awards
Grant Date Fair Value of Stock and Option Awards ($) (3)
| |||||||||||||||||||||||||||||||||||||||||||||
Estimated Potential Payouts Under Non Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | ||||||||||||||||||||||||||||||||||||||||||||
Name
| Grant Type
| Grant
| Threshold
| Target ($)
| Maximum
| Threshold
| Target
| Maximum
| |||||||||||||||||||||||||||||||||||||
C. Michael Petters |
Annual Incentive Plan |
|
0 |
|
|
1,187,500 |
|
|
2,375,000 |
| |||||||||||||||||||||||||||||||||||
Long-term Incentive (RPSR)
|
| 3/1/2017
|
|
| 0
|
|
| 17,314
|
|
| 34,628
|
|
| 3,799,904
|
| ||||||||||||||||||||||||||||||
Christopher D. Kastner |
Annual Incentive Plan |
|
0 |
|
|
367,500 |
|
|
735,000 |
| |||||||||||||||||||||||||||||||||||
Long-term Incentive (RPSR)
|
| 3/1/2017
|
|
| 0
|
|
| 4,761
|
|
| 9,522
|
|
| 1,044,897
|
| ||||||||||||||||||||||||||||||
Brian J. Cuccias |
Annual Incentive Plan |
|
0 |
|
|
385,000 |
|
|
770,000 |
| |||||||||||||||||||||||||||||||||||
Long-term Incentive (RPSR)
|
| 3/1/2017
|
|
| 0
|
|
| 4,927
|
|
| 9,854
|
|
| 1,081,329
|
| ||||||||||||||||||||||||||||||
Kellye L. Walker |
Annual Incentive Plan |
|
0 |
|
|
369,513 |
|
|
739,026 |
| |||||||||||||||||||||||||||||||||||
Long-term Incentive (RPSR)
|
| 3/1/2017
|
|
| 0
|
|
| 4,106
|
|
| 8,212
|
|
| 901,144
|
| ||||||||||||||||||||||||||||||
Edgar Green III |
Annual Incentive Plan |
|
0 |
|
|
280,000 |
|
|
560,000 |
| |||||||||||||||||||||||||||||||||||
Long-term Incentive (RPSR)
|
| 3/1/2017
|
|
| 0
|
|
| 3,827
|
|
| 7,654
|
|
| 839,912
|
| ||||||||||||||||||||||||||||||
Matthew J. Mulherin, ret. |
Annual Incentive Plan |
|
0 |
|
|
224,671 |
|
|
449,342 |
| |||||||||||||||||||||||||||||||||||
Long-term Incentive (RPSR)
|
| 3/1/2017
|
|
| 0
|
|
| 4,927
|
|
| 9,854
|
|
| 1,081,329
|
|
Grant Date Fair Value of Stock and Option Awards (3) | ||||||||||||||||||||||||||||||||
Estimated Potential Payouts Under Non Equity Incentive Plan Awards (1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | |||||||||||||||||||||||||||||||
Name | Grant Type | �� | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||
Christopher D. Kastner | Annual Incentive Plan | 0 | 1,375,000 | 2,750,000 | ||||||||||||||||||||||||||||
| Long-term Incentive (RPSR) | 3/1/2022 |
|
|
|
|
|
|
|
|
| 0 | 21,552 | 43,104 | 4,399,840 | |||||||||||||||||
C. Michael Petters | Annual Incentive Plan | 0 | 962,500 | 1,925,000 | ||||||||||||||||||||||||||||
| Long-term Incentive (RPSR) | 3/1/2022 |
|
|
|
|
|
|
|
|
| 0 | 7,112 | 14,224 | 1,451,915 | |||||||||||||||||
Thomas E. Stiehle | Annual Incentive Plan | 0 | 460,000 | 920,000 | ||||||||||||||||||||||||||||
| Long-term Incentive (RPSR) | 3/1/2022 |
|
|
|
|
|
|
|
|
| 0 | 7,347 | 14,694 | 1,499,890 | |||||||||||||||||
Chad N. Boudreaux | Annual Incentive Plan | 0 | 456,000 | 912,000 | ||||||||||||||||||||||||||||
| Long-term Incentive (RPSR) | 3/1/2022 |
|
|
|
|
|
|
|
|
| 0 | 5,633 | 11,266 | 1,149,977 | |||||||||||||||||
Kara R. Wilkinson | Annual Incentive Plan |
|
|
| 0 | 412,000 | 824,000 |
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| Long-term Incentive (RPSR) | 3/1/2022 |
|
|
|
|
|
|
|
|
| 0 | 5,633 | 11,266 | 1,149,977 | |||||||||||||||||
Jennifer R. Boykin | Annual Incentive Plan | 0 | 441,252 | 882,504 | ||||||||||||||||||||||||||||
| Long-term Incentive (RPSR) | 3/1/2022 |
|
|
|
|
|
|
|
|
| 0 | 5,633 | 11,266 | 1,149,977 |
(1) | Amounts in these columns show the |
(2) | These amounts reflect RPSRs granted in |
(3) | The amounts reported in this column represent the full grant date fair values of the equity awards computed in accordance with the FASB ASC Topic 718. |
68 | Huntington Ingalls Industries, Inc. |
2018 Notice and Proxy Statement 61
Outstanding Equity Awards at 20172022 Year-End
The following table summarizes the equity compensation awards made to our NEOs that were outstanding as of December 31, 2017.2022.
