DEF 14A 1 lockheedmartin2021proxy.htm DEF 14A Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the RegistrantFiled by a Party other than the Registrant
CHECK THE APPROPRIATE BOX:
 Preliminary Proxy Statement

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

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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4) Date Filed:



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March 12, 2021
Dear Fellow Stockholders:
It is my pleasure to invite you to Lockheed Martin's 2021 Annual Meeting of Stockholders on Thursday, April 22, 2021, at 8:00 a.m. EDT. The meeting will once again be held virtually via live webcast to facilitate full stockholder participation while protecting health and safety. Information on how to participate in the Annual Meeting can be found on page 85.
Resiliency Through a Global Pandemic
The global pandemic has presented unprecedented business challenges and continues to inflict personal loss for so many, including within the Lockheed Martin family. Throughout the crisis, our priorities have been to ensure the health and welfare of our employees and their families, continue to perform and deliver for our customers and our national security, and use our resources and leadership as a company to assist our communities, our country and our allies. We took swift action early in the pandemic to address the threat and have continued to do so since, including maintaining robust health and safety protocols in the workplace, delivering personal protective equipment to frontline workers and supporting our communities and suppliers. Despite the challenges presented by COVID-19, we continued to hire through the pandemic, welcoming more than 11,000 new employees in 2020.
Strong 2020 Financial Performance
Despite the challenges of 2020, we’re proud to report that the resiliency of our employees to adapt and continue to deliver for our customers resulted in another year of strong financial results, including record sales and earnings per share from continuing operations and increased backlog. We continued our strong cash performance, generating $8.2 billion in cash from operations after discretionary pension contributions of $1.0 billion. And we returned $3.9 billion in cash to stockholders through dividends and share repurchases. For more detailed information on our financial results, please review our proxy statement and the enclosed 2020 Annual Report.
Leadership Transitions
Following a remarkable 38-year career at Lockheed Martin, Marillyn A. Hewson ended her service as Executive Chairman and as a member of the Board on March 1, 2021. We are extremely grateful for her many valuable contributions to our company and the Board and she leaves behind a legacy as one of Lockheed Martin's most successful and respected leaders. In addition to my transition to the role of President and CEO in June 2020, several other executives were also elevated to new executive leadership positions as part of a disciplined leadership transition, reflecting the Corporation’s deliberate and thorough succession planning. The board and the executive leadership team also want to acknowledge the unfortunate passing of Michele Evans, former EVP, Aeronautics in early 2021. Michele was an exceptional leader and a champion for diversity and inclusion and has left a great legacy of future leaders she inspired.
On behalf of the entire board of directors, I want to thank you for your continued investment in Lockheed Martin. Your vote is important. I urge you to promptly cast your vote in accordance with the board's recommendations.
Sincerely,
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James D. Taiclet                       
Chairman, President and                 
Chief Executive Officer                     
www.lockheedmartin.com2021 Proxy Statement
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Notice of 2021 Annual Meeting of Stockholders
AgendaBoard Recommendation
Item 1
Election of 11 directors
FOR
each of the director- nominees
Virtual Annual Meeting
When:
Thursday, April 22, 2021, 8:00 a.m. EDT
Live Webcast Access:
Online audio webcast at: www.meetingcenter.io/266927146
Password: LMT2021 (if prompted for one)
Who Can Vote:
Stockholders of record at the close of business on February 26, 2021 are entitled to vote. Whether or not you plan to attend the Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described below. See pages 85-89 for additional information regarding accessing the Annual Meeting and how to vote your shares.

Item 2
Ratification of the appointment of Ernst & Young LLP as our independent auditors for 2021
FOR
Item 3
Advisory vote to approve the compensation of our named executive officers (Say-on-Pay)FOR
Item 4
Consideration of a stockholder proposal to adopt written consent,
if properly presented
AGAINST
Item 5Consideration of a stockholder proposal to issue a report on human rights due diligence, if properly presentedAGAINST
Consideration of any other matters that may properly come before the meeting
The 2021 Annual Meeting will be conducted online only through a live audio webcast via the Internet. We have adopted this format to assist in protecting the health and safety of the Corporation's stockholders and employees in light of continued public health concerns regarding COVID-19 and to facilitate stockholder attendance and to enable stockholders to participate fully and equally, regardless of size, resources, or physical location.
We have enclosed our 2020 Annual Report to Stockholders. The report is not part of the proxy soliciting materials for the 2021 Annual Meeting. The Proxy Materials or a Notice of Internet Availability were first sent to stockholders on or about March 12, 2021.
Your vote is extremely important. Please vote at your earliest convenience to ensure the presence of a quorum at the meeting. Promptly voting your shares in accordance with the instructions you receive will save the expense of additional solicitation.
Sincerely,
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Maryanne R. Lavan
Senior Vice President, General Counsel
and Corporate Secretary
March 12, 2021
How to Vote in Advance:
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Via the Internet:
At the website listed on the proxy card or voting instruction form you received.
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By Telephone:
Call 1-800-652-8683 in the United States, Canada and Puerto Rico, 1-781-575-2300 for other locations, or the numbers provided on your voting instruction form.
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By Mail:
Mark, date and sign your proxy card or voting instruction form and return it in the accompanying postage prepaid envelope.
Important Notice Regarding the Availability of Proxy Materials for the 2021 Annual Meeting:
The 2021 Proxy Statement and 2020 Annual Report are available at www.edocumentview.com/LMT.
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Table of Contents

ANNUAL MEETING QUESTIONS AND ANSWERS
www.lockheedmartin.com2021 Proxy Statement
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About Lockheed Martin
Lockheed Martin is a global security and aerospace company that employs 114,000 people worldwide and is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. Our mission is to solve complex challenges, advance scientific discovery and deliver innovative solutions to help our customers keep people safe.
OUR BUSINESS
We have four business segments, each of which is dedicated to specific products and services.
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Aeronautics, 40%
Engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies
$26.3B
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Missiles and Fire Control, 17%
Provides air and missile defense systems; tactical missiles and air-to-ground precision strike weapon systems; logistics; fire control systems; mission operations support, readiness, engineering support and integration services; manned and unmanned ground vehicles; and energy management solutions
$11.3B
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Rotary and Mission Systems, 25%
Designs, manufactures, services and supports various military and commercial helicopters, surface ships, sea and land-based missile defense systems, radar systems, sea and air-based mission and combat systems, command and control mission solutions, cyber solutions, and simulation and training solutions
$16.0B
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Space, 18%
Engaged in the research, design, development, engineering and production of satellites, space transportation systems, and strategic, advanced strike and defensive systems; provides network-enabled situational awareness and integrates complex space and ground global systems to help our customers gather, analyze and securely distribute critical intelligence data
$11.9B
2021 STRATEGIC FRAMEWORK
Enhance defense, security and scientific discovery by delivering reliable, innovative and affordable solutions to our customers’ most daunting challenges
LEADINNOVATEDRIVEGROW
the defense industry and our customers in building a superior 21st Century Warfare capability
to provide cutting edge solutions to our customers at every level from product to Joint All-Domain Operations
operational excellence throughout the Corporation and efficiency throughout the industry
organically and through capital and acquisition investments to benefit our stakeholders
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Support for Our Employees, Suppliers and Communities Impacted by COVID-19
Lockheed Martin continues to support the critical security needs of our nation and its allies during the COVID-19 global pandemic while also providing support to industrial base suppliers, front-line medical workers and local communities to help with relief and response efforts. We recognize that the rapid spread of COVID-19 and its wide-ranging impacts have caused severe disruption across society and tragic loss of life around the world. Managing the impacts of COVID-19 on our employees, suppliers and communities has been a key priority for the Corporation and our Board in 2020. In response to this crisis, the Corporation is guided by and operates with three clear priorities: (i) we will continue to protect the health and safety of our men and women on the job and their families; (ii) we will continue to perform and deliver for our customers because what they do for our national security, global communities, and infrastructure is critical to our nation and our allies; and (iii) we will do our part to use our innovation, resources, and leadership as a company to assist our communities and our country.
Employee Health and Safety
Recognizing that our workforce is our most valuable asset in supporting our national security mission, we have taken action to protect its health and safety:
We have fulfilled our pledge to cover 100% of medical expenses related to COVID-19 for those employees and their families participating in company health plans.
We employed a number of methods to reduce the concentration of employees in office and production environments who are doing work deemed essential by the U.S. government. We implemented teleworking, minimum staffing and social distancing policies for our employees consistent with current federal guidance as they continued to support national security.
We provided employees with personal protective equipment, instituted new cleaning procedures including how tools are handled and, in some places, how areas are cleaned between shifts, restricted travel and implemented strict rules governing who can visit our facilities.
We enacted enhanced contingency plans in our factories to reduce the likelihood of an interruption in production of critical security programs.
Supply Chain Commitment
Throughout the pandemic, we helped ensure a healthy supply base, accelerating payments to more than 10,100 suppliers, including nearly 6,200 small businesses across all 50 states, the District of Columbia, Puerto Rico, and 47 nations.
During 2020, the Department of Defense announced it would increase progress payment rates to large businesses from 80 percent to 90 percent, accelerating payments for the completion of work in recognition of the challenges posed by COVID-19. During 2020, Lockheed Martin flowed all of the accelerated payments it received from the Department of Defense to its supply chain with a focus on small businesses and those at-risk.
We have continued in 2021 to monitor COVID-19 impacts and to accelerate cash to at-risk suppliers and small businesses, working with our U.S. government partners and suppliers, to meet commitments vital to national security.
Aid to Our Communities and International Partners
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We made nearly $22 million in charitable contributions, as well as donations of meals for local communities surrounding Lockheed Martin locations, and personal protective equipment for doctors, nurses, and first responders.
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We supported COVID-19 related initiatives around the world including in 16 different countries other than the U.S.
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We donated the use of our facilities for crisis-related activities including critical medical supply storage, distribution, and COVID-19 testing, where needed and practical.
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We have continued to recruit and hire new employees to fill key roles around the country, often virtually, to advance technologies that will shape the future and keep us an employer of choice.
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We provided corporate air support to the U.S. Department of Health and Human Services and the National Marrow Donor Program.
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We donated more than 1,400 iPhones to local hospitals and community organizations across the country.
www.lockheedmartin.com2021 Proxy Statement
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Proxy Statement Summary
The Board of Directors (the Board) of Lockheed Martin Corporation (the Corporation) is providing the Notice of 2021 Annual Meeting of Stockholders, this Proxy Statement and proxy card (the Proxy Materials) in connection with the Corporation's solicitation of proxies for the 2021 Annual Meeting (the Annual Meeting) to be held virtually on April 22, 2021, at 8:00 a.m. EDT.
This proxy summary highlights information contained elsewhere in our Proxy Statement. The summary does not contain all the information that you should consider, and we encourage you to read the entire Proxy Statement carefully.
Voting Matters and Board Recommendations
Proposal
1
Election of 11 Director-Nominees
The Board recommends a vote FOR each of the director-nominees.

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See pages 11-16 for further information.
Proposal
2
Ratification of the Appointment of Ernst & Young LLP as our Independent Auditors for 2021
  The Board recommends a vote FOR ratification of Ernst & Young LLP for 2021.

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See pages 36-37 for further information.
Proposal
3
Advisory Vote to Approve the Compensation of our Named Executive Officers (Say-on-Pay)
The Board recommends a vote FOR our Say-on-Pay proposal.

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See page 39 for further information.
Proposal
4
Stockholder Proposal to Adopt Stockholder Action by Written Consent
  The Board recommends a vote AGAINST proposal 4.

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See pages 81-82 for further information.
Proposal
5
Stockholder Proposal to Issue a Report on Human Rights Due Diligence
  The Board recommends a vote AGAINST proposal 5.

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See pages 83-84 for further information.
Stockholder Outreach
40+
Engagements
30+
Stockholders
26%
Outstanding Stock (as of December 31, 2020)
Lockheed Martin engages with a broad range of stockholders, including index funds, unions and public pension funds, actively-managed funds and socially-responsible investment funds, and proxy advisory firms. During 2020, we extended invitations to some of our largest investors, representing approximately 40 percent of our outstanding shares, and other significant stakeholders and invited them to engage on various topics including our 2020 leadership changes, board and workforce diversity, human capital management, executive compensation, and sustainability matters, including climate change. We engaged by telephone conference or written correspondence over 40 times with these investors and other stakeholders, including stockholders representing approximately 26 percent of our outstanding shares. Investors welcomed our year-round global outreach and expressed appreciation for our ongoing engagement.
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Proxy Statement Summary
Corporate Governance Highlights
Board Composition, Committees, Skills and Qualifications
The Board carefully reviews its composition to ensure it has the right mix of people with diverse perspectives, business and professional experiences as well as professional integrity, sound judgment and collegiality. The Board seeks to identify candidates with knowledge or experience that will expand or complement its existing expertise to ensure the Board is aligned to the Corporation's future strategic challenges and opportunities.
Lockheed Martin Committees
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Name, Age, Independence, Position and Other Public BoardsACBSMDCNCG
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Daniel F. Akerson, 72, Independent Lead Director
Retired Chairman & CEO, General Motors Company
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David B. Burritt, 65, Independent
President & CEO, United States Steel Corporation (U.S. Steel)
-
Director at U.S. Steel
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Bruce A. Carlson, 71, Independent
Retired United States Air Force General
-
Director at Benchmark Electronics Inc. (Audit)
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Joseph F. Dunford, Jr., 65, Independent
Retired United States Marine Corps General;
Former Chairman of the Joint Chiefs of Staff
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James O. Ellis, Jr., 73, Independent
Retired President & CEO, Institute of Nuclear Power Operations
-
Director at Dominion Energy, Inc. (Finance & Risk Oversight; Audit)
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Thomas J. Falk, 62, Independent
Retired Chairman & CEO, Kimberly-Clark Corporation
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Ilene S. Gordon, 67, Independent
Retired Chairman & CEO, Ingredion Incorporated
-
Director at International Paper Company (Presiding Director; Governance Chair; Management Development & Compensation); International Flavors & Fragrances, Inc. (Compensation)
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Vicki A. Hollub, 61, Independent
President & CEO, Occidental Petroleum Corporation
-
Director at Occidental Petroleum Corporation
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Jeh C. Johnson, 63, Independent
Partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP; Former Secretary of Homeland Security
- Director at U.S. Steel (Audit; Corporate Governance & Sustainability)
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Debra L. Reed-Klages, 64, Independent
Retired Chairman, President & CEO, Sempra Energy
-
Director at Chevron Corporation (Audit); Caterpillar Inc. (Compensation & Human Resources)
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James D. Taiclet, 60
Chairman, President & CEO, Lockheed Martin Corporation

A
CBS
MDC
NCG
Audit
Classified Business and Security
Management Development and Compensation
Nominating and Corporate Governance
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Member
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Chair
www.lockheedmartin.com2021 Proxy Statement
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Proxy Statement Summary
Our Alignment with Governance Standards
In 2018, Lockheed Martin became a signatory to the Commonsense Principles 2.0, a series of corporate governance principles for public companies, their boards and their institutional stockholders, which are intended to provide a basic framework for sound, long-term oriented governance. These Principles recognize that not every principle will be applied in the same fashion (or at all) by every company or board. In addition, our corporate governance practices comply with the Investor Stewardship Group (ISG) Corporate Governance Principles for U.S. Listed Companies that went into effect in 2018. Below we identify each of the ISG's corporate governance principles and how our specific practices are aligned.
BOARDS ARE ACCOUNTABLE TO STOCKHOLDERS
ü Annual election of directors
ü Majority voting standard for uncontested director elections
ü Directors not receiving majority support tender resignation to Board for consideration
ü Market-standard proxy access right for stockholders
ü No poison pill
ü Fully disclose corporate governance practices
BOARDS SHOULD ADOPT STRUCTURES AND PRACTICES THAT ENHANCE THEIR EFFECTIVENESS
ü 10 of 11 directors are independent
ü 3 of our directors are women
ü Significant Board refreshment
ü Directors reflect a diverse mix of skills and experience
ü All Board committees are fully independent
ü Annual Board and committee self-assessments
ü Board access to officers and employees
ü 2020 Board attendance greater than 97%
ü Overboarding policy ensures Board members can devote sufficient time to the Corporation
BOARDS SHOULD BE RESPONSIVE TO STOCKHOLDERS AND BE PROACTIVE IN ORDER TO UNDERSTAND THEIR PERSPECTIVES
ü Proactive, year-round engagement with stockholders, including participation of independent Lead Director
ü Engagement topics included 2020 leadership changes, board and workforce diversity, human capital management, executive compensation, and environmental, social and governance (ESG) matters, including climate change
BOARDS SHOULD HAVE STRONG, INDEPENDENT LEADERSHIP
ü Empowered independent Lead Director
ü Annual review of Board leadership structure
ü Independent chairs of all Board committees
STOCKHOLDERS SHOULD BE ENTITLED TO VOTING RIGHTS IN PROPORTION TO THEIR ECONOMIC INTEREST
ü One class of voting stock
ü “One share, one vote” standard
BOARDS SHOULD DEVELOP MANAGEMENT INCENTIVE STRUCTURES THAT ARE ALIGNED WITH THE LONG-TERM STRATEGY OF THE COMPANY
ü Compensation programs actively reviewed by the Board and include short- and long-term goals tied to the long-range plan and that underpin our long-term strategy
Board Effectiveness
Our Board takes a multi-faceted approach to continually assess Board composition and evaluate effectiveness.
PRACTICES CONTRIBUTING TO BOARD EFFECTIVENESSSKILLS ENHANCED IN THE PAST 5 YEARS:

