DEF 14A 1 nc10003368x1_def14a.htm DEF 14A

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

Filed by the Registrant

Filed by a Party other than the Registrant

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Preliminary Proxy Statement
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to §240.14a-12

 

L3HARRIS TECHNOLOGIES, INC.

 

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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(GRAPHIC)

 

 

 

 

  (GRAPHIC)  

 

 

L3Harris Technologies: A leading global defense technology company.

Highly agile, innovative industry leader with a broad offering of global customer solutions.

 

 

 

SPEED

The world of technology moves fast; we move faster. By anticipating threats and market shifts, we respond to the needs of our customers with solutions built for rapid time frames in an environment of constant change.

>  Focused, agile solutions not beholden to entrenched platforms of traditional primes

>  Affordability as an operating principle to foster new approaches that can be brought to market more efficiently and more effectively

 

INNOVATION

Every day, we bring new ideas and new approaches to make ourselves and our customers better, smarter, stronger and safer. With a focus on the world ahead, we design, build and deliver the technology of tomorrow, today.

>  Market-leading R&D investment as a percentage of revenue

>  The scale to invest in breakthrough technology

>  Culture of continuous improvement for our people and our technologies

 

FLAWLESS EXECUTION

We are always focused on the people we serve. We design and deliver the right solution with a relentless commitment to getting the job done – and done right.

Everything we make lives up to its promise, every time.

>  A laser focus on building and delivering better technology to those who need it most

>  A unified, inspired team with common goals, objectives and core values

 

 

 

 

 

 

NOTICE OF 2019
ANNUAL MEETING OF
SHAREHOLDERS

When:

Friday, October 25, 2019

7:30 AM CDT

Where:

Four Seasons Resort and
Club Dallas at Las Colinas

4150 North MacArthur Boulevard

Irving, Texas 75038

YOUR VOTE IS IMPORTANT

Even if you plan to attend the
Annual Meeting, we encourage you
to vote your shares in advance to
ensure they are counted.

 

HOW YOU CAN VOTE

Internet*

www.proxyvote.com

Until 11:59 p.m. on
October 24, 2019

   

Phone*

1-800-690-6903

Until 11:59 p.m. on
October 24, 2019

   

Mail

Complete, sign and date your proxy/voting instruction card and mail in the postage-paid return envelope.

   

In Person

If you attend the Annual Meeting, you can cast your vote there.

*You must have the control number that appears on your Notice of Internet Availability of Proxy Materials or proxy/voting instruction card.

Meeting Agenda

Proposal 1:

To elect as directors the 12 nominees named in the accompanying proxy statement for a term of approximately six months ending at the 2020 Annual Meeting of Shareholders to be held April 24, 2020.

Proposal 2:

To hold an advisory vote to approve the compensation of our named executive officers as disclosed in the accompanying proxy.

Proposal 3:

To ratify the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for the fiscal transition period ending January 3, 2020.

Shareholders also will act on any other business that may properly come before the meeting.

The accompanying proxy statement more fully describes these matters. We have not received notice of other matters that may be properly presented at the Annual Meeting.

All holders of common stock of record at the close of business on August 30, 2019 are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof. No ticket is required to attend the Annual Meeting, but for security reasons, you may be asked to show evidence of share ownership and a valid government-issued photo ID. Packages, bags, boxes and other items are subject to inspection.

By Order of the Board of Directors,

Scott T. Mikuen

Senior Vice President, General Counsel and Secretary
Melbourne, Florida

September 10, 2019

Important notice regarding the availability of proxy materials for the annual meeting of shareholders to be held on October 25, 2019:

The Proxy Statement and 2019 Annual Report to Shareholders are available at: www.l3harris.com/corporate-governance



 

L3HARRIS 2019 PROXY STATEMENT 3

 

 

 

 

DEAR FELLOW

SHAREHOLDERS

 

L3HARRIS TECHNOLOGIES, INC.

1025 West NASA Boulevard

Melbourne, Florida 32919



 

William M. Brown

Chairman & CEO

 

September 10, 2019

On behalf of your Board of Directors, I am pleased to invite you to attend the 2019 Annual Meeting of Shareholders of L3Harris Technologies, Inc. to be held on Friday, October 25, 2019. This will be our first Annual Meeting of Shareholders following the June 29, 2019 completion of the all-stock merger involving Harris Corporation and L3 Technologies, Inc., with Harris Corporation changing its name to “L3Harris Technologies, Inc.”

The transformational merger – one of the largest combinations ever in the defense industry – created an agile global aerospace and defense technology company with the scale, resources and capabilities to provide affordable, innovative and rapidly fielded solutions to address customers’ critical mission needs. The merger also combined six directors from L3 Technologies, Inc. with six continuing directors from Harris Corporation, joining together in reconstituting your Board of Directors.

The accompanying Notice of 2019 Annual Meeting of Shareholders and Proxy Statement describe the matters to be acted on at the meeting, which include:

>election of the 12 nominees for director named in the accompanying Proxy Statement (who currently serve on the reconstituted Board) for a term of approximately six months expiring at the 2020 Annual Meeting of Shareholders;
>an advisory vote to approve the compensation of our named executive officers;
>ratification of the appointment of our independent registered public accounting firm for the fiscal transition period ending January 3, 2020; and
>such other business as may properly come before the meeting or any adjournments or postponements thereof.

Your Board of Directors unanimously recommends a vote FOR election of its nominees for director, FOR advisory approval of the compensation of our named executive officers and FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal transition period ending January 3, 2020. These matters are discussed in greater detail in the accompanying Proxy Statement.

As you review the Proxy Statement, please keep in mind that applicable rules require disclosure of historical information regarding certain compensation of our directors and executive officers for fiscal 2019, which included only directors and executive officers of Harris Corporation (not L3 Technologies, Inc. or L3Harris Technologies, Inc.). This is because the merger that established L3Harris Technologies, Inc. and the resulting changes in directors and executive officers occurred on June 29, 2019, after our fiscal 2019 ended.

It is important that your shares be represented and voted at the meeting, even if you are unable to attend. You can ensure that your shares are represented and voted at the meeting by submitting your proxy/voting instruction over the Internet or by telephone, or by mail by using the traditional proxy/voting instruction if you received your proxy materials by mail. You can find instructions for these convenient ways to vote on both the Notice of Internet Availability of Proxy Materials and the proxy/voting instruction card, as well as in the accompanying Notice of 2019 Annual Meeting of Shareholders and Proxy Statement.

Sincerely,

 

William M. Brown

Chairman and Chief Executive Officer



4 L3HARRIS 2019 PROXY STATEMENT

 

 

  CONTENTS
  PROXY SUMMARY 6
  PROPOSAL 1: ELECTION OF DIRECTORS 12
  Our Nominees as a Group 12
  Voting Standard for Directors 13
  Criteria for Board Membership 13
  Nominee Biographies 14
  Director Nomination Process 21
  Board Refreshment Policy 22
  CORPORATE GOVERNANCE 23
  Our Board’s Role and Responsibilities 23
  Stock Ownership Guidelines for Non-Employee Directors 27
  Board Leadership Structure 27
  Board Committees 30
  Other Governance Matters 33
  Director Compensation and Benefits 34
  PROPOSAL 2: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS 39
  COMPENSATION DISCUSSION AND ANALYSIS 41
  Executive Summary 41
  Our Executive Compensation Philosophy and Practices 44
  Overview of Our Main Executive Compensation Elements 49
  Executive Compensation Decisions for Fiscal 2019 52
  Employment Agreements 61
  Other Compensation Elements 63
  Other Compensation Policies 65
  COMPENSATION COMMITTEE REPORT 67
  RELATIONSHIP BETWEEN COMPENSATION PLANS AND RISK 68
  COMPENSATION TABLES 69
  REPORT OF THE AUDIT COMMITTEE OF L3HARRIS 90
  PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 92
  Fees Paid to Independent Registered Public Accounting Firm 93
  Pre-Approval of Audit and Non-Audit Services 93
  SHARE OWNERSHIP 94
  Shares Owned By Directors, Nominees and Executive Officers 94
  Principal Shareholders 95
  Delinquent Section 16(a) Reports 95
  SHAREHOLDER NOMINATIONS AND PROPOSALS 96
  INFORMATION ABOUT THE ANNUAL MEETING 97
  APPENDIX A: RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES 102

 

 

Cautionary Statement Regarding Forward-Looking Statements

 

The statements in this proxy statement, including regarding speed, innovation and execution, the transformational merger and annualized revenue on pages 2, 4 and 6, respectively, that are not historical in nature are forward-looking statements made in reliance on the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and involve risks and uncertainties, as well as assumptions that may not materialize or prove correct, which could cause our results to differ materially from those expressed in or implied by such forward-looking statements. A discussion of such risks and uncertainties is included in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for our fiscal year ended June 28, 2019. Such forward-looking statements are made as of the date of filing of this proxy statement, and we disclaim any intention or obligation, other than imposed by law, to update or revise any of them, whether as a result of new information, future events or developments or otherwise.

 

The Board of Directors of L3Harris Technologies, Inc. is soliciting proxies to be voted at our 2019 Annual Meeting of Shareholders on October 25, 2019, and at any adjournments or postponements thereof. We expect that this proxy statement and form of proxy will be mailed and made available to shareholders beginning on or about September 11, 2019.

 

L3HARRIS 2019 PROXY STATEMENT 5

 

 

   

PROXY

SUMMARY

2019 Annual Meeting
of Shareholders

Friday, October 25, 2019

7:30 AM CDT

Four Seasons Resort and Club Dallas at Las Colinas
4150 North MacArthur Boulevard
Irving, Texas 75038

Record Date: August 30, 2019

This summary does not contain all information shareholders should consider, and we encourage shareholders to read the entire proxy statement carefully.

 

VOTING MATTERS

        For more
information
  Board’s
recommendation
Proposal 1   Elect Board’s 12 nominees for director for a term of approximately 6 months expiring at 2020 Annual Meeting of Shareholders to be held April 24, 2020   Page 12   FOR each nominee
             
Proposal 2  

Advisory vote to approve compensation of named executive officers as disclosed in this proxy statement

  Page 39   FOR the proposal
             
Proposal 3  

Ratify appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal transition period ending January 3, 2020

  Page 92   FOR the proposal

 

Shareholders also will act on any other business that may properly come before the meeting.

       
  HIGHLIGHTS OF THE L3HARRIS MERGER  
       
  All-stock merger completed on June 29, 2019 (“L3Harris Merger”) involving Harris Corporation (“Harris”) and L3 Technologies, Inc. (“L3”), with Harris changing its name to “L3Harris Technologies, Inc.” (“L3Harris”)  
 

>  Transformational merger – one of largest combinations ever in defense industry – creating an agile global aerospace and defense technology innovator that delivers end-to-end solutions to meet customers’ mission-critical needs, with approximately $17 billion in annualized revenue (for fiscal transition period), 50,000 employees (around 20,000 engineers and scientists) and customers in more than 100 countries.

>  Top-tier leadership structure was set under merger agreement, with full transition of Chairman and CEO positions from William M. Brown (formerly Harris’

    Chairman, President and CEO) to Christopher E. Kubasik (currently Vice Chairman, President and COO and formerly L3’s Chairman, CEO and President) within three years.

>  New 12-member Board, as reconstituted upon merger, drew members in equal numbers from boards of L3 and Harris.

>  Common stock trades on NYSE under ticker symbol “LHX.”

>  Fiscal year end transitioning from Friday nearest June 30 to Friday nearest December 31.

 
       

 

BOARD AND GOVERNANCE HIGHLIGHTS

We have long been focused on and committed to responsible and effective corporate governance in order to enhance the creation of sustainable, long-term shareholder value and to be accountable and responsive to our shareholders. The following are highlights regarding our governance framework and the composition of our Board of Directors (our “Board”), which was reconstituted in connection with the L3Harris Merger.

6 L3HARRIS 2019 PROXY STATEMENT

 

 

   
   

PROXY SUMMARY

Director Nominees

Our Board’s nominees for election as director are the twelve directors currently comprising our reconstituted Board:

>William M. Brown, Chairman and CEO (formerly Harris’ Chairman, President and CEO);
>Christopher E. Kubasik, Vice Chairman, President and COO (formerly L3’s Chairman, CEO and President);
>Five independent directors from the Harris Board (Sallie B. Bailey, Peter W. Chiarelli, Thomas A. Dattilo, Roger B. Fradin and Lewis Hay III); and
>Five independent directors from the L3 Board (Thomas A. Corcoran, Lewis Kramer, Rita S. Lane, Robert B. Millard and Lloyd W. Newton).

All nominees are independent except for Mr. Brown and Mr. Kubasik. The nominees are standing for election for a term of approximately six months expiring at the 2020 Annual Meeting of Shareholders to be held April 24, 2020. This is shorter than a typical twelve-month term due to the transition in our fiscal year end to the Friday nearest December 31 and the resulting transition in the timing of our Annual Meeting of Shareholders to occur in the April-May timeframe, starting with the 2020 Annual Meeting of Shareholders.

               Current L3Harris Committees
Director Nominee  Age  Director Since*  Principal Occupation/Experience  Other
Current
Public
Company
Boards
  Audit  Compensation  Finance  Nominating
and
Governance
  Ad Hoc
Technology
Sallie B. Bailey  59  2018  Former EVP and CFO of Louisiana-Pacific Corporation               
William M. Brown  56  2011  Chairman and CEO of L3Harris  1               
Peter W. Chiarelli  69  2012  General, U.S. Army (Retired)              
Thomas A. Corcoran  75  1997  President of Corcoran Enterprises, LLC; former Senior Advisor for The Carlyle Group  1             
Thomas A. Dattilo  68  2001  Advisor for private investment firms; former Chairman and CEO of Cooper Tire & Rubber Company               
Roger B. Fradin  65  2016  Operating Executive with The Carlyle Group; former Vice Chairman of Honeywell International Inc.  4            
Lewis Hay III  63  2002  Operating Advisor for Clayton Dubilier & Rice, LLC; former Chairman and CEO of NextEra Energy, Inc.  1              
Lewis Kramer  71  2009  Former Global Client Service Partner and National Director of Audit Services of Ernst & Young LLP  1             
Christopher E. Kubasik  58  2018  Vice Chairman, President and COO of L3Harris                 
Rita S. Lane  56  2018  Principal at Hajime, LLC; former VP, Operations of Apple Inc.  2             

Robert B. Millard

Lead Independent Director

  69  1997  Chairman of Massachusetts Institute of Technology Corporation  1            
Lloyd W. Newton  76  2012  General, U.S. Air Force (Retired); former EVP of Pratt & Whitney Military Engines              
* Reflects tenure with L3 or Harris board of directors, as applicable. ■ Member ■ Chairperson

L3HARRIS 2019 PROXY STATEMENT 7

 

 

 

PROXY SUMMARY

   
   

Nominee Skills and Attributes

Our Board believes that these twelve nominees are well positioned to discharge our Board’s responsibilities.

Not only do they represent a diverse mix of backgrounds, skills and experience and a track record of driving long-term shareholder value, but, together, they also possess a deep and unique understanding of L3’s and Harris’ businesses and the challenges and opportunities L3Harris faces.

As shown below, our nominees, drawn in equal numbers from the boards of directors of L3 and Harris, represent a favorable balance of shorter and longer tenures. At the same time, our Board’s reconstitution presents an opportunity for all nominees to benefit from new interactions and refreshed perspectives.

Tenure of Director Nominees (including tenure with L3 or Harris board of directors, as applicable)

 

4

UNDER 4 YEARS

4

4 – 10 YEARS

4

MORE THAN 10 YEARS

(GRAPHIC)

 

Key Governance Practices

Below are some key practices and policies that demonstrate our Board’s commitment to responsible and effective corporate governance to enhance the creation of sustainable, long-term shareholder value and to be accountable and responsive to our shareholders: 

BOARD STRUCTURE AND POLICIES

>Independent directors make up approximately 83% of the Board and 100% of each standing committee.
>All directors elected annually; majority voting standard in uncontested elections.
>Lead Independent Director broadly empowered with defined responsibilities and authority.
>Independent directors regularly hold executive sessions led by Lead Independent Director.
>Our Board and all standing committees conduct annual self-evaluations for continuous improvement in performance and effectiveness.
>Our Board membership criteria take into account diversity of viewpoints, background, experience, gender, race,

ethnicity and similar demographics, as well as avoiding potential overboarding (more than 4 other public company boards, under our guidelines).

>Policy requiring directors to retire at age 75 (exception for three years for directors designated pursuant to L3Harris Merger-related provisions of our governing documents).
>Board reviews and evaluates management development and succession plans.
>Strong ethics and business conduct program, reflecting our commitment to our Code of Conduct and broader compliance principles, to responsible corporate citizenship and sustainability and to our belief that we should conduct all business dealings with honesty, integrity and responsibility.


8 L3HARRIS 2019 PROXY STATEMENT

 

 

 

   
   

PROXY SUMMARY

SHAREHOLDER INPUT AND ALIGNMENT

>Meaningful stock ownership guidelines for non-employee directors.
>Prohibition on short sales, hedging, other derivative transactions and pledging of our common stock by directors and executive officers.
>Robust proxy access By-Law provision allowing eligible shareholders to nominate and include in our proxy materials candidates for election to our Board.
>Shareholders holding at least 25% of common stock can call a special meeting.
>Annual “say-on-pay” advisory vote.
>Engagement with large shareholders on key aspects of executive compensation program.


PERFORMANCE HIGHLIGHTS

During fiscal 2019, we operated as Harris Corporation – a leading technology innovator, solving customers’ toughest mission-critical challenges by providing solutions that connect, inform and protect – and reported our financial results in three segments. As of the end of fiscal 2019, Harris had approximately $6.8 billion in annual revenue and about 18,200 employees. As noted above, the closing of the L3Harris Merger occurred on June 29, 2019, after the end of Harris’ fiscal 2019, and thus fiscal 2019 results reflect standalone results for Harris (not L3 or the combined company, L3Harris).

Key Fiscal 2019 Financial Results 

These results are important because they are components of performance measures used in incentive compensation.

 

REVENUE   OPERATING INCOME    
$6.8B   $1.09B    
Up 10% from fiscal 2018   Up 19% from fiscal 2018    

 

ADJUSTED FREE CASH FLOW*   NON-GAAP EPS*      
$1.06B   $8.29       
Up $140M from fiscal 2018   Up 30% from fiscal 2018      

  

 

TSR (cumulative to end of fiscal 2019; reflects reinvestment of dividends)

1-YEAR     3-YEAR     5-YEAR    
33.1 %   141.6 %   176.3 %  

 

*See Appendix A for reconciliations of GAAP to non-GAAP financial measures.