Outstanding Equity Awards at 20172022 Year-End
Name
| Number of Securities Underlying Unexercised Options Exercisable (#)
| Grant Date
| Option Exercise Price ($)
| Option Expiration Date
| Number of Units of Stock that Have Vested (#)
| Market Value of Units of Stock that Vested
| Equity
|
Equity
| ||||||||||||||||||||||||
C. Michael Petters |
|
3/1/2017 |
|
|
17,520 |
|
|
4,129,379 |
| |||||||||||||||||||||||
3/1/2016 | 29,335 | 6,914,254 | ||||||||||||||||||||||||||||||
| 2/23/2015
|
|
| 27,733
|
|
| 6,536,690
|
| ||||||||||||||||||||||||
Christopher D. Kastner |
|
3/1/2017 |
|
|
4,818 |
|
|
1,135,496 |
| |||||||||||||||||||||||
3/1/2016 | 8,067 | 1,901,347 | ||||||||||||||||||||||||||||||
| 2/23/2015
|
|
| 6,130
|
|
| 1,444,867
|
| ||||||||||||||||||||||||
Brian J. Cuccias |
|
3/1/2017 |
|
|
4,986 |
|
|
1,175,087 |
| |||||||||||||||||||||||
3/1/2016 | 7,295 | 1,719,380 | ||||||||||||||||||||||||||||||
| 2/23/2015
|
|
| 6,130
|
|
| 1,444,867
|
| ||||||||||||||||||||||||
Kellye L. Walker |
|
3/1/2017 |
|
|
4,155 |
|
|
979,279 |
| |||||||||||||||||||||||
3/1/2016 | 6,957 | 1,639,876 | ||||||||||||||||||||||||||||||
| 2/23/2015
|
|
| 6,577
|
|
| 1,550,207
|
| ||||||||||||||||||||||||
Edgar A. Green III |
|
3/1/2017 |
|
|
3,872 |
|
|
912,737 |
| |||||||||||||||||||||||
12/1/2016 | 2,311 | 544,733 | ||||||||||||||||||||||||||||||
3/1/2016 | 1,932 | 455,279 | ||||||||||||||||||||||||||||||
| 2/23/2015
|
|
| 1,773
|
|
| 417,929
|
| ||||||||||||||||||||||||
Matthew J. Mulherin, retired |
|
3/1/2017 |
|
|
4,986 |
|
|
1,175,087 |
| |||||||||||||||||||||||
3/1/2016 | 8,349 | 1,967,802 | ||||||||||||||||||||||||||||||
| 2/23/2015
|
|
| 7,893
|
|
| 1,860,346
|
|
Name | Number of Securities of Underlying Unexercised Options Exercisable (#) | Grant Date | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) (1) | Equity Incentive Awards: Market or Payout Value of Unearned Units or Other Rights that Have Not Vested | ||||||||||||||||||||||||
Christopher D. Kastner |
| 3/1/2022 |
|
| 21,896 |
|
| 5,051,057 |
| |||||||||||||||||||||||
| 3/1/2021 |
|
| 11,653 |
|
| 2,688,144 |
| ||||||||||||||||||||||||
| 2/24/2020 |
|
| 6,846 |
|
| 1,579,137 |
| ||||||||||||||||||||||||
C. Michael Petters |
| 3/1/2022 |
|
| 7,226 |
|
| 1,666,812 |
| |||||||||||||||||||||||
| 3/1/2021 |
|
| 25,637 |
|
| 5,913,918 |
| ||||||||||||||||||||||||
| 2/24/2020 |
|
| 20,081 |
|
| 4,632,334 |
| ||||||||||||||||||||||||
Thomas E. Stiehle |
| 3/1/2022 |
|
| 7,464 |
|
| 1,721,888 |
| |||||||||||||||||||||||
| 3/1/2021 |
|
| 5,827 |
|
| 1,344,072 |
| ||||||||||||||||||||||||
| 2/24/2020 |
|
| 1,231 |
|
| 284,082 |
| ||||||||||||||||||||||||
Chad N. Boudreaux |
| 3/1/2022 |
|
| 5,723 |
|
| 1,320,184 |
| |||||||||||||||||||||||
| 3/1/2021 |
|
| 5,534 |
|
| 1,276,689 |
| ||||||||||||||||||||||||
| 4/1/2020 |
|
| 3,836 |