ü Identification of Diverse Board Candidates
ü Rotation of Board Committee Assignments
ü Annual Performance Assessments
ü Robust Onboarding and Continuing Education
ü Tenure and Overboarding Guidelines
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Enterprise risk management
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Environment, safety and health, and sustainability expertise
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Global organization experience
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Innovation, information technology and cybersecurity
MEANINGFUL REFRESHMENT
The Board has added 6 new directors in the past 5 years.
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Industry and customer experience
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Proxy Statement Summary
Executive Compensation Highlights
2020 CEO Transition and Pay Decisions
On March 12, 2020, the Board elected James D. Taiclet to succeed Marillyn A. Hewson as President and Chief Executive Officer (CEO) of the Corporation, effective June 15, 2020. Following the recommendation of the Management Development and Compensation Committee (Compensation Committee), the Board of Directors approved the 2020 compensation arrangements for Mr. Taiclet as President and CEO, which was comprised of an annual base salary of $1,700,000, an annual incentive target of 175% of salary for 2020 under the Lockheed Martin Corporation Amended and Restated 2006 Management Incentive Compensation Plan (MICP), to be prorated based on time in the role; and an annual long-term incentive (LTI) award opportunity for 2020 of $14.0 million, allocated 50% in Performance Stock Units (PSUs), 30% in Restricted Stock Units (RSUs) and 20% in the cash-based Long-Term Incentive Performance award (LTIP). Additionally, the Board approved a replacement award of RSUs to offset forfeited unvested incentive equity awards from his former employer. These arrangements are further detailed on pages 42 and 43.
Mr. Taiclet has served as a member of the Board since 2018, with his tenure beginning prior to his appointment as President and CEO. Upon the commencement of his employment with the Corporation, Mr. Taiclet did not receive any additional compensation for serving as a member of the Board and his unvested equity awards under the Lockheed Martin Corporation Amended and Restated Directors Equity Plan were forfeited.
2020 Pay and Performance
A substantial portion of compensation paid to our named executive officers (NEOs) is performance-based. We use the 50th percentile of our comparator group to set target compensation but allow for payments to exceed or fall below the target level based upon actual performance. This outcome is consistent with our pay-for-performance philosophy to set pay and targets at market levels, but pay incentive compensation to reflect actual performance.
Based on our strong short- and long-term financial and operational performance, as manifested in record sales, segment operating profit, and earnings per share from continuing operations for the year, our 2020 annual and 2018-2020 LTI plans paid out above their respective target levels. The Board did not make any modifications to our compensation programs or positive adjustments in response to COVID-19.
1-, 3- and 5-Year Total Stockholder Returns
2020 Annual Incentive
Component Weightings and Achievements
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2018-2020 Long-Term Incentive
Component Weightings and Achievements
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*    See Non-GAAP terms in Appendix A for an explanation of “Segment Operating Profit,” “Return on Invested Capital (ROIC),” and “Performance Cash” and our forward-looking statements concerning future performance or goals for future performance.
www.lockheedmartin.com2021 Proxy Statement
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Proxy Statement Summary
Enterprise Risk and Sustainability
Sustainability Governance Structure
We take an integrated approach to managing corporate culture, ethics and business integrity, governance, and sustainability issues through a risk management lens. Oversight of ESG matters follows our formal sustainability governance structure. This structure includes our Nominating and Corporate Governance Committee (Governance Committee), the executive leadership team and a working group of key functional leaders who partner to implement sustainability policies and processes across our operations. The Governance Committee is chartered by the Board of Directors to lead its oversight responsibilities relating to the Corporation’s ethical conduct, human rights, environmental stewardship, corporate culture, philanthropy, workforce diversity, health and safety.
Relevant Issues and Strategic Priorities
Through 2020, we have focused on five core sustainability issues and objectives, which are set forth below. These five core issues include ESG topics that represent stakeholder priorities and drivers of long-term value creation. The independent directors who serve on the Governance Committee review performance against the Sustainability Management Plan, a set of targets that correspond to objectives associated with our five core sustainability issues. The Governance Committee also approves the Corporation’s Code of Conduct (www.lockheedmartin.com/en-us/who-we-are/ethics/code-of-ethics.html) and annual Sustainability Report (sustainability.lockheedmartin.com).
 Sustainability Mission
Our sustainability mission is to foster innovation, integrity and security to protect the environment, strengthen communities and propel responsible growth.
 
Our Sustainability Governance Structure
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In 2019-2020, we underwent a core issues assessment and surveyed our stakeholders to inform our next generation of sustainability priorities. This updated core issue model, previewed on page 34, focuses our efforts in the areas that provide the greatest value to our stakeholders and our business. Our 2020 Sustainability Report will include the revised goals and key performance indicators (KPIs) that reflect the stakeholder feedback we have received, internal and external trends, and the continued evolution of our business to create value well into the future.
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Proposal
1
Election of Directors
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•    Diverse slate of directors with broad leadership and customer experience.
•    Ten of our eleven director-nominees are independent.
•    Average director tenure is six years with six new directors in five years.
The Board unanimously recommends a vote FOR each of the director-nominees.
Board Composition, Qualifications and Diversity
We have no agreements obligating the Corporation to nominate a particular candidate as a director, and none of our directors represents a special interest or a particular stockholder or group of stockholders.
At Lockheed Martin, we recognize diversity and inclusion as a business imperative and strategic asset to our investors. We believe that our business accomplishments are a result of the efforts of our employees around the world, and that a diverse employee population will result in a better understanding of our customers’ needs. Our success with a diverse workforce also informs our views about the value of a board of directors that has persons of diverse skills, experiences and backgrounds. To this end, the Board seeks to identify candidates with areas of knowledge or experience that will expand or complement the Board’s existing expertise in overseeing a technologically advanced global security and aerospace company. While the Corporation does not have a formal policy on Board diversity, our Governance Guidelines place a great emphasis on diversity, and our Governance Committee actively considers diversity in recruitment and nominations of director candidates. The current composition of our Board reflects those efforts and the importance of diversity to our Board. Diversity in skills and backgrounds ensures that the widest range of options and viewpoints are expressed in the boardroom.
Board Attendance
In 2020, the Board met a total of 11 times. All directors on the Board during 2020 attended more than 75 percent of the total Board and committee meetings to which they were assigned and overall attendance was greater than 97 percent. Board members are encouraged to attend the annual meeting of stockholders and all incumbent directors attended the 2020 virtual annual meeting.
www.lockheedmartin.com2021 Proxy Statement
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Proposal 1: Election of Directors
Summary of Director-Nominees’ Core Competencies
We consider current Board skills, background, experience, tenure and anticipated retirements to identify gaps that may need to be filled through the Board refreshment process. The following chart summarizes the core competencies that the Board considers valuable to effective governance and successful oversight of our corporate strategy, and illustrates how the current Board members individually and collectively represent these key competencies. The lack of an indicator for a particular item does not mean that the director does not possess that qualification, skill or experience, rather, the indicator represents that the item is a core competency that the director brings to the Board.
SKILLS AND EXPERIENCE
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CEO LEADERSHIP EXPERIENCE
CEO public company leadership that contributes to the understanding and oversight of large complex organizations
üüüüüüü
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ENVIRONMENTAL, SAFETY & SUSTAINABILITY
Strengthens the Board's oversight and assures that strategic business imperatives and long-term value creation are achieved in accordance with our environmental, safety and sustainability initiatives
üüüüü
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HUMAN CAPITAL MANAGEMENT
Contributes to our ability to attract, motivate and retain a highly qualified workforce, including executives
üüüüüüüüüüü
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FINANCIAL EXPERT
Meets the Securities and Exchange Commission's (SEC) criteria as an independent “audit committee financial expert”
üüüüüü
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MANUFACTURING
Contributes to the understanding of the challenges of complex manufacturing
üüüüüüüü
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SENIOR GOVERNMENT / MILITARY EXPERIENCE
Contributes to an understanding of our customers and the ability to understand policy issues
üüüüüü
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GLOBAL EXPERIENCE
Contributes to the understanding of operations and business strategy abroad
üüüüüüüüüüü
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ENGINEERING, TECHNOLOGY & INNOVATION
Contributes to the understanding of key technology imperatives
üüüüü
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RISK MANAGEMENT
Contributes to the identification, assessment and mitigation of risks facing the Corporation
üüüüüüüüüüü
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CYBERSECURITY / INFORMATION TECHNOLOGY
Contributes to the understanding and oversight of cybersecurity threats and digital transformation
üüüü
OTHER BOARD DEMOGRAPHICS
Caucasian/Whiteüüüüüüüüüü
African American/Blackü
Veterans of the U.S. Armed Forcesüüüüü
Gender (Male/Female)MMMMMMFFMFM
Age7265716573626761636460
Tenure (rounded years)71361161153313
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Proposal 1: Election of Directors

Director-Nominees
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Biography
Vice Chairman of The Carlyle Group from March 2014 to December 2015. Mr. Akerson was Chairman of the Board of Directors and Chief Executive Officer of General Motors Company from January 2011 until his retirement in January 2014. Prior to joining General Motors, he was a Managing Director of The Carlyle Group, serving as the Head of Global Buyout from July 2009 to August 2010 and as Co-Head of U.S. Buyout from June 2003 to June 2009. Mr. Akerson serves as Chairman of the U.S. Naval Academy Foundation. He previously served on the board of directors of KLDiscovery Inc. from December 2019 until January 2020 and CommScope Holding Company, Inc. from April 2019 until December 2020.
Daniel F. Akerson
Age 72
Director since 2014
Independent Lead Director
Other Current Boards
None
Skills, Qualifications and Core Competencies
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•    Core leadership skills and experience with the demands and challenges of the global marketplace
•    Extensive operating, marketing and senior management experience in a succession of major companies in challenging, highly competitive industries
•    Enterprise risk management, financial, investment and mergers and acquisitions expertise
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Biography
President and Chief Executive Officer of United States Steel Corporation (U.S. Steel) since May 2017. Mr. Burritt also was named to U.S. Steel's board of directors at that time. Mr. Burritt previously served as President and Chief Operating Officer of U.S. Steel from February 2017 to May 2017; Chief Financial Officer from September 2013 to May 2017; and Executive Vice President from September 2013 to February 2017. Prior to joining U.S. Steel, Mr. Burritt served as Chief Financial Officer of Caterpillar Inc. until his retirement in 2010, after more than 32 years with the company.
David B. Burritt
Age 65
Director since 2008
Independent Director
Other Current Boards
U.S. Steel
Skills, Qualifications and Core Competencies
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•    Expertise in public company accounting, risk management, disclosure, financial system management, manufacturing and commercial operations and business transformation from roles as CEO and CFO at U.S. Steel and CFO and Controller at Caterpillar Inc.
•    Over 40 years’ experience with the demands and challenges of the global marketplace from his positions at U.S. Steel and Caterpillar Inc.
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Biography
Retired U.S. Air Force General, Mr. Carlson has been chairman of Utah State University's Space Dynamics Laboratory Guidance Council since June 2013 and chairman of its board of directors since 2018. Previously, Mr. Carlson served as the 17th Director of the National Reconnaissance Office from 2009 until 2012. He retired from the U.S. Air Force in 2009 after more than 37 years of service, including service as Commander, Air Force Materiel Command at Wright-Patterson AFB, Ohio, Commander, Eighth Air Force at Barksdale AFB, Louisiana; and Director for Force Structure, Resources and Assessment (J-8) for the Joint Staff.
Bruce A. Carlson
Age 71
Director since 2015
Independent Director
Other Current Boards
Benchmark Electronics Inc.
Skills, Qualifications and Core Competencies
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•    Industry-specific expertise and knowledge of our core customer, including aircraft and satellite development and acquisition experience from his service in senior leadership positions with the military
•    Experience with the demands and challenges associated with managing large organizations from his service as a Commander and Joint Staff Director of the Joint Chiefs and the National Reconnaissance Office
•    Skilled in executive management, logistics and military procurement
www.lockheedmartin.com2021 Proxy Statement
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Proposal 1: Election of Directors
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Biography
Retired U.S. Marine Corps General, Mr. Dunford served as the 19th Chairman of the Joint Chiefs of Staff from 2015 until his retirement in September 2019. His previous assignments include serving as the 36th Commandant of the Marine Corps and the Commander of all U.S. and NATO Forces in Afghanistan. He is a Senior Fellow at the Belfer Center, Harvard University, and Chairman of the Board of the Semper Fi and America’s Fund.
Joseph F. Dunford, Jr.
Age 65
Director since 2020
Independent Director
Other Current Boards
None
Skills, Qualifications and Core Competencies
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•    Industry-specific expertise and knowledge of our core customer from his service in senior leadership positions with the military
•    Experience with the demands and challenges associated with managing large organizations from his service as a Commander and Chairman of the Joint Chiefs of Staff
•    Skilled in executive management, logistics, military procurement and cybersecurity threats
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Biography
Admiral Ellis has served as an Annenberg Distinguished Fellow at the Hoover Institution at Stanford University since 2014. Previously, he served as President and Chief Executive Officer of the Institute of Nuclear Power Operations from May 2005 until his retirement in May 2012. Mr. Ellis retired from active duty in July 2004 after serving as Admiral and Commander, United States Strategic Command, Offutt Air Force Base, Nebraska. He formerly served as a director of Level 3 Communications, Inc. from March 2005 to November 2017.
James O. Ellis, Jr.
Age 73
Director since 2004
Independent Director
Other Current Boards
Dominion Energy, Inc.
Skills, Qualifications and Core Competencies
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•    Industry-specific expertise and knowledge of our core customers from his service in senior leadership positions with the military and the private sector
•    Expertise in aeronautical and aerospace engineering, information technology and emerging energy issues
•    Skilled in enterprise risk management
•    Over 40 years’ experience in managing and leading large and complex technology-focused organizations, in large part as a result of serving for 35 years as an active duty member of the United States Navy
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Biography
Executive Chairman of Kimberly-Clark Corporation from January 2019 through December 2019. Having served 36 years at Kimberly-Clark Corporation, Mr. Falk was Chairman of the Board and Chief Executive Officer from 2003 until December 2018; Chief Executive Officer from 2002 and President and Chief Operating Officer from 1999 to 2002.
Thomas J. Falk
Age 62
Director since 2010
Independent Director
Other Current Boards
None
Skills, Qualifications and Core Competencies
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•    Experience with the demands and challenges associated with managing global organizations from his experience as Chairman and Chief Executive Officer of Kimberly-Clark Corporation
•    Knowledge of financial system management, public company accounting, disclosure requirements and financial markets
•    Manufacturing, human capital management, compensation, governance and public company board experience
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Proposal 1: Election of Directors

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Biography
Executive Chairman of the Board of Ingredion Incorporated from January 2018 through July 2018. Previously, Ms. Gordon was Chairman of the Board, President and Chief Executive Officer of Ingredion Incorporated from May 2009 through December 2017. Ingredion Incorporated is a publicly-traded corporation manufacturing food ingredients globally.
Ilene S. Gordon
Age 67
Director since 2016
Independent Director
Other Current Boards
International Paper Company; International Flavors & Fragrances, Inc.
Skills, Qualifications and Core Competencies
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•    Experience with the demands and challenges associated with managing global organizations from her experience as Chairman, President and Chief Executive Officer of Ingredion Incorporated
•    Knowledge of financial system management, public company accounting, disclosure requirements and financial markets
•    Marketing, human capital management, compensation, governance and public company board experience
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Biography
President and Chief Executive Officer of Occidental Petroleum Corporation (Occidental), an international oil and gas exploration and production company since April 2016. Having served more than 30 years at Occidental, Ms. Hollub served as President and Chief Operating Officer from 2015 to 2016; Senior Executive Vice President, Occidental and President, Oxy Oil and Gas - Americas from 2014 to 2015, and Executive Vice President, Occidental and Executive Vice President, U.S. Operations and Oxy Oil and Gas from 2013 to 2014.
Vicki A. Hollub
Age 61
Director since 2018
Independent Director
Other Current Boards
Occidental
Skills, Qualifications and Core Competencies
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•    Broad insight and experience with the demands and challenges associated with managing global organizations from her experience as President and Chief Executive Officer of Occidental and more than three decades in executive and operational roles
•    Expertise in the Middle East region and Latin America
•    Skilled in enterprise risk management, environmental, safety and health, and sustainability
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Biography
Partner at the international law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP since January 2017. Previously, Mr. Johnson served as U.S. Secretary of Homeland Security from December 2013 to January 2017; and as General Counsel of the U.S. Department of Defense and as General Counsel of the U.S. Department of the Air Force. Mr. Johnson is presently a director of the Council on Foreign Relations, and formerly served as a director of PG&E Corporation from May 2017 to March 2018.
Jeh C. Johnson
Age 63
Director since 2018
Independent Director
Other Current Boards
U.S. Steel
Skills, Qualifications and Core Competencies
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•    Expertise in national security, leadership development and organizational preparedness from his service as U.S. Secretary of Homeland Security
•    Industry-specific expertise and insight into our core customers, including requirements for acquisition of products and services, from prior senior leadership positions with the military
•    Experience with large organization management and assessing human resources, equipment, cybersecurity, and financial requirements, as well as reputational risks
www.lockheedmartin.com2021 Proxy Statement
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Proposal 1: Election of Directors
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Biography
Retired in December 2018 as Executive Chairman of Sempra Energy. She served as Chairman, President and Chief Executive Officer of Sempra Energy from March 2017 to May 2018, Chairman and Chief Executive Officer of Sempra Energy from December 2012 to March 2017 and Chief Executive Officer of Sempra Energy from June 2011 to December 2012. Previously, Ms. Reed-Klages served as an Executive Vice President of Sempra Energy and as President and Chief Executive Officer of SDG&E and SoCalGas, Sempra Energy’s regulated California utilities. She was also previously President, Chief Operating Officer and CFO of SDG&E and SoCalGas. She previously served on the boards of directors of Halliburton Company from January 2001 to September 2018 and Oncor Electric Delivery Company LLC during 2018.
Debra L. Reed-Klages
Age 64
Director since 2019
Independent Director
Other Current Boards
Chevron Corporation
Caterpillar Inc.
Skills, Qualifications and Core Competencies
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•    Experience with the demands and challenges associated with managing global organizations from her experience as Chairman, President and Chief Executive Officer of Sempra Energy
•    Skilled in enterprise risk management, environmental, safety and health, and sustainability
•    Knowledge of financial system management, compensation, governance and public company board experience
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Biography
Chairman since March 2021 and President and Chief Executive Officer of Lockheed Martin since June 2020. Previously, Mr. Taiclet served as Chairman, President and Chief Executive Officer of American Tower Corporation from February 2004 until March 2020 and Executive Chairman from March 2020 to May 2020. Previously, Mr. Taiclet served as President of Honeywell Aerospace Services, a unit of Honeywell International and Vice President, Engine Services at Pratt & Whitney, a unit of United Technologies Corporation.
James D. Taiclet
Age 60
Director since 2018
Chairman, President and CEO
Other Current Boards
None
Skills, Qualifications and Core Competencies
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•    Effective leadership and executive experience as Chairman, President and CEO of American Tower Corporation
•    Expertise in management at large-scale, multinational corporations, including regulatory compliance, corporate governance, capital markets and financing, strategic planning and investor relations
•    Industry-specific expertise from service as a U.S. Air Force officer and pilot and as an executive at Honeywell Aerospace Services and Pratt & Whitney
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Proposal 1: Election of Directors