 

L3HARRIS 2019 PROXY STATEMENT 9

 

 

PROXY SUMMARY

   
   

 

Strategic Achievements

Our strong fiscal 2019 financial results reflected our successful execution of the key strategic priorities Harris set for fiscal 2019, which were:

>Accelerating revenue growth across all three of its business segments;
>Driving flawless execution while expanding margins through operational excellence; and
>Sustaining cash flow with shareholder-friendly capital deployment.

 

EXECUTIVE COMPENSATION HIGHLIGHTS

Although we now operate as L3Harris, this proxy statement discusses compensation for the named executive officers of Harris during fiscal 2019. This uncommon situation results from the interplay between the timing of our fiscal year end relative to the L3Harris Merger and Securities and Exchange Commission (“SEC”) rules requiring that we hold an advisory vote on our executive compensation for fiscal 2019, which ended one day prior to the closing of the merger.

Our basic executive compensation philosophy is unaltered by the L3Harris Merger – it has been and will continue to be as follows:

OVERALL OBJECTIVE

Encourage and reward creation of sustainable, long-term shareholder value

 

GUIDING PRINCIPLES

>   Align with shareholders’ interests

>   Be competitive at target performance level

 

>   Motivate achievement of financial goals and strategic objectives

>   Align realized pay with performance

Pay Mix for Fiscal 2019

Consistent with our goals of aligning pay with performance and with the interests of our shareholders, a high percentage of fiscal 2019 total target direct compensation is at risk (either performance-based or time-based). Total target direct compensation is the sum of base salary level, target annual cash incentive award and the target value of performance share units, stock options and restricted stock units granted as part of our annual cycle of grants to executive officers.

 

 

10 L3HARRIS 2019 PROXY STATEMENT

 

 

   
   

PROXY SUMMARY

Overview of Compensation Decisions for Fiscal 2019

            Target Value of   Payout for Fiscal
    Base Salary   Annual Cash   Equity-Based Compensation   2017-2019
    Level   Incentive Payout   Granted in Fiscal 2019   Performance Share Units
Mr. Brown   $1,350,000   $3,735,000   $8,800,000   73,961 shares
    3.8% increase from   162.4% of target   7% increase from    
    fiscal 2018       fiscal 2018    
Mr. Ghai   $600,000   $650,000   $1,600,000   11,126 shares
    9.1% increase from   135.4% of target   23% increase from    
    fiscal 2018       fiscal 2018    
Mr. Duffy   $548,500   $550,000   $1,200,000   9,675 shares
    3.5% increase from   143.2% of target   9% increase from    
    fiscal 2018       fiscal 2018    
Mr. Mehnert   $570,000   $550,000   $1,150,000   11,126 shares
    2.7% increase from   128.7% of target   same as fiscal 2018    
    fiscal 2018            
Mr. Mikuen   $570,000   $650,000   $1,200,000   9,675 shares
    3.6% increase from   162.9% of target   9% increase from    
    fiscal 2018       fiscal 2018    

Payouts in respect of fiscal 2017-2019 cycle performance share unit awards (granted in fiscal 2017), shown in the righthand column, were at 157.7% of target, principally because our earnings per share compound annual growth rate (“EPS CAGR”) adjusted result exceeded adjusted target and our total shareholder return (“TSR”) performance over the fiscal 2017-2019 performance period compared with companies in the Standard & Poor’s 500 (“S&P 500”) exceeded the 80th percentile, resulting in an upward payout adjustment of 33%.

In addition, as discussed in the Compensation Discussion and Analysis section of this proxy statement, the L3Harris Merger closing triggered accelerated vesting and payouts of both fiscal 2018-2020 cycle performance share unit awards (granted in fiscal 2018) and fiscal 2019-2021 cycle performance share unit awards (granted in fiscal 2019), pursuant to the terms and conditions of those awards. For details on those payouts, see the discussion beginning on page 58.

L3HARRIS 2019 PROXY STATEMENT  11

 

 

 

PROPOSAL 1:

ELECTION OF DIRECTORS

 

 

 

Our Board unanimously recommends voting FOR election of its 12 nominees for director for a term of approximately six months expiring at the 2020 Annual Meeting of Shareholders to be held on April 24, 2020.

 

>With a diverse mix of backgrounds, skills and experience and a track record of driving long-term shareholder value, as well as a deep and unique understanding of L3’s and Harris’ businesses and the challenges and opportunities L3Harris faces, our reconstituted Board is well positioned to discharge its responsibilities
>Nominees collectively have broad and diverse leadership experience and many other qualifications, skills and attributes that our Board views as valuable to L3Harris
>Favorable balance of shorter and longer tenures among nominees, all of whom are independent, except Mr. Brown, our Chairman and CEO, and Mr. Kubasik, our Vice Chairman, President and COO


 

 

Our entire Board is elected annually by our shareholders. Our Restated Certificate of Incorporation provides that our Board shall consist of not less than 8 or more than 13 directors, the exact number of directors to be determined from time to time by our Board. Each director holds office until the Annual Meeting of Shareholders for the year in which that director’s term expires, and until that director’s successor is elected and qualified, except in the case of death, resignation, retirement or removal from office. Vacancies may be filled by a majority of the remaining directors.

 

 

OUR NOMINEES AS A GROUP

 

In connection with the L3Harris Merger closing, the authorized number of directors was increased from 11 to 12, and our Board was reconstituted and currently consists of the following twelve directors:

>William M. Brown, Chairman and Chief Executive Officer (formerly Harris’ Chairman, President and Chief Executive Officer);
>Christopher E. Kubasik, Vice Chairman, President and Chief Operating Officer (formerly L3’s Chairman, Chief Executive Officer and President);
>Five independent directors from the Harris Board (Sallie B. Bailey, Peter W. Chiarelli, Thomas A. Dattilo, Roger B. Fradin and Lewis Hay III); and
>Five independent directors from the L3 Board (Thomas A. Corcoran, Lewis Kramer, Rita S. Lane, Robert B. Millard and Lloyd W. Newton).


Also in connection with the L3Harris Merger closing, our reconstituted Board amended our By-Laws so that the L3Harris fiscal year will end on the Friday nearest December 31. For this reason, L3Harris’ current fiscal period (following Harris’ fiscal 2019 ended June 28, 2019) is an abbreviated fiscal transition period ending January 3, 2020. We typically hold our Annual Meeting of Shareholders approximately four months after our fiscal year ends. Following the 2019 Annual Meeting of Shareholders in October 2019, due to our new fiscal year timing, we will transition the timing of our Annual Meeting of Shareholders to occur in the April-May timeframe, starting with the 2020 Annual Meeting of Shareholders to be held on April 24, 2020.

 

Based on the recommendation of our Nominating and Governance Committee, our Board has nominated the 12 directors comprising our reconstituted Board – all of whom are standing for election as incumbents – for a new term of approximately six months that will begin at the 2019 Annual Meeting and expire at the 2020 Annual Meeting of Shareholders.

 

No nominee is related to any other nominee or to any executive officer of L3Harris or its subsidiaries, by blood, marriage or adoption.

 

 

12  L3HARRIS 2019 PROXY STATEMENT

 

 

 

 

   

PROPOSAL 1: ELECTION OF DIRECTORS VOTING STANDARD FOR DIRECTORS

 

Below we provide information on each nominee’s experience, qualifications, attributes and skills that our Board has determined support their nomination and service as a L3Harris director. Data with respect to the number of shares of our common stock beneficially owned by each of our directors as of August 30, 2019 can be found in the table on page 94. Beginning on page 21, we describe our director nomination process and the criteria we apply in selecting nominees. 

 

 

 

VOTING STANDARD FOR DIRECTORS

 

Under our By-Laws and Corporate Governance Guidelines, the voting standard for the election of our directors is a majority voting standard in uncontested elections and a plurality voting standard in contested elections. The election of directors at the 2019 Annual Meeting of Shareholders is an uncontested election and thus the majority voting standard applies.

 

To be elected under a majority voting standard, a director nominee must receive more “For” votes than “Against” votes. Abstentions and any broker non-votes will have no effect on the election of directors because only votes cast “For” or “Against” a nominee will be counted. Any incumbent director nominee who does not receive more “For” votes than “Against” votes must promptly offer to tender his or her resignation following certification of the vote, and our Nominating and Governance Committee will then recommend to our Board whether or not to accept it. Our Board shall take action within 90 days following certification of the vote, unless such action would cause us to fail to comply with the New York Stock Exchange (“NYSE”) independence or other legal requirements, in which event our Board shall take action as promptly as practicable while continuing to meet such requirements. Our Board will also promptly publicly disclose its decision and the reasons therefor. If our Board does not accept the resignation, the nominee will continue to serve as a director until the next Annual Meeting of Shareholders and until his or her successor shall be duly elected and qualified, or until his or her prior death, resignation, retirement or removal from office. If our Board accepts the resignation, then a majority of our Board, in its sole discretion, may fill any resulting vacancy or may choose not to fill the vacancy and to decrease the size of our Board.

 

Proxies will be voted for the election of each of Ms. Bailey, Ms. Lane and Messrs. Brown, Chiarelli, Corcoran, Dattilo, Fradin, Hay, Kramer, Kubasik, Millard, and Newton to serve for a term of approximately six months expiring at the 2020 Annual Meeting of Shareholders to be held on April 24, 2020, unless otherwise specified in the proxy/voting instructions. Proxies cannot be voted for more than the 12 nominees for director named in this proxy statement.

 

 

CRITERIA FOR BOARD MEMBERSHIP

 

General Criteria

 

Under our Corporate Governance Guidelines, our Board selects director nominees based on the recommendation of our Nominating and Governance Committee and the following criteria:

>Demonstrated ability and sound judgment;
>Personal qualities and characteristics, accomplishments and reputation in the business community, professional integrity, educational background, business experience and related experience;
>Willingness to objectively appraise management performance;
>Current knowledge and contacts in the markets in which we do business and in our industry or other relevant industries, giving due consideration to potential conflicts of interest;
>Ability and willingness to commit adequate time to Board and committee matters, including attendance at Board, committee and annual shareholder meetings;
>Diversity of viewpoints, background, experience, gender, race, ethnicity and similar demographics;
>The number of other boards of which the individual is a member; and
>Compatibility of the individual’s experience, qualifications, skills, attributes and personality with those of other directors and potential directors in building a Board that is effective, collegial and responsive to the needs of L3Harris and the interests of our shareholders.


L3HARRIS 2019 PROXY STATEMENT 13

 

 

 

 

PROPOSAL 1: ELECTION OF DIRECTORS NOMINEE BIOGRAPHIES

   

 

Incumbent Nominees

 

Our Nominating and Governance Committee’s process for considering, reviewing and evaluating incumbent directors as potential nominees for re-election typically is as follows:

>Prior to each annual meeting of shareholders, each current director discusses his or her participation on our Board and its committees and other relevant matters with our Chairman.
>Each current director also is requested to discuss any concerns or issues regarding continued membership on our Board with the Chairperson of our Nominating and Governance Committee.
>In addition, our Nominating and Governance Committee reviews each current director’s experience, qualifications, attributes, skills, tenure, contributions, other directorships, meeting attendance record, any changes in employment status and other information it deems helpful in considering and evaluating the director for nomination.

 

Because our Board was reconstituted in connection with the L3Harris Merger closing, our Nominating and Governance Committee did not follow this process with respect to the nominees for election at the 2019 Annual Meeting, all of whom are incumbent directors; however, our Nominating and Governance Committee expects to resume this process with respect to nominees for election at the 2020 Annual Meeting.

 

Consideration of Diversity

 

Our Board values diversity as a factor in selecting nominees to serve on our Board. Although we have adopted no specific policy on diversity, our Nominating and Governance Committee considers our Board membership criteria in selecting nominees for directors, including “diversity of viewpoints, background, experience, gender, race, ethnicity and similar demographics.” Such considerations also may include personal characteristics, functional background, executive or professional experience, and international experience. As a general matter, our Board considers diversity in the context of our Board as a whole and takes into account the personal characteristics and experience of current and prospective directors to facilitate Board deliberations and decisions that reflect a broad range of perspectives.

 

 

NOMINEE BIOGRAPHIES

 

Each of the nominees has consented to stand for election. If any nominee becomes unavailable for election, which we do not currently anticipate, proxies instructing a vote for that nominee may be voted for a substitute nominee selected by our Board or, alternatively, our Board may determine to leave the vacancy temporarily unfilled or reduce the number of directors in accordance with our By-Laws.

 

 

14 L3HARRIS 2019 PROXY STATEMENT

 

 

 

 

   

PROPOSAL 1: ELECTION OF DIRECTORS Nominee Biographies

 

 

           

L3Harris Committees

>   Audit

>   Finance

  Sallie B. Bailey  

Age: 59
Director since April 2018

Independent Director

Qualifications, Skills and Attributes Valuable to L3Harris Board

>   Knowledge of corporate finance, strategic planning, banking relationships, operations, complex information technology and other systems, enterprise risk management and investor relations

>   Knowledge and experience with complex financial and accounting functions and internal controls

 

>   Knowledge of complex financial, operational, management and strategic issues faced by a large global company

>   Public company board and corporate governance experience

     
       
       
       
         
Position, Principal Occupation and Professional Experience  

>   Executive Vice President and Chief Financial Officer of Louisiana-Pacific Corporation (Dec. 2011 - July 2018)

>   Vice President and Chief Financial Officer of Ferro Corporation (Jan. 2007 - July 2010)

>   11-year career at The Timken Company in various senior management positions of increasing

 

responsibility (1995 - 2006), lastly as Senior Vice President, Finance and Controller

>   Previously with Tenneco Inc. in various finance organization roles (1988 - 1995), lastly as Assistant Treasurer

>   Previously with Deloitte and Touche LLP as an audit supervisor

         
         
Other Directorships  

>   The AZEK Company (since 2019) (non-public company)

>   General Cable Corporation (2013 - 2018)

  >   Milacron Holdings Corp. (2004 - 2008)
         

 

           


L3Harris Committees

>   None

  William M. Brown  

Age: 56

Director since Dec. 2011

Employee Director

(not independent)

Qualifications, Skills and Attributes Valuable to L3Harris Board
>   Current role as our Chief Executive Officer and the terms of employment agreement (failure to nominate would constitute “constructive termination”), as well as his leadership and management skills

>   Knowledge of complex strategic, operational, management and financial issues faced by a large company with international operations

 

>   Knowledge and expertise related to strategic planning, global supply chain and procurement, productivity and lean manufacturing initiatives, international sales, marketing and operations, domestic and international mergers and acquisitions, regulatory challenges, and enterprise risk management

>   Public company board and governance experience

         
Position, Principal Occupation and Professional Experience  

>   Chairman of the Board and Chief Executive Officer of L3Harris Technologies, Inc. (since June 29, 2019)

>   Chairman of the Board, President and Chief Executive Officer of Harris Corporation (April 2014 - June 28, 2019)

>   President and Chief Executive Officer of Harris Corporation (Nov. 2011 - April 2014)

>   14-year career in U.S. and international roles at United Technologies Corporation (“UTC”),

 

a diversified global building and aerospace company (1997 - 2011), including Senior Vice President, Corporate Strategy and Development; 5 years as President of UTC’s Fire & Security Division; and President of Asia Pacific Operations of UTC’s Carrier Corporation

>   Previously with McKinsey & Company as senior engagement manager and with Air Products and Chemicals, Inc. as project engineer

         
         
Other Directorships, Trusteeships and Memberships   >   Celanese Corporation (since 2016)

>   Chairman of Aerospace Industries Association Board of Governors

>   Board of Directors of Fire Department of NYC Foundation

  >   Board of Trustees of Florida Institute of Technology

>   National Security Telecommunications Advisory Committee

>   Council of Trustees of Association of the United States Army

 

L3HARRIS 2019 PROXY STATEMENT 15

 

 

 

PROPOSAL 1: ELECTION OF DIRECTORS Nominee Biographies

   

 



L3Harris Committees

>   Ad Hoc
Technology
(Chairperson)

>   Audit

  Peter W. Chiarelli  

Age: 69

Director since Aug. 2012

Independent Director

 

  Qualifications, Skills and Attributes Valuable to L3Harris Board
 

>   Knowledge and expertise in complexities of both U.S. and international militaries, defense communities and defense industries

>   Extensive background in military operations and national security

  >   Experience addressing complex operational and strategic issues, managing significant operating budgets, and handling legislative and public affairs
         
         
         
         
         
           
Position, Principal
Occupation and
Professional Experience
 

>   Chief Executive Officer, 1560 LLC, a company engaged in public policy and electoral research and analysis (since 2018)

>   Chief Executive Officer of One Mind, a non-profit organization bringing together healthcare providers, researchers and academics to cure brain disorders (April 2012 - Jan. 2018)

>   General, U.S. Army (Retired), retired in March 2012 after nearly 40 years of service with U.S. Army, commanding troops at all levels from platoon to Multi-National Corps and holding various senior officer positions, including:

 

▪   Vice Chief of Staff (Army’s second-highest-ranking officer), with responsibility for oversight of day-to-day operations and for leading budget planning and execution and efforts to modernize equipment, procedures and formations

▪   Senior Military Assistant, Secretary of Defense

▪   Commander of Multi-National Corps - Iraq

 

▪   Division Commander, Fort Hood, Texas and Baghdad, Iraq

▪   U.S. Army Chief of Operations, Training and Mobilization

▪   Executive Officer, Supreme Allied Commander, Europe

         
Other Directorships   >   1560 LLC (since 2018) (non-public company)   >   Interologic Inc. (since 2018) (non-public company)
         

 

           


L3Harris Committees

>   Audit

>   Finance

  Thomas A. Corcoran  

Age: 75

Director since June 29, 2019
(1997 including L3 service)

Independent Director

 

Qualifications, Skills and Attributes Valuable to L3Harris Board

 

>   Knowledge of complex operational, management, financial, strategic and governance issues faced by large public companies

>   Knowledge and expertise related to global supply chain, manufacturing, human resources, accounting and internal controls, finance and economic analysis and mergers and acquisitions

 

>   Knowledge of, and experience with, aerospace and defense and technology industries and with the government procurement process, including with major U.S. Department of Defense programs

>   Public company board and governance experience

         
Position, Principal
Occupation and
Professional Experience
 

>   President, Corcoran Enterprises, LLC, a private management consulting firm (since 2001)

>   Senior Advisor, The Carlyle Group, a private equity investment firm (2001 - 2017)

>   President and Chief Executive Officer, Gemini Air Cargo, an aircraft, crew, maintenance and insurance cargo airline (March 2001 - April 2004)