|
| 884,969 |
| ||||||||||||||||||||||||
| 2/24/2020 |
|
| 1,231 |
|
| 284,082 |
| ||||||||||||||||||||||||
Kara R. Wilkinson |
| 3/1/2022 |
|
| 5,723 |
|
| 1,320,184 |
| |||||||||||||||||||||||
| 4/1/2021 |
|
| 3,252 |
|
| 750,090 |
| ||||||||||||||||||||||||
| 3/1/2021 |
|
| 1,278 |
|
| 294,713 |
| ||||||||||||||||||||||||
| 2/24/2020 |
|
| 1,000 |
|
| 230,677 |
| ||||||||||||||||||||||||
Jennifer R. Boykin |
| 3/1/2022 |
|
| 5,723 |
|
| 1,320,184 |
| |||||||||||||||||||||||
| 3/1/2021 |
|
| 6,700 |
|
| 1,545,503 |
| ||||||||||||||||||||||||
| 2/24/2020 |
|
| 5,248 |
|
| 1,210,499 |
|
(1) | The numbers in this column assume target performance levels for RPSRs. The RPSR award granted in March |
(2) | The market values are based on the closing price of our common stock on December |
2023 Notice and | 69 |
62 Huntington Ingalls Industries, Inc.
Option Exercises and Stock Vested in 20172022
The following table provides additional information about the value realized by our NEOs on exercises of option awards and vesting of stock awards during the year ended December 31, 2017.2022. We did not have any stock options outstanding in 2022.
2017 Option Exercises and2022 Stock Vested
Option Awards |
Stock Awards | |||||||||||||||
Name
| Number of
| Value
|
Number of
| Value
| ||||||||||||
C. Michael Petters
|
|
262,294
|
|
|
42,791,247
|
|
|
70,716
|
|
|
15,520,040
|
| ||||
Christopher D. Kastner
|
|
0
|
|
|
0
|
|
|
15,631
|
|
|
3,430,536
|
| ||||
Brian J. Cuccias
|
|
0
|
|
|
0
|
|
|
15,631
|
|
|
3,430,536
|
| ||||
Kellye L. Walker
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
| ||||
Edgar A. Green III
|
|
0
|
|
|
0
|
|
|
4,424
|
|
|
970,935
|
| ||||
Matthew J. Mulherin, retired
|
|
0
|
|
|
0
|
|
|
19,539
|
|
|
4,288,224
|
|
|
Option Awards |
Stock Awards | ||||||||||
Name & Principal Position | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (1) (#) | Value Realized on Vesting (2) ($) | ||||||||
Christopher D. Kastner | 0 | 0 | 10,418 | 2,126,992 | ||||||||
C. Michael Petters | 0 | 0 | 30,563 | 6,239,724 | ||||||||
Thomas E. Stiehle | 0 | 0 | 1,875 | 382,756 | ||||||||
Chad N. Boudreaux | 0 | 0 | 1,875 | 382,756 | ||||||||
Kara R. Wilkinson | 0 | 0 | 1,469 | 299,932 | ||||||||
Jennifer R. Boykin | 0 | 0 | 7,986 | 1,630,456 |
(1) |
The numbers in this column represent RPSRs that were received in |
The values in this column are calculated by multiplying the number of RPSRs vested by the closing price of our common stock on the NYSE on the date of vesting. |
70 | Huntington Ingalls Industries, Inc. |
2018 Notice and Proxy Statement 63
20172022 Pension Benefits
The following table shows the present value of accumulated benefits payable to each of our NEOs under the qualified defined benefit pension plans and nonqualified defined benefit pension plans that we sponsor.