Board Effectiveness, Evaluations and Refreshment
Board composition is a critical area of focus for the Board. Having the right mix of people who bring diverse perspectives, business and professional experiences and competencies as well as professional integrity, sound judgment and collegiality, provides a foundation for robust dialogue, informed advice and collaboration in the boardroom. The Board strives to ensure an environment that encourages diverse critical thinking and values innovative, strategic discussions to achieve a higher level of success for the Corporation and its stockholders. The Governance Committee screens and recommends candidates for nomination by the full Board. The Governance Committee uses a variety of methods to help identify potential board candidates with the desired skills and background needed for the Corporation’s business, including informal networks, internal resources and other channels.
The Governance Committee reviews both the short- and long-term strategies of the Corporation to determine what current and future skills and experience are required of the Board in exercising its oversight function and in the context of our strategic priorities. Our internal executive search team compiles a list of prospective director candidates reflecting the Board's criteria, qualifications and experience, keeping in mind its commitment to diversity. Candidates are identified from this source pool by the Chairman and the Governance Committee and may be interviewed by the Chairman and independent Lead Director, who also chairs the Governance Committee. While there is no formal Board policy with regard to the consideration of diversity in identifying director nominees, the source pool intentionally includes candidates with diverse backgrounds to further enhance the Board's diversity. Our Board believes that a balance of director diversity and tenure is a strategic asset to our investors. The range of our Board's tenure encompasses directors who have historic institutional knowledge of Lockheed Martin and the competitive environment, complemented by newer directors with varied backgrounds and skills and fresh perspectives.
Board Refreshment Elements
Governance Committee Review of Board Candidates
The Board seeks a diverse group of candidates who, at a minimum, possess the background, skills, expertise, competencies and time to make a significant contribution to the Board. The Governance Guidelines (available at www.lockheedmartin.com/corporate-governance) list criteria against which candidates may be judged. In addition, the Governance Committee considers, among other things:
•    input from the Board’s self-assessment process to prioritize areas of expertise that were identified;
•    investor feedback and perceptions;
•    the candidates’ skills and competencies to ensure they are aligned to the Corporation’s future strategic challenges and
opportunities;
•    the needs of the Board in light of Board retirements; and
•    a balance between public company and government customer-related experience.
During the process of identifying and selecting director nominees, the Governance Committee screens and recommends candidates for nomination by the full Board. For incumbent directors, the Governance Committee also considers attendance, past performance on the Board and contributions to the Board and their respective committees. The Bylaws currently provide that the size of the Board may range from 10 to 14 members.
Director candidates also may be identified by stockholders and will be evaluated under the same criteria applied to other director nominees and considered by the Governance Committee. Information on the process and requirements for stockholder nominees may be found in Sections 1.10 and 1.11 of our Bylaws on the Corporation’s website at www.lockheedmartin.com/corporate-governance.
Board Committee Assignments
In February of each year, the Governance Committee reviews the membership, tenure, leadership and commitments of each of the committees and considers possible changes given the qualifications and skill sets of members on the Board or a desire for committee rotation or refreshment. The Governance Committee also takes into consideration the membership requirements and responsibilities set forth in each of the respective committee charters and the Governance Guidelines as well as any upcoming vacancies on the Board due to our mandatory retirement age. The Governance Committee recommends to the Board any proposed changes to committee assignments and leadership to be made effective at the next annual meeting of stockholders. The Governance Committee also reviews the operation of the Board generally, and based on its recommendation and based on Board feedback, effective September 25, 2020, the Executive Committee, which was not being used, was eliminated.
www.lockheedmartin.com2021 Proxy Statement
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Proposal 1: Election of Directors
Annual Performance Assessment
The Board conducts a self-assessment of its performance and effectiveness as well as that of its committees on an annual basis. The self-assessment helps the Governance Committee to track progress in certain areas targeted for improvement from year-to-year and to identify ways to enhance the Board’s and its committees’ effectiveness. The evaluation process includes the following steps:
1Annual Written Questionnaire
Open-ended questions to solicit candid feedback. Topics covered include:
Board meeting content and virtual format
Board culture
Board leadership structure and CEO transition
Board composition, selection and diversity
Potential skills gaps for identifying board candidates
Committee effectiveness
Evaluation of risks, including COVID-19 response
Peer assessment to elicit feedback on the performance of individual directors
2One-on-One Discussions with Independent Lead Director
Every few years, including in 2019 and 2020, the independent Lead Director conducts separate, one-on-one discussions with each director to discuss any additional feedback or perspectives.
3Committee/Board Private Sessions
The Governance Committee and each other committee and the full board review the results of the evaluations in private session. The board discussion is led by the independent Lead Director.
4Feedback Incorporated
Continued streamlining Board committee structure by eliminating the Executive Committee
Added additional site visit of classified programs
Added additional directors with cybersecurity, CEO and senior military experience

Robust Onboarding and Continuing Education
New directors are provided a comprehensive orientation about the Corporation, including our business operations, strategy and governance. New directors have one-on-one sessions with the CEO, other directors and other members of senior management. Members of our senior management regularly review with the Board the operating plan of each of our business segments and the Corporation as a whole. Although disrupted beginning in March 2020 by COVID-19, the Board also conducts periodic site visits to our facilities as part of its regularly scheduled Board meetings and directors are encouraged to visit sites on an ad hoc basis and meet one-on-one with members of senior management and other employees. Directors are encouraged to attend outside director continuing education programs sponsored by educational and other institutions to assist them in staying abreast of developments in corporate governance and critical issues relating to the operation of public company boards.
Our Director Tenure Guidelines
Mandatory Retirement AgeA director must retire at the annual meeting following his or her 75th birthday.
Term LimitsWe do not have term limits for directors as we believe implementing term limitations may prevent the Board from taking advantage of insight that longer tenure brings.
Employment ChangeDirectors should expect to resign upon any significant change in principal employment or responsibilities.
Failed ElectionDirectors must offer to resign as a result of a failed stockholder vote under majority voting policy.
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Corporate Governance
Lockheed Martin believes good governance is integral to achieving long-term stockholder value. The Board’s primary role is to oversee management and represent the interests of stockholders. Directors are expected to attend Board meetings, the meetings of the committees on which they serve and the annual meeting of stockholders. The Board and its committees regularly schedule and hold executive sessions without any members of management present. Between meetings, directors interact with the Chairman, President and CEO, the independent Lead Director and other members of management and are available to provide advice and counsel to management.
Independent Lead Director
The Board believes that having a strong, independent Lead Director role is important to sound corporate governance. In accordance with our Bylaws and Governance Guidelines, the independent members of the Board annually elect one of the independent directors to serve as the Lead Director by the affirmative vote of a majority of the directors who have been determined to be "independent" for purposes of the New York Stock Exchange (NYSE) listing standards. Daniel F. Akerson has served as the independent Lead Director since April 2019. The Board has structured the role of the independent Lead Director to further enhance the functioning of the Board and with sufficient authority to serve as a counterbalance to management. The responsibilities of the role, as specified in the Bylaws include to:
    preside as chair at Board meetings while in executive sessions of the non-management members of the Board or executive sessions of the independent directors or if the Chairman is not present;
    determine the frequency and timing of executive sessions of non-management directors and report to the Chairman and CEO on all relevant matters arising from those sessions, and invite the Chairman and CEO to join the executive session for further discussion as appropriate;
    consult with the Chairman and committee chairs regarding the topics for and schedules of the meetings of the Board and committees and approve the topics for and schedules of Board meetings;
    review and approve all Board and committee agendas (in addition to each committee chair) and provide input to management on the scope and quality of information sent to the Board;
    assist with recruitment of director candidates and, along with the Chairman, extend invitations to potential directors to join the Board;
    act as liaison between the Board and management and among the directors and the committees of the Board;
    serve as an ex-officio member of each committee if not otherwise a member of the committee;
    serve as the point of contact for stockholders and others to communicate with the Board;
    recommend to the Board and committees the retention of advisors and consultants who report directly to the Board;
    call a special meeting of the Board or of the independent directors at any time, at any place and for any purpose; and
    perform all other duties as may be assigned by the Board from time to time.



www.lockheedmartin.com2021 Proxy Statement
19


Corporate Governance
Message from the Independent Lead Director
I have served as Lead Director since April 2019 and in that role also chair the independent Nominating and Corporate Governance Committee. Since 2019 we have added two new independent directors to the Board. In 2019, Debra L. Reed-Klages became a director, bringing valuable chief executive officer experience as well as expertise in risk management and environmental sustainability. In early 2020, Retired Chairman of the Joint Chiefs of Staff General Joseph F. Dunford, Jr. joined our Board bringing additional valuable insight of our core customer, including customer experience with our programs and technologies. They have both already been tremendous assets to the Board. Ensuring that we continue to benefit from diverse perspectives in the boardroom continues to be an important element of our corporate governance framework.
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Daniel F. Akerson, Independent Lead Director
Leadership Transition
One of the Board's most important responsibilities is succession planning and choosing the right CEO to lead the Corporation. A great deal of Board focus and attention went into the selection of James D. Taiclet as the Chairman, President and CEO to lead the Corporation following Marillyn Hewson's decision to retire. I have worked closely with Jim and Marillyn during the transition and we have received positive feedback from employees, investors and other key stakeholders on the transition.
Board Response to COVID-19
During 2020, the Board has been actively engaged in overseeing management's response to COVID-19. The Board receives updates at least monthly and it has been a recurring discussion topic at Board meetings. The Board approved an increase to the Corporation's 2020 charitable contributions budget in support of COVID-19 efforts. The Audit Committee has been closely monitoring potential risks related to COVID-19, including ensuring management had the resources needed for a successful year-end audit, and the Nominating and Corporate Governance Committee has continued to review the effect of COVID-19 on employee safety and health.
Continued Independent Oversight and Engagement
Each year, our Bylaws and Corporate Governance Guidelines mandate that the independent members of the Board elect an independent director to serve as the Lead Director by the affirmative vote of a majority of the independent directors, meaning those who have been determined to be “independent” for purposes of the New York Stock Exchange listing standards. I am honored to have been selected again to serve in this role for 2021. I look forward to continuing to work closely with our Chairman, President and CEO and contributing to our Board’s strong oversight as Lead Director and to engagement with stockholders. I welcome your comments. Stockholders and other interested parties may communicate with me by email at Lead.Director@lmco.com.
Board Leadership Structure
The Board believes that it must be independent and must provide strong and effective oversight. The Board also believes that the independent Board members should have the flexibility to respond to changing circumstances and choose the board leadership structure that best fits the then-current situation. As a result, the roles of the Chairman and the CEO have been split from time to time to facilitate leadership transitions, while at other times the roles have been combined.
In consultation with the Board, on March 12, 2020, Ms. Hewson announced her plans to step down as President and CEO of the Corporation, subject to approval of the Board. Ms. Hewson expressed her willingness to serve as Executive Chairman of the Board to assist in the transition. The Board reviewed its leadership structure in connection with Ms. Hewson's announcement to step down as President and CEO. The Board determined that the transition to the new President and CEO would be best accomplished by having Ms. Hewson serve as Executive Chairman to assist in the transition effective June 15, 2020. This resulted in a separation of the roles of Chairman and CEO during 2020. Ms. Hewson served in the Executive Chairman role until March 1, 2021, when she retired from the Board.
Effective March 1, 2021, the independent directors elected President and CEO James D. Taiclet as Chairman, President and CEO. As it does annually, the Board of Directors reviewed the Corporation's leadership structure, including benchmarking data of the leadership structure of other large companies and industry peers and stockholder proposal trends for separating the roles. At present, the Board believes that the combination of the roles, along with the robust authority given to the experienced independent Lead Director, Dan Akerson, effectively maintains independent oversight of management. The Board consists entirely of independent directors, other than Mr. Taiclet, and exercises a strong, independent oversight function through frequent executive sessions, independent Board committees and having a strong independent Lead Director with clearly delineated and comprehensive duties. The Board believes there is value in presenting a single face to our customers through the combined Chairman and CEO role and that this structure and having the Board and management operate under the unified leadership of the highly experienced Mr. Taiclet best positions the Corporation to successfully implement its strategy.
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Corporate Governance
The independent directors will continue to review the leadership structure on an ongoing basis, at least annually, to provide effective risk management and to ensure that it continues to meet the needs of the Corporation and supports the generation of stockholder value over the long-term. Information regarding the CEO transition is provided under the caption "Talent Management and Succession Planning" on page 24.
Executive Sessions
Generally, each meeting agenda of the Board and each committee includes an executive session of the non-management directors. The Governance Guidelines require that at least three Board meetings per year will include an executive session of the non-management directors. In each case, these sessions include a discussion of the performance of the CEO. The independent Lead Director presides during the executive sessions of the Board, and will report the results to the Chairman and CEO on all relevant matters, or invite the Chairman and CEO to join the executive session for further discussion, as appropriate. If the group of non-management directors includes directors who are not independent directors, at least one executive session including only independent directors will be scheduled each year. The respective chairman of each committee presides during the committee executive sessions.
Committees of the Board of Directors
The Board has four standing committees: Audit, Classified Business and Security (CBS Committee), Management Development and Compensation (Compensation Committee) and Nominating and Corporate Governance (Governance Committee). Based on Board feedback and the recommendation of the Governance Committee, effective September 25, 2020, the Executive Committee, which was not being used, was eliminated. The Board considered survey data which showed that four standing committees is most prevalent among our peer companies. Charters for each committee are available on the Corporation’s website at www.lockheedmartin.com/corporate-governance. In addition to these committees, the Board may establish other standing or special committees as may be necessary to carry out its responsibilities. Descriptions of each of the standing Committees are set forth below.
Audit Committee
Members:
Thomas J. Falk, Chair
David B. Burritt
James O. Ellis, Jr.
Ilene S. Gordon
Debra L. Reed-Klages
All Audit Committee members are independent within the meaning of the NYSE listing standards, applicable SEC regulations and our Governance Guidelines and each has accounting and related financial management expertise sufficient to be considered financially literate within the meaning of the NYSE listing standards. The Board has determined that Messrs. Burritt and Falk and Mss. Gordon and Reed-Klages are qualified audit committee financial experts within the meaning of applicable SEC regulations.
2020 Focus Areas
Meetings in 2020: 8
Monitoring and Assessing Potential Accounting and Financial Reporting
Impacts from COVID-19
Enterprise Risk Management and 2020 Audit Plan
Oversight of Capital Allocation
Roles and Responsibilities of the Committee
The Audit Committee assists the Board in fulfilling its oversight responsibilities relating to the financial condition of the Corporation, the integrity of the financial statements and compliance with legal and regulatory requirements. The Audit Committee has oversight of the Corporation’s internal audit plan and reviews risks and opportunities to management's long-term strategy as identified by the Corporation's enterprise risk management processes. It is directly responsible for the appointment, compensation, retention, oversight and termination of the Corporation's independent auditors, Ernst & Young LLP (Ernst & Young). The Audit Committee also reviews the allocation of resources, the Corporation’s financial condition and capital structure and policies regarding derivatives. The Audit Committee meets privately with management, the Senior Vice President, Ethics and Enterprise Assurance, and Ernst & Young. The functions of the Audit Committee are further described in the “Audit Committee Report” on page 38.

www.lockheedmartin.com2021 Proxy Statement
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Corporate Governance
Classified Business and Security Committee
Members1:
James O. Ellis, Jr., Chair
Bruce A. Carlson
Joseph F. Dunford, Jr.
Jeh C. Johnson
All members of the CBS Committee are independent within the meaning of the NYSE listing standards and our Governance Guidelines and hold high-level security clearances.
2020 Focus Areas
Meetings in 2020: 3
Supply Chain Cybersecurity Risk Mitigation and Technical Solutions
Oversight of Risks Related to Classified Programs
Security of Personnel, Facilities and Data (including classified cybersecurity matters)
Roles and Responsibilities of the Committee
The CBS Committee assists the Board in fulfilling its oversight responsibilities relating to the Corporation’s classified business activities and the security of personnel, facilities and data (including classified cybersecurity matters). The CBS Committee consists of directors who possess the appropriate security clearance credentials, at least one of whom must be a member of the Audit Committee, none of whom are officers or employees of the Corporation and all of whom are free from any relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment as a member of the CBS Committee.
1Mr. Taiclet served on the Committee until March 2020; and Mr. Dunford joined in February 2020.
Management Development and Compensation Committee
Members1:
Ilene S. Gordon, Chair
Thomas J. Falk
Vicki A. Hollub
Debra L. Reed-Klages