>   President and Chief Executive Officer, Allegheny Teledyne Incorporated, a global manufacturer of

 

technically advanced specialty materials and complex components (Oct. 1999 - Dec. 2000)

>   President and Chief Operating Officer, Electronic Systems Sector and Space & Strategic Missiles Sector, Lockheed Martin Corporation, a global aerospace, defense, security and advanced technologies company (April 1993 - Sept. 1999)

>   26-year career at General Electric in various management positions

         
         
Other Directorships   >   Aerojet Rocketdyne Holdings, Inc. (since 2008)

>   L3 Technologies, Inc. (1997 – June 28, 2019)

>   Aer Lingus (2008 - 2013) (non-public company)

  >   Force Protection Inc. (2008 - 2012) (non-public company)

>   LaBarge, Inc. (2005 - 2011)

>   Serco Ltd. (2007 - 2011)

 

16  L3HARRIS 2019 PROXY STATEMENT

 

 

 

   

PROPOSAL 1: ELECTION OF DIRECTORS NOMINEE BIOGRAPHIES

 

       

 

L3Harris Committees

>    Compensation

>    Nominating and
Governance

Thomas A. Dattilo

Age: 68

Director since Aug. 2001

Independent Director

 

Qualifications, Skills and Attributes Valuable to L3Harris Board

>   Knowledge of complex operational, management, financial, strategic and governance issues faced by a large global public company

>   Knowledge and expertise related to global supply chain and distribution, mergers and acquisitions, lean manufacturing and related initiatives, international operations, human resources and talent management, accounting and internal controls, and investor relations

>   Experience and knowledge related to strategic planning, capital raising, mergers and acquisitions, and economic analysis

>   Public company board, governance and executive compensation experience

Position, Principal
Occupation and
Professional Experience

>   Advisor to various private investment firms (currently)

>   Chairman and Senior Advisor to Portfolio Group, a privately-held provider of outsourced financial services to automobile dealerships specializing in aftermarket extended warranty and vehicle service contract programs (Jan. 2013 - June 2016)

>   Senior Advisor for Cerberus Operations and Advisory Company, LLC, a unit of Cerberus Capital Management, a private investment firm (2007 - 2009)

>   Chairman, President and Chief Executive Officer of Cooper Tire & Rubber Company (“Cooper”), which specializes in design, manufacture and sale of passenger car and truck tires (2000 - 2006)

>   President and Chief Operating Officer of Cooper (1999 - 2000)

>   Previously held senior positions with Dana Corporation, including President of its sealing products group

Other Directorships
and Trusteeships

>   Haworth, Inc. (since 2010) (non-public company)

>   Solera Holdings, Inc. (2013 - 2016)

>   Alberto-Culver Company (2006 - 2011)

>   Cooper Tire & Rubber Company (1999 - 2006)

>   Former Chairman of Board of Trustees of Manufacturers Alliance for Productivity and Innovation

     

       

 

L3Harris Committees

>    Ad Hoc Technology

>    Finance (Chairperson)

Roger B. Fradin

Age: 66

Director since Oct. 2016

Independent Director

 

Qualifications, Skills and Attributes Valuable to L3Harris Board

>   Knowledge of complex strategic, operational, financial, management and governance issues faced by a large public company

>   Knowledge of domestic and international operations, business development, strategic planning, product development and marketing, technology innovation, corporate finance, mergers and acquisitions, human resources and talent management, accounting and internal controls

>   Entrepreneurial background, with experience in driving growth for business and entering new markets, both organically and through acquisitions

>   Knowledge and experience in capital markets and finance matters

>   Public company board and governance experience

Position, Principal
Occupation and
Professional Experience

>   Operating Executive with The Carlyle Group, a global alternative asset manager (since Feb. 2017)

>   17-year career in senior positions with Honeywell International Inc., a diversified technology and manufacturing company (2000 - 2017), including:

 

▪   Vice Chairman (2014 - 2017)

▪   President and Chief Executive Officer, Automation and Controls business unit (2004 - 2014)

  President and Chief Executive Officer, Security and Fire Solutions business unit
Other Directorships

>   Resideo Technologies, Inc. (since 2018)

>   Goldman Sachs Acquisition Holdings Corp. (since 2018)

>   Pitney Bowes Inc. (since 2012)

>   MSC Industrial Direct Co., Inc. (since 1998)

 

L3HARRIS 2019 PROXY STATEMENT  17

 

 

PROPOSAL 1: ELECTION OF DIRECTORS NOMINEE BIOGRAPHIES

   

 

       

 

L3Harris Committees

>    Compensation
(Chairperson)

>    Nominating and
Governance

Lewis Hay III

Age: 63

Director since Feb. 2002

Independent Director
Qualifications, Skills and Attributes Valuable to L3Harris Board

>   Knowledge of complex strategic, operational, management, regulatory, financial and governance issues faced by a large public company

>   Knowledge and expertise related to strategic planning, capital raising, financial planning, enterprise risk management, accounting and

internal controls, mergers and acquisitions, and investor relations

>   Public company board, governance and executive compensation experience

Position, Principal
Occupation and
Professional Experience

>   Operating Advisor for Clayton, Dubilier & Rice, LLC, a private equity investment firm (since Jan. 2014)

>   14-year career in senior positions with NextEra Energy, Inc. (formerly FPL Group, Inc.) (“NextEra”), one of the nation’s leading electricity-related services companies and the largest renewable energy generator in North America (1999 - 2013), including:

 

▪   Executive Chairman of NextEra
(July 2012 - Dec. 2013)

▪   Chairman and Chief Executive Officer of NextEra
(Dec. 2006 - July 2012)

▪   Chairman, President and Chief Executive Officer of NextEra
(Jan. 2002 - Dec. 2006)

▪   Chief Executive Officer of Florida Power & Light Company
(Jan. 2002 - July 2008)

Other Directorships,
Trusteeships and
Memberships

>   Anthem, Inc. (since 2013)

>   PowerTeam Services, LLC (since 2018) (non-public company)

>   Capital One Financial Corporation (2003 - 2019)

>   NextEra Energy, Inc. (2001 - 2013)

>   Former director and Chairman of Institute of Nuclear Power Operations

>   Former director and Chairman of Edison Electric Institute

>   Former member of Business Roundtable and Florida Council of 100

>   President Obama’s Council on Jobs and Competitiveness (2011 - 2013)

 

       

 

L3Harris Committees

>    Audit (Chairperson)

>    Compensation

Lewis Kramer

Age: 71

Director since June 29, 2019
(2009 including L3 service)

Independent Director
Qualifications, Skills and Attributes Valuable to L3Harris Board

>   Knowledge and experience with complex financial, audit and accounting matters and complex information technology and other systems

>   Knowledge of capital structure and related credit and finance matters, enterprise risk management and mergers and acquisitions

>   Extensive financial and business knowledge gained while serving as an independent auditor for numerous organizations across many industries

>   Public company board, governance and executive compensation experience

>   Expertise on functioning of audit committees and internal-control related matters

Position, Principal
Occupation and
Professional Experience
>   Retired from Ernst & Young LLP, a multinational professional services firm, in June 2009 after a nearly 40-year career during which he served on the firm’s U.S. Executive Board and held various senior positions including:
  ▪    Global Client Service Partner for worldwide external audit and all other services for major clients ▪   National Director of Audit Services
Other Directorships >   Las Vegas Sands Corp. (since 2017) >   L3 Technologies, Inc. (2009 – June 28, 2019)

 

18  L3HARRIS 2019 PROXY STATEMENT

 

 

   

PROPOSAL 1: ELECTION OF DIRECTORS NOMINEE BIOGRAPHIES

 

       

 

L3Harris Committees

>    None

Christopher E. Kubasik

Age: 58

Director since June 29, 2019
(2018 including L3 service)

Employee Director
(not independent)
Qualifications, Skills and Attributes Valuable to L3Harris Board

>   Current role as our President and Chief Operating Officer and the terms of his employment agreement, as well as his leadership and management skills

>   Knowledge and experience with complex strategic, operational, management and financial issues faced by a large aerospace and defense company with international operations

>   Knowledge and experience with complex financial and accounting functions and internal controls, mergers and acquisitions, human resources and talent development

>   Broad experience in aerospace, defense, and technology industries and with the government procurement process

>   Public company board and governance experience

Position, Principal
Occupation and
Professional Experience

>   Vice Chairman, President and Chief Operating Officer of L3Harris Technologies, Inc. (since June 29, 2019)

>   Chairman, Chief Executive Officer and President of L3 Technologies, Inc. (May 2018 - June 28, 2019)

>   Chief Executive Officer and President of L3 Technologies, Inc. (Jan. 2018 - April 2018)

>   President and Chief Operating Officer of L3 Technologies, Inc. (Oct. 2015 – Dec. 2017)

>   President and Chief Executive Officer of Seabury Advisory Group LLC (now part of Accenture plc), a leading aviation and development professional services firm (March 2014 - Oct. 2015)

>   President and Chief Executive Officer of Ackuity Advisors, Inc., an aerospace and defense consulting firm (Jan. 2013 - March 2014)

>   Various senior executive positions with Lockheed Martin Corporation (1999 - 2012), a global aerospace, defense, security and advanced technologies company, including Vice Chairman, President and Chief Operating Officer from 2010 to 2012

>   17-year career with Ernst & Young LLP, where he was named partner in 1996

Other Directorships,
Trusteeships and
Memberships

>   Spirit AeroSystems Holdings, Inc. (2013 - 2016)

>   L3 Technologies, Inc. (2018 – June 28, 2019)

>   International Paper Company (2012)

>   Lockheed Martin Corporation (2010 - 2012)

>   Executive Committee and Board of Governors of the Aerospace Industries Association (2018 - 2019)

>   Vice President of the Board of Governors of The Wings Club Foundation, Inc. (since 2016)

 

       

 

 

L3Harris Committees

>    Compensation

>    Finance

Rita S. Lane

Age: 56

Director since June 29, 2019
(2018 including L3 service)

Independent Director
Qualifications, Skills and Attributes Valuable to L3Harris Board

>   Knowledge and expertise related to global supply chain and distribution, manufacturing, sales and marketing and complex information technology and related systems

>   Knowledge and expertise related to strategic planning, technology innovation and research and development

>   Knowledge of complex operational, management, financial and operational issues faced by large global companies

>   Public company board and governance experience

Position, Principal
Occupation and
Professional Experience

>   Serves as the Principal at Hajime, LLC, a supply chain advisor for start-up companies (since Jan. 2014)

>   Vice President, Operations of Apple Inc., where she oversaw the launch of the iPad® and manufacturing of the Mac® Desktop & Accessories product lines (July 2008 - Jan. 2014)

>   Senior Vice President, Integrated Supply Chain and Chief Procurement Officer of Motorola Solutions, Inc. (June 2006 - July 2008)

>   14-year career with International Business Machines Corporation serving within the Systems & Personal Computer division and as Vice President, Integrated Supply Chain

>   Served for 5 years in the U.S. Air Force as a Captain

Other Directorships

>   Sanmina Corporation (since 2016)

>   Signify N.V. (since 2016)

>   L3 Technologies, Inc. (2018 – June 28, 2019)

 

L3HARRIS 2019 PROXY STATEMENT  19

 

 

 

PROPOSAL 1: ELECTION OF DIRECTORS NOMINEE BIOGRAPHIES

   

 

       

 

L3Harris Committees

>    Ad Hoc Technology

>    Nominating and
Governance

Robert B. Millard

Age: 69

Director since June 29, 2019
(1997 including L3 service)

Lead Independent Director

(since June 29, 2019)

Qualifications, Skills and Attributes Valuable to L3Harris Board
>   Knowledge and expertise related to corporate finance, capital raising, financial planning, accounting, mergers and acquisitions, and economic analysis

>   Experience and knowledge related to strategic planning, product development, technology innovation, and talent management

>   Public company board, governance and executive compensation experience

Position, Principal
Occupation and

Professional Experience

>   Chairman of the Massachusetts Institute of Technology Corporation since 2014

>   Held various positions in business, including:

▪ Managing Director at Lehman Brothers and its predecessors (1976 - 2008)

  Chairman of Realm Partners L.L.C. (2009 - 2014)

Other Directorships,
Trusteeships and
Memberships

>   Evercore Inc. (since 2012)

>   L3 Technologies, Inc. (1997 – June 28, 2019)

>   GulfMark Offshore, Inc. (1989 - 2013)

>   Member of the Council on Foreign Relations

>   Fellow of the American Academy of Arts and Sciences

>   Board of Directors of American Association for Advancement of Science

 

       

 

L3Harris Committees

>    Ad Hoc Technology

>    Nominating and
Governance (Chairperson)

Lloyd W. Newton

Age: 76

Director since June 29, 2019 (2012 including L3 service)

Independent Director
Qualifications, Skills and Attributes Valuable to L3Harris Board

>   Knowledge and expertise in complexities of U.S. military and defense industry and extensive background in U.S. Department of Defense operations and human resources

>   Experience addressing complex organizational and strategic issues, managing significant operating budgets and handling legislative and public affairs

>   Knowledge of, and experience with, large aerospace and defense government projects and with the procurement process, including with major U.S. Department of Defense programs, and with complex operations, business development and technology-driven business environments

>   Public company board and governance experience

Position, Principal
Occupation and
Professional Experience

>   Executive Vice President, Pratt & Whitney Military Engines, an aerospace manufacturer (Sept. 2000 - March 2006)

>   Four-Star General and Commander, U.S. Air Force (Retired), retired in March 2000, after 34 years of service. Responsible for the recruiting, training and education of all Air Force personnel from 1997 until his retirement. Also served as an Air Force congressional liaison officer with the U.S. House of Representatives and was a member of the Air Force’s Air Demonstration Squadron, the Thunderbirds.

Other Directorships

>   L3 Technologies, Inc. (2012 - June 28, 2019)

>   Torchmark Corporation (2006 - 2018)

>   Sonoco Products Co. (2008 - 2014)

>   Goodrich Corporation (2006 - 2012)

 

20  L3HARRIS 2019 PROXY STATEMENT

 

 

 

   

PROPOSAL 1: ELECTION OF DIRECTORS NOMINEE BIOGRAPHIES

 

DIRECTOR NOMINATION PROCESS

Our Board is responsible for approving nominees to stand for election as directors. Our Nominating and Governance Committee assists in this process, identifying individuals it determines are qualified to become Board members and recommending nominees.

The Harris Board had a long-standing policy to consider director nominees recommended by shareholders, and this policy continues under our current Board. A shareholder who wishes to recommend a nominee may do so by following the process discussed on page 96. Our Secretary will forward properly submitted shareholder-recommended nominations to the Chairperson of our Nominating and Governance Committee, and such nominations will be evaluated and considered by that committee in the same manner in which it evaluates other proposed nominees.

In addition, the “proxy access” provision of our By-Laws allows an individual eligible shareholder, or a group of no more than 20 eligible shareholders, to nominate and include in our proxy materials candidates for election to our Board under terms that include the following:

>The shareholder or shareholder group must have owned 3% or more of the outstanding shares of our common stock continuously for at least three years.
>The maximum number of proxy access nominees permitted is the greater of two or 20% of our Board (rounded down to the nearest whole number).
>The shareholder(s) and the nominee(s) must satisfy additional eligibility and procedural requirements set forth in Article II, Section 11 of our By-Laws, including that a proxy access nomination notice must be delivered to us within a prescribed time period in advance of our Annual Meeting (see page 96 for the specific timeframe that applies to nominations for our 2020 Annual Meeting of Shareholders) and that all nominees and nominating shareholder(s) provide certain information, representations and agreements to us.

Our Board believes that the proxy access provision of our By-Laws strikes an appropriate balance between providing our shareholders with broad and meaningful access to our proxy materials, on one hand, and requiring sufficient transparency, protecting the interests of all shareholders and ensuring effective governance, on the other hand, and reflects best practices by being broadly consistent with other S&P 500 companies’ proxy access by-laws.

Prior to the L3Harris Merger, the Harris Governance and Corporate Responsibility Committee generally retained a third-party search firm to assist in identifying and/or evaluating potential nominees, and all of our current independent directors who were previously directors of Harris were identified and/or evaluated using that process. Our Nominating and Governance and Committee expects to continue to retain a third-party search firm to assist in identifying and/or evaluating potential nominees.

 

L3HARRIS 2019 PROXY STATEMENT 21

 

 

 

PROPOSAL 1: ELECTION OF DIRECTORS BOARD REFRESHMENT POLICY

   

 

BOARD REFRESHMENT POLICY

Before the L3Harris Merger, both the Harris Board and the Harris Governance and Corporate Responsibility Committee regularly reviewed Board composition and director qualifications, skills and attributes in preparation for anticipated director retirements in accordance with Harris’ then-existing director retirement policy. The Harris Board expected to undertake significant refreshment efforts in connection with four anticipated near-term director retirements in accordance with that policy, which would have resulted in lower average director tenure. Indeed, that process had already begun, with Mr. James F. Albaugh and Mr. Fradin joining the Harris Board in 2016; Ms. Bailey, a chief financial officer with finance and accounting experience, among other skills and attributes, joining the Harris Board in April 2018; and Mr. Terry D. Growcock and Dr. James C. Stoffel retiring from the Harris Board effective at the 2018 Annual Meeting of Shareholders.

As noted above, on June 29, 2019, pursuant to the Merger Agreement and upon completion of the L3Harris Merger, our Board was reconstituted to consist of twelve directors:

>William M. Brown, Chairman and Chief Executive Officer (formerly Harris’ Chairman, President and Chief Executive Officer);
>Christoper E. Kubasik, Vice Chairman, President and Chief Operating Officer (formerly L3’s Chairman, Chief Executive Officer and President);
>Five independent directors from the Harris Board (Sallie B. Bailey, Peter W. Chiarelli, Thomas A. Dattilo, Roger B. Fradin and Lewis Hay III); and
>Five independent directors from the L3 Board (Thomas A. Corcoran, Lewis Kramer, Rita S. Lane, Robert B. Millard and Lloyd W. Newton).

Our Board believes that these twelve directors not only have a diverse mix of backgrounds, skills and experience and a track record of driving long-term shareholder value, but, together, also possess a deep and unique understanding of L3’s and Harris’ businesses and thus the challenges and opportunities L3Harris faces, and therefore, our reconstituted Board is well positioned to discharge its responsibilities. The reconstituted Board has a favorable balance of shorter and longer tenures. Also, because some of our directors are serving together for the first time, our Board has the benefit of new interactions and the accompanying refreshed perspectives.