20172022 Pension Benefits
Name
| Plan Name
|
Number of Years Credited Service
|
Present Value of Accumulated Benefit ($) (1)
|
Payments During Last Fiscal Year ($)
| ||||||||||
C. Michael Petters (2)
|
Special Officer SERP
|
|
13.167
|
|
|
11,336,079
|
|
|
—
|
| ||||
HII NNS Inc. Retirement Benefit Restoration Plan
|
| 29.500
|
|
| 13,253,047
|
|
| —
|
| |||||
HII NNS Inc. Retirement Plan
|
| 29.500
|
|
| 1,254,805
|
|
| —
|
| |||||
Christopher D. Kastner (2)
|
OSERP
|
|
26.917
|
|
|
737,385
|
|
|
—
|
| ||||
HII Supplemental Plan 2—ERISA 2
|
| 26.917
|
|
| 3,920,855
|
|
| —
|
| |||||
HII Retirement Plan “B”
|
| 26.917
|
|
| 1,620,323
|
|
| —
|
| |||||
Brian J. Cuccias (2)
|
OSERP
|
|
31.750
|
|
|
2,341,263
|
|
|
—
|
| ||||
Avondale Supp Pension Plan
|
| 31.750
|
|
| 1,510,581
|
|
| —
|
| |||||
HII Litton Restoration Plan
|
| 31.750
|
|
| 2,614,915
|
|
| —
|
| |||||
HII Retirement Plan “B”
|
| 31.750
|
|
| 820,953
|
|
| —
|
| |||||
Kellye L. Walker (3)
|
—
|
|
—
|
|
|
—
|
|
|
—
|
| ||||
Edgar A. Green III (4)
|
—
|
|
—
|
|
|
—
|
|
|
—
|
| ||||
Matthew J. Mulherin, retired (2)(5) | �� OSERP
|
|
36.583
|
|
|
1,610,835
|
|
|
—
|
| ||||
HII NNS Inc. Retirement Benefit Restoration Plan
|
| 35.083
|
|
| 5,792,976
|
|
| 10,743
|
| |||||
HII NNS Inc. Retirement Plan
|
| 35.083
|
|
| 1,793,052
|
|
| 39,642
|
|
Name & Principal Position | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit ($) (1) | Payments During Last Fiscal Year ($) | ||||||||
Christopher D. Kastner (2) | OSERP |
| 31.917 |
|
| 1,316,554 |
| — | ||||
HII Supplemental Plan 2—ERISA 2 |
| 31.917 |
|
| 6,589,339 |
| — | |||||
HII Retirement Plan “B” |
| 31.917 |
|
| 1,768,783 |
| — | |||||
C. Michael Petters (2) | Special Officer SERP |
| 17.333 |
|
| 10,060,603 |
| — | ||||
HII NNS Inc. Retirement Benefit Restoration Plan |
| 34.500 |
|
| 12,625,032 |
| — | |||||
HII NNS Inc. Retirement Plan |
| 34.500 |
|
| 1,040,977 |
| — | |||||
Thomas E. Stiehle (2) | OSERP |
| 36.000 |
|
| 1,995,791 |
| — | ||||
HII Supplemental Plan 2—ERISA 2 |
| 36.000 |
|
| 2,175,228 |
| — | |||||
HII Retirement Plan “B” |
| 36.000 |
|
| 1,462,698 |
| — | |||||
Chad N. Boudreaux (3) | — |
| — |
|
| — |
| — | ||||
Kara R. Wilkinson (2) | OSERP |
| 26.583 |
|
| 2,287,917 |
| — | ||||
HII Litton Restoration Plan |
| 26.583 |
|
| 179,388 |
| — | |||||
HII Retirement Plan “B” |
| 26.583 |
|
| 396,056 |
| — | |||||
Jennifer R. Boykin (2) | OSERP |
| 35.000 |
|
| 1,763,550 |
| — | ||||
HII NNS Inc. Retirement Benefit Restoration Plan |
| 35.000 |
|
| 2,933,984 |
| — | |||||
HII NNS Inc. Retirement Plan |
| 35.000 |
|
| 1,621,758 |
| — |
(1) | While benefits may be spread over different plans, it is our policy that an executive’s total benefit under these plans is essentially limited to 60% of such executive’s final average pay. The pension benefits for Mr. Petters under the Special Officer Supplemental Executive Retirement Plan are based |
(2) | The following plans in which these executives participate were consolidated as of December 31, 2014, to form the Huntington Ingalls Industries Omnibus Supplemental Retirement Plan: HII Newport News Shipbuilding Inc. Retirement Benefit Restoration Plan, HII |