All members of the Compensation Committee are independent within the meaning of the NYSE listing standards, applicable SEC regulations and our Governance Guidelines.
2020 Focus Areas
Meetings in 2020: 3
CEO Transition and Other Leadership Changes
Talent Management and Succession Planning
Human Capital Governance and Workforce Diversity
Roles and Responsibilities of the Committee
The Compensation Committee reviews and approves the corporate goals and objectives relevant to the compensation of the CEO and other elected officers, evaluates the performance of the CEO and, either as a committee or together with the other independent members of the Board, determines and approves the compensation philosophy and levels for the CEO and other executive officers. The Compensation Committee does not delegate its responsibilities with respect to compensation that is specific to the executive officers.  For other employees and for broad-based compensation plans, the Compensation Committee may delegate authority to the CEO or the Senior Vice President, Human Resources, subject to certain annual limits. 
Additional information regarding the role of the Compensation Committee and our compensation practices and procedures is provided under the captions “Compensation Committee Report” on page 39, “Compensation Discussion and Analysis (CD&A)” beginning on page 40 and “Other Compensation Matters” on page 55.
1Mr. Taiclet served on the Committee until March 2020.
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Corporate Governance
Nominating and Corporate Governance Committee
Members1:
Daniel F. Akerson, Chair
David B. Burritt
Bruce A. Carlson
Joseph F. Dunford, Jr.
Vicki A. Hollub
Jeh C. Johnson
All members of the Governance Committee are independent within the meaning of the NYSE listing standards, applicable SEC regulations and our Governance Guidelines.
2020 Focus Areas
Meetings in 2020: 4
Oversight of Environmental, Social and Governance Matters
COVID-19 Efforts Related to Crisis Management, Business Continuity and Employee Safety and Health
Revisions to Code of Conduct
Roles and Responsibilities of the Committee
The Governance Committee develops and implements policies and practices relating to corporate governance, including our Governance Guidelines. The Governance Committee assists the Board by selecting candidates to be nominated to the Board, making recommendations concerning the composition of Board committees and overseeing the annual evaluation of the Board and its committees.
The Governance Committee reviews and recommends to the Board the compensation of directors. Our executive officers do not play a role in determining director pay other than to gather publicly available information.
The Governance Committee assists the Board in fulfilling its oversight efforts in corporate responsibility, corporate culture, human rights, environmental stewardship, political contributions, ethical business practices, community outreach, philanthropy, diversity, inclusion and equal opportunity, sustainability, and employee safety and health. The Governance Committee monitors compliance and recommends changes to our Code of Conduct.
1Mr. Dunford joined in February 2020.
Board Role and Responsibilities
Board Role in Strategic Planning
The Board is involved in strategic planning and review throughout the year. Every September the Board meets in a half-day session dedicated to a discussion of the Corporation’s strategy, one-year plan and three-year long-range plan. The President and CEO regularly reviews developments against the Corporation’s strategic framework at Board meetings and provides updates between regularly scheduled sessions as necessary. This schedule corresponds to management’s annual schedule for developing the long-range plan and provides the Board with the opportunity to provide input while the long-range plan is being developed and to monitor progress on the plan. In addition:
the Board (or the appropriate committee) reviews the progress and challenges to the Corporation’s strategy and approves specific initiatives, including acquisitions and divestitures over a certain monetary threshold;
the Board (or the appropriate committee) reviews trends identified as significant risks and topical items of strategic interest such as human capital strategy and cybersecurity on a regular basis;
generally, at least annually, the Board meets at a Corporation facility where directors can tour the operations and engage directly with employees and experience first-hand the Corporation's culture; and
each business segment executive vice president presents an operations review to the Board and each business segment financial officer presents a financial review to the Audit Committee on a rotating basis.
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Corporate Governance
Enterprise Risk Management
Our risk management philosophy is to balance risk and reward within the risk tolerance of management and the Board, taking into account the Corporation's operations and long-term strategy. This is accomplished through risk management practices, our core values and our Code of Conduct, each of which reinforces a risk transparent culture. The Board and its committees receive risk updates throughout the year. Executive management provides updates on risks managed at the Enterprise level. Business segment management provides updates on risks to individual business segment objectives. Additional information regarding the Board's role in enterprise risk management is provided on page 33.
Cybersecurity
Cybersecurity is included in the Corporation’s enterprise risk management process and is overseen by the Board. The Board receives a briefing from senior leadership on cybersecurity and information security twice a year or more frequently as needed (either orally or in writing). The Classified Business and Security Committee also is briefed by senior management on the security of classified cyber data and information and the security of suppliers and the global supply chain within the Corporation’s classified business. Lockheed Martin takes a variety of precautions to protect our systems and data, including that of our customers and third parties, which includes threat detection and cybersecurity mitigation plans. Lockheed Martin provides annual training for our employees on the protection of sensitive information and on how to identify and prevent a successful “phishing” attack. We also have a corporate-wide counterintelligence and insider threat detection program to proactively identify external and internal threats and mitigate these threats in a timely manner. Lockheed Martin maintains an enterprise ISO 27001 certification which undergoes annual surveillance auditing and recertification every three years. We are prepared to obtain an independent, third party Cybersecurity Maturity Model Certification (CMMC), which is a requirement for companies doing business with the U.S. Department of Defense, as soon as the auditing bodies are available.
Talent Management and Succession Planning
Management has established semi-annual talent reviews. During these reviews, the executive leadership team discusses succession plans for key positions and identifies top talent for development in future leadership roles. Our Board is actively engaged in management succession planning. CEO succession planning discussions are led by the independent Lead Director and the Board members have direct access to and interaction with members of senior management and high potential future leaders as part of this succession planning. This includes informal and one-on-one settings to enable directors to personally assess potential candidates and cultivate future leaders.
CEO Transition. In consultation with the Board, in March 2020, Ms. Hewson announced her plans to step down from the position of President and CEO, subject to the approval of a successor by the Board. After a review of the possible candidates previously discussed by the Board over the past several years and taking into account the recommendation of Ms. Hewson, the Board, under the leadership of the independent Lead Director, elected James D. Taiclet to succeed Ms. Hewson as President and Chief Executive Officer of the Corporation, effective June 15, 2020. The Board also appointed Ms. Hewson to serve as Executive Chairman of the Board, effective June 15, 2020, to ensure a smooth and disciplined transition. Mr. Taiclet had been a Board member since 2018 and was an experienced chief executive, Gulf War veteran and military pilot, and the Board viewed him as the best candidate to lead the Corporation. Effective March 1, 2021, Ms. Hewson stepped down as Executive Chairman and the Board elected Mr. Taiclet Chairman, President and CEO.
COO Appointment. Upon the recommendation of Ms. Hewson and taking into account prior Board reviews of management talent and development opportunities, in March 2020, the Board under the leadership of the independent Lead Director also elected Frank A. St. John, who was serving as Executive Vice President, Rotary and Mission Systems, as Chief Operating Officer (COO) of the Corporation and Stephanie C. Hill, who was serving as Senior Vice President, Enterprise Business Transformation, as Executive Vice President, Rotary and Mission Systems. The Board agreed that these executives had the potential to be strong and successful leaders for the Corporation. The appointments were effective on June 15, 2020.
The Board of Directors maintains a succession plan for the CEO and other key members of management and has a contingency plan if the CEO were to depart unexpectedly.
The Corporation has a corporate policy imposing a mandatory retirement age of 65 for all executive officers other than the CEO. The CEO’s tenure is at the discretion of the Board, which is free to consider all relevant factors.
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Corporate Governance
Board Oversight of People Strategy
Our People Strategy
Human capital is a critical business asset at Lockheed Martin. Due to the specialized nature of our business, our performance depends on identifying, attracting, developing, motivating, and retaining a highly skilled workforce in multiple areas, including: engineering, science, manufacturing, information technology, cybersecurity, business development and strategy and management.
The Board of Directors is actively engaged in the oversight of human capital management and strategy. Our human capital management strategy, which we refer to as our people strategy, is tightly aligned with our business needs and technology strategy. In order to ensure that we achieve our human capital objectives, we regularly conduct an employee engagement survey to gauge employee satisfaction and to understand the effectiveness of our employee and compensation programs. The Board reviews these survey results. The Senior Vice President, Human Resources, updates the Board on the Corporation’s people strategy on an annual basis. Board members also are active partners in the development of our workforce, engaging and spending time with our high-potential leaders at Board meetings and other events.
During 2020, our human capital efforts were focused on accelerating the transformation of our technology for workforce management through investments in upgraded systems and processes, and continuing to increase our agility to meet the quickly changing needs of the business, considering the challenges of the global pandemic and social and political unrest. We use a variety of human capital measures in managing our business, including: workforce demographics; diversity metrics with respect to representation, attrition, hiring, promotions and leadership; and talent management metrics including retention rates of top talent and hiring metrics.
We streamlined the people strategy in 2020 to focus on three key priorities: Maximize Talent; Advance Technology; and Optimize Culture. We have developed a scalable strategy that endures the unprecedented past year of COVID-19 and social unrest. In 2021 and beyond, we will continue to execute on the Lockheed Martin people strategy and its three strategic imperatives to accelerate transformation.

               
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Maximize
Talent
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Advance
Technology
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Optimize
Culture
Acquire and Retain Top Diverse Talent at All Levels
Upskill Technical Talent to Match Strategic Shift To 21st Century Warfare
Increase Executive Successor Pipeline and Leader Readiness
Advance University Partnerships and Outreach
     
Upgrade Systems to Improve HR Process Efficiency
Enhance People Analytics and Data Driven Solutions
Utilize Artificial Intelligence to Transform Hiring Experience
Leverage Technology to Eliminate Repetitive Tasks
     
Strengthen Inclusive Engagement, Diversity and Belonging
LMForward the Workplace (a multi-faceted initiative for long-term work solutions for 2021 and beyond)
Drive a Flexible Employee Experience as a Brand Discriminator
Advance Culture of Collaboration to Drive Business Transformation