We do not impose term limits for directors. Under our retirement policy, a director who reaches age 75 may not be appointed, re-appointed, nominated or stand for election or re-election, but may serve out the remainder of his or her then-current term. This policy does not apply to any director designated pursuant to the L3Harris Merger-related provisions of our Restated Certificate of Incorporation and our By-Laws, until after the third anniversary of the L3Harris Merger. A director also is expected to offer to tender his or her resignation from the Board in the event of retirement from his or her principal position or another significant change in employment position or employer. Our Board then would determine whether such director’s continued Board membership under the new circumstances is in the best interests of L3Harris and our shareholders, free from conflicts of interest and otherwise appropriate.

 

22  L3HARRIS 2019 PROXY STATEMENT

 

 

CORPORATE

GOVERNANCE

We have long been focused on and committed to responsible and effective corporate governance in order to enhance the creation of sustainable, long-term shareholder value and to be accountable and responsive to our shareholders. In support of those goals, we have Corporate Governance Guidelines that trace their history to 1960. Our Board regularly reviews our Corporate Governance Guidelines and updates them from time to time as regulatory requirements change and governance practices evolve. Our Nominating and Governance Committee is responsible for overseeing our Corporate Governance Guidelines and reporting and making recommendations to our Board concerning corporate governance matters.

The Corporate Governance Guidelines address a broad set of issues that our Board believes are integral to sound governance practices:

>Board composition
>Director independence
>Selection of Chairman
>Designation and responsibilities of Lead Independent Director
>Selection of Board nominees
>Board membership criteria
>Majority voting for directors
>Director retirement policy
>Other directorships
     
>Director compensation
>Stock ownership guidelines
>Prohibitions on hedging
>Prohibition on margin accounts and pledging transactions
>Meeting schedules and agenda
>Executive sessions of independent directors
>Access to management
>Board committees and membership
     
>Board and director responsibilities
>Director orientation and continuing education
>CEO performance evaluation and compensation
>Succession planning
>Board and committee self-evaluations


A copy of our Corporate Governance Guidelines is available on the Corporate Governance section of our website at www.l3harris.com/corporate-governance.

 

OUR BOARD’S ROLE AND RESPONSIBILITIES

Overview

Our Board is responsible for overseeing the management of our business, property and affairs and is focused on the creation of sustainable, long term shareholder value. In addition to participating in Board and committee meetings held at our corporate headquarters or other offices or locations and reviewing materials, Board members inform themselves about our business through discussions with our Chief Executive Officer (“CEO”), our President and Chief Operating Officer (“COO”) and our other executives, and by visiting our facilities.

Our Board’s major responsibilities include:

>overseeing the conduct of our business and reviewing and approving our long-term strategy, our key strategic and financial objectives and operating plans and other significant actions;
>overseeing the management of our business and other enterprise risks;
>establishing and maintaining an effective governance structure, including appropriate board composition;
>planning for board succession and appointing directors to fill Board vacancies between annual meetings of shareholders;
>selecting the CEO and COO, electing our corporate officers, evaluating the performance of the CEO, COO and other executive officers, planning for CEO succession and monitoring management’s succession planning for other executive officers;
>determining CEO and COO compensation and overseeing the determination of other executive officer compensation;
L3HARRIS 2019 PROXY STATEMENT  23

 

 

CORPORATE GOVERNANCE OUR BOARD’S ROLE AND RESPONSIBILITIES

   

>overseeing our ethics and compliance programs; and
>overseeing the systems of control which promote accurate and timely reporting of financial information to shareholders and our processes for maintaining the integrity of our financial statements and other public disclosures.

Strategy Oversight

Our Board plays an active role in overseeing the formulation and implementation of our overall business strategy. As part of our annual strategic planning process, toward the end of each fiscal year, our senior leadership team and other executives present to our Board company-wide and business unit annual operating plans and three-year strategic plans for the upcoming fiscal year(s). Our Board thoroughly reviews and provides substantive insight and guidance on these plans and, after further review sessions, approves them. Our Board then receives regular updates throughout the year on the progress, challenges and risks with respect to execution of the plans.

Our Board also routinely receives updates on and discusses topics of strategic importance to us, such as technology, cybersecurity, enterprise risk management and merger, acquisition and portfolio shaping opportunities. Our Board holds executive sessions solely for independent directors, and separately with our CEO and COO present, at each regularly-scheduled Board meeting to discuss strategic and other significant business developments.

Risk Oversight

In fulfilling its responsibility of overseeing the management of our business and other enterprise risks, our Board has approved our use of an enterprise risk management (“ERM”) process administered by management, as described below, and considers risks and related mitigation identified through the ERM process or raised in the context of a range of matters on which management reports to our Board or one of its committees.

ENTERPRISE RISK MANAGEMENT PROCESS

Our ERM process, among other things, is designed to identify material risks across L3Harris with input from each business segment and function. This process has been reviewed by our Board and is the subject of oversight and regular review by our Audit Committee. However, the responsibility for the day-to-day management of risk lies with our management, and our management continually monitors the material risks facing L3Harris, including strategic risk, financial risk, operational risk, and legal and compliance risk. Under our ERM process, which is coordinated through a cross-functional management committee, various material business risks are regularly identified, assessed and prioritized. The top risks to L3Harris, which are reflected in an enterprise risk “heat map,” and any mitigation plans associated with those risks, are reported to our Board. In addition, our management ERM committee regularly provides reports to our senior executives to ensure dissemination of information about identified risks to management and throughout L3Harris. We also manage risk through numerous controls and processes embedded in our operations, which are reviewed from time to time with our Board and/or its relevant committees.

ALLOCATION OF RISK OVERSIGHT RESPONSIBILITIES

As noted above, our Board also considers risks that are raised in the context of various matters that management may bring to the attention of our Board or one of its committees. When a committee considers risks, it provides reports regarding such risks to our full Board. Examples of risks considered by our Board and its committees are shown below:

>Full Board – elements of risk related to Company-wide and business unit annual operating plans, three-year strategic plans, cybersecurity, merger, acquisition and portfolio shaping opportunities, market environment updates, regular financial and operations updates and other strategic discussions.
>Audit Committee – elements of risk related to financial reporting, internal audit, internal control over financial reporting, auditor independence and related areas of accounting, taxation, law and regulation.
>Compensation Committee – elements of risk related to compensation policies and practices and talent management and succession planning.
>Finance Committee – elements of risk related to liquidity, financial arrangements, capital structure, ability to access capital markets and the financial and investment aspects of our defined contribution and defined benefit plans.
>Nominating and Governance Committee – elements of risk related to corporate governance issues and various aspects of U.S. and international regulatory compliance, ethics, business conduct, social responsibility, environmental, health and safety matters and export/import controls.
24  L3HARRIS 2019 PROXY STATEMENT

 

 

   

CORPORATE GOVERNANCE OUR BOARD’S ROLE AND RESPONSIBILITIES

Management Succession Planning

As part of its oversight responsibility for management succession planning, our Board dedicates at least one full meeting each year to a comprehensive review of our management succession strategy and our leadership pipeline for key roles, including the CEO, based on our long-term strategy. Our Board’s Compensation Committee facilitates the review session, which includes:

>consideration and assessment of key leadership talent throughout our Company;
>our talent strategy for critical positions, including roles for which it may be necessary to consider external candidates; and
>contingency plans in the event the CEO or another executive officer unexpectedly is unable to serve for any reason, including death or disability.

In addition, management conducts periodic talent reviews of all of our business segments and corporate functional areas, including discussion of the succession plans for key positions and identification of top talent for development in future leadership roles. These reviews inform and support our Board’s review session. Our Board also receives regular updates on key talent indicators for our overall workforce, including diversity, recruiting and development programs and our human capital strategy, and has regular opportunities to observe key leaders and high-potential talent through presentations, meetings and other events. On occasion, individual Board members may serve in a mentoring capacity for one or more of our executives.

Ethics, Compliance and Sustainability Oversight

Our Board has responsibility for overseeing our ethics and compliance programs and our activities related to corporate citizenship and responsibility and sustainability. This oversight is carried out largely through our Board’s Nominating and Governance Committee, which assists our Board in overseeing our ethics and business conduct program, our environmental, health and safety programs and our charitable, civic, educational and philanthropic activities, and also monitors and takes appropriate action regarding strategic issues and trends relating to corporate citizenship and responsibility that could affect our operations, financial performance or public image. For additional details on the role of our Nominating and Governance Committee, see page 32.

CODE OF CONDUCT

All L3Harris employees, officers and directors are required to abide by our Code of Conduct to help ensure that we consistently conduct our business in an ethical and legal manner. Our Code of Conduct is an important component of a comprehensive ethics and compliance program that includes compliance with all laws and corporate policies and procedures, an open relationship among employees that contributes to good business conduct, and an abiding belief that we should conduct all business dealings with integrity, honesty and responsibility.

Our Nominating and Governance Committee assists our Board in fulfilling its oversight responsibility as to our compliance with the goals and objectives in our Code of Conduct by reviewing and taking action regarding compliance processes, standards and controls and reviewing results of relevant audits and investigations. Our Code of Conduct covers a broad range of topics, including:

>Respect in the workplace
>Health and safety
>Privacy of personally identifiable information
>Avoiding conflicts of interest
>Working with governments
>Commitment to quality
>Preventing bribery and corruption
>Business courtesies
>Fair competition
>Exports, imports and trade compliance
>Confidential information and intellectual property
>Material non-public information and insider trading
>Communicating L3Harris information
>Social media
>Business records and record management
>Protecting L3Harris and customer assets
>Political activities and lobbying
>Human rights
>Corporate responsibility


Employees are required to report any conduct they believe in good faith to be a violation of our Code of Conduct or policies. Our Code of Conduct is posted on our website at www.l3harris.com/corporate-governance and also is available by written request to our Corporate Ethics Office, L3Harris Technologies, Inc., 1025 West NASA Boulevard, Melbourne, Florida 32919. Any amendment to, or waiver from, our Code of Conduct that is required to be disclosed to shareholders will be posted on our website within four business days following such amendment or waiver.

L3HARRIS 2019 PROXY STATEMENT  25

 

 

CORPORATE GOVERNANCE OUR BOARD’S ROLE AND RESPONSIBILITIES

   

SUSTAINABILITY

In addition to ensuring a commitment to adherence to our Code of Conduct, the Harris Board and the Harris Governance and Corporate Responsibility Committee oversaw in fiscal 2019 an evaluation of climate and water risk relative to our business operations and the geographical areas in which we conduct business in order to mitigate potential risks, as well as the finalization and public announcement of our long-term environmental sustainability goals:

>reducing greenhouse gas emissions by 21% over a 2017 baseline (determined using the Science Based Target Initiative);
>reducing water consumption by 20% over a 2017 baseline; and
>diverting at least 75% of waste from landfill by 2025.

Communicating With Our Board of Directors

GENERAL COMMUNICATIONS

Shareholders and other persons who wish to communicate with a member or members of our Board, including our Chairman, our Vice Chairman, our Lead Independent Director, the chairperson of any standing committee of our Board or the independent directors as a group, may send an e-mail to the intended recipient(s) c/o our Secretary at corporate.secretary@l3harris.com or may write to the intended recipient(s) c/o our Secretary, L3Harris Technologies, Inc., 1025 West NASA Boulevard, Melbourne, Florida 32919. Our Secretary will review each such communication and, if it is related to the duties and responsibilities of our Board and its committees, it will be forwarded to the appropriate recipient(s). A director who receives a communication for which he or she was the intended recipient will determine whether it will be sent to our full Board or a committee.

Our Board has instructed our Secretary not to forward communications our Secretary deems unduly hostile, threatening, illegal or otherwise inappropriate (such as surveys, spam, junk mail, resumes, service or product inquiries or complaints, solicitations or advertisements). Our Secretary will periodically provide our Board a summary of all communications (other than surveys, spam, etc.) that were not forwarded to the intended recipient(s) and will make those communications available to any director upon request.

ACCOUNTING, INTERNAL CONTROL, AUDITING AND OTHER MATTERS

Our Audit Committee has established procedures for the receipt, retention and treatment of complaints and concerns regarding accounting, internal accounting controls or auditing matters, financial reporting or disclosure matters, and other matters relating to actual, alleged or potential violations of any law, rule or regulation relating to securities or to fraud against shareholders. Upon receipt of a complaint or concern, a determination will be made whether it pertains to any of these matters, and if it does, it will be handled in accordance with these procedures. A copy of the procedures is available on the Corporate Governance section of our website at www.l3harris.com/corporate-governance.

Employees may communicate concerns about such matters to their supervisor, manager or ethics advisor, or to the Vice President, Internal Audit and Compliance or the Director, Ethics and Compliance or certain other individuals. Alternatively, they may communicate their concerns on a confidential, anonymous basis by way of e-mail or toll-free hotline numbers listed on our website and in our Code of Conduct.

Other persons with such complaints or concerns may contact our Vice President, Internal Audit and Compliance or Director, Ethics and Compliance at 1025 West NASA Boulevard, Melbourne, Florida 32919.

26  L3HARRIS 2019 PROXY STATEMENT

 

 

   

CORPORATE GOVERNANCE STOCK OWNERSHIP GUIDELINES FOR NON-EMPLOYEE DIRECTORS

 

STOCK OWNERSHIP GUIDELINES FOR
NON-EMPLOYEE DIRECTORS

To further align the interests of our non-employee directors and shareholders, our Board has adopted stock ownership guidelines for our non-employee directors, as follows:

>Our non-employee directors are expected to own L3Harris stock or stock equivalent units having a minimum value equal to five times the annual cash retainer for service as a member of our Board.
>Directors are expected to meet these levels within five years after election or appointment to our Board (or five years from the closing of the L3Harris Merger, in the case of non-employee directors designated by Harris or L3 in connection with the L3Harris Merger).

Shares owned outright or jointly by the non-employee director and deferred equity awards (on an after-tax basis) credited for the non-employee director under any deferred compensation plan maintained by L3Harris count toward the guidelines. Directors who are retiring and will not be standing for re-election at the next Annual Meeting are no longer subject to the guidelines. As of August 30, 2019, all of our non-employee directors met the stock ownership guidelines or were on track to achieve such ownership within the applicable compliance timeframe.

 

BOARD LEADERSHIP STRUCTURE

Our Board’s leadership is currently structured as follows:

>a combined position of Chairman of the Board (“Chairman”) and CEO;
>a Vice Chairman of the Board (“Vice Chairman”);
>a Lead Independent Director with well-defined duties that support our Board’s oversight responsibilities;
>a robust standing committee structure comprised solely of independent directors; and
>engaged Board members who are independent (other than our current Chairman and CEO and our current Vice Chairman, President and COO) and who conduct candid and constructive discussions and deliberations.

Board Policy on Chairman and CEO Roles

Our Board elects a Chairman from among the directors and also may appoint a Vice Chairman, as it has done in connection with the L3Harris Merger. Our Board combines or separates the positions of Chairman and CEO based on what our Board believes best serves the needs of L3Harris and our shareholders at any particular time based on then-existing facts and circumstances. For example, in connection with the transition to Mr. Brown as Harris’ CEO in November 2011, the Harris Board appointed Mr. Dattilo as non-executive Chairman to provide independent leadership during the transition and enable Mr. Brown to concentrate on our business operation. A few years later, the Harris Board re-combined the CEO and Chairman positions and designated Mr. Dattilo as Lead Independent Director.

This history evidences our Board’s proactive commitment to strong corporate governance and appropriate independent oversight of management. Our Board believes it would be fundamentally wrong, however, to permanently and inflexibly separate or combine the positions of Chairman and CEO and remove our Board’s ability to choose the leadership structure that best serves the needs of L3Harris and our shareholders at a given time based on its unique knowledge of the challenges and opportunities L3Harris faces.

Current Board Leadership

Our Board believes the following factors are key to providing it with appropriate opportunities for oversight, discussion and evaluation of L3Harris’ decisions and direction:

>the Lead Independent Director structure;
>the independence of each director, other than Mr. Brown and Mr. Kubasik;
>the ability of independent directors to participate in the agenda-setting process for our Board and committee meetings;
>regularly scheduled executive sessions of independent directors; and
>our directors’ access to management.
L3HARRIS 2019 PROXY STATEMENT  27

 

 

CORPORATE GOVERNANCE BOARD LEADERSHIP STRUCTURE

   

Our Lead Independent Director currently is Mr. Millard, whom our Board designated on June 29, 2019 and who succeeds Mr. Hay.

As noted elsewhere, under the terms of the L3Harris Merger and the related employment agreements with Mr. Brown and Mr. Kubasik:

>Mr. Brown will serve as our Chairman and CEO through the second anniversary of the merger, then step down as CEO and continue to serve for one additional year as Chairman. On the third anniversary of the merger, he will retire as an officer and employee of L3Harris and resign as a member of our Board.
>Mr. Kubasik will serve as Vice Chairman, President and COO through the second anniversary of the merger (or, if earlier, the date that Mr. Brown ceases to serve as our CEO), at which point he will become our CEO. On the third anniversary of the merger, Mr. Kubasik will become our Chairman.

The employment agreements with Mr. Brown and Mr. Kubasik are described in “Compensation Discussion and Analysis – Employment Agreements” beginning on page 61.

Our Board believes that its current leadership structure provides independent board leadership and oversight while also benefiting from having Mr. Brown serve as Chairman as well as CEO, and that Mr. Brown has demonstrated the strong leadership and vision necessary to drive our strategies and achieve our objectives while so serving. Our Board believes that Mr. Brown’s in-depth knowledge of our businesses and their challenges and opportunities, as well as his extensive understanding of our day-to-day operations and his ability to provide insight and direction on important strategic initiatives, make him well-positioned to chair regular Board meetings and to bring key business and stakeholder issues to our Board’s attention.

Role of Lead Independent Director

When our Chairman is not an independent director, our independent directors (by affirmative majority vote) designate one independent Board member to serve as Lead Independent Director. Service as Lead Independent Director generally is for a one-year term commencing on the date of our Annual Meeting of Shareholders. Until the third anniversary of the completion of the L3Harris Merger, our Lead Independent Director must be a director designated by L3 prior to the L3Harris Merger, who may be removed as Lead Independent Director prior to that anniversary only with the approval of at least 75% of the other then-serving independent directors.