(3) | Mr. Boudreaux was hired in |
64 Huntington Ingalls Industries, Inc.
The pension values represent the present values of the benefits expected to be paid in the future. They do not represent actual lump sum values that may be paid from a plan. The amount of future payments is based on the current accrued pension benefit as of December 31, 2017.2022. Pursuant to SEC disclosure rules, (i) the actuarial assumptions used to calculate amounts for this table are the same as those used for our financial statements, and (ii) all pension values are determined assuming the NEO works until the specified retirement age, which is the earliest unreduced retirement age (as defined in each plan).
2023 Notice and Proxy Statement | 71 |
Executive Compensation
General Explanation of the Pension Benefits Table
Individual employees may be covered by several different pension plans as a result of our history as a division of Northrop Grumman. However, an executive’s total benefit under the pension plans is essentially limited to 60% of his or her final average pay. The accrued tax qualified pension benefit cannot be reduced or taken away under applicable law, so all historical pension plans have been maintained.
Pension plans provide income during retirement, as well as benefits in special circumstances, including death and disability. In general, the plans are structured to reward and retain employees of long service and recognize higher achievement levels through increases in annual pay. The term “qualified plan” generally means a plan that qualifies for favorable tax treatment under Internal Revenue Code (“IRC”)IRC Section 401. Savings plans (also known as 401(k) plans) and traditional pension plans are examples of qualified plans. Qualified plans apply to a broad base of employees. The term “nonqualified plan” generally means a plan that is limited to a specified group of management personnel. Our nonqualified plans supplement our qualified plans and (1) provide benefits that would be provided under our qualified plans if there were no limitations imposed by the IRC and (2) provide a minimum level of pension benefits to our executives in recognition of their higher levels of responsibility.
The amounts in the table are based onupon the specific provisions of each plan, which are described in more detail below. Two basic types of pension benefits are reflected in the Pension Benefits table: traditional benefits and cash balance benefits. For purposes of computing amounts in the table, traditional benefits are determined based on the annual pension earned as of December 31, 2017,2022, and include any supplemental payments. Cash balance benefits are based upon the account balance as of December 31, 2017,2022, plus a future interest credit, converted to an annuity using the applicable conversion factors.
Mr.Messrs. Stiehle and Kastner participatesparticipate in the Huntington Ingalls Industries Retirement Plan “B” and the Huntington Ingalls Industries Supplemental Plan 2—ERISA Supplemental Program 2. Messrs.2 (“ERISA 2”). Ms. Wilkinson participates in the Huntington Ingalls Industries Retirement Plan “B” and the HII Litton Industries, Inc. Restoration Plan. Mr. Petters and MulherinMs. Boykin participate in the HII Newport News Shipbuilding Inc. Retirement Plan and the HII Newport News Shipbuilding Inc. Retirement Benefit Restoration Plan. Mr. CucciasBoudreaux participates in the Huntington Ingalls Industries Retirement Plan “B”, the Avondale Industries, Inc. Restated Supplemental Pension Plan and the HII Litton Industries, Inc. Restoration Plan. Ms. Walker and Mr. Green participate in the Huntington Ingalls Industries Officers Retirement Account Contribution Plan (“ORAC”). Each NEO, except Mr.Messrs. Petters Ms. Walker and Mr. Green,Boudreaux, also participates in the Officers Supplemental Executive Retirement Program (“OSERP”). Mr. Petters participates in the Special Officer Supplemental Executive Retirement Plan.
Effective December 31, 2014, the following plans in which our NEOs participate were consolidated to form the Huntington Ingalls Industries Omnibus Supplemental Retirement Plan: HII Newport News Shipbuilding Inc. Retirement Benefit Restoration Plan, HII Electronic Systems Executive Pension Plan, Avondale Industries, Inc. Restated Supplemental Pension Plan, HII Litton Industries, Inc. Restoration Plan and Special Officer Supplemental Executive Retirement Plan. The consolidation does not affect the benefit amounts payable to the participants.