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Corporate Governance
Workforce Diversity and Inclusion
At Lockheed Martin, we recognize that corporate diversity, including gender, race and ethnicity, is of importance to our employees, our investors, and our broader stakeholders. Diversity and inclusion is not only a legal and social imperative, but a business imperative that we believe is a key to our future success. We believe that building a workplace where every voice is heard and every idea is welcome through fostering diversity and inclusion, we build more effective teams, encourage innovation and can better attract and retain top talent, all of which make us more competitive.
Annually, the Board meets to review our succession strategy and leadership pipeline for key roles, including the CEO, taking into account the Corporation’s long-term corporate strategy. More broadly, the Board is regularly informed on key talent indicators for the overall workforce, including performance against diversity metrics with respect to representation, hiring, promotions, and leadership. Talent management and employee engagement metrics and goals are included in the strategic and operational performance measures in management's annual incentive program.
We have focused our diversity and inclusion initiatives on employee recruitment, including investments in minority serving institutions and outreach, employee training and development, such as efforts focused on expanding the diverse talent pipeline, and employee engagement, including through participation in our Business Resource Groups. Our Business Resource Groups are voluntary, employee-led groups that foster a diverse and inclusive workplace aligned with our organizational mission, values, goals and business practices. Through these and other focused efforts, we have improved the diversity of our overall U.S. workforce and within leadership positions, specifically in the representation of women, people of color and people with disabilities.
Employee Profile (as of December 31, 2020):
Women*People of Color*Veterans*People with Disabilities*
Overall23%28%22%9%
Executives**22%14%21%9%
*Based on employees who self-identify. Includes only U.S. employees and expatriates except for Women, which also includes local country nationals. Excludes casual workers, interns/co-ops and employees of certain subsidiaries and joint ventures.
**Executive is defined as director-level (one level below vice president) or higher.
In addition to these diversity metrics, we also intend to make our Consolidated EEO-1 Report information available on our website beginning with 2020 data, which we expect to be available later in 2021. Our 2020 achievements include:
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Recruiting Top Talent:
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Fostering an Inclusive Workplace:
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Supporting STEM Education:
Improved the diversity of the workforce, specifically in the representation of women and People of Color, through focused hiring and partnerships with Minority Serving Institutions (MSIs) and external organizations
Ranked #1 Top Supporters of Historically Black College & University (HBCU) Engineering Institutions for 6th consecutive year
Ranked #2 Top 50 Employers in Women Engineer Magazine
Increased employee participation in Corporation-sponsored diversity and inclusion initiatives, including Business Resource Groups, and Leadership Forums
Recognized as a Best Place to Work for LGBT Equality after scoring 100% on the Human Rights Campaign’s Corporate Equality Index for 11th consecutive year
Recognized by Disability:IN
with a score of 100 on the
Disability Equality Index
$1.182 million contributed to MSIs to support student development, research, summer bridge programs, STEM, pre-college programs and curriculum development
Invested $1.391 million in education equality programs, including the National Society of Black Engineers, Advancing Minorities Interests in Engineering, Girls Inc, Black Engineer of the Year Awards, Ron Brown Fund and INROADS
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Corporate Governance
Human Rights
Our Human Rights Policy and Principles:
As outlined in our Good Corporate Citizenship and Respect for Human Rights Policy, at Lockheed Martin, we believe that respect for human rights is an essential element of being a good corporate citizen. Our commitment to respecting human rights underlies Setting the Standard, the Lockheed Martin Code of Ethics and Business Conduct, and our stated values—Do What’s Right, Respect Others, and Perform with Excellence. This commitment applies to all employees, the Board, and others who represent or act for us.
Our Human Rights Policy includes the following principles:
Support human rights by treating employees with respect, promoting fair employment practices, providing fair and competitive wages and prohibiting harassment, bullying, discrimination, use of child or forced labor and trafficking in persons for any purpose.
Uphold the laws applying to our business, wherever we operate.
Seek to minimize the negative consequences of our business activities and decisions on our stakeholders, including by minimizing harm to the environment and conserving natural resources, promoting workplace safety, ensuring accuracy and transparency in our communications and delivering high-quality products and services.
Contribute to economic and social well-being by investing our resources in innovative products and services, supporting charitable, philanthropic, and social causes, participating appropriately in political affairs and public debate to advance and advocate our values (including engaging our customers to balance appropriately the sale and use of our technology against national and international interests) and promoting efforts to stop corrupt practices that interfere with markets, inhibit economic development and limit sustainable futures.
Board Oversight of Human Rights:
The Board, through the Governance Committee, reviews and monitors the Corporation’s policies and procedures regarding corporate responsibility and human rights and our compliance with related laws and regulations. Business Integrity is one of the core issues in our Sustainability Management Plan and the Governance Committee receives regular reports from our Senior Vice President, Ethics and Enterprise Assurance on how we are implementing our Sustainability Management Plan, which includes goals with respect to human rights.
Our Human Rights Due Diligence Approach:
Our human rights due diligence processes are embedded within our operating and decision-making practices and procedures and do not exist as a stand-alone procedure.
We have robust procedures to ensure that new contracts meet our standards and values. Prospective commitments are reviewed to ensure that they fit our strategic direction, will uphold our reputation, and are structured for successful technical and financial performance. Each business area has implemented proposal review and approval procedures that evaluate risks, and which can result in a decision not to bid at all. Proposals that involve the pursuit of an opportunity related to certain types of products or programs that carry increased reputational risks require review of a multi-disciplinary corporate review committee that is chaired by our CFO and COO and includes our Senior Vice President, Ethics and Enterprise Assurance, who reports to the Governance Committee. In 2020, we also formed a Weapons Review Council at our Missiles and Fire Control business area. This Council thoroughly reviews products and activities that may potentially raise human rights issues.
We conduct risk-based anti-corruption due diligence, which may be subject to audits, before entering into relationships with third parties, including consultants. We require international consultants to undergo training on our Code of Conduct and associated business conduct and anti-corruption policies. We will walk away from business rather than risk violating anti-corruption laws and our corporate values.
Our robust trade compliance program is designed to ensure that sales of our products are conducted in accordance with all international trade laws and regulations of the U.S. and each foreign country in which we operate.
We provide oversight of our standards and controls by providing mandatory training to our employees and trusted grievance mechanisms, providing resources and support to our suppliers, and aligning the interests of employees and suppliers within established frameworks. Formal and informal stakeholder engagement is an integral part of our business. We continue to encourage our employees, suppliers and the general public to report potential human rights violations through our anonymous ethics helpline. We also communicate our expectations to suppliers that they implement supply chain due diligence processes related to conflict minerals in their products.
Responsible Sales
All of our sales – domestic, international, commercial and governmental – are subject to our Code of Ethics and Business Conduct and all applicable U.S. and foreign laws and regulations, including those related to anti-corruption, import-export control, taxation, repatriation of earnings, exchange controls and the anti-boycott provisions of the U.S. Export Controls Reform Act of 2018. We have procedures to mitigate corruption risks in all international and domestic dealings.
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Corporate Governance
Stockholder Engagement and Responsiveness
The Board of Directors places great importance on regularly communicating with our stockholders to better understand their viewpoints and inform discussions in the boardroom. The Governance Committee oversees our stockholder engagement efforts on behalf of the Board. We recognize the value of building informed and meaningful relationships with our investors that promote increased transparency and accountability. Our Governance Guidelines outline our stockholder engagement program.
Accountability to our stockholders continues to be an important component of the Corporation’s success. At the 2020 annual meeting, an advisory, non-binding stockholder proposal to adopt the right for stockholders to act by written consent received support of more than 47 percent of the votes cast. While the majority of our stockholders rejected the proposal (for the sixth time in the past 10 years, all by the same stockholder proponent), the Board carefully considered the voting results and continued to seek investor feedback as we have done in prior years and continues to believe stockholders have an effective suite of rights to express their views, effect change between annual meetings and ensure Board accountability (see the Board of Directors Statement in Opposition to Proposal 4 on page 82).
Our integrated investor outreach team, led by our Corporate Secretary's office and representatives from Sustainability and Human Resources, engages proactively with our stockholders and other key stakeholders, maintaining a year-round governance schedule as shown below. Stockholders' views are communicated to the Board throughout the year and are instrumental in the development of our governance, compensation and sustainability policies and inform our business strategy. In particular, the Board recognizes the importance of ESG topics to our stockholder base, and will continue to seek stockholder input on a range of ESG issues and practices in furtherance of enhancing long-term stockholder value.
Below is a summary of the feedback we received during 2020 off-season engagements:
Positive feedback on the Corporation's response to COVID-19 to protect the well-being of our employees and support for our communities, suppliers and partners;
Continued focus on Board refreshment and appreciation of diversity of ethnic background, gender, and experiences as well as the importance of maintaining alignment of directors' skillsets with our long-term strategy;
Continued interest in how we determine our sustainability priorities, including climate change risks and measure progress;
Understanding our people strategy, approach to human capital management and our workforce diversity efforts;
Continued interest in how sustainability and diversity goals are linked to our annual incentive program with pre-set metrics and goals; and
Discussion of CEO transition and succession planning.
These investor and stakeholder discussions yielded valuable feedback that was incorporated into the Board's deliberations.
Stockholder Engagement Cycle
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Year-Round Engagement with Stockholders
Solicit feedback on governance best practices and trends, Board composition and refreshment, executive compensation, human capital management, ESG matters and other topics of interest to stockholders
Discuss stockholder proposals with proponents, if any
Respond to investor inquiries and requests for information or engagement
Annual Meeting of Stockholders
Publish Annual Report, Proxy Statement and Sustainability Report
Specific engagements with stockholders about the voting matters to be addressed at the annual meeting in April
Receive and publish voting results for management and stockholder proposals
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Board Response
Board responds, as appropriate, with continued discussions with stockholders and enhancements to policies, practices and disclosures
Board uses stockholder feedback to enhance our disclosures, governance practices and compensation programs
Evaluate Annual Meeting Results
Discuss and evaluate voting results from annual meeting of stockholders
Stockholder input informs our Board’s ongoing process of continually enhancing governance and other practices
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Corporate Governance
Board Policies and Processes
Corporate Governance Guidelines
The Board has adopted Governance Guidelines that describe the framework within which the Board and its committees oversee the governance of the Corporation. The current Governance Guidelines are available on the Corporation’s website at www.lockheedmartin.com/corporate-governance.
The Governance Committee regularly assesses our governance practices considering emerging trends and practices and implements best governance practices that it believes enhance the operation and effectiveness of the Board.
Our Governance Guidelines cover a wide range of subjects, including:
•    The role of the Board and director responsibilities;
•    The role and responsibilities of the independent Lead Director;
•    Application of our Code of Ethics and Business Conduct (the Code of Conduct) to the Board;
•    Director nomination procedures and qualifications;
•    Director independence standards;
•    Director overboarding limits;
•    Policies for the review, approval and ratification of related person transactions;
•    Director orientation and continuing education;
•    Review by the Governance Committee of any change in job responsibilities of directors;
•    Procedures for annual performance evaluations of the Board and its committees;
•    Director stock ownership guidelines;
•    Clawback policy for executive incentive compensation;
•    Policy prohibiting hedging and pledging of Corporation stock;
•    Majority voting for the election of directors and resignation procedures for directors who fail to receive a majority vote;
•    Process for director compensation review, specifically use of competitive data and input from independent compensation consultant; and
•    Stockholder engagement program; our independent Lead Director will consider requests to speak to investors and will designate (in consultation with the Senior Vice President, General Counsel and Corporate Secretary) a director to engage with the requesting investors, if appropriate.
Director Overboarding Policy
The Board recognizes that its members benefit from service on the boards of other companies and it encourages such service. The Board also believes, however, that it is critical that directors are able to dedicate sufficient time to their service on the Corporation’s Board. Therefore, the Governance Guidelines provide that, without obtaining the approval of the Governance Committee:
Directors
A director may not serve on the boards of more than four other public companies.
Public Company CEO or Equivalent
Active CEOs or equivalent may not serve on the boards of more than two other public companies.
Audit Committee
Audit Committee members may not serve on more than two other public company audit committees.
Compensation Committee
Compensation Committee members may not serve on more than three other public company compensation committees.
Directors must notify the CEO, independent Lead Director and Senior Vice President, General Counsel and Corporate Secretary before accepting an invitation to serve on the board of any other public company. The Governance Committee reviews and determines whether the position would affect the director’s ability to serve on the Corporation’s Board.
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Corporate Governance
Director Independence
All of our directors are independent under applicable NYSE listing standards, except Mr. Taiclet. Under the NYSE listing standards and our Governance Guidelines, a director is not independent if the director has a direct or indirect material relationship with the Corporation. The Governance Committee annually reviews the independence of all directors and reports its findings to the full Board. To assist in this review, the Board has adopted director independence guidelines that are included in our Governance Guidelines, which are available on the Corporation’s website at www.lockheedmartin.com/corporate-governance.
Our director independence guidelines set forth certain relationships between the Corporation and directors and their immediate family members or affiliated entities, which the Board, in its judgment, has deemed to be material or immaterial for purposes of assessing a director’s independence. In the event a director has a relationship with the Corporation that is not addressed in the independence guidelines, the independent members of the Board determine whether the relationship is material.
The Board has determined that the following directors are independent: Daniel F. Akerson, David B. Burritt, Bruce A. Carlson, Joseph F. Dunford, Jr., James O. Ellis, Jr., Thomas J. Falk, Ilene S. Gordon, Vicki A. Hollub, Jeh C. Johnson, and Debra L. Reed-Klages. The Board determined that James D. Taiclet, who was elected President and CEO effective June 15, 2020 and Chairman effective March 1, 2021, was independent prior to his election as President and CEO but as an employee he is no longer independent under the NYSE listing standards or our Governance Guidelines. Mr. Taiclet stopped serving on the CBS and Compensation Committees at the time of the Board's decision to elect him President and CEO in March 2020. Former Chairman, President and CEO Marillyn A. Hewson was also determined by the Board not to be independent while she served on the Board. In determining that each of the non-management directors is independent, the Board considered the relationships described under “Certain Relationships and Related Person Transactions of Directors, Executive Officers and 5 Percent Stockholders,” on page 31, each of which were determined to be immaterial to each individual’s independence.
The Governance Committee and Board considered that the Corporation, in the ordinary course of business, purchases products and services from, or sells products and services to, companies or subsidiaries or parents of companies at which some of our directors (or their immediate family members) are or have been directors or officers and to other institutions with which some of these individuals have or have had relationships. These relationships included: Mr. Akerson (CommScope Holding Company, Inc. and Northrop Grumman Corporation (family member’s employer)); Mr. Carlson (Benchmark Electronics Inc., the Charles Stark Draper Laboratory and Utah State Space Dynamics Laboratory); Mr. Dunford (K&L Gates LLP (family member’s employer)); Mr. Ellis (Blue Origin, LLC (family member’s employer), Dominion Energy Inc., the Economist Group (family member’s employer) and Stanford University (fellow at Hoover Institution and family member’s employer)); Ms. Gordon (The Conference Board and International Paper Company); Mr. Johnson (KANTAR LLC (family member’s employer)); and Ms. Reed-Klages (The Boeing Company (family member’s employer), Caterpillar Inc. and the University of Southern California). In determining that these relationships did not affect the independence of those directors, the Board considered that none of the directors had any direct or indirect material interest in, or received any special compensation in connection with, the Corporation’s business relationships with those entities. In addition to their consideration of these ordinary course of business transactions, the Governance Committee and the Board relied upon the director independence guidelines included in our Governance Guidelines to conclude that contributions to a tax-exempt organization by the Corporation did not create any direct or indirect material interest for the purpose of assessing director independence.
The Governance Committee also concluded that all members of each of the Audit Committee, the Compensation Committee and the Governance Committee are independent within the meaning of our Governance Guidelines and NYSE listing standards, including the additional independence requirements applicable to members of the Audit Committee and Compensation Committee.
Related Person Transaction Policy
The Board has approved a written policy and procedures for the review, approval and ratification of transactions among the Corporation and its directors, executive officers and their related interests. A copy of the policy is available on the Corporation’s website at www.lockheedmartin.com/corporate-governance. Under the policy, all related person transactions (as defined in the policy) are to be reviewed by the Governance Committee. The Governance Committee may approve or ratify related person transactions at its discretion if deemed fair and reasonable to the Corporation. This may include situations where the Corporation provides products or services to related persons on an arm’s length basis on terms comparable to those provided to unrelated third parties. Any director who participates in or is the subject of an existing or potential related person transaction may not participate in the decision-making process of the Governance Committee with respect to that transaction.
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Corporate Governance
Under the policy, and consistent with applicable SEC regulations and NYSE listing standards, a related person transaction is any transaction in which the Corporation was, is or will be a participant, where the amount involved exceeds $120,000, and in which a related person had, has, or will have a direct or indirect material interest. A related person includes any director or director-nominee, any executive officer of the Corporation, any person who is known to be the beneficial owner of more than five percent of any class of the Corporation’s voting securities, or an immediate family member of any person described above.
Our policy requires each director and executive officer to complete an annual questionnaire to identify his or her related interests and persons, and to notify the Corporation of changes in that information. Based on that information, the Corporation maintains a master list of related persons for purposes of tracking and reporting related person transactions.
Because it may not be possible or practical to pre-approve all related person transactions, the policy contemplates that the Governance Committee may ratify transactions after they commence or pre-approve categories of transactions or relationships. If the Governance Committee declines to approve or ratify a transaction, the related person transaction is referred to management to make a recommendation to the Governance Committee concerning whether the transaction should be terminated or amended in a manner that is acceptable to the Governance Committee.
Certain Relationships and Related Person Transactions of Directors, Executive Officers and 5 Percent Stockholders
The following transactions or relationships are considered to be “related person” transactions under our corporate policy and applicable SEC regulations and NYSE listing standards. We currently employ approximately 114,000 employees and have an active recruitment program for soliciting job applications from qualified candidates. We seek to hire the most qualified candidates and consequently do not preclude the employment of family members of current directors or executive officers. William J. Drennen, III, the brother-in-law of our chief accounting officer, is employed by the Corporation as a senior staff systems engineer. Mr. Drennen’s 2020 base salary was $169,478 and he received an annual cash incentive award of $13,558. His base salary was increased to $174,562 for 2021 and he is eligible to earn an incentive award applicable to employees at his level. Bruce Carlson's son, Dr. Scott Carlson, is employed by the Corporation as a senior staff aeronautical engineer. Dr. Carlson's 2020 base salary was $148,026 and he received an annual cash incentive award of $11,842. His base salary was increased to $152,467 for 2021 and he may be eligible to earn an incentive award applicable to employees at his level. Mr. Drennen and Dr. Carlson may participate in other employee benefit plans and arrangements that generally are made available to other employees at the same level (including health, welfare, vacation, and retirement plans). Their respective compensation was established in accordance with the Corporation’s employment and compensation practices applicable to employees with equivalent qualifications, experience, and responsibilities and the Board and executive officers of the Corporation did not have any direct involvement in setting their individual compensation. Neither Mr. Drennen nor Dr. Carlson served as an executive officer of the Corporation during 2020.
From time to time, the Corporation has purchased services in the ordinary course of business from financial institutions that beneficially own five percent or more of our common stock. In 2020, the Corporation paid approximately $10,006,174 to State Street Corporation and its affiliates (including State Street Bank and Trust Company) (collectively, State Street) for investment management, custodial, benefit plan administration and credit facility fees; approximately $1,061,953 to BlackRock, Inc. and its affiliates for investment management fees; approximately $983,803 to Capital Guardian, an affiliate of Capital World Investors, for investment management fees; and approximately $277,137 to The Vanguard Group, Inc., for investment management fees. A portion of the fees included in the amounts paid to State Street, BlackRock, Inc., Capital Guardian and The Vanguard Group are estimated based on a percentage of net asset value under management.
Accountability to Stockholders
Majority Voting Policy for Director Elections
The Corporation’s Charter and Bylaws provide for simple majority voting. Pursuant to the Governance Guidelines, in any uncontested election of directors, any incumbent director who receives more votes “AGAINST” than votes “FOR” is required to offer his or her resignation for Board consideration.
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Corporate Governance
Upon receipt of a resignation of a director tendered as a result of a failed stockholder vote, the Governance Committee will make a recommendation to the Board as to whether to accept or reject the resignation, or whether other action is recommended. In considering the tendered resignation, the Board will consider the Governance Committee’s recommendation as well as any other factors it deems relevant, which may include:
the qualifications of the director whose resignation has been tendered;
the director’s past and expected future contributions to the Corporation;
the overall composition of the Board and its committees;
whether accepting the tendered resignation would cause the Corporation to fail to meet any applicable rule or regulation (including NYSE listing standards and the federal securities laws); and
the percentage of outstanding shares represented by the votes cast at the annual meeting.
The Board will act on a tendered resignation within 90 days following certification of the stockholder vote for the annual meeting and will promptly disclose its decision and rationale as to whether to accept the resignation (or the reasons for rejecting the resignation, if applicable) in a press release, in a filing with the SEC, or by other public announcement, including a posting on the Corporation’s website.
If a director’s resignation is accepted by the Board, or if a nominee for director who is not an incumbent director is not elected, the Board may fill the resulting vacancy or may decrease the size of the Board pursuant to the Corporation’s Bylaws. The Board may not fill any vacancy so created with a director who was nominated but not elected at the annual meeting by the vote required under the Corporation’s Bylaws.
Stockholder Right to Amend Bylaws
Following a dialogue with many of our largest investors and a deliberative review of the issue, the Board proactively changed the Bylaws in December 2017 to give the Corporation’s stockholders the right to amend the Bylaws. The authority of the stockholders and the Board to amend the Bylaws is subject to the provisions of the Corporation’s Charter and applicable statutes. Our Bylaws can be found on the Corporation’s website at www.lockheedmartin.com/corporate-governance.
Proxy Access
Our Bylaws permit a stockholder or a group of up to 20 stockholders who together have owned at least three percent of the Corporation’s outstanding common stock continuously for three years to nominate for election by the Corporation’s stockholders and include in the Corporation’s proxy solicitation materials for its annual meeting up to the greater of two directors or 20 percent of the number of directors in office at the time of the proxy access deadline described on page 91.
Stockholder Right to Call Special Meeting
Any stockholder who individually owns 10 percent, or stockholders who in the aggregate own 25 percent, of the outstanding common stock may demand the calling of a special meeting to consider any business properly brought before the stockholders. Our Bylaws do not restrict the timing of a request for a special meeting. The only subject matter restriction is that the Corporation is not required to call a special meeting to consider a matter that is substantially the same as a matter voted on at a special meeting within the preceding 12 months unless requested by stockholders entitled to cast a majority of the votes at the special meeting.
No Poison Pill
The Corporation does not have a Stockholder Rights Plan, otherwise known as a “Poison Pill.” Through our Governance Guidelines, the Board has communicated that it has no intention of adopting one at this time and if it were to adopt a Stockholder Rights Plan, the Board would seek stockholder ratification within 12 months of the date of adoption.
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Enterprise Risk and Sustainability
As a leader in developing and delivering innovative engineering solutions, Lockheed Martin helps to enable the growth, safety, and resiliency of communities and economies around the world. The core sustainability issues we focus on and the corresponding actions we take are designed to address some of the most pressing ESG issues facing society today and in the future.
To build integrated assurance, enterprise risk and sustainability are managed under one department and mutually reinforced through the following processes:
Risk Identification: We monitor a dynamic risk universe that includes ESG topics prevalent in voluntary frameworks, mandatory regulations, and internally identified sources.
Risk Assessment: We prioritize and evaluate assumptions from a diverse set of risk topics that are relevant to strategic and operational objectives. This includes examining environmental and social factors applicable to risk topics in our business.
Risk Controls and Mitigation: Through the Risk Audit Strategy Board (a periodic, rigorous examination of the intersection between our Enterprise Risk matrix and our internal audit plan) we strive to mitigate risk related to several ESG factors, and we track, measure and report our performance for greater transparency. This process also informs how we evaluate the effectiveness of controls for risk elements identified through our enterprise risk assessments, corporate policies, and internal audits.
Enterprise Risk Management Highlights
A prominent oversight responsibility of the Board concerns the management of corporate risk-taking to achieve strategic objectives and monitoring of risk mitigation effectiveness. The Audit Committee reviews the state of enterprise risk governance, as well as the assessments of risks that may impact the Corporation’s ability to achieve strategic business objectives. The Audit Committee also reviews risk disclosures and reporting and management evaluations of risk mitigation performance. Other Board committees also supervise management's execution of additional subject-specific risks relevant to their function’s compliance with laws and regulations. Examples of this are cybersecurity and ethics and business conduct.
Risk Governance
Board CommitteeRisk Mitigation Purview
AuditFinancial and compliance risks and risk identification process; risks related to business strategy and identified enterprise risk
Classified Business and SecurityClassified programs and security of personnel, facilities and data-related risks including classified cybersecurity
Nominating and Corporate GovernanceBoard composition, corporate governance, employee safety and health, ethical conduct, human rights, corporate culture, human capital and environmental risks
Management Development and CompensationTalent, workforce and incentive compensation risks
Our enterprise risk management process involves providing the Board with regular, periodic reports on:
A clear governance structure guiding our risk management process across the Corporation;
The categories of risks the Corporation faces, including significant drivers posing potential impacts to meeting strategic objectives or compliance standards;
A clear framework for accountability that illustrates mitigating measures and action plans, and how the CEO and the executive leadership team are involved in reviewing and executing such activities;
The ways in which risks are measured on an enterprise basis, the setting of aggregate and subject-specific risk indicators, and related policies and procedures in place to control risks; and
The analysis underpinning the prioritization of key risks and the tools for risk observation to ensure that new or shifting risks are readily identified and addressed by management. This includes understanding risks inherent in the Corporation’s strategic plans, risks arising from the competitive landscape and the potential for technology and other ESG developments to impact profitability and prospects for sustainable, long-term value creation.
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Enterprise Risk and Sustainability
Beyond 2020 Sustainability Priorities
As described on page 10, our core sustainability issues represent stakeholder priorities and drivers of long-term value creation. Since the goals associated with these core issues came to a close at the end of 2020, we have reviewed and updated our sustainability strategy, using what we have learned while delivering on our Sustainability Management Plan objectives through 2020. Our updated sustainability priorities, previewed here, reflect the stakeholder feedback we’ve received, internal and external trends, and the continued evolution of our business to create value well into the future. We ultimately identified four sustainability priorities consisting of 14 core issues (as outlined below) for our next Sustainability Management Plan that will guide us from 2021 to 2025.
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Advancing Resource Stewardship
Counterfeit Parts Prevention
Energy Management
Total Cost of Ownership
Hazardous Chemicals and Materials
Resource and Substance Supply Vulnerability
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Elevating Digital Responsibility
Data Privacy and Protection
Artificial Intelligence
IP Rights
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Fostering Workforce Resiliency
Workplace Safety
Inclusion and Equity
Harassment Free Workplace
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Modeling Business Integrity
Anti-Bribery and Corruption
Ethical Business Practices
Safe Products
Sustainability Highlights
Lockheed Martin's commitment to addressing business-related climate change risks while delivering stockholder value is illustrated by our actions, progress, and the associated recognition we have received. In 2020, Lockheed Martin:
Released its ninth annual Sustainability Report in April
Published its first Sustainability Accounting Standards Board (SASB) report
Published its first Task Force On Climate-related Financial Disclosures (TCFD) report
Received an “A” CDP Climate Change score and made CDP's 2020 Climate A List
Was named as an industry leader by Forbes and JUST Capital within the JUST 100, representing America’s most JUST Companies
Earned, as the only North American prime defense contractor to do so, a ranking on the Dow Jones Sustainability World Index based on best-in-class sustainability practices. This is Lockheed Martin's seventh consecutive year on the Dow Jones Sustainability World Index, and its eighth consecutive year on the North American Index
Received the United States Environmental Protection Agency’s Energy Star Partner of the Year Award
Achieved $4 billion in annual product sales with direct, measurable benefits to energy and advanced infrastructure resiliency and more than $700 million in cumulative corporate cost and supply chain efficiencies since 2015.
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Enterprise Risk and Sustainability
Climate & Environmental Stewardship
At Lockheed Martin, climate risks and opportunities impact our long-term resiliency as a leader in global security and aerospace. It is our responsibility to understand, and actively address climate risks while leveraging opportunities to foster a strong business model for the future. In 2020, we issued our first climate-related risk assessment in alignment with the TCFD recommendations, which demonstrates our responsibility to our global community of stakeholders.
Go Green Goals
Our Go Green initiative promotes environmental stewardship through reductions in carbon emissions, energy and waste which yields operational efficiency and cost avoidance. Since the inception of the Go Green program in 2007, Lockheed Martin has been able to reduce energy consumption by 19%, carbon emissions by 47%, and waste to landfill by 51%. We are pursuing ambitious climate-related targets to reduce our carbon emissions and increase our renewable energy procurement enterprise-wide. We also emphasize energy efficiency efforts, water reduction projects, and waste minimization activities at our facilities. In 2020, Lockheed Martin experienced some adverse impacts to the initiative as a result of COVID-19. We continue to analyze these impacts on our Go Green goals in order to re-evaluate and determine the most appropriate path forward for the program.
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REDUCE CARBON EMISSIONS
PER $ GROSS PROFIT BY
REDUCE ENERGY
PER OCCUPANT BY
REDUCE WASTE
PER OCCUPANT BY
70%
2015 baseline
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14%
2016 baseline
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11%
2016 baseline
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2020 PERFORMANCE
39%
14%
9%
Supplier Engagement
Lockheed Martin works closely with suppliers to strengthen our communities and foster responsible growth. Lockheed Martin's efforts and accomplishments in these areas during the year-long measuring period from October 1, 2019 to September 30, 2020 included the following:
>21.9 percent of suppliers selected were small businesses
Earned a “very good” rating from the Defense Contract Management Agency for small business performance on Department of Defense Contracts with a strategic focus on advancing STEM education and supporting military and veteran causes
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>$6.2 billion spent with over 7,500 small businesses
>$1.2 billion spent with woman-owned businesses
>$681.4 million spent with nearly 800 veteran-owned businesses
>$68 million spent with Alaskan Native and Tribally Owned Corporations
>$333.9 million spent with over 200 service-disabled, veteran-owned small businesses
Our Global Supply Chain Operation’s team conducted its first-ever Human Trafficking Supply Chain Assessment based on the U.S. Department of State Trafficking in Persons Report in 2019. Since then, we expanded the input sources and have developed a visual dashboard that maps Lockheed Martin’s human trafficking risk across its supply chain. We will continue monitoring emerging global legislation as we advance our preventative approaches and are working to integrate Transparency International’s Corruption Perception Index, and Conflict Mineral data from our annual due diligence process, to provide additional perspectives.
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Audit Matters
Proposal
2
Ratification of Appointment of Independent Auditors
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•    Independent accounting firm with the breadth of knowledge, support and expertise of its national office.
•    Significant industry and government contracting expertise.
•    Periodic mandated rotation of the audit firm’s lead engagement partner.
The Board unanimously recommends that you vote FOR the ratification of the appointment of Ernst & Young as independent auditors for 2021.
The Audit Committee has appointed Ernst & Young LLP (Ernst & Young), an independent registered public accounting firm, as the independent auditors to perform an integrated audit of the Corporation’s consolidated financial statements and internal control over financial reporting for the year ending December 31, 2021. The services provided to the Corporation by Ernst & Young for the last two fiscal years are described under the caption “Fees Paid to Independent Auditors” on the following page.
The Audit Committee is directly responsible for the appointment, compensation, retention, oversight and termination of the Corporation’s independent auditors in accordance with the NYSE listing standards. The Audit Committee also is responsible for the audit fee negotiations associated with the retention of Ernst & Young. The Audit Committee and its Chairman are involved in the selection of Ernst & Young’s lead engagement partner. The Audit Committee regularly meets with Ernst & Young without management present.
Ernst & Young has served as the Corporation’s independent auditors since 1994. The Audit Committee reviews the engagement of Ernst & Young annually following completion of Ernst & Young’s audit of the prior year’s financial statements. The Audit Committee also conducts a mid-year assessment of the quality of Ernst & Young’s work. As part of its annual and mid-year assessment of Ernst & Young, the Audit Committee has considered:
the materials on independence provided by Ernst & Young;
work quality;
management’s level of satisfaction with its services;
the adequacy of Ernst & Young’s staffing;
the breadth of knowledge, support and expertise of its national office;
the length of time Ernst & Young has been engaged;
external data regarding Ernst & Young’s audit quality and performance, including recent Public Company Accounting Oversight Board (PCAOB) reports on Ernst & Young and its peer firms;
Ernst & Young’s institutional knowledge and expertise with respect to the Corporation’s business and government contracting practices, quality and cost-effective services;
familiarity with the Corporation’s account;
level of expertise in accounting issues relating to government contracts; and
Ernst & Young’s performance in providing independent analysis of management positions.
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Audit Matters
Stockholder approval of the appointment is not required. However, the Board believes that obtaining stockholder ratification of the appointment is a sound corporate governance practice. If the stockholders do not vote on an advisory basis in favor of Ernst & Young, the Audit Committee will reconsider whether to hire the firm and may retain Ernst & Young or hire another firm without resubmitting the matter for stockholders’ approval. The Audit Committee retains the discretion at any time to appoint a different independent auditor.
Representatives of Ernst & Young are expected to be present at the Annual Meeting, and such representatives will be available to respond to appropriate questions and will have the opportunity to make a statement if they desire.
Pre-Approval of Independent Auditors Services
The Audit Committee pre-approves all audit, audit-related, tax and other services performed by the independent auditors. The Audit Committee pre-approves specific categories of services up to pre-established fee thresholds. Unless the type of service has previously been pre-approved, the Audit Committee must approve that specific service before the independent auditors may perform such service. In addition, separate approval is required if the amount of fees for any pre-approved category of service exceeds the fee thresholds established by the Audit Committee. The Audit Committee also has delegated to the Committee Chairman or any member pre-approval authority with respect to permitted services up to $500,000, provided that the Committee Chairman or any committee member must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
Fees Paid to Independent Auditors
The following table sets forth the fees billed by Ernst & Young, the Corporation’s independent auditors, for audit services, audit-related services, tax services and all other services rendered for 2020 and 2019. All fees were pre-approved in accordance with the Audit Committee’s pre-approval policy. The Audit Committee considered and concluded that the provision of these services by Ernst & Young was compatible with the maintenance of the auditor’s independence.
20192020
($)($)
Audit Fees(a)
22,775,00023,500,000
Audit-Related Fees(b)
195,000310,000
Tax Fees(c)
2,300,0002,600,000
All Other Fees00
(a)Audit fees are for services related to the annual audit of the Corporation’s consolidated financial statements, including the audit of internal control over financial reporting, the interim reviews of the Corporation’s quarterly financial statements, statutory audits of the Corporation’s foreign subsidiaries and consultations on accounting matters.
(b)Audit-related fees are primarily related to audits of the Corporation’s employee benefit plans and due diligence services in connection with acquisitions.
(c)Tax fees are for domestic and international tax compliance and advisory services. Tax compliance fees were $1.7 million and $1.3 million in 2020 and 2019, respectively, and fees for advisory services were $0.9 million and $1.0 million in 2020 and 2019, respectively.