The responsibilities and authority of our Lead Independent Director include:

>Presiding at all meetings of our Board at which our Chairman is not present, including executive sessions our independent directors;
>Serving as liaison between our Chairman and our independent directors;
>Approving the information sent to our Board and the meeting agendas for our Board;
>Approving our Board meeting schedules to assure sufficient time for discussion of all agenda items;
>Calling meetings of our independent directors;
>Being available for consultation and direct communication with major shareholders, if they request and consistent with our policies regarding shareholder communications;
>Providing timely feedback from executive sessions of our independent directors to our CEO or other members of senior management;
>Playing a key role in the annual CEO and COO evaluation process, together with the Chairperson of our Compensation Committee (or the Chairperson of our Nominating and Governance Committee if the same individual is serving as Lead Independent Director and Chairperson of our Compensation Committee);
>Playing a key role in our Board’s annual self-evaluation process and related matters, together with the Chairperson of our Nominating and Governance Committee (or the Chairperson of our Compensation Committee if the same individual is serving as Lead Independent Director and Chairperson of our Nominating and Governance Committee);
>Guiding and playing a key role in the CEO succession planning process; and
>Other responsibilities and authority as our Board may determine from time to time.


The designation of a Lead Independent Director is not intended to inhibit communications among our directors or between any of them and our Chairman.

 

Mr. Terry D. Growcock served as Lead Independent Director during fiscal 2019 until his retirement from the Harris Board at Harris’ 2018 Annual Meeting of Shareholders in October 2018, when the Harris Board designated Mr. Hay to serve as Lead Independent Director. In connection with the closing of the L3Harris Merger, our Board designated Mr. Millard as Lead Independent Director on June 29, 2019.

28  L3HARRIS 2019 PROXY STATEMENT

 

 

   

CORPORATE GOVERNANCE BOARD LEADERSHIP STRUCTURE

Executive Sessions of Independent Directors

Our Corporate Governance Guidelines require that at least two-thirds of the directors on our Board be independent directors. The agenda for each regularly scheduled Board meeting includes an executive session of independent directors, which is chaired by our Lead Independent Director. The agenda for each regularly scheduled standing committee meeting (other than quarterly earnings review meetings of our Audit Committee) likewise includes an executive session of independent directors.

An important part of the executive sessions of independent directors of our Board and its standing committees is the discussion of results from the annual self-evaluations undertaken by our Board and its standing committees, which are described below.

Self-Evaluations by our Board and Committees

Our Board and its standing committees undertake annual self-evaluations designed to foster continuous improvement in performance and effectiveness. Our Nominating and Governance Committee facilitates our Board’s annual self-evaluation. Directors are asked to consider areas such as our Board’s role, relations with management, composition and meetings, and committee members are asked to consider areas such as the committee’s role and the responsibilities articulated in its charter, its composition and its operation. Self-evaluations may be undertaken utilizing written questionnaires, facilitated discussions or other means, as determined by our Board or the applicable committee. As noted above, review and discussion of the self-evaluation process and results occurs in executive session of our Board or the applicable committee.

Director Independence Standards

Our Board assesses the independence of our directors and examines the nature and extent of any relationships between us and our directors, their families and their affiliates. Our Board is guided in this assessment by our Director Independence Standards, available on the Corporate Governance section of our website at www.l3harris.com/corporate-governance.

For a director to be considered independent, our Board must affirmatively determine that the director does not have any direct or indirect material relationship with us, other than as a director. When assessing the materiality of a director’s relationship with us, our Board will consider the issue not merely from the standpoint of the director, but also from the standpoint of persons or organizations with which the director has an affiliation. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others.

Pursuant to our Corporate Governance Guidelines, our Board undertook a review of director independence in August 2019, which included a review of the responses of each director to questions regarding his or her commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, and discussions with the director. Based on the NYSE listing standards and our Director Independence Standards, our Board has affirmatively determined in its business judgment that each director, with the exception of Mr. Brown, our Chairman and CEO, and Mr. Kubasik, our Vice Chairman, President and COO, is independent and has no direct or indirect material relationship with L3Harris, other than as a director, that impairs the director’s independence.

In connection with its independence determination, our Board considered that L3 conducted and we conduct business with the Massachusetts Institute of Technology, where Mr. Millard is chair of the Massachusetts Institute of Technology Corporation. In no instances did the amount received by us or such other organization in our fiscal 2019 exceed the greater of $1 million or 1% of either L3’s or such other organization’s consolidated gross revenues. Mr. Millard did not have any interest in these transactions and was not involved in decisions regarding L3 or us with respect to these transactions.

L3HARRIS 2019 PROXY STATEMENT  29

 

 

CORPORATE GOVERNANCE BOARD COMMITTEES

   

 

 

BOARD COMMITTEES

Our Board currently has four standing committees to assist in discharging its responsibilities: Audit, Compensation, Finance, and Nominating and Governance. Our Board also has an Ad Hoc Technology Committee that provides oversight of technology and innovation processes, initiatives and talent. 

Each committee regularly reports its activities and actions to our full Board, generally at the next Board meeting following the committee meeting. Our Board has adopted a written charter for each committee. The charters of our Audit Committee, Compensation Committee and Nominating and Governance Committee comply with the NYSE corporate governance requirements. There are no NYSE requirements with respect to our Finance Committee charter. 

Copies of all standing committee charters and our Corporate Governance Guidelines are available on the Corporate Governance section of our website at www.l3harris.com/corporate-governance and also are available to shareholders upon written request to our Secretary at L3Harris Technologies, Inc., 1025 West NASA Boulevard, Melbourne, Florida 32919. 

Each standing committee’s principal functions are summarized below, with a more detailed description of purposes and responsibilities contained in its charter (and in our Corporate Governance Guidelines, in the case of our Nominating and Governance Committee).

  

         


Chair

Lewis Kramer

 

Members

Sallie B. Bailey
Peter W. Chiarelli
Thomas A. Corcoran

Audit Committee  

Key responsibilities
>   Assisting our Board in overseeing, among other things: the quality and integrity of our financial statements; our compliance with relevant legal and regulatory requirements; our internal control over financial reporting; our independent registered public accounting firm’s qualifications and independence; and the performance of our internal audit function and our independent registered public accounting firm.

>   Directly appointing, compensating, retaining, terminating and overseeing the work of our independent registered public accounting firm. 

>   Pre-approving all audit services, internal control-related services and non-audit services to be provided by our independent registered public accounting firm.

>   Reviewing and discussing with our independent registered public accounting firm, our internal audit department and our management any major issues regarding accounting principles and financial statement presentations; the effect of regulatory and accounting initiatives or actions, as well as off-balance sheet structures, on our

 

     financial statements, and any major issues concerning the adequacy of our internal controls or special steps adopted in light of any material control deficiencies.

>   Discussing guidelines and policies governing management’s risk assessment process.

>   Reviewing and discussing our earnings press releases, the types of financial information and earnings guidance we provide, and the types of presentations made by us to analysts and rating agencies.

>   Reviewing and discussing quarterly and year-end operating results with our independent registered public accounting firm, our internal audit department and our management; reviewing our interim financial statements prior to their inclusion in our Form 10-Q filings; and recommending to our Board the inclusion of our annual financial statements in our Annual Reports on Form 10-K.

 

Our Board has determined that each member of our Audit Committee: 

 

>   is independent within the meaning of NYSE listing standards, applicable laws and rules and our Director Independence Standards: and 

>   satisfies the “financial literacy” requirements of NYSE listing standards and has “accounting or related financial management expertise.”

 

Our Board also has determined that Mr. Kramer and Ms. Bailey each satisfy the “audit committee financial expert” criteria, as that term is defined by SEC rules. 

       

30  L3HARRIS 2019 PROXY STATEMENT 

 

 

 

   

CORPORATE GOVERNANCE BOARD COMMITTEES

 

         


Chair

Lewis Hay III

 

Members

Thomas A. Dattilo

Lewis Kramer

Rita S. Lane 

Compensation Committee  

Key responsibilities
>   Reviewing management training, development, organizational structure and succession plans, and recommending to our Board individuals for election as officers, including executive officers.

>   Overseeing and reviewing our overall compensation philosophy, establishing the compensation and benefits of our executive officers and administering our equity-based compensation plans.

>   Reviewing and approving corporate goals and objectives relevant to the compensation of our CEO and COO, evaluating our CEO’s and COO’s respective performance against those goals and objectives, and together with all independent directors of our Board, determining and approving annual salary, cash and equity incentives and other executive benefits for our CEO and COO based on this evaluation. 

>   Reviewing and approving the annual salary, cash and equity incentives and other benefits for our other executive officers.

>   Reviewing and approving employment, separation, severance and change in control agreements and terms and any special arrangements in the event of termination of employment, death or retirement of executive officers.

>   Determining stock ownership guidelines for our CEO, COO, executive officers and other corporate officers and overseeing compliance with such guidelines.

 

>   Overseeing regulatory compliance with applicable executive compensation laws, rules and regulations and with NYSE rules regarding shareholder approval of equity compensation plans.

>   Reviewing, in consultation with our Nominating and Governance Committee, responses to shareholder proposals regarding matters falling within the responsibilities and duties of our Compensation Committee.

>   Reviewing management’s assessment of the effect on our business of risks from our compensation policies and practices and periodically discussing such matters with management.

>   Periodically reviewing our diversity and inclusion efforts.

>   Reviewing and discussing the “Compensation Discussion and Analysis” section of our proxy statement with management and making a recommendation to the Board on the inclusion of such section in our proxy statement.

>   Retaining and terminating independent executive compensation consultants, including approving such consultants’ fees and other retention terms.

 

Our Board has determined that each member of our Compensation Committee is independent within the meaning of the NYSE listing standards, applicable laws and rules and our Director Independence Standards.

       

The Compensation Committee has delegated to our CEO the authority to grant equity awards to employees who are not executive officers, subject to an annual maximum number of shares underlying the awards that may be granted, and annually reviews these awards.

For additional information regarding the role of our Compensation Committee and our executive compensation process and procedures, including the role of executive officers and compensation consultants in recommending the amount or form of executive compensation, see the “Compensation Discussion and Analysis” section of this proxy statement beginning on page 41.

 

L3HARRIS 2019 PROXY STATEMENT  31

 

 

 

CORPORATE GOVERNANCE BOARD COMMITTEES

   

 

         


Chair

Roger B. Fradin

 

Members 

Sallie B. Bailey

Thomas A. Corcoran

Rita S. Lane

Finance Committee  

Key responsibilities
>   Periodically reviewing our financial position, capital structure, working capital, capital transactions, equity investments, debt ratings and other matters relating to our financial condition.

>   Reviewing our dividend policy, capital asset plan and share repurchase policy and making recommendations to our Board relating to such policies.

 

>   Overseeing the financial and investment policies and objectives applicable to our material benefit plans.

 

Our Board has determined that each member of our Finance Committee is independent within the meaning of the NYSE listing standards and our Director Independence Standards.

       

         


Chair

Lloyd W. Newton

 

Members

Thomas A. Dattilo

Lewis Hay III

Robert B. Millard 

Nominating and Governance
Committee
 

Key responsibilities
>   Identifying and recommending qualified individuals for election or re-election to the Board and filling vacancies on our Board.

>   Adopting a policy and procedure for considering director candidates recommended by our shareholders.

>   Developing, reviewing and recommending to our Board our Corporate Governance Guidelines and monitoring trends and evolving practices in corporate governance. 

>   Periodically assessing the adequacy of our corporate governance framework, including our Restated Certificate of Incorporation and By-Laws, and recommending changes to our Board for approval, as appropriate.

>   Developing, reviewing and recommending to our Board director compensation and benefit plans.

>   Reviewing and making recommendations to our Board concerning, the structure, size, composition and operation of our Board and its committees, including recommending committee assignments.

>   Developing, reviewing and recommending to our Board the meeting schedule for our Board and its committees, in consultation with our Lead Independent Director and each committee chairperson.

 

 

>   Reviewing, and approving or ratifying, related person transactions in accordance with relevant policies.

>   Reviewing and making recommendations to our Board regarding shareholder proposals and a process for shareholder communications with our Board.

>   Facilitating our Board’s annual self-evaluation of its performance and effectiveness.

>   Retaining and terminating independent director compensation consultants, including approving such consultants’ fees and other retention terms.

>   Assisting our Board in overseeing our ethics and business conduct program consistent with sound, ethical business practices and legal requirements.

>   Assisting our Board in overseeing our environmental, health and safety programs and charitable, civic, educational and philanthropic activities.

>   Reviewing and taking appropriate action concerning strategic issues and trends relating to corporate citizenship and responsibility, including social and political trends and public policy issues that may have an impact on our operations, financial performance or public image.

 

Our Board has determined that each member of our Nominating and Governance Committee is independent within the meaning of the NYSE listing standards and our Director Independence Standards.

  

For additional information regarding the role of our Nominating and Governance Committee and our director compensation process and procedures, including the role of compensation consultants relating to director compensation, see the “Director Compensation and Benefits” section of this proxy statement beginning on page 34.

 

32  L3HARRIS 2019 PROXY STATEMENT

 

 

 

   

CORPORATE GOVERNANCE OTHER GOVERNANCE MATTERS

 

OTHER GOVERNANCE MATTERS

Meeting Attendance

In fiscal 2019, the Harris Board of Directors held 11 meetings, and its committees held a total of 25 meetings, and the average attendance of Harris directors at those meetings is shown in the table below.

Harris’ Fiscal 2019 Board and Committee Meetings and Attendance

Harris Board / Committee   Number of Meetings Held   Average Meeting Attendance
Board of Directors   11   94%
Audit Committee   8   97%
Finance Committee   3   100%
Governance and Corporate Responsibility Committee   4   100%
Management Development and Compensation Committee   8   100%
Ad Hoc Technology Committee   2   100%

Each current director of L3Harris who served as a director of Harris before the L3Harris Merger attended at least 93% of the fiscal 2019 meetings of the Harris Board and its committees on which he or she served. All of the current directors of L3Harris who served as a director of Harris before the L3Harris Merger taken together attended an average of 97% of the fiscal 2019 meetings of the Harris Board and its committees on which they served during the relevant periods. Each current director of L3Harris who served as a director of L3 before the L3Harris Merger attended at least 80% of the calendar year 2019 meetings of the L3 Board of Directors and its committees on which he or she served which were held prior to the L3Harris Merger.

We typically schedule a Board meeting in conjunction with our Annual Meeting of Shareholders. In the absence of unavoidable conflict, all Board members are expected to attend each Annual Meeting of Shareholders. All of Harris’ then-serving Board members, other than Mr. Fradin, attended Harris’ 2018 Annual Meeting of Shareholders.

Related Person Transaction Policy

Our Board has adopted a written policy and procedures for the review, approval and ratification of transactions among L3Harris and our directors and executive officers and their related interests. The policy supplements the conflicts of interest policies set forth in our Code of Conduct and our other internal policies and procedures. Under the related person transaction policy, all related person transactions are to be reviewed by our Nominating and Governance Committee. Our Nominating and Governance Committee may approve or ratify a related person transaction if, in its business judgment, it determines that the transaction is in, or is not inconsistent with, the best interests of L3Harris and our shareholders. This may include situations where we provide to or receive from related persons products or services on an arm’s-length basis on terms comparable to those provided to or received from unrelated third parties. Any director who participates in or is the subject of an existing or potential related person transaction may not participate in the review, approval or ratification of the related person transaction.

Under the policy and consistent with SEC rules, a related person transaction is any transaction, arrangement or relationship in which L3Harris was, is or will be a participant, where the amount involved exceeds $120,000 and in which a related person had, has or will have a direct or indirect material interest. A related person includes any of our directors, nominees for director or executive officers, any person who is known to be the beneficial owner of more than 5% of any class of our common stock, an immediate family member of any person described above and any firm, corporation or other entity controlled by any person described above. The policy requires that each director and executive officer annually complete a questionnaire to identify his or her related interests and persons and notify us of changes in that information. Before entering into a proposed related person transaction, the related person or involved business area of L3Harris is requested to notify our Secretary of the facts and circumstances of the proposed transaction. If the Secretary determines that the proposed transaction is a related person transaction, it shall be submitted to our Nominating and Governance Committee for review and consideration. A related person transaction entered into without our Nominating and Governance Committee’s prior approval will not violate this policy or be unenforceable, so long as the transaction is brought to our Nominating and Governance Committee promptly after it is entered into or after it becomes apparent that the transaction is covered by this policy and is ratified by our Nominating and Governance Committee. 

L3HARRIS 2019 PROXY STATEMENT  33

 

 

CORPORATE GOVERNANCE DIRECTOR COMPENSATION AND BENEFITS

   

Based on its holdings as reported on a Schedule 13G/A filed with the SEC, each of T. Rowe Price Associates, Inc. and BlackRock, Inc. beneficially owned more than 5% of our common stock as of August 30, 2019. T. Rowe Price Associates, Inc. and certain of its affiliates provided asset management services in fiscal 2019 for our Retirement Plan, for which participants paid or will pay approximately $2.8 million. BlackRock, Inc. and certain of its affiliates provided asset management services in fiscal 2019 for certain of our defined contribution and defined benefit plans, for which participants paid or will pay approximately $1.6 million and we paid or will pay approximately $0.9 million.

The agreements with each of T. Rowe Price Associates, Inc. and BlackRock, Inc. were negotiated on an arm’s-length basis, and the ownership of our common stock plays no role in the business relations between us and T. Rowe Price Associates, Inc. or BlackRock, Inc. In addition, we believe that the agreements represent standard terms and conditions for asset management services. In accordance with our related person transaction policy, the Harris Governance and Corporate Responsibility Committee reviewed, ratified and approved such agreements.

 

DIRECTOR COMPENSATION AND BENEFITS

Our Board compensation program is intended to attract and retain directors with demonstrated ability, integrity, judgment and experience to fulfill their responsibility to oversee management and to develop and oversee the implementation of strategies aimed at creating sustainable, long-term value for our shareholders. The program also is intended to recognize the time commitments and potential liability associated with serving on the board of a public company.

Our independent directors are not permitted to receive, directly or indirectly, any consulting, advisory or other compensatory fees from us, and we do not compensate our employee directors separately for service as a director.

The form and amount of director compensation is annually reviewed and assessed by our Nominating and Governance Committee. The committee reviews compensation comparison peer group data and broad survey data concerning director compensation practices, levels and trends for companies comparable to us in revenue, businesses and complexity, as supplied by independent compensation consultants, including Pearl Meyer & Partners. If the committee believes any changes to director compensation are warranted, it makes recommendations for the Board to consider. In the case of director compensation in respect of fiscal 2019 or any prior periods discussed in this proxy statement, the practices described in this paragraph were followed by the Harris Governance and Corporate Responsibility Committee and any relevant recommendations were made to the Harris Board.

In connection with the L3Harris Merger, effective June 29, 2019, our Board approved changes to our Board compensation program that take into account the increased complexity of our business and operations resulting from the completion of the L3Harris Merger. Both our current Board compensation program and the Harris Board compensation program for fiscal 2019 are described below.