2018 Notice Effective December 31, 2019, the Huntington Ingalls Industries Officers Supplemental Executive Retirement Program (the “OSERP”) and Proxy Statement 65
Huntington Ingalls Industries Supplemental Plan 2—ERISA 2 were merged into the Huntington Ingalls Industries Omnibus Supplemental Retirement Plan, which was subsequently renamed the Huntington Ingalls Industries Consolidated Supplemental Retirement Plan. This merger does not affect the benefit amounts payable to the participants.
The changechanges in pension values shown in the Summary Compensation Table includesinclude the effect of:
• | an additional year of service from December 31, 2021 to December 31, 2022; |
• | changes in eligible pension pay; |
72 | Huntington Ingalls Industries, Inc. |
Executive Compensation
• | changes in applicable pay cap limits; and |
• | changes in actuarial assumptions. |
Description of Qualified Plans
Huntington Ingalls Industries Retirement Plan “B” and HII Newport News Shipbuilding Inc. Retirement Plan. The general benefit structure of these plans is similar except for the historical benefit formulas, the transition benefit formulas and the timing of the transition period, all of which are described below. The plans are qualified under IRC Section 401 and provide up to three component pieces of benefits depending on when a participant is hired and terminates. The following chart illustrates the component pieces (described in more detail after the chart):
Part B (5-Year Transition Benefit) Benefit based on a formula similar to the one under the historical plan formula during the transition period | ||||||||||||
Part A Benefit under the historical plan formula before the transition period | + | or (if greater) | + | Part D Benefit under the cash balance formula after the transition period | = | Pension Benefit | ||||||
Part C (5-Year Transition Benefit) formula during the transition period |
The components are the historical benefit (the Part A benefit), the transition benefit (the greater of the Part B benefit or the Part C benefit) and the cash balance benefit (the Part D benefit). Eligible employees who joined a plan after the transition date associated with their pension plan accrue only the cash balance benefit (Part D) from their first date of participation.
The qualified benefit for each NEO is the sum of these three benefits (Part A + Max (Part B or C) + Part D).The transition period for the Huntington Ingalls Industries Retirement Plan “B” iswas July 1, 2003 through June 30, 2008, while the transition period for the HII Newport News Shipbuilding Inc. Retirement Plan iswas January 1, 2004 through December 31, 2008. During the transition period, each eligible participant earned the greater of (i) the benefit calculated under a formula similar to his or her historical plan (Part B) or (ii) the cash balance formula benefit (Part C).
The cash balance formula (Parts C and D benefits) uses a participant’s points (age plus years of service) to determine apay-based credit amount (a percentage of eligible pay) on a monthly basis. Interest is credited monthly on the amount in the participant’s hypothetical individual account. At normal retirement age, a participant’s balance in the hypothetical account is converted into an annuity payable for life, using specified factors. There are various forms of annuities from which the participant can choose, including a single-life annuity or ajoint-and-survivor annuity.
Specific Elements of the Plans. The following paragraphs describe specific elements of the qualified plans in more detail.which our NEOs participate.
• | Formulas Under Historical Plans: |
• | HII Newport News Shipbuilding Inc. Retirement Plan—This plan provides a benefit equal to 55% of final average pay (as limited by IRC Section 401(a)(17)) multiplied by benefit service up to a maximum of 35 years divided by 35. Participants withpre-1997 service also have a frozen |
66 Huntington Ingalls Industries, Inc.
accrued benefit with the prior NNS parent company, Tenneco. Total benefit service is used for the plan benefit, but the frozen accrued benefit with Tenneco is offset from the total benefit. Final average pay is the average of the final 60 months of base pay multiplied by 12 to determine an annual final average pay. |
2023 Notice and | 73 |
Executive Compensation
• | HII Northrop Grumman |
• | HII Grumman Pension Plan—This plan is a legacy part of the Huntington Ingalls Industries Retirement Plan “B” and provides a benefit equal to 1.6667% of final average pay (as limited by IRC Section 401(a)(17)) multiplied by benefit service after December 31, 1994, plus the frozen accrued benefit as of December 31, 1994. Final average pay is the average of the three highest-paid years during which the participant was an eligible employee of the company after 1996. Messrs. Stiehle and Kastner have historical (Part A) benefits under this formula. |
• | HII Ingalls Shipbuilding, Inc. Retirement Plan—This plan is a legacy part of the Huntington Ingalls Industries Retirement Plan “B” and provides a benefit equal to the greater of (1) and (2), reduced by (3): |
1) | 60% of pre-tax deposits to the Huntington Ingalls Industries Financial Security and Savings Program (“FSSP”) retirement account and after-tax contributions to the plan. |
2) | 85% of pre-tax deposits to the FSSP retirement account and after-tax contributions to the plan minus 75% of the estimated primary social security benefit multiplied by the ratio of after-tax contributions to the plan and pre-tax FSSP retirement account deposits divided by after-tax contributions to the plan plus pre-tax FSSP retirement account deposits plus imputed deposits (4% of eligible pay). |
3) | The annuity equivalent of the pre-tax FSSP retirement account deposits and after-tax contributions to the plan. |
Ms. Wilkinson has historical (Part A) benefits under this formula. Part B is determined using the percentageabove formula with imputed deposits instead of pay credit specified at each point level for the Part C benefit for each NEO. Interest is credited monthly based on the30-year Treasury bond rate in effect four months priorpre-tax deposits to the crediting month.