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Audit Matters
Audit Committee Report
The Audit Committee of the Board of Directors is responsible for overseeing the Corporation’s accounting, auditing and financial reporting process, financial risk assessment and management process and for monitoring compliance with certain regulatory and compliance matters, on behalf of the Board of Directors.
The Corporation’s management is responsible for preparing the quarterly and annual consolidated financial statements, the financial reporting process, and maintaining and evaluating disclosure controls and procedures and a system of internal control over financial reporting.
In addition to its oversight of the Corporation’s internal audit organization, the Audit Committee is directly responsible for the appointment, compensation, retention, oversight and termination of the Corporation’s independent auditors, Ernst & Young, an independent registered public accounting firm. The independent auditors are responsible for performing an independent audit of the Corporation’s annual consolidated financial statements and internal control over financial reporting and expressing an opinion on the material conformity of those consolidated financial statements with U.S. generally accepted accounting principles and on the effectiveness of the Corporation’s internal control over financial reporting.
In connection with the preparation of the Corporation’s consolidated financial statements as of and for the year ended December 31, 2020, the Audit Committee reviewed and discussed with management and Ernst & Young the Corporation’s audited consolidated financial statements, including discussions regarding critical accounting policies, financial accounting and reporting principles and practices, the quality of such principles and practices, the reasonableness of significant judgments and estimates, and the effectiveness of internal control over financial reporting. The Audit Committee also discussed with Ernst & Young, with and without management, the quality of the financial statements, clarity of the related disclosures, effectiveness of internal control over financial reporting and other items required by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC. Additionally, the Audit Committee received and reviewed the written disclosures and letter from Ernst & Young required by applicable requirements of the PCAOB regarding Ernst & Young's communications with the Audit Committee concerning independence, and has discussed with Ernst & Young its independence.
Based on the Audit Committee’s reviews and discussions described in this report, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements as of and for the year ended December 31, 2020 be included in Lockheed Martin Corporation’s Annual Report on Form 10-K for 2020 for filing with the SEC. The Audit Committee also reappointed Ernst & Young to serve as the Corporation’s independent auditors for 2021, and requested that this appointment be submitted to the Corporation’s stockholders for ratification at the Annual Meeting. The Board of Directors approved the Audit Committee’s recommendations.
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Thomas J. Falk
Chairman
David B. BurrittJames O. Ellis, Jr.Ilene S. GordonDebra L. Reed-Klages
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Executive Compensation
Proposal
3
Advisory Vote to Approve the Compensation of Our NEOs (Say-on-Pay)
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•    Pay-for-performance alignment is built into the design of our annual and long-term incentive programs.
•    Executive compensation targets are set by reference to 50th percentile of peers with actual payouts dependent on performance outcomes.
•    More than 94% of votes cast at the 2020 annual meeting approved Say-on-Pay and we continue to engage with our stockholders on an on-going basis.
The Board unanimously recommends that you vote FOR the advisory vote to approve the compensation of our named executive officers.
As required by Section 14A of the Securities Exchange Act of 1934, as amended, we ask our stockholders to vote annually to approve, on an advisory (non-binding) basis, the compensation of our named executive officers (NEOs) as described in detail in the Compensation Discussion and Analysis (CD&A) and the accompanying tables in the Executive Compensation section of this Proxy Statement. This vote is commonly known as Say-on-Pay.
Stockholders should review the entire Proxy Statement and, in particular, the CD&A beginning on page 40 and the Executive Compensation Tables beginning on page 58, for information on our executive compensation programs and other important items.
We believe that the information provided in this Proxy Statement demonstrates that our executive compensation programs are designed to link pay to performance. Accordingly, the Board recommends that stockholders approve the compensation of our NEOs by approving the following Say-on-Pay resolution:
RESOLVED, that the stockholders of Lockheed Martin Corporation approve, on an advisory basis, the compensation of the named executive officers identified in the “Summary Compensation Table,” as disclosed in the Lockheed Martin Corporation 2021 Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the accompanying footnotes and narratives. This vote is not intended to address any specific item of compensation, but rather our overall compensation policies and procedures related to the NEOs. Although the results of the Say-on-Pay vote do not bind the Corporation, the Board will, as it does each year, continue to review the results carefully and plans to continue to seek the views of our stockholders throughout the year.
Compensation Committee Report
The Management Development and Compensation Committee makes recommendations to the Board of Directors concerning the compensation of the Corporation’s NEOs. We have reviewed and discussed with management the Compensation Discussion and Analysis that will be included in the Corporation’s Schedule 14A Proxy Statement, filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended. Based on that review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Proxy Statement. The Board approved our recommendation.
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Ilene S. Gordon
Chairman
Thomas J. FalkVicki A. HollubDebra L. Reed-Klages
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Executive Compensation
Compensation Discussion and Analysis (CD&A)
This CD&A discusses the compensation decisions for the NEOs listed in the Summary Compensation Table on page 58.
2020-2021 Leadership Changes
In 2020 and early 2021, there were the following leadership changes affecting the NEOs:
James D. Taiclet  was elected President and Chief Executive Officer effective June 15, 2020, succeeding Ms. Hewson, and was elected Chairman effective March 1, 2021;
Marillyn A. Hewson transitioned to Executive Chairman effective June 15, 2020, after serving as President and Chief Executive Officer since January 2013 and Chairman of the Board since January 2014. Effective March 1, 2021, Ms. Hewson became Strategic Advisor to the CEO and is expected to serve in that role through February 28, 2022;
Frank A. St. John was promoted to Chief Operating Officer effective June 15, 2020, after serving as Executive Vice President, Rotary and Mission Systems since August 26, 2019; and
Michele A. Evans, Executive Vice President, Aeronautics, passed away on January 1, 2021 and was succeeded by Gregory M. Ulmer effective February 1, 2021.