Cash and Equity-Based Retainers for Non-Employee Directors

BEFORE THE MERGER

For fiscal 2019, prior to the L3Harris Merger, non-employee directors of Harris received the following cash and equity-based retainers:

>Board member of Harris: $105,000 annual cash retainer and $145,000 annual equity-based retainer in the form of Harris stock equivalent units credited under the Harris Corporation 2005 Directors’ Deferred Compensation Plan (described in more detail below)
>Lead Independent Director of Harris: $25,000 annual cash retainer
>Chairperson of the Harris Audit Committee: $25,000 annual cash retainer
>Chairperson of the Harris Management Development and Compensation Committee: $20,000 annual cash retainer
>Chairperson of any other Harris standing committee: $15,000 annual cash retainer
>Committee member (other than Chairperson) of any Harris standing committee: annual cash retainer equal to 50% of the annual cash retainer for the Chairperson of the applicable committee

Each retainer was payable on a quarterly basis in arrears and pro-rated based on period of service if a director did not serve for the entire quarter.

34  L3HARRIS 2019 PROXY STATEMENT

 

 

   

CORPORATE GOVERNANCE DIRECTOR COMPENSATION AND BENEFITS

AFTER THE MERGER

Effective June 29, 2019, non-employee directors of L3Harris receive the following cash and equity-based retainers:

>Board member: $130,000 annual cash retainer and $165,000 annual equity-based retainer in the form of director share units (described in more detail below)
>Lead Independent Director: $35,000 annual cash retainer
>Chairperson of Audit Committee: $30,000 annual cash retainer
>Chairperson of any other standing committee: $20,000 annual cash retainer

Each cash retainer is payable on a quarterly basis in arrears and pro-rated based on period of service if a director does not serve for the entire quarter.

For the equity-based retainer, each year at our Annual Meeting of Shareholders, non-employee directors will be granted a number of director share units under the Harris Corporation 2015 Equity Incentive Plan (or any successor equity compensation plan adopted by L3Harris) calculated by dividing $165,000 by the fair market value of one share of L3Harris common stock on the grant date (rounded down to the nearest whole share). The director share units generally will fully vest on the one-year anniversary of the grant date, subject to the non-employee director’s continued service and the terms and conditions of the non-employee director’s director share unit agreement. If a non-employee director becomes a director after an Annual Meeting of Shareholders, he or she will be granted a pro-rated director share unit award based on the period of the non-employee director’s service on our Board during the year. During our fiscal transition period from June 29, 2019 to January 3, 2020, the director share unit award for each non-employee director to be made at our 2019 Annual Meeting of Shareholders will be calculated based on a grant date value of $82,500 instead of $165,000.

Deferred Compensation Plans for Non-Employee Directors

BEFORE THE MERGER

Prior to the L3Harris Merger, Harris maintained the Harris Corporation 2005 Directors’ Deferred Compensation Plan, as amended (the “Harris Directors’ Deferred Compensation Plan”), an unfunded, nonqualified deferred compensation plan for the benefit of Harris’ non-employee directors. Effective June 29, 2019, no further deferrals of director compensation were permitted and no further credits of Harris stock equivalent units were made under the Harris Directors’ Deferred Compensation Plan. The Harris Directors’ Deferred Compensation Plan replaced the Harris Corporation 1997 Directors’ Deferred Compensation and Annual Stock Unit Award Plan (the “Harris 1997 Directors’ Plan”). Effective December 31, 2004, no further deferrals of director compensation were permitted and no further annual awards of Harris stock equivalent units were made under the Harris 1997 Directors’ Plan.

Under the Harris Directors’ Deferred Compensation Plan, Harris credited each non-employee director’s account on a quarterly basis with a number of Harris stock equivalent units (each unit equivalent in value to one share of Harris’ common stock) having an aggregate fair market value equal to $36,250 (representing an annual rate of $145,000). As noted above, the number of units credited for a quarter was pro-rated, based on period of service, if the director did not serve on the Harris Board for the entire quarter.

In addition, prior to the commencement of a calendar year, each non-employee director could make an irrevocable election to defer all or a portion of his or her cash director compensation for the subsequent year or years under the Harris Directors’ Deferred Compensation Plan. Amounts deferred at the election of a director were deemed to be invested, at the director’s discretion, in investment alternatives that mirrored those available under the Harris Corporation Retirement Plan or in Harris stock equivalent units. A director could not transfer or reallocate deferred amounts deemed invested in other investments into Harris stock equivalent units, but could reallocate (provided director minimum stock ownership guidelines were satisfied) deferred amounts deemed invested in Harris stock equivalent units into any other available investment alternative. Each Harris stock equivalent unit was credited with dividend equivalents equal to the dividends paid on Harris common stock, which were deemed reinvested in additional Harris stock equivalent units on the dividend payment date.

A director could elect to receive deferred amounts either in a cash lump sum on a date certain within 5 years after his or her resignation or retirement, or in substantially equal annual cash installments over a designated number of years beginning on a date certain within 5 years after his or her resignation or retirement, provided that all amounts were fully paid within 10 years of resignation or retirement. Within 90 days following a director’s death, a lump sum cash payment equal to the then-remaining balance in his or her account was required to be made to his or her beneficiary. Within 90 days following a change in control (as defined in the director deferred compensation plans) and to the extent permitted by Federal tax laws, each non-employee director (or former non-employee director) was required to receive a lump sum cash payment equal to the then-remaining balance in his or her account. If payment within 90 days following a change in control was not permitted by Federal tax laws, then payment was required to be made at the time and in the form that payment would have been made if a change in control had not occurred.

L3HARRIS 2019 PROXY STATEMENT  35

 

 

CORPORATE GOVERNANCE DIRECTOR COMPENSATION AND BENEFITS

   

In accordance with the provisions of the Harris Directors’ Deferred Compensation Plan and the Harris 1997 Directors’ Plan, as a result of the L3Harris Merger, which constituted a change in control under those plans, lump sum cash payments were made to each non-employee director or former non-employee director participating in the plans in an amount equal to the then-remaining balance in his or her account.

AFTER THE MERGER

On June 29, 2019, our Board adopted the L3Harris Technologies, Inc. 2019 Non-Employee Director Deferred Compensation Plan (the “L3Harris Director Deferred Compensation Plan”), an unfunded, non-qualified deferred compensation plan for the benefit of our non-employee directors which becomes effective December 31, 2019.

Under the L3Harris Director Deferred Compensation Plan, prior to the commencement of a calendar year beginning on or after January 1, 2020, each non-employee director of L3Harris may elect to defer all or a portion of cash retainer fees to be earned and director share units to be granted in the subsequent year or years. (Special rules govern the timing of deferral elections by new non-employee directors who join our Board after a calendar year has commenced.)

Any cash retainer deferred will be credited as deferred units (each deferred unit equivalent in value to one share of L3Harris common stock) to the non-employee director’s account as of the date the retainer would have otherwise been paid. The number of deferred units credited will be equal to the cash retainer amount deferred as of such date divided by the fair market value of L3Harris common stock on such date. Any director share unit award deferred will be credited as deferred units to the non-employee director’s account as of the date on which the director share units vest.

Each deferred unit is credited with dividend equivalents equal to dividends paid on L3Harris common stock, which are deemed reinvested in additional deferred units on the dividend payment date. Deferred units will be appropriately adjusted in the event of any change in L3Harris common stock through a merger, consolidation, or otherwise; a stock dividend; or a stock split, combination or other change in L3Harris common stock.

Payment will be made in shares of L3Harris common stock equal to the number of deferred units credited to the director’s account (with any fractional deferred units paid in cash based on the fair market value of one share of L3Harris common stock on the payment date). A director may elect to receive deferred amounts either in a lump sum on a date certain within 90 days after his or her resignation or retirement or in up to 10 annual installments over a designated number of years beginning on a date certain within 90 days after his or her resignation or retirement. Within 90 days following a non-employee director’s death, a lump sum equal to the then-remaining balance in his or her account will be made to his or her beneficiary. Within 10 business days after a change in control (as defined in the Harris Corporation 2015 Equity Incentive Plan) and to the extent permitted by Federal tax laws, each non-employee director (or former non-employee director) will receive a cash lump sum equal to the number of deferred units credited to his or her account on the date of the change in control, multiplied by the fair market value of one share of L3Harris common stock on such date. If payment within 10 business days following a change in control is not permitted by Federal tax laws, then payment will be made at the time and in the form that payment would have been made if a change in control had not occurred.

Equity Awards by Harris for New Non-Employee Directors

The Harris Board compensation program included one-time grants of restricted share awards to new non-employee directors. Harris did not grant any such restricted share awards in fiscal 2019 because no new non-employee directors became members of the Harris Board during fiscal 2019. Pursuant to their terms and conditions, all restricted share awards granted to Harris non-employee directors that were unvested at the time of the L3Harris Merger became fully vested upon completion of the L3Harris Merger because it constituted a change in control. One-time grants of restricted share awards are not part of the current L3Harris Board compensation program.

When a new non-employee director joined the Harris Board, such director was granted a restricted share award for a number of shares of Harris common stock having an aggregate grant date fair value approximately equal to 50% of the then-current annual rate of Harris stock equivalent units ($145,000 during fiscal 2019) credited to a director’s account under the Harris Directors’ Deferred Compensation Plan. Such restricted share awards were granted on the first NYSE trading day of the calendar month following the calendar month in which such non-employee director’s election or appointment to the Harris Board became effective and in accordance with Harris’ equity grant policy. Each restricted share award was scheduled to vest ratably over three years, provided the non-employee director continuously served on the Harris Board through the applicable vesting date. Unvested restricted shares could not be sold or otherwise transferred; would be immediately forfeited in the event the non-employee director’s service on the Harris Board terminated for any reason other than death or permanent disability following the 1-year anniversary of the grant date; and would become fully vested upon the

36  L3HARRIS 2019 PROXY STATEMENT

 

 

   

CORPORATE GOVERNANCE DIRECTOR COMPENSATION AND BENEFITS

non-employee director’s service on the Harris Board terminating due to death or permanent disability following the 1-year anniversary of the grant date or upon a change in control of Harris.

Reimbursement, Insurance and Charitable Gift Matching

We pay or reimburse each non-employee director for travel and out-of-pocket costs and expenses incurred in connection with attending Board and committee meetings and other meetings on our behalf and attending director education programs. On occasion, spouses or guests are invited to accompany directors to Board-related events, and we cover their travel and related expenses.

We also provide each non-employee director with accidental death and dismemberment insurance of up to $200,000 and business travel insurance of up to an additional $200,000 in the event that he or she is involved in an accident while traveling on business relating to our affairs, and we pay the premiums for such insurance. The premiums for coverage during fiscal 2019 for all non-employee directors collectively amounted to less than $500. We also provide liability insurance coverage for all of our directors and officers.

Non-employee directors may participate in the same charitable gift matching program available to our employees, under which our foundation matches contributions to eligible educational institutions and tax-exempt organizations up to an annual maximum of $10,000 per director and per employee.

Prior to the L3Harris Merger, Harris followed similar practices concerning reimbursement, insurance, and charitable gift matching.

Indemnification Agreements

We have entered into indemnification agreements with each of our directors and Board-elected officers, including the executive officers named in the Fiscal 2019 Summary Compensation Table on page 69. Under these agreements, we indemnify directors and officers with respect to their activities as a director, officer, employee or agent of L3Harris, or when serving at our request as a director, officer, employee or agent or in any other capacity for another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys’ fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by them in connection with any threatened, pending or completed action, suit or other proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal, including appeals, to which they were, are or are threatened to be made, parties as a result of their service to us. Under the indemnification agreements, each director or officer will continue to be so indemnified with respect to his or her service to or for us even after ceasing to occupy a position as an officer, director, employee or agent of L3Harris. Prior to the L3Harris Merger, Harris followed this same practice.

L3HARRIS 2019 PROXY STATEMENT  37

 

 

 

CORPORATE GOVERNANCE DIRECTOR COMPENSATION AND BENEFITS

   

FISCAL 2019 COMPENSATION OF NON-EMPLOYEE DIRECTORS TABLE

The following table sets forth information regarding compensation paid to each of Harris’ non-employee directors for fiscal 2019. It does not include any L3Harris directors who are former directors of L3 because they were appointed to our Board after fiscal 2019 in connection with completion of the L3Harris Merger on June 29, 2019. We currently do not have, and Harris did not have in fiscal 2019, a non-equity incentive plan or pension plan for directors.

Harris Non-Employee Director  Fees Earned
or Paid in
Cash
$(1)
   Stock
Awards
$(2)
   Option
Awards
$(3)
   Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
$(4)
   All Other
Compensation
$(5)
   Total
$
 
James F. Albaugh  $  122,500   $  144,203   $  0   $  0   $  0   $  266,703 
Sallie B. Bailey*  $  113,333   $  144,203   $  0   $  0   $  0   $  257,536 
Peter W. Chiarelli*  $  125,000   $  144,203   $  0   $  0   $  0   $  269,203 
Thomas A. Dattilo*  $  144,167   $  144,203   $  0   $  0   $  0   $  288,370 
Roger B. Fradin*  $  125,000   $  144,203   $  0   $  0   $  5,000   $  274,203 
Terry D. Growcock**  $  50,833   $  48,333   $  0   $  0   $  10,000   $  109,167 
Lewis Hay III*  $  154,167   $  144,203   $  0   $  0   $  10,000   $  308,370 
Vyomesh I. Joshi  $  130,000   $  144,203   $  0   $  0   $  0   $  274,203 
Leslie F. Kenne  $  120,000   $  144,203   $  0   $  0   $  0   $  264,203 
Dr. James C. Stoffel**  $  45,000   $  48,333   $  0   $  0   $  10,000   $  103,333 
Gregory T. Swienton  $  150,000   $  144,203   $  0   $  0   $  0   $  294,203 
Hansel E. Tookes II  $  137,500   $  144,203   $  0   $  0   $  10,000   $  291,703 
*Service continued as a L3Harris director after fiscal 2019.
**Mr. Growcock and Dr. Stoffel retired from the Harris Board effective at the 2018 Annual Meeting of Shareholders in October 2018.
(1)Reflects total cash compensation earned in fiscal 2019 for Harris Board, committee, committee chairperson and Lead Independent Director retainers.
(2)Reflects the aggregate grant date fair value computed in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“ASC 718”) with respect to stock equivalent units awarded in fiscal 2019 and credited to the director’s account under the Harris Directors’ Deferred Compensation Plan.

Under ASC 718, the fair value of the stock equivalent unit awards was determined as of the grant date using the closing market price of Harris common stock on the grant date. The aggregate grant date fair value of each of these awards credited on October 1, 2018, January 1, 2019 and April 1, 2019 was $36,250 and on June 28, 2019 was $35,453 (June 28, 2019 amount reflects pro-ration for all then-serving directors for serving less than the full quarter; other amounts also were subject to pro-ration for an individual director serving less than the full quarter). These amounts reflect our accounting for these awards and do not necessarily correspond to the actual values that may be realized by directors.

As of June 28, 2019, Harris non-employee directors had the following aggregate number of stock equivalent units accumulated in their deferred accounts for all years of service as a director from deferrals of cash compensation and awards of stock equivalent units, including additional stock equivalent units credited as a result of dividend equivalents earned with respect to such stock equivalent units and any restricted units: Mr. Albaugh — 3,000 units; Ms. Bailey — 1,069 units; Gen. Chiarelli — 10,637 units; Mr. Dattilo — 1,844 units; Mr. Fradin — 2,757 units; Mr. Growcock — 0 units; Mr. Hay — 23,048 units; Mr. Joshi — 7,731 units; Ms. Kenne — 18,589 units; Dr. Stoffel — 0 units; Mr. Swienton — 27,592 units; and Mr. Tookes — 17,513 units. As noted above, in accordance with applicable plan provisions, because the L3Harris Merger constituted a change in control under the plans, lump sum cash payments were made to each non-employee director or former non-employee director participating in the plans in an amount equal to the then-remaining balance in his or her account.

(3)Stock options were not an element of compensation for Harris non-employee directors, and consequently, non-employee directors held no stock options as of June 28, 2019.
(4)There were no above-market or preferential earnings in the Harris director deferred compensation plans.
(5)As noted above, Harris non-employee directors were eligible to participate in our foundation’s gift matching program up to an annual maximum of $10,000 per director. Although directors participated on the same basis as Harris employees, SEC rules require disclosure of the amount of a director’s participation in a gift matching program. The amounts shown for Messrs. Fradin, Growcock, Hay, Stoffel and Tookes reflect gift matching payments made during fiscal 2019.
38  L3HARRIS 2019 PROXY STATEMENT

 

 

PROPOSAL 2:

ADVISORY VOTE TO APPROVE
THE COMPENSATION OF OUR

NAMED EXECUTIVE OFFICERS

 

Our Board unanimously
recommends voting
FOR
approval of the
compensation of our
named executive officers
as disclosed in this proxy
statement.

>Because the L3Harris Merger and any resulting executive officer changes occurred after fiscal 2019 ended, our named executive officers for fiscal 2019 include only Harris executive officers
>Executive compensation decisions were made by independent members of the Harris Board and Management Development and Compensation Committee prior to the L3Harris Merger
>Executive compensation for fiscal 2019 reflected pay-for-performance alignment, with strong fiscal 2019 financial results and TSR results

 

As at past Annual Meetings and as required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and related SEC rules, we are asking our shareholders to vote, on a non-binding, advisory basis, to approve the compensation of our named executive officers as disclosed in this proxy statement. We encourage you, before voting, to review this entire proxy statement, and particularly the Compensation Discussion and Analysis section on pages 41-66, the Compensation Tables section on pages 69-79 and the Potential Payments Upon Termination or a Change in Control section on pages 79-89.

The overall objective of our executive compensation program is to encourage and reward the creation of sustainable, long-term shareholder value. Our guiding principles, shown on page 44 and summarized below, provide a framework for our executive compensation program to meet this objective. Specifically, our program is designed to:

>Directly align the interests of our executives with those of our shareholders.
>Provide competitive compensation and benefits to attract, motivate and retain executives that drive our desired business results.
>Ensure that a significant portion of compensation is at-risk and based on company and personal performance so as to motivate achievement of our financial goals and strategic objectives.
>Align an executive’s realized pay with his or her performance through above-target compensation for above-target performance and below-target compensation for below-target performance.

 

L3HARRIS 2019 PROXY STATEMENT

 39

 

 

PROPOSAL 2: ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

   

We believe that our executive compensation program helped to incentivize our executives, was integral to achieving our strong fiscal 2019 financial results and TSR results, and appropriately rewarded executives for that performance.