• | Cash Balance Formula. Table 1 shows the percentage of pay credit specified at each point level for the Part C benefit for each NEO. Interest is credited monthly based upon the 30-year Treasury bond rate in effect four months prior to the crediting month. |
• | For the Part D benefit, the cash balance formula for each NEO is based upon Table 2. Interest is credited monthly based on the 30-year Treasury bond rate in effect four months prior to the crediting month. |
2018 Notice and Proxy Statement 67
74 | Huntington Ingalls Industries, Inc. |
Table 1 (Part C Formula)
Credit Amount | ||||||||
Credit Amount | ||||||||
Points (attained age and total service)
| All Eligible Pay
|
Eligible Pay in Excess of Social Security Wage Base (%)
| All Eligible Pay (%)
|
Eligible Pay in Excess of Social Security Wage Base (%)
| ||||
Under 25
|
6.0
|
6.0
| 6.0 | 6.0 | ||||
25 to 34
|
6.5
|
6.0
| 6.5 | 6.0 | ||||
35 to 44
|
7.0
|
6.0
| 7.0 | 6.0 | ||||
45 to 54
|
7.5
|
6.0
| 7.5 | 6.0 | ||||
55 to 64
|
8.0
|
6.0
| 8.0 | 6.0 | ||||
65 to 74
|
8.5
|
6.0
| 8.5 | 6.0 | ||||
75 to 84
|
9.0
|
6.0
| 9.0 | 6.0 | ||||
Over 84
|
9.5
|
6.0
| 9.5 | 6.0 |
Table 2 (Part D Formula)
Credit Amount | ||||||||
Credit Amount | ||||||||
Points (attained age and total service)
| All Eligible Pay
|
Eligible Pay in Excess of Social Security Wage Base (%)
| All Eligible Pay (%)
|
Eligible Pay in Excess of Social Security Wage Base (%)
| ||||
Under 25
|
3.5
|
4.0
| 3.5 | 4.0 | ||||
25 to 34
|
4.0
|
4.0
| 4.0 | 4.0 | ||||
35 to 44
|
4.5
|
4.0
| 4.5 | 4.0 | ||||
45 to 54
|
5.0
|
4.0
| 5.0 | 4.0 | ||||
55 to 64
|
5.5
|
4.0
| 5.5 | 4.0 | ||||
65 to 74
|
6.5
|
4.0
| 6.5 | 4.0 | ||||
75 to 84
|
7.5
|
4.0
| 7.5 | 4.0 | ||||
Over 84
|
9.0
|
4.0
| 9.0 | 4.0 |
• | Vesting. Participants vest in their program benefits upon completion of three years of service. As of December 31, 2022, each NEO participating in a qualified pension plan has a non-forfeitable right to receive retirement benefits, which are payable upon early (if eligible) or normal retirement, as elected by the NEO. |
• | Form of Benefit. The standard form of benefit is an annuity payable for the life of the participant. At normal retirement, the annuity for the cash balance formula is equal to the accumulated account balance divided by 9. Other annuity options may be elected; however, each option is actuarially equivalent in value to the standard form. |
• | Pay. Pay for purposes of the cash balance, the HII Ingalls Shipbuilding, Inc. Retirement Plan, the HII |
• | Normal Retirement. Normal retirement means the benefit is not reduced for early commencement. It is generally specified in each formula as: age 65 for the HII Ingalls Shipbuilding, Inc. Retirement |
2023 Notice and Proxy Statement | 75 |
Executive Compensation