NEOTitleYears of Service
At End of 2020
(rounded)
James D. TaicletChairman, President and Chief Executive Officer6 months
Marillyn A. HewsonStrategic Advisor to the CEO; Former Chairman, President and Chief Executive Officer38 years
Kenneth R. PossenriedeChief Financial Officer34 years
Frank A. St. JohnChief Operating Officer34 years
Richard F. AmbroseExecutive Vice President, Space20 years
Michele A. EvansFormer Executive Vice President, Aeronautics34 years
To assist stockholders in finding important information in the CD&A, sections are highlighted as follows:
Page(s)
41Our 2020 Performance
432020 CEO Compensation
452020 Comparator Group Companies
472020 Compensation Elements
48-502020 Annual Incentive
50-532020 Long-Term Incentive Compensation
532018-2020 LTIP and PSU Awards
54-552021 Incentives
55-57Other Compensation Matters
2020 Say-on-Pay Vote
At our 2020 annual meeting, more than 94% of the votes cast by our stockholders approved our Say-on-Pay proposal and more than 95% of the votes cast approved our new equity plan. We meet with our key investors throughout the year to understand the topics that matter most to them as they relate to executive compensation. We sought the views of our stockholders with respect to our existing policies and practices. (Please see “Stockholder Engagement and Responsiveness” on page 28 for more specific details). Investors we engaged with during 2020 reacted positively to our pay governance and executive compensation programs. We consider the input of our stockholders, along with emerging best practices, to ensure alignment with our executive pay programs. We welcome feedback regarding our executive compensation programs and will continue to engage with our stockholders in 2021.
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Executive Compensation
Executive Summary
Our 2020 Performance
Record
Sales of
$65.4B
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Record Segment
Operating Profit* of
$7.2B
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Year-End Backlog of
$147.1B
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Record Earnings
per Share from continuing operations of
$24.50
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In 2020, Lockheed Martin demonstrated agility, resilience, and resolve in the face of the year’s unprecedented geopolitical, business, and public health challenges. We continued to exhibit strong growth across our diverse portfolio, as manifested in our financial and operational results. In 2020, the Corporation achieved records for sales, segment operating profit* and earnings per share. Lockheed Martin’s net sales and segment operating profit in 2020 both increased 9% compared to 2019 and we generated cash from operations of $8.2 billion after $1.0 billion of discretionary pension contributions. In addition, we ended 2020 with orders of $68.1 billion, adding to our strong year-end backlog of $147.1 billion.
Despite COVID-19 supplier challenges that impacted aircraft deliveries, the F-35 fifth generation fighter program worked with our customers and partners to mitigate risks brought on by the pandemic and continued to achieve unmatched combat capability. In 2020, we delivered 120 F-35s and remained on track to meet the joint government and industry recovery commitments over the coming years. In total, the program has surpassed 600 aircraft deliveries and more than 350,000 flight hours. The F-35 program also celebrated several international milestones with Poland and Singapore joining the program and several other nations expressing interest in joining as well.
The Corporation also had strategic and operational accomplishments across our other business segments in 2020. In April, we were awarded a contract valued at more than $6 billion to supply PAC-3 Missile Segment Enhancement interceptors, launcher modification kits, and associated equipment to support the United States and international customers. Early in the year, we celebrated the launch of the sixth and final Advanced Extremely High Frequency satellite. Notably, the satellite was the first in orbit for the newly formed U.S. Space Force. We also received a $2 billion Performance-Based Logistics contract for sustainment services on the MH-60 SEAHAWK® platform for the U.S. Navy. Strategically, Lockheed Martin continued to invest in emerging technologies in the areas of autonomy, hypersonics, and artificial intelligence to better serve our customers in an increasingly volatile and unpredictable threat environment.
We also continued our efforts to return cash to stockholders through dividends and share repurchases. During 2020, we returned $3.9 billion of cash from operations to our stockholders, with $1.1 billion in share repurchases and $2.8 billion paid in cash dividends. Lockheed Martin's total stockholder returns have outperformed the S&P 500 Aerospace & Defense Index over the past one-, three-, and five-year periods, reflecting these financial, strategic and operational accomplishments.
*See Appendix A for an explanation of Non-GAAP terms.
1-Year TSR
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3-Year TSR
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5-Year TSR
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Executive Compensation
Compensation Overview
Our executive compensation programs covering our NEOs are designed to attract and retain critical executive talent, to motivate behaviors that align with stockholders’ interests and to pay for performance. The majority of our NEOs’ pay is variable and contingent on performance with over two-thirds in the form of long-term incentives (LTI). To ensure pay is competitive with market practices, we conduct a benchmarking analysis each year when establishing base salary, annual incentive target opportunities and LTI target opportunities. Each element of compensation is evaluated against the 50th percentile, which we refer to as “market rate,” of our comparator group of companies, as shown on page 45. Although target incentive opportunities are set by reference to the market rate, incentive plan terms provide for actual payouts to be based upon actual performance that can result in payouts above or below targeted levels. Based on actual results relative to our pre-established goals under our incentive programs, the 2020 annual incentive program paid out at 177% of target and the 2018-2020 Long-Term Incentive Performance awards (LTIP) and Performance Stock Units (PSUs) paid out at 200% of target for all NEOs.
We have not made any modifications to our compensation programs or to our targets or goals in response to COVID-19 or the Coronavirus Aid, Relief and Economic Security (CARES) Act. However, in September 2020, the Compensation Committee approved amendments to outstanding long-term incentive award agreements to ensure that the ultimate payouts are not impacted to a participant’s benefit or detriment by government stimulus and assistance programs enacted in response to COVID-19 or by pension risk transfer transactions (please see “Setting Performance Goals for PSUs and LTIP” on page 52 for more specific details).
CEO Transition
Effective June 15, 2020, Ms. Hewson transitioned from Chairman, President and CEO to Executive Chairman and Mr. Taiclet was elected President and CEO. Effective March 1, 2021, Mr. Taiclet was elected Chairman and Ms. Hewson became Strategic Advisor to the CEO. Ms. Hewson is expected to serve in this role until February 28, 2022.
The Corporation maintains and has regularly adhered to a compensation philosophy of providing target total compensation opportunities consistent with the market rate. This policy is consistently applied to all NEOs. The table below illustrates the annualized value of Mr. Taiclet’s approved 2020 target total compensation opportunity:
Approved 2020 Compensation
ElementSalary ($)Target Annual Incentive %Target Total Cash ($)Long-Term Incentives* ($)Target Total Compensation ($)
Annualized Target Pay1,700,0001754,675,00014,000,00018,675,000
*    2020 LTI grant excludes equity replacement grant with an approximate value of $5.55 million.
The annual and long-term incentive opportunities represent target and grant date values respectively. These opportunities can be earned subject to subsequent performance and service. The annual cash compensation elements—salary and annual incentive—were pro-rated based on the number of days employed for 2020. The long-term incentive award was not pro-rated reflecting both the longer term nature of the award and that Mr. Taiclet would have otherwise received a full long-term incentive award for 2020 from his prior employer if he had continued to be its CEO. Mr. Taiclet's long-term incentive award, as with all other NEOs, was comprised of 70% performance-based awards (50% PSUs and 20% cash based LTIP) and 30% time-based Restricted Stock Units (RSUs).
Upon his termination of employment with his prior employer, Mr. Taiclet forfeited portions of performance-based equity awards covering two separate performance cycles (2018-2020 and 2019-2021) and his opportunity to earn an annual cash incentive award for 2020. The Board, with the assistance of its outside compensation consultant, estimated that Mr. Taiclet was forfeiting approximately $5.55 million in value that he would have otherwise earned at this prior employer. To induce Mr. Taiclet to accept employment with the Corporation by covering the estimated value of these forfeited awards, Mr. Taiclet was granted a replacement award, which was allocated between two tranches of RSUs as follows:
7,689 RSUs ($2.87 million) that vest one year from the date of grant to replace the foregone annual cash incentive opportunity and the forfeited 2018-2020 performance-based award; and
7,180 RSUs ($2.68 million) that vest two years from the date of grant to replace the forfeited 2019-2021 performance-based award.

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Executive Compensation
The vesting periods of these two tranches were structured to approximately parallel the time periods over which the original forfeited awards would have been earned/vested and the number of RSUs was determined based on dividing the estimated forfeited value by the closing stock price of the Corporation's common stock on the NYSE on June 15, 2020, which was the effective date of Mr. Taiclet's appointment as President and CEO. RSUs were chosen to create immediate alignment with Lockheed Martin stockholders and further Mr. Taiclet’s equity ownership in the Corporation.
No adjustments were made to Ms. Hewson's previously approved 2020 compensation in connection with her transition to Executive Chairman. Consistent with the policy of not providing Board compensation to employee directors, Ms. Hewson did not receive separate director compensation for her service on the Board during 2020. For her service as Strategic Advisor to the CEO, effective March 1, 2021 through February 28, 2022, Ms. Hewson's annual base salary will be reduced from $1,855,000 to $900,000. Ms. Hewson will not be eligible for an annual incentive for 2021 performance and will not receive any equity or long-term incentive performance awards in 2021. While she remains an employee of the Corporation, Ms. Hewson will continue to participate in the savings, health, disability and life insurance benefit plans and programs in which she has been a participant and will continue to be eligible for an annual executive physical, home office support, professional memberships, continued use of corporate aircraft and continued security based on assessed risk to her. Consistent with past practice, to the extent personal security is necessary and taxable, Ms. Hewson will receive a tax gross-up sufficient to make her whole.
2020 CEO Compensation
2020 CEO Target Pay Mix. We believe that the compensation opportunities of our CEO should be predominantly variable, and the variable elements of the compensation package should tie to the Corporation’s long-term success and the achievement of sustainable long-term total returns to our stockholders. As shown in the chart to the right, a significant portion of our CEO’s target compensation is variable and in the form of LTI with more than half of total target pay in the form of equity-based incentives.
Base Salary. In 2020, Mr. Taiclet’s annual base salary was set at $1,700,000.
2020 Annual Incentive. Mr. Taiclet’s target annual incentive amount for 2020 was 175% of salary, or $1,636,250 after proration based on his start date.
2020-2022 Long-Term Incentives. In 2020, Mr. Taiclet was granted an annual LTI award of approximately $14.0 million, which was allocated 50% in PSUs, 30% in RSUs, and 20% in the cash-based LTIP. RSUs will cliff-vest after three years, while the payout of PSUs and LTIP will be based upon our results at the end of the three-year performance period relative to the three-year performance goals that were established in the beginning of 2020. This does not include the one-time replacement award of approximately $5.55M to offset forfeited incentives at his previous employer.
Benefit and Retirement Plans. Mr. Taiclet is eligible for benefit and retirement programs, similar to other salaried employees. None of our NEOs received additional years of service credits or other forms of formula enhancements under our benefit or retirement plans. Mr. Taiclet does not participate in a pension plan, as the salaried pension plan was closed to employees hired after December 31, 2005 and fully frozen effective January 1, 2020.
CEO Target Opportunity Mix *
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* Fixed vs. variable and cash vs. equity components are designated in the Compensation Elements table on page 47. We consider base salary and annual incentives as short-term pay and PSUs, LTIP, and RSUs as long-term pay. Cash represents base salary, annual incentive target and LTIP target. We do not include retirement or other compensation components in the chart. Chart reflects base salary and annual incentives on a non-prorated basis and does not include the one-time replacement award of RSUs.
www.lockheedmartin.com2021 Proxy Statement
43


Executive Compensation
Summary of Compensation Approach
Guiding Pay Principles
Attract, motivate and retain executive talent
Market-based 50th percentile approach to target all compensation elements
Link executive pay to Enterprise performance
Provide an appropriate mix of short-term vs. long-term pay and fixed vs. variable pay
Align to stockholder interests and long-term Corporation value
Our Decision-Making Process
The Compensation Committee seeks input from our CEO and other members of our management team as well as input and advice from an independent compensation consultant to ensure the Corporation’s compensation philosophy and information relevant to individual compensation decisions are taken into account. Mr. Taiclet did not participate in the Board's and Compensation Committee's deliberations on his selection and appointment as the Corporation's new President and CEO and related compensation decisions.
Independent Pay Governance
indieboard_icon1.jpg
indiecompconsultant_icon1.jpg
indiecompcommittee_icon1.jpg
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Independent
Board Members
Review and approve compensation of the CEO and review and ratify compensation of other NEOs. Review with management, at least annually, the succession plan for the CEO and other senior positions.
Independent
Compensation Consultant
Provides advice on executive pay programs, pay levels and best practices. Provides design advice for annual LTI vehicles and other compensation programs.
Independent
Compensation Committee
Reviews and approves incentive goals relevant to NEO compensation. Reviews and approves the compensation for each NEO. Recommends CEO compensation to the independent members of the Board.
Stockholders &
Other Key Stakeholders
Provide feedback on various executive pay practices and governance during periodic meetings with management, which then is reviewed by and discussed with our independent Board members.
RoleManagementCEO
Management
Compensation
Consultant(1)
Independent
Compensation
Consultant(2)
Independent Compensation
Committee
Independent
Board
Members
Peer Group / External Market Data and Best Practices for Compensation Design and DecisionsReviewsReviewsDevelopsDevelops/
Reviews
Reviews
Annual NEO Target CompensationRecommendsReviewsApprovesRatify
Annual CEO Target CompensationAdvisesRecommendsApprove
Annual and Long-Term Incentive Measures, Performance Targets and Performance ResultsDevelopsReviewsReviewsApprovesRatify
Long-Term Incentive Grants, Dilution, Burn RateDevelopsReviewsReviewsApprovesRatify
Risk Assessment of Incentive PlansReviewsReviewsDevelopsReviews
Succession PlansDevelopsReviewsReview
(1)    Aon and Willis Towers Watson.
(2)    Meridian Compensation Partners (Meridian).
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Executive Compensation
How We Determine Market Rate Compensation
For each of the principal elements of executive compensation, we determine the “market rate” as the size-adjusted 50th percentile of our comparator group of companies. Size-adjusted market rates are calculated for us by Aon, using revenue regression analysis. This statistical technique accounts for revenue size differences within the peer group and results in a market rate for all compensation elements consistent with our revenue relationship to our peers. We also may adjust the market rate to reflect differences in an executive’s job scope relative to the industry or the comparator group of companies, as appropriate.
The Compensation Committee considers the current market data in combination with other internal factors when setting individual annual target pay levels, such as changes to market data year-over-year, internal pay equity, individual performance, job scope and criticality to the Corporation. Our incentive plans are designed so that actual performance in excess of established performance targets results in payouts above target and actual performance below established performance targets results in payouts below target or no payout.
How We Select the Comparator Group for Market Rate Purposes
To establish the market rate for each of the principal elements of compensation, we select a group of publicly-traded companies (our comparator group). We regularly review our comparator group to maintain relevancy and to ensure the availability of data, while seeking to avoid significant annual changes in the group to ensure a level of consistency. Because the number of comparable companies with our revenue level is not extensive, we include companies in our comparator group based on a number of factors, including:
Similarity in size (a high correlative factor in determining pay), generally based on annual revenues;
Participation in the Aon executive compensation survey (our primary source for data in making market comparisons), which enables us to obtain reliable data for market comparisons that otherwise may not be publicly available;
Industrial companies and, to the extent possible, companies that compete in the aerospace and defense industry, which enables comparison with companies that face similar overall labor costs, economic factors and market fluctuations;
Companies with which we compete for executive talent, as competitive conditions and the limited number of comparably-sized aerospace and defense companies require us to recruit outside of the core aerospace and defense companies for a broad range of disciplines (e.g., finance, human resources, legal, supply chain management) to obtain individuals with a broad range of skills that are transferable across industries; and
Companies with comparable executive officer positions or management structures, which enables more appropriate compensation comparisons.
We do not consider market capitalization in selecting our comparator group because market capitalization can change quickly as industries and companies go in and out of favor as investments and companies restructure.
The data presented to and considered by the Compensation Committee regarding the level of compensation at the Corporation’s comparator group of peer companies was developed from the proprietary results of the Aon executive compensation survey, subject to review by Meridian. There was no change in the composition of our 2020 comparator group from 2019. All of the 2020 comparator group companies participated in the Aon survey. Our 2020 revenues represented the 64th percentile of the comparator group.
2020 Comparator Group Companies
3M Company
General Dynamics Corporation*
Raytheon Company*
Caterpillar Inc.
General Electric Company
The Boeing Company*
Cisco Systems, Inc.
Honeywell International Inc.*
United Parcel Service, Inc.
Deere & Company
International Business Machines Corporation
United Technologies Corporation*
DowDuPont Inc.**
Intel Corporation
FedEx Corporation
Northrop Grumman Corporation*
*    Aerospace & Defense Industry
**    In June 2019, DowDuPont Inc. completed a series of transactions to split into multiple separate entities but data is included given participation in the Aon survey prior to the split.
In June 2020, the Compensation Committee reviewed the comparator group, as it does each year. In light of the split of DowDuPont Inc., the Compensation Committee replaced DowDuPont Inc. with Dow Inc. and also added HP Inc. given its satisfaction of our criteria described above. This updated Comparator Group was used for compensation decisions for 2021.
www.lockheedmartin.com2021 Proxy Statement
45