Please note that your vote on this proposal is not intended to address any specific element of compensation; rather, it relates to the overall compensation of our named executive officers as disclosed in this proxy statement under SEC rules. Also, the vote is advisory, which means that the results are not binding on us. However, our Board and our Compensation Committee, which are responsible for designing and administering our executive officer compensation program, value the opinions expressed by our shareholders and will consider the voting results when making future decisions regarding compensation for our named executive officers.

Shareholders will be voting on the following resolution:

“RESOLVED, that the shareholders of L3Harris Technologies, Inc. hereby approve, on an advisory basis, the compensation of the named executive officers as disclosed in the L3Harris Technologies, Inc. proxy statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Fiscal 2019 Summary Compensation Table and other related tables and accompanying footnotes and narratives.”

We currently hold our advisory vote to approve the compensation of our named executive officers (“Say-on-Pay vote”) annually. Shareholders have an opportunity to cast an advisory vote on the frequency of the Say-on-Pay vote at least every six years, and the next advisory vote on the frequency of the Say-on-Pay vote will be at our 2023 Annual Meeting of Shareholders.

40  L3HARRIS 2019 PROXY STATEMENT

 

 

 
 

COMPENSATION
DISCUSSION
AND ANALYSIS

A word to our shareholders about this CD&A: Although we now operate as L3Harris Technologies, Inc. following the L3Harris Merger, this CD&A describes compensation for Harris Corporation executive officers. This uncommon situation results from the interplay between the timing of our fiscal year end relative to the merger and SEC rules requiring that we hold an advisory vote on our executive compensation for fiscal 2019, which ended one day prior to the closing of the merger.


EXECUTIVE SUMMARY

This Compensation Discussion and Analysis (“CD&A”) is intended to help shareholders understand our overall executive compensation program, objectives, framework and elements. It also discusses and analyzes the basis for the compensation paid with respect to fiscal 2019 to our named executive officers shown in the Fiscal 2019 Summary Compensation Table on page 69 and the related tables and narrative discussion thereafter.

How the L3Harris Merger Affects This CD&A

As noted above, the L3Harris Merger closed after the end of Harris’ fiscal 2019, and Harris was renamed “L3Harris Technologies, Inc.” Because the L3Harris Merger and any resulting executive officer changes occurred after fiscal 2019 ended, the named executive officers discussed in this proxy statement include only executive officers of Harris (not L3 or the combined company, L3Harris). However, the description in this proxy statement of Harris’ executive compensation program, and of the philosophy, principles and key practices that shape it, generally is expected to continue in place for L3Harris.

Also, while payouts of annual and long-term incentive compensation awards normally are approved in August after our fiscal year has ended, the impending L3Harris Merger necessitated changing this timing for fiscal 2019, and those payouts instead were approved by the Harris Board of Directors (the Harris “Board”) and the Harris Management Development and Compensation Committee (the Harris “Compensation Committee”) on June 28, 2019. This was immediately before our fiscal 2019 ended, and in advance of the L3Harris Merger closing and the transition to the new L3Harris Board and L3Harris Compensation Committee.

In addition to discussing compensation for the named executive officers of Harris, this CD&A includes highlights of the current employment agreement between L3Harris and Christopher E. Kubasik, who became our Vice Chairman, President and Chief Operating Officer on June 29, 2019 following completion of the L3Harris Merger. In the fall of 2018, when Mr. Kubasik was L3’s Chairman, Chief Executive Officer and President, and L3 and Harris agreed to merge, he entered into two letter agreements with L3 (together, the “Kubasik Letter Agreement”) outlining the terms and conditions of his employment following completion of the L3Harris Merger. L3Harris assumed the Kubasik Letter Agreement on June 29, 2019 after the L3Harris Merger closed.

 

L3HARRIS 2019 PROXY STATEMENT  41

 

 

COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE SUMMARY

   
   

The named executive officers of Harris for fiscal 2019 were:

William M. Brown

Chairman, President
and Chief Executive Officer

Rahul Ghai

Senior Vice President
and Chief Financial Officer

Robert L. Duffy

Senior Vice President,
Human Resources and
Administration

Dana A. Mehnert

President,
Communication
Systems

Scott T. Mikuen

Senior Vice President,
General Counsel and
Secretary

         

Mr. Brown became L3Harris’ Chairman and Chief Executive Officer on June 29, 2019 following completion of the L3Harris Merger. Messrs. Ghai and Duffy ceased serving in their respective executive officer capacities on June 29, 2019 upon completion of the L3Harris Merger. Mr. Mehnert served as Senior Vice President, Chief Global Business Development Officer from July 2015 to September 2018 and became President, Communication Systems in September 2018.

Fiscal 2019 Performance

BUSINESS ENVIRONMENT

During fiscal 2019, we operated as Harris Corporation, a leading technology innovator, solving customers’ toughest mission- critical challenges by providing solutions that connect, inform and protect, and reported our financial results in three reportable segments. Harris supported government and commercial customers in more than 100 countries, with its largest customers being various departments and agencies of the U.S. Government and their prime contractors. Harris’ products, systems and services had defense and civil government applications, as well as commercial applications. As of the end of fiscal 2019, Harris had approximately $6.8 billion in annual revenue and about 18,200 employees. Approximately 77 percent of its revenue was derived from sales to U.S. Government customers, including foreign military sales funded through the U.S. Government, both directly and through prime contractors. Harris’ common stock was listed on the NYSE under ticker symbol “HRS.”

KEY FINANCIAL RESULTS

Our strong fiscal 2019 financial results and TSR results reflected our successful execution against the key strategic priorities Harris set for fiscal 2019, which were:

>Accelerating revenue growth across all three business segments (Communication Systems, Electronic Systems, and Space and Intelligence Systems);
>Driving flawless execution while expanding margins through operational excellence; and
>Sustaining cash flow with shareholder-friendly capital deployment.

Key Fiscal 2019 Results vs. Fiscal 2018 Results

(in millions, except per share amounts)  Fiscal 2018
Results ($)
   Fiscal 2019
Results ($)
   Change
Orders  $  7,429   $  7,451      --
Revenue  $  6,168   $  6,801    10%
Net income  $  699   $  949    36%
Adjusted EBIT*  $  1,166   $  1,345    15%
Operating income  $  920   $  1,092    19%
Non-GAAP operating income*  $  984   $  1,157    18%
Income from continuing operations per diluted common share  $  5.78   $  7.89    37%
Non-GAAP income from continuing operations per diluted common share*  $  6.39   $  8.29    30%
Operating cash flow  $  751   $  1,185     $434
Adjusted free cash flow*  $  915   $  1,055     $140
Cash used to retire debt  $  555   $  300    n/m
Cash used to repurchase shares of our common stock  $  272   $  200    n/m
Annualized cash dividend rate per share**  $  2.28   $  2.74    20%
Cash used to pay dividends  $  272   $  325    n/m
Cash used to make voluntary contributions to qualified defined benefit pension plans  $  300   $  --    n/m
Company-sponsored research and development  $  311   $  331    6%

n/m = not meaningful

*See Appendix A for reconciliations of GAAP to non-GAAP financial measures.
**On June 29, 2019, the L3Harris Board increased our quarterly cash dividend rate from $.685 per share to $.75 per share, for an annualized cash dividend rate of $3.00 per share.
42  L3HARRIS 2019 PROXY STATEMENT

 

 

   
   

COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE SUMMARY

In particular, we increased revenue 10%; expanded non-GAAP operating income 18%; delivered 30% growth in non-GAAP income from continuing operations per diluted common share growth; and through working capital reduction combined with earnings growth, generated higher adjusted free cash flow of $1,055 billion. These results outpaced fiscal 2018 performance and reflected outperformance against our guidance metrics. These results are important because they are components of performance measures used in incentive compensation determinations for fiscal 2019.

Based on these and prior-period results, we delivered strong 1-year, 3-year and 5-year cumulative TSR results (based on our fiscal year periods ended June 28, 2019) relative to companies in the S&P 500 and to the median of our compensation comparison peer group for fiscal 2019, as shown below:

TSR Results(1) at End of Fiscal 2019

 

(1)TSR results reflect reinvestment of dividends and, in the case of the median of our compensation comparison peer group for fiscal 2019, exclude Orbital ATK, Inc. and Rockwell Collins, Inc. due to them being acquired by other companies.

Target Pay Mix for Fiscal 2019

For fiscal 2019, in accordance with our principle of aligning pay with performance, the percentage of total target direct compensation that was at risk in the form of performance-based compensation or time-based vesting compensation (at risk due to a potential stock price decrease) was 89% for Harris’ CEO and 75% for the other named executive officers of Harris, on average, as reflected in the graph below.

CEO and Other Named Executive Officer Fiscal 2019 Target Direct Compensation Mix

 

L3HARRIS 2019 PROXY STATEMENT  43

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS OUR EXECUTIVE COMPENSATION PHILOSOPHY AND PRACTICES

   

 

Shareholder Engagement on Executive Compensation and “Say-on-Pay” Results

 

As part of our shareholder outreach, we seek shareholder views and input on our executive compensation program. In fact, past input received from our large shareholders influenced determinations by the Harris Compensation Committee to adjust the weighting of certain financial performance measures under our annual cash incentive compensation plan and to alter the financial performance measures for our performance share units. We expect to continue to seek the views and input of our large shareholders regarding our executive compensation program on a regular basis.

 

At our last Annual Meeting held in 2018 (as Harris Corporation), approximately 96% of the shares voted on the “say-on-pay” proposal were cast in support of Harris’ 2018 executive compensation and related disclosures. At that time, the Harris Compensation Committee viewed those results as broad shareholder support for Harris’ executive compensation program and consequently made no material changes to the program or to Harris’ compensation policies. Additionally, at the April 4, 2019 special meeting of Harris shareholders to vote on the proposals identified in the definitive joint proxy statement/prospectus filed by Harris in connection with the Merger Agreement and the L3Harris Merger (the “Harris S-4”), approximately 74% of the shares voted on the “say-on-golden-parachute” proposal were cast in support of the compensation that will or may be paid to Harris’ named executive officers in connection with the L3Harris Merger, as disclosed in the Harris S-4. Going forward, the new L3Harris Board and L3Harris Compensation Committee will continue to consider input from shareholders, including through advisory votes on executive compensation, in making compensation decisions and reviewing executive compensation programs and policies.

 

OUR EXECUTIVE COMPENSATION PHILOSOPHY AND PRACTICES

 

Overall Objective and Guiding Principles

 

The overall objective of our executive compensation program is to encourage and reward the creation of sustainable, long-term shareholder value. Our guiding principles provide a framework for our executive compensation program to meet this objective.

 

L3HARRIS GUIDING PRINCIPLES FOR EXECUTIVE COMPENSATION

     

Align with Shareholders’ Interests

 

We believe an executive’s interests are directly aligned with our shareholders’ interests when our compensation programs appropriately balance short-and long-term financial performance, are impacted by our stock price performance and require meaningful ownership of our stock.

 

Be Competitive at Target Performance Level

 

We believe an executive’s total compensation should be competitive at the target performance level to motivate performance and to attract, retain, develop and reward executives who possess the abilities and skills to build long-term shareholder value.

     
     

Motivate Achievement of Financial Goals and Strategic Objectives

 

We believe an effective way to incentivize an executive to create long-term shareholder value is to make a significant portion of overall compensation dependent on the achievement of our short-and long-term financial goals and strategic objectives and on the value of our stock.

 

Align Realized Pay with Performance

 

We believe that although an executive’s total compensation should be tied to achievement of financial goals and strategic objectives and should be competitive at the target performance level, above-target performance should be appropriately rewarded and there should be downside risk of below-target compensation if we do not achieve our financial goals and strategic objectives.

 

Although compensation levels differ among our named executive officers based on competitive factors and their varying roles, responsibilities and performance, there are no material differences in the manner in which total target direct compensation is determined for any of our named executive officers or the compensation policies that apply to them. The material elements of our executive compensation program applicable to our named executive officers also apply to our other executive officers.

 

44  L3HARRIS 2019 PROXY STATEMENT

 

 

 

   

COMPENSATION DISCUSSION AND ANALYSIS OUR EXECUTIVE COMPENSATION PHILOSOPHY AND PRACTICES

 

Key Practices

 

In accordance with our overall objective and our guiding principles, we follow sound executive compensation practices that are designed to encourage and reward the creation of sustainable, long-term shareholder value.

 

WHAT WE DO

 

Place executive compensation decisions in the hands of independent directors

 

Retain an independent executive compensation consulting firm

 

Periodically review and change composition of compensation comparison peer group, as appropriate

 

Make significant portion of each executive’s overall compensation dependent on our performance against pre-determined targets for short-and long-term financial measures

 

Make significant portion of each executive’s overall compensation opportunity equity-based to establish a strong link between compensation and our stock price performance

 

Align performance share unit award payouts with our stock price performance through a relative TSR adjustment metric

 

Have meaningful stock ownership guidelines to maintain alignment of executives’ interests with those of our shareholders

 

Hold annual “say-on-pay” advisory vote and seek input of large shareholders on key aspects of our executive compensation program

 

Regularly review and evaluate plans for management development and succession

 

Pay cash severance under executive change in control severance agreements only on a “double trigger” basis

 

Have “clawback” policy to recover cash and equity incentive payments from executives if our financial statements are restated due to errors, omissions or fraud

 

Provide for accelerated vesting of equity-based compensation granted after fiscal 2019 only on a “double trigger” basis

 

WHAT WE DON’T DO

 

Provide excessive perquisites

 

Permit repricing or back-dating of options

 

Provide excise tax gross-ups under executive change in control severance agreements

 

Pay dividend equivalents to executive officers on performance share unit and restricted stock unit awards (except to extent earned at end of the applicable period)

 

Permit directors, executives or other employees to engage in short sales or enter into hedging, puts, calls or other “derivative” transactions with respect to our securities

 

Permit directors or executives to hold or purchase our stock on margin or in a margin account or otherwise pledge our stock as collateral for margin accounts, loans or any other purpose


 

L3HARRIS 2019 PROXY STATEMENT  45

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS OUR EXECUTIVE COMPENSATION PHILOSOPHY AND PRACTICES

   

 

Who Does What

ROLE OF COMPENSATION COMMITTEE

The Harris Compensation Committee set the philosophy, objectives, elements, policies and practices of compensation for Harris executive officers. In approving compensation levels and targets, individual objectives and financial performance measure targets for our named executive officers, the Harris Compensation Committee reviewed the relationship between Harris’ executive compensation program and the achievement of Harris’ financial goals and strategic objectives, with an emphasis on creating a “pay for profitable growth” environment.

As noted above, following the L3Harris Merger, the membership of the L3Harris Board and its standing committees (including the L3Harris Compensation Committee) was reconstituted in accordance with the Merger Agreement. As a result, the Harris Compensation Committee has been succeeded by the new L3Harris Compensation Committee.

ROLE OF INDEPENDENT COMPENSATION CONSULTANT

The Harris Compensation Committee had the authority to retain compensation consultants and other advisors to assist it in fulfilling its duties and responsibilities. In recent years, it directly retained Pearl Meyer & Partners (“PM”), a nationally recognized, independent executive compensation consulting firm, to provide it with objective analysis, recommendations on plan design and other advice and information, including competitive market data, related to CEO compensation and the compensation of other executive officers. The Harris Governance and Corporate Responsibility Committee separately retained PM to provide it with similar types of analysis, recommendations, advice and information related to the compensation of non-employee directors. PM performed these services solely at the direction and under the supervision of the applicable committee and did not provide any other services for, or receive other fees from, Harris. With regard to PM’s services related to CEO and other executive officer compensation, the Harris Compensation Committee had sole authority to modify or approve PM’s compensation, determine the nature and scope of its services, evaluate its performance, terminate the engagement and engage a replacement or additional consultant at any time. The Harris Compensation Committee also periodically met with PM in executive session, without Harris’ CEO or other members of management present. The Harris Compensation Committee also assessed PM’s independence and whether its work raised any conflicts of interest (taking into consideration the independence factors in the NYSE listing standards and SEC rules) and determined in its business judgment that PM was independent and that its work did not raise any conflicts of interest.

In fiscal 2019, the Harris Compensation Committee also retained PM to provide recommendations prior to the L3Harris Merger on the compensation arrangements for our CEO and COO following the L3Harris Merger.

ROLE OF CEO

The Harris Compensation Committee considered recommendations from Harris’ CEO in making decisions regarding the Harris executive compensation program and the compensation of other executive officers of Harris. During the annual compensation planning process, Harris’ CEO recommended targets for all incentive compensation programs. The targets were based on the Harris Board-approved annual operating plan and long-term strategic plan. As part of the annual performance review process, which included an assessment of each executive officer’s performance against individual objectives, the CEO presented his evaluation of each executive officer’s contributions during the previous year (including both strengths and development needs), reviewed succession plans for each executive position, and recommended specific compensation for the other executive officers, including base salary level adjustments and annual cash incentive and equity awards.

Annual Compensation Cycle

The Harris Board and the Harris Compensation Committee generally followed an annual compensation cycle with respect to each new fiscal year as described below. The L3Harris Board and L3Harris Compensation Committee expect to follow a similar cycle.

With respect to the compensation decisions described below, the independent directors of the Board make all final compensation decisions for our CEO and, following the L3Harris Merger, our COO (typically based on the recommendation of the Compensation Committee in both cases), and the Compensation Committee makes them for other executive officers. These decisions include: determining the types and levels of benefits; establishing performance measures, weightings and targets; setting target compensation values; granting equity awards and determining payouts.

 

46  L3HARRIS 2019 PROXY STATEMENT

 

 

 

   

COMPENSATION DISCUSSION AND ANALYSIS OUR EXECUTIVE COMPENSATION PHILOSOPHY AND PRACTICES

 

WHAT WE DO PRIOR TO OR EARLY IN A NEW FISCAL YEAR

Consider program
design changes
Determine what changes, if any, should be made to the executive compensation program for the new fiscal year (after receiving input from our CEO and independent compensation consultant, and an assessment of compensation trends and competitive market data).

Set target
compensation values

The process for setting target compensation values includes a review of:
the executive’s three-year compensation history, including base salary level and annual cash incentive and equity awards;
the types and levels of other benefits available to the executive, such as change in control severance agreements; and
compensation comparison peer group data or broad compensation market data, including surveys.

Establish performance
measures and targets
and individual
performance
objectives

Establish:
short-and long-term financial performance measures and their relative weighting and associated targets for performance-based, at-risk elements of compensation for the new fiscal year; and
individual performance objectives for each executive and for his or her business unit or organization.
These measures, weightings and targets and performance objectives are intended to encourage and reward the creation of sustainable, long-term value for our shareholders and to align with our Board-approved annual operating plan and long-term strategic plan.
Make equity grants

Annual equity award grants to executive officers are made at meetings, the dates for which usually are set one year or more in advance, and annual equity award grants to our other eligible employees typically are made on the same date. We do not time equity grants to take advantage of information, either positive or negative, about us that has not been publicly disclosed.

In special circumstances, such as new hires or promotions or for retention or recognition, grants may occur outside of the typical cycle. Under a policy adopted by our Compensation Committee, such grants are made on the first trading day of the month following the hiring, promotion or other event (if this day falls during a “quiet period” under our insider trading policy, then on the first trading day after such period ends).

WHAT WE DO AFTER THAT FISCAL YEAR ENDS
Conduct performance
reviews
For our CEO, the independent directors of the Board conduct a performance review, evaluating the CEO’s achievement of objectives established early in the fiscal year, other accomplishments, overall company performance and the CEO’s self-evaluation of performance for the fiscal year. This review occurs in executive session, under the leadership of the Chairperson of our Compensation Committee and without the CEO or other members of management present. (Our independent directors expect to follow the same process for our new COO.)
  For other executive officers, our CEO provides our Compensation Committee with specific compensation recommendations based on our CEO’s review and assessment of each executive officer’s performance, including achievement of objectives established early in the fiscal year for the executive and his or her business unit or organization, contribution to company performance and other accomplishments.
Determine payouts Payouts of performance-based, at-risk elements of compensation to executives are determined based on performance reviews relative to pre-determined objectives and formulaic calculations of our financial results for the fiscal year against pre-determined targets, typically after audited financial statements become available approximately two months after the fiscal year end.

For fiscal 2019, due to the then-impending closing of the L3Harris Merger, performance reviews were conducted and payouts of performance-based elements of compensation to Harris executive officers were approved on June 28, 2019, immediately before fiscal 2019 ended, instead of after the fiscal year ended as in a typical compensation cycle. For our abbreviated fiscal transition period, which began June 29, 2019 and will end January 3, 2020, in connection with selecting executives for roles in the combined L3Harris after the merger, target compensation values and equity-based compensation awards for executives were approved within the first month following the L3Harris Merger closing, with equity-based compensation awards granted on August 1, 2019 (the first trading day after our “quiet period” ended, in accordance with our insider trading policy). We expect to return to our typical annual compensation cycle starting with our next full fiscal year commencing January 4, 2020.

 

L3HARRIS 2019 PROXY STATEMENT  47

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS OUR EXECUTIVE COMPENSATION PHILOSOPHY AND PRACTICES

   

Competitive Considerations 

BENCHMARKING 

The Harris Board and the Harris Compensation Committee set total target direct compensation for Harris’ CEO and other executives in their discretion (including based on factors such as experience, position, responsibilities, tenure and contributions), but generally within the range of 20% below to 20% above the median of total target direct compensation for comparable positions in our compensation comparison peer group (to the extent such data was available) and after considering other broad compensation market data, including surveys. The L3Harris Compensation Committee expects to follow a similar practice. For fiscal 2019, Harris’ Human Resources Department performed a comprehensive assessment and benchmarking of the competitive compensation positioning of Harris’ CEO and other executive officers and the mix and elements of their compensation, primarily focusing on our compensation comparison peer group, but also using broad compensation market data. For fiscal 2019, the Harris Compensation Committee also engaged PM to assess the composition of our compensation comparison peer group and to review, assess and validate Harris’ Human Resources Department’s assessment and benchmarking process. 

COMPENSATION COMPARISON PEER GROUP 

Our compensation comparison peer group is used to assess the competitiveness of the compensation of our CEO and other executive officers. We seek to include companies that compete with us for executive talent and are similar to us in industry, business model, revenue and/or market capitalization. Our Compensation Committee periodically reviews the composition of this peer group and makes changes it determines are appropriate based on changes to our businesses or to the attributes of companies in the group or the availability of their compensation data. PM, our CEO and management provide input to our Compensation Committee regarding changes to the attributes of peer companies. 

Harris Compensation Comparison Peer Group for Fiscal 2019 (same as fiscal 2018)

 

Curtiss-Wright Corporation

Huntington Ingalls Industries, Inc.

L3 Technologies, Inc.

Leidos Holdings, Inc.

Motorola Solutions, Inc.

 

Northrop Grumman Corporation

Orbital ATK, Inc.

Parker Hannifin Corporation

Raytheon Company

Rockwell Automation, Inc.

 

Rockwell Collins, Inc.

Spirit AeroSystems Holdings, Inc.

Teledyne Technologies Incorporated

Textron Inc.

TransDigm Group Incorporated

 

In August 2019, the L3Harris Compensation Committee approved changes to our compensation comparison peer group for our fiscal transition period ending January 3, 2020, as shown in the following table. Companies added to the group compete with L3Harris for executive talent and are similar to L3Harris in industry, business model, revenue and/or market capitalization. Companies removed from the group generally were removed due to acquisitions by other companies, evolving business disparity or evolving revenue or market capitalization disparity. 

L3Harris Compensation Comparison Peer Group for Fiscal Transition Period Ending January 3, 2020

(Companies added shown in red) 

 

Eaton Corporation plc

Emerson Electric Co.

General Dynamics Corporation

Honeywell International Inc.

Leidos Holdings, Inc.

 

 

Lockheed Martin Corporation

Motorola Solutions, Inc.

Northrop Grumman Corporation

Parker Hannifin Corporation

Raytheon Company

 

Rockwell Automation, Inc.

Spirit AeroSystems Holdings, Inc.

Textron Inc.

United Technologies Corporation

 

Companies removed: Curtiss-Wright Corporation, Huntington Ingalls Industries, Inc., L3 Technologies, Inc., Orbital ATK, Inc., Rockwell Collins, Inc., Teledyne Technologies Incorporated and TransDigm Group Incorporated.

 

48 L3HARRIS 2019 PROXY STATEMENT

 

 

 

   

COMPENSATION DISCUSSION AND ANALYSIS OVERVIEW OF OUR MAIN EXECUTIVE COMPENSATION ELEMENTS

 

 

OVERVIEW OF OUR MAIN EXECUTIVE COMPENSATION ELEMENTS

The compensation program for our executive officers primarily consists of the following elements: 

>base salary;

>annual cash incentive award compensation; and

>equity-based long-term incentive compensation (for fiscal 2019, in the form of performance share units, stock options and restricted stock units).

As noted above, the overall objective of our compensation program is to encourage and reward the creation of sustainable, long-term shareholder value. The Harris Compensation Committee determined, and the L3Harris Compensation Committee believes, that the current elements of our executive compensation program further this objective. They directly align the interests of our executives and shareholders, are competitive, motivate achievement of our short-and long-term financial goals and strategic objectives and align realized pay with performance. 

We do not have a formal policy relating to the mix among the various elements of our compensation program. However, we believe that the greater an executive’s responsibility level and ability to influence results, the greater the portion of his or her overall compensation that should be performance-based, at-risk compensation. 

Base Salary 

Base salary reflects a fixed, stable portion of the overall compensation package and also generally serves as the base amount from which other compensation elements are determined. It represents a relatively small percentage of total target direct compensation, particularly for executive officers with greater responsibility and ability to influence results. 

The Compensation Committee reviews executive base salary levels prior to or early in each fiscal year and whenever there is a substantial change in an executive’s responsibilities or in market conditions. It generally targets an executive officer’s base salary level to fall between 20% below and 20% above the market median for comparable positions, where available, at companies in our compensation comparison peer group, and considers other relevant market data, including surveys. However, an executive’s base salary level also is influenced by his or her experience, position, responsibilities, tenure, contributions and individual performance, as well as current business conditions and our business outlook. 

Annual Cash Incentive 

Harris provided executive officers the opportunity to earn annual cash incentive compensation under the Harris Corporation Annual Incentive Plan (our “Annual Incentive Plan”). Awards under this plan are structured to provide payouts ranging from 0% to 200% of pre-established award target values, depending on: 

>our performance against specific pre-determined financial performance measures; and

>named executive officer performance against pre-determined individual objectives and contribution to our overall results.

For executives, this structure creates: 

>the upside potential of above-target payouts if our financial performance is above target; and

>the downside risk of below-target payouts if our financial performance is below target.

Through this structure, the annual cash incentive motivates our executives to focus on achieving or exceeding pre-determined financial performance measure targets and individual objectives strategically chosen to align with the interests of our shareholders. The L3Harris Compensation Committee expects to use a similar structure for annual cash incentive compensation awards. 

SETTING AWARD TARGET VALUES 

As described above in “Annual Compensation Cycle,” early in the fiscal year, an annual cash incentive compensation award target value was set for each executive officer. For the named executive officers, these target values generally were set as a percentage of base salary level, using compensation comparison peer group data as a reference point, if available for a comparable position, or broad compensation market data, including surveys. The independent directors of the Harris Board (based on the recommendation of the Harris Compensation Committee) set target values for the CEO, and the Harris Compensation Committee set them for other executive officers.

 

L3HARRIS 2019 PROXY STATEMENT  49

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS OVERVIEW OF OUR MAIN EXECUTIVE COMPENSATION ELEMENTS 

   

ESTABLISHING METRICS AND INDIVIDUAL PERFORMANCE OBJECTIVES 

Also early in the fiscal year, specific financial performance measures and their relative weighting and associated targets and thresholds were established, as well as individual performance objectives for each executive officer. Again, the independent directors of the Harris Board (in the case of Harris’ CEO) and the Harris Compensation Committee (in the case of other executive officers) established these metrics and objectives. 

As a general principle, we seek to establish targets for financial performance measures that are aligned with our annual operating plan and are challenging yet achievable. Targets are set at levels we believe require significant effort on the part of executives, yet also represent a reasonable expectation of financial results based on prior-year performance, existing business conditions, the markets in which we participate and our outlook. 

DETERMINING PAYOUTS 

Historically, approximately two months after the end of each fiscal year, the independent directors of the Harris Board (in the case of Harris’ CEO) and the Harris Compensation Committee (in the case of other executive officers) determined and approved payouts of performance-based, cash incentive compensation under our Annual Incentive Plan based on formulaic calculations of our financial results against specific pre-determined financial performance measure targets, as well as performance reviews relative to pre-determined objectives for the fiscal year. In certain instances, as permitted under our Annual Incentive Plan, financial performance measure targets and our actual results may be adjusted in recognition of unusual or nonrecurring events affecting us or our financial statements, such as items that are determined not to be reflective of normal, ongoing business operations. At the request of the Chairperson of our Audit Committee, our Internal Audit Department independently verifies calculations for payouts under our Annual Incentive Plan. As noted above, for fiscal 2019, due to the then-impending closing of the L3Harris Merger, payouts of cash incentive compensation under our Annual Incentive Plan were determined and approved on June 28, 2019, immediately before fiscal 2019 ended, instead of approximately two months after the fiscal year ended as in prior fiscal years. 

Long-Term Incentives 

Harris provided long-term incentive compensation to executive officers under the Harris Corporation 2015 Equity Incentive Plan (our “Equity Incentive Plan”). Long-term incentive compensation is designed to motivate our executives to focus on achievement of our long-term financial goals and strategic objectives. 

TYPES OF EQUITY AWARDS USED 

We award different types of equity-based compensation because we believe that each type incentivizes and rewards shareholder value creation in a different way. Equity awards also are intended to retain executives, encourage share ownership and maintain a direct link between our executive compensation program and the value and appreciation in value of our stock. Types of awards we typically use are:

>Performance share units. Performance share unit awards motivate our executives to achieve our multi-year financial and operating goals because the number of units ultimately earned depends on how we perform, generally over a three- year performance period, against financial performance measures and their relative weighting and associated targets established early in the first fiscal year of each performance period. As with all forms of equity-based compensation, the value of performance share units also is impacted directly by increases or decreases in our stock price.

>Stock options. Stock options motivate our executives to increase shareholder value because the options have value, and compensation can be realized, only to the extent the price of our common stock increases between the grant date and the date of exercise.

>Restricted stock units. Restricted stock unit awards primarily facilitate retention and succession planning because they carry restrictions that typically expire only if the executive is still employed with us at the end of a three-year period.

In limited circumstances, we also may grant performance stock options to better align compensation with execution against certain strategic initiatives and may grant shares of restricted stock and restricted stock unit awards to facilitate recruitment. 

SETTING AWARD TARGET VALUES 

Early in the fiscal year, the total target value for long-term equity incentive compensation awards is established for each executive officer. For the named executive officers, the target value typically is set using our compensation comparison peer group data as a reference point, if available for a comparable position, and/or other broad compensation market data, including surveys. The independent directors of the Harris Board (based on the recommendation of the Harris Compensation Committee) set target values for the CEO, and the Harris Compensation Committee set them for other executive officers.

 

50 L3HARRIS 2019 PROXY STATEMENT

 

 

 

   

COMPENSATION DISCUSSION AND ANALYSIS OVERVIEW OF OUR MAIN EXECUTIVE COMPENSATION ELEMENTS

DETERMINING THE MIX OF INCENTIVES FOR EACH EXECUTIVE 

Early in the fiscal year, the appropriate mix of types of equity-based compensation is determined for each executive officer (i.e., the percentage of total award target value allocated to each type of award), after considering relevant data for our compensation comparison peer group, the retention value of each type and other factors important to us, including linking incentive compensation to performance, tax and accounting treatment and PM’s recommendation. The independent directors of the Harris Board (based on the recommendation of the Harris Compensation Committee) determined the mix for the CEO, and the Harris Compensation Committee determined the mix for other executive officers. 

We then determine the specific numbers of performance share units, restricted stock units and stock options to be granted to each executive officer based on the applicable percentage of total award target value allocated to each type of award. For fiscal 2019 and prior fiscal years, we valued units or options based on a 60-day average closing market price of our common stock prior to the grant date, which differs from the grant date fair value method we are required to use in calculating amounts shown in the “Stock Awards” and “Option Awards” columns of the Fiscal 2019 Summary Compensation Table on page 69. However, we did use the grant date fair value method for grants to executive officers for our fiscal transition period ending January 3, 2020, and we expect to use that method in subsequent fiscal years. 

PERFORMANCE SHARE UNITS 

Establishing performance metrics. As described above in “Annual Compensation Cycle,” early in the first fiscal year of each multi-year performance period (generally three years), we establish specific financial performance measures and their relative weighting and associated targets and thresholds, which serve as the basis for measuring how we perform and determining payouts. Performance share unit awards are structured to provide payouts in shares of our common stock ranging from 0% to 200% of the target number of performance share units granted under such awards. The independent directors of the Harris Board (based on the recommendation of the Harris Compensation Committee) established the metrics for the CEO, and the Harris Compensation Committee established them for other executive officers. 

As a general principle, we seek to establish targets for financial performance measures that are aligned with our three-year strategic plan and are challenging yet achievable. Targets are set at levels we believe require significant effort on the part of executives, yet also represent a reasonable expectation of financial results based on prior-year performance, existing business conditions, the markets in which we participate and our outlook. 

Determining payouts. Historically, approximately two months after the end of each fiscal year, the independent directors of the Harris Board (based on the recommendation of the Harris Compensation Committee, in the case of Harris’ CEO), and the Harris Compensation Committee (in the case of other executive officers) determined and approved payouts under performance share unit awards for the multi-year performance period that concluded at the end of that fiscal year, based on formulaic calculations of our results against specific pre-determined financial performance measure targets for such performance period. In certain instances, as permitted under our Equity Incentive Plan, financial performance measure targets and our actual results may be adjusted in recognition of unusual or nonrecurring events affecting us or our financial statements, such as items that are determined not to be reflective of normal, ongoing business operations. At the request of the Chairperson of our Audit Committee, our Internal Audit Department independently verifies calculations for payouts in respect of performance share unit awards. 

As noted elsewhere, due to the then-impending closing of the L3Harris Merger, payouts in respect of performance share unit awards for the fiscal 2017-2019, fiscal 2018-2020 and fiscal 2019-2021 performance periods were determined and approved on June 28, 2019, immediately before our fiscal 2019 ended and in anticipation of the accelerated vesting and payouts of the fiscal 2018-2020 and fiscal 2019-2021 award cycles triggered by the L3Harris Merger closing on June 29, 2019. These determinations and approvals were made by the Harris Board and Harris Compensation Committee prior to the transition to the new L3Harris Board and L3Harris Compensation Committee (the memberships of which were reconstituted on the closing date in accordance with the Merger Agreement). 

STOCK OPTIONS 

Stock options granted to our executive officers typically have the following terms: 

>Exercise price equal to the closing price of our common stock on the grant date;

>Vesting in equal installments of one-third each on the first, second and third anniversary of the grant date, subject to the recipient’s continued employment through the applicable vesting date;

>Expiration 10 years from the grant date; and

>Vesting accelerated upon a change in control or other events (as discussed elsewhere in this proxy statement) (applies for options granted through fiscal 2019; “double trigger” accelerated vesting applies for options granted after fiscal 2019).

 

L3HARRIS 2019 PROXY STATEMENT  51

 

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS EXECUTIVE COMPENSATION DECISIONS FOR FISCAL 2019

   

Stock options, including performance stock options, may not be repriced, replaced, modified or regranted through cancellation if the effect thereof would be to reduce the exercise price of such stock options, except with prior approval of our shareholders, or in connection with a change in our capitalization, including spin-offs. 

RESTRICTED STOCK AND RESTRICTED STOCK UNITS 

Restricted stock or restricted stock units are used primarily to facilitate retention and succession planning and, in more limited circumstances, as a recruitment mechanism to replace the value of equity awards that an executive may have forfeited upon leaving a former employer. Restrictions on these awards, which typically expire at the end of a three-year period, provide that the shares or units may not be sold or otherwise transferred and will be immediately forfeited if the recipient’s employment ends for any reason other than involuntary termination, death, disability or retirement. 

EXECUTIVE COMPENSATION DECISIONS FOR FISCAL 2019 

This section describes the compensation paid or awarded for fiscal 2019 to the named executive officers of Harris with respect to each major compensation element (base salary, annual cash incentive and long-term incentives) and how this compensation was determined. 

As noted elsewhere in this proxy statement, we are describing fiscal 2019 compensation only for named executive officers of Harris (not L3 or the combined company, L3Harris). This is because, when Harris’ fiscal 2019 ended on June 28, 2019, the L3Harris Merger had not yet closed and the new executive officers of L3Harris had not yet been appointed.

Base Salary 

The table below shows the fiscal 2019 base salary level (effective September 29, 2018) for each named executive officer of Harris (including a comparison with the prior fiscal year), as approved early in fiscal 2019 in accordance with the discussion above. 

Base Salary Levels: Fiscal 2019 vs. Fiscal 2018