Executive Compensation
Compensation and Risk
The Corporation’s executive and broad-based compensation programs are intended to promote decision-making that supports a pay for performance philosophy while mitigating risk by utilizing the following design features:
Mix of fixed and variable pay opportunities
Multiple performance measures, multiple time periods and capped payouts under incentive plans
Stock ownership requirements
Oversight by independent Board committee
Incentive goals set at the Enterprise or business segment level
Moderate severance program that includes post-employment restrictive covenants
Institutional focus on ethical behavior
Annual risk assessment
Compensation Committee oversight of equity burn rate and dilution
Enhanced clawback policy
With the assistance of a risk assessment conducted by Meridian on an annual basis, the Compensation Committee concluded that risks arising from our executive and broad-based incentive compensation programs are not reasonably likely to have a material adverse effect on the Corporation.
Compensation Best Practices
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Best Practices in Our Programs
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Practices We Do Not Engage In or Allow
    Pay aligns with performance
    Market-based (50th percentile) approach for determining NEO target pay levels
    Caps on annual and long-term incentives, including when Total Stockholder Return (TSR) is negative
    Enhanced clawback policy on variable pay
    Double-trigger provisions for change in control
    Robust stock ownership requirements
    Low burn rate and dilution
No payment of dividends or dividend equivalents on unvested equity awards
    No employment agreements
    No option backdating, cash-out of underwater options or repricing
    No excise tax assistance (gross-ups) upon a change in control
    No tax gross-ups on personal use of corporate aircraft
    No individual change in control agreements
    No automatic acceleration of unvested incentive awards in the event of termination
    No enhanced retirement formula or inclusion of long-term incentives in pensions
    No enhanced death benefits for executives
    No hedging or pledging of Company stock
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Executive Compensation
2020 Named Executive Officers’ Compensation
2020 Target Compensation
Our NEOs’ target compensation for 2020 is shown below, which is closely aligned to the market rate. When determining pay for our NEOs, the Compensation Committee considers the current market data in combination with other internal factors when setting annual target pay levels, such as changes to market data year-over-year, internal pay equity, individual performance, job scope and criticality to the Corporation. Effective June 15, 2020, Marillyn A. Hewson transitioned to Executive Chairman and James D. Taiclet was elected President and Chief Executive Officer. Additionally, Frank A. St. John was appointed Chief Operating Officer effective June 15, 2020 and in connection with his promotion the Compensation Committee approved an additional $150,000 LTI grant (increasing his total annual LTI opportunity from $4.5 million to $4.65 million).
Annual Incentive
NEOBase
Salary
($)
Target
%
Target
Amount
($)
2020 Annual LTI Grant
($)
Total Target Direct
Compensation
($)
Mr. Taiclet*1,700,0001751,636,25014,000,20417,336,454
Ms. Hewson1,855,0001753,246,25015,000,28920,101,539
Mr. Possenriede935,000105981,7504,650,2366,566,986
Mr. St. John935,000105981,7504,650,5996,567,349
Mr. Ambrose935,000105981,7504,000,2575,917,007
Ms. Evans935,000105981,7504,500,2416,416,991
*    Mr. Taiclet's prorated 2020 base salary was $915,385. His annual incentive target amount shown above is prorated based on time served during 2020. His 2020 Annual LTI grant and Total Target Direct Compensation excludes his equity replacement grant with an approximate value of $5.55 million.
2020 Compensation Elements
Our compensation programs are designed to provide a mix of short- and long-term compensation, fixed and variable pay and cash and equity-based compensation, as well as to reflect our philosophy of providing pay for performance. Benefit, Retirement and Perquisite programs are not included in our compensation elements below (additional information about these programs can be found on page 57).
FixedVariable
Base Salary+Annual Incentive+Long-Term Incentives
50% PSUs20% LTIP30% RSUs
WHAT?CashCashEquityCashEquity
WHEN?AnnualAnnual3-year
Performance Cycle
3-year
Performance Cycle
3-year
Cliff Vesting
HOW?
Measures,
Weightings &
Payouts
Market rate, as well as internal pay equity, experience and critical skills
70% Financial
20% Sales, 40% Segment Operating Profit**, 40% Cash from Operations***
30% Strategic & Operational Key Metrics: Focus Programs, International, Mission Success®, Program Performance, Portfolio Shaping/Enterprise Initiatives, Innovation, Talent Management
Payout: 0-200% of target
Relative TSR*
ROIC**
Performance Cash**
(50%)
(25%)
(25%)
Value delivered through long-term stock price performance
•    Award 0-200% of target # of shares
•    Relative TSR measure capped at 100% if TSR is negative
•    Value capped at 400% of stock price on date of grant x shares earned
•    Payout 0-200% of target
•    Relative TSR measure capped at 100% if TSR is negative
WHY?
Provides competitive levels of fixed pay to attract and retain executives.
Attracts and motivates executives by linking annual Corporation performance to an annual cash incentive.
Creates strong alignment with stockholder interests by linking long-term pay to key performance metrics and stock price. Provides a balance of internal and market-based measures to assess long-term performance.
Promotes retention of key talent and aligns executive and stockholder interests.
*    See page 52 for 2020-2022 Relative TSR Comparators.
**    Refer to Appendix A for an explanation of Non-GAAP terms as well as our disclosure regarding forward-looking statements concerning future performance or goals for future performance.
*** Adjusted for unplanned pension contributions pursuant to resolutions of the Compensation Committee.
www.lockheedmartin.com2021 Proxy Statement
47


Executive Compensation
Base Salary
Base salaries are reviewed and increased annually taking into account the market rate (50th percentile), the executive’s individual performance and internal pay equity. In establishing the base salary for each NEO, we determined the market rate using comparator group company data and evaluated whether the market rate should be adjusted up or down based on differences in the scope of the NEO’s position as compared to the industry and the comparator group companies.
2020 Annual Incentive
As has been the case since 2018, the 2020 annual incentive plan for our CEO, other NEOs and all other officers elected by the Board was based 70% on financial goals and 30% on strategic and operational goals measured at the Enterprise level, as illustrated in the graphic below. Although the annual incentive plan uses a formulaic approach, the Compensation Committee retains discretion in administering the plan, which discretion includes choosing and approving goals, assessing strategic and operational results and modifying payouts based on business segment and individual performance for any officer elected by the Board, including the NEOs.
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Under the terms of our annual incentive plan, the CEO’s bonus and the bonus for each of the other NEOs cannot exceed 0.3% and 0.2%, respectively, of Cash from Operations. Annual incentive payouts range from 0% to 200% of target.
2020 Annual Incentive Goals and Results
At its February 2020 meeting, the Compensation Committee approved Enterprise-wide objectives for 2020 reflecting financial, strategic and operational goals. These goals are used as the Enterprise Component for all executives in the Corporation and serve as the only goals for the CEO, NEOs and all other officers elected by the Board. We have not made any modifications to our annual incentive goals in response to COVID-19 or the CARES Act.
Financial Assessment (70% Weight). The financial targets under the annual incentive plan align with the guidance we disclosed publicly at the beginning of 2020. We believe this approach to setting the financial metrics for annual incentive purposes appropriately links compensation to our effectiveness in meeting our public commitments to our stockholders. Our financial commitments are established at the completion of our annual long-range planning process and are consistent with our long-range plan commitments. The long-range planning process includes reviews of the assumptions used by the business segments in generating their financial projections, such as industry trends and competitive assessments, current and future projected program performance levels and the risks and opportunities surrounding these baseline assumptions. The long-range plan on which our financial goals are based is tied to the business environment in which we operate and can vary year-over-year. Our long-range plan values for Sales, Segment Operating Profit (see Appendix A for definition of Non-GAAP terms) and Cash from Operations are set forth in the 2020 guidance we provided publicly to investors in January 2020 and represent the target level (100% performance) for each of these metrics. For the purposes of assessing performance under our annual incentive program, Cash from Operations results are adjusted for unplanned pension contributions, so that the impact on incentive compensation is not a factor in the decision to make the additional pension contribution. We established maximum (200% performance) and threshold payout levels (50% performance) around these targets based on a review of historical performance against long-range plan commitments for each of the three annual incentive metrics, which ensures the appropriate level of rigor on each of the threshold, target and maximum goals. We used straight-line interpolation between target and both maximum and minimum historical performance levels. The Compensation Committee reviewed the methodology and the targets established as part of its annual process during 2020.
2020 Financial Measures
Weight
2020 Goals ($)
Results ($)
Calculated Payout
Weighted Payout
Sales20%62,750 - 64,250M65,398M160%32%
Segment Operating Profit*40%6,800 - 6,950M7,152M156%63%
Cash from Operations**40%≥ 7,600M9,208M200%80%
Financial Payout Factor
175 %
*    See Appendix A for definition of Non-GAAP terms.
**    Reported Cash from Operations for fiscal 2020 was $8.2B, which has been adjusted by $1.0 billion for unplanned pension contributions.
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Executive Compensation
Strategic & Operational Assessment (30% Weight). Our strategic and operational performance assessments are evaluated differently than financial performance assessments. For the 2020 performance year, a broad set of goals were established for our strategic and operational commitments at the beginning of the year, including goals tied to the development of new business, program performance, technological innovation, and executing on sustainability initiatives, such as achievement of pre-established measures and targets related to diversity and talent management. The strategic and operational performance goals are not measured against quantitative performance criteria for each goal, because some are aspirational, cannot be forecasted reliably or are qualitative in nature. When determining the overall payout factor, the Compensation Committee considers both quantitative and qualitative results and applies discretion when evaluating performance in totality. The strategic and operational performance goals and results are set forth below.
2020 Strategic & Operational Goals Summary
Assessment Summary Highlights
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Focus Programs
Shape and secure key Focus Program wins and achieve Keep Sold Program milestones
Orders of $68.1 billion and year-end backlog of $147.1 billion
Achieved 92% keep sold program milestones
79% win rate on programs throughout the year
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International
Continue international expansion through increased orders and sales
$16.4B of net sales to international customers (including foreign military sales)
Continued strong international interest in our programs and focus on strengthening international relationships
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Mission Success
Achieve Mission Success milestones
Achieved objectives for key metrics while mitigating external factors with completion of 95% targeted Mission Success events
Key program milestones achieved throughout the Corporation in all customer operational domains
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Program Performance
Execute programs to achieve customer commitments and increase stockholder value
Implemented new Corporate Focus Supplier (CFS) initiative
Returned $3.9 billion of Cash from Operations to our stockholders through dividends and share repurchases
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Portfolio Shaping / Enterprise Initiatives
Assess portfolio on an ongoing basis to maximize stockholder value, which includes M&A activity, streamlining operations and other enterprise initiatives
Pursued strategic acquisitions and partnerships to drive business growth
Exceeded affordability goals and realized corporate overhead savings
Achievement or substantial progress on 2020 Sustainability Management Plan goals relating to: Business Integrity, Product Impact, Employee Wellbeing, Resource Efficiency and Information Security
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Innovation
Execute technology and digital transformation strategy, ensuring robust innovation, collaboration and strategic partnering
Launched 21st Century Warfare initiative, integrating advanced concepts like direct energy and hypersonics with maturing /commercial technology like advanced communications / 5G and Artificial Intelligence
Continued implementation of transformational digital capabilities and infrastructure across the enterprise
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Talent Management
Attract, develop and retain the workforce needed to deliver commitments to customers and stockholders
Evolved the way we work and developed infrastructure for future success
Successfully executed diversity and inclusion initiatives with respect to representation, attrition, external hiring, and leadership
Achieved business objectives in 19 union negotiations
Strategic & Operational Payout Factor
180 %
The Compensation Committee reviewed these accomplishments and recommended this factor to recognize the Corporation’s strong operational performance in a highly competitive environment while undertaking and executing major strategic initiatives.
www.lockheedmartin.com2021 Proxy Statement
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Executive Compensation
Summary of Annual Incentive Payout Calculations
For 2020, the Compensation Committee approved an annual incentive target of 175% of base salary for Mr. Taiclet, aligning with the 2020 market rates (50th percentile). Ms. Hewson's and Mr. Possenriede's annual incentive target percentage did not change and remained at 175% and 105% of base salary, respectively. Mr. St. John's target of 105% of base salary also did not change in connection with his appointment as COO during 2020. Our business segment EVPs' targets were set to 105% of their base salaries. The final payout factor and payout amounts for each of our NEOs, as determined by the Board, are shown below:
Summary of 2020 Enterprise Performance & Overall Payout Factor
Weight
2020 Factors
Weighted Payout
Financial70%175%123%
Strategic & Operational30%180%54%
Overall Payout Factor
177 %
Base SalaryTarget % of SalaryTarget AwardXOverall Payout=Payout
NEO($)(%)($)Factor($)
Mr. Taiclet*1,700,0001751,636,250177%2,896,200
Ms. Hewson1,855,0001753,246,2505,745,900
Mr. Possenriede935,000105981,7501,737,700
Mr. St. John935,000105981,7501,737,700
Mr. Ambrose935,000105981,7501,737,700
Ms. Evans935,000105981,7501,737,700
*Mr. Taiclet's annual incentive target and payout are prorated based on time served during fiscal year 2020.
2020 Long-Term Incentive Compensation
The following summary shows the 2020 LTI compensation mix for the CEO and other NEOs and principal terms of the awards.
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PSUs (distributed in common stock):
Performance Measures: Three-year Relative TSR (50%), ROIC (25%) & Performance Cash (25%)
Caps:
200% of target shares
Relative TSR measure capped at 100% if the Corporation’s TSR is negative
Value capped at 400% of stock price on date of grant times shares earned
RSUs (distributed in common stock):
Vesting Schedule: RSUs cliff vest 100% three years after the grant date
3-Year LTIP (paid in cash):
Performance Measures: Three-year Relative TSR (50%), ROIC (25%) & Performance Cash (25%)
Caps:
200% of target amount
Relative TSR measure capped at 100% if the Corporation’s TSR is negative
Individual payout capped at $10 million
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Executive Compensation
In determining the appropriate level of equity grants for 2020, the Compensation Committee took into consideration the long-term incentive market rate (50th percentile) along with a variety of other factors, including the number of awards outstanding and shares remaining available for issuance under the Corporation’s equity incentive plans, the number of shares that would be issued under contemplated awards over the range of potential performance achievement, the total number of the Corporation’s outstanding shares, the resulting implications for stockholder dilution and the number of shares granted to our executives year-over-year.
PSU Awards (50% of the LTI award)
PSU awards are calculated by multiplying the overall target LTI award value by the 50% weighting assigned to the PSU portion. The number of PSUs granted is determined based on the closing stock price of the Corporation's common stock on the NYSE on the date of grant. Each NEO’s PSU target number of shares is determined as of the grant date of the award, and the actual number of shares earned at the end of the period is calculated based on our performance measured against the three financial metrics as follows: 50% Relative TSR, 25% ROIC and 25% Performance Cash.
The number of shares granted at the end of the cycle can range from 0% to 200% of the applicable target number of shares. If average TSR is negative at the end of the performance cycle, the payout factor for the Relative TSR measure is capped at 100%. In addition, the maximum value that can be earned under a PSU award is 400% of the stock price on the date of grant times the shares earned. The award calculation is formulaic pursuant to the provisions defined in the award agreement, and no adjustment can be made to the final number of shares granted, which is determined based on the performance outcomes relative to our pre-set goals. Participants also accrue deferred dividend equivalents on the shares earned, which are paid in cash following vesting of the underlying shares.
RSU Awards (30% of LTI award)
RSU awards are calculated by multiplying the overall target LTI award value by the 30% weighting assigned to the RSU portion.
The number of RSUs granted is determined based on the closing stock price of the Corporation's common stock on the NYSE on the date of grant. Deferred dividend equivalents are accrued during the vesting period and paid in cash following the vesting of the underlying shares.
LTIP Awards (20% of the LTI award)
LTIP awards are cash-based and are calculated by multiplying the overall target LTI award value by the 20% weighting assigned to the LTIP portion. Each NEO’s LTIP target is determined at the time of grant, and the actual award earned at the end of the three-year performance period is calculated based on the same performance measures as those used for the PSUs (50% Relative TSR, 25% ROIC and 25% Performance Cash).
Payouts can range from 0% to 200% of the applicable target. If average TSR is negative at the end of the performance cycle, the payout factor for the Relative TSR measure is capped at 100%. The award calculation is formulaic pursuant to the provisions defined in the award agreement, and no adjustment can be made to the final payout factor, which is determined based on the performance outcomes relative to our pre-set goals. For the 2020-2022 LTIP grants, any amount payable to a single participant in excess of $10 million will be forfeited.
Selection of LTI Performance Measures
The LTI performance metrics approved by the Compensation Committee are measures that we believe most effectively support our long-term business and strategic goals and directly tie the long-term goals of our executive leadership team to the interests of our stockholders.
The measurements used for the financial component of our 2020 annual incentive plan (Sales, Segment Operating Profit and Cash from Operations) also serve as the foundation for achieving our long-term goals such that we must consistently achieve or exceed the Corporation’s annual goals in order to achieve our LTI goals.
The selected LTI performance metrics consist of Relative TSR (50% weight), ROIC (25% weight) and Performance Cash (25% weight). We chose these three metrics because we believe they represent the best measures of value creation for the Corporation over a long-term period. We also applied equal weighting to the market-based measure of value creation, TSR, to what we believe are the best internal measures of value creation, Performance Cash and ROIC.
www.lockheedmartin.com2021 Proxy Statement
51


Executive Compensation
We selected Relative TSR to measure our performance against our industry peers, including the S&P Aerospace Index companies and other large publicly traded U.S. Government contractors. Because every industry faces different challenges and opportunities, we believe that comparing our TSR against peers facing a similar business environment is preferred to comparisons outside our industry.
Accordingly, the Relative TSR Comparators for the 2020-2022 performance cycle are shown below:
2020-2022 Relative TSR Comparators
Arconic Inc.
Honeywell International Inc.
Textron Inc.
Booz Allen Hamilton Holding Corporation
Huntington Ingalls Industries, Inc.
The Boeing Company
CACI International Inc.
Leidos Holdings, Inc.
TransDigm Group Incorporated
General Dynamics Corporation
Northrop Grumman Corporation
Raytheon Technologies Corporation*
L3Harris Technologies
Science Applications International Corp.
*In April 2020, Raytheon Company and United Technologies Corporation merged to form Raytheon Technologies Corporation.
Because the Relative TSR index is not perfectly aligned with the businesses in which Lockheed Martin operates and because any number of macro-economic factors that could affect market performance are beyond the control of the Corporation, we use ROIC and Performance Cash as internal measures that are directly affected by management’s decisions. ROIC measures how effectively we employ our capital over time, while Performance Cash provides the means for investment or value creation. By including a cash measure in both our annual and long-term incentive plans, the plans mitigate the risk of short-term cash strategies that do not create long-term value.
In tandem, we believe that these metrics drive the behaviors of our management team in ways that are intended to create the most value for our stockholders.
Setting Performance Goals for PSUs and LTIP
Our long-range planning process is used to establish the target (100% level of payment) for the Performance Cash and ROIC metrics in the PSU and LTIP grants. In setting minimum and maximum levels of payment, we reviewed historical levels of performance against long-range plan commitments, and conducted sensitivity analyses on alternative outcomes focused on identifying likely minimum and maximum boundary performance levels. Levels between 100% and the minimum and maximum levels were derived using linear interpolation between the performance hurdles. The specific Performance Cash and ROIC target values for the 2020-2022 PSU and LTIP plans are not publicly disclosed at the time of grant due to the proprietary nature and competitive sensitivity of the information. However, the method used to calculate the awards will be based on actual performance compared to the Corporation’s 2020-2022 targets, which use straight-line interpolation between points.
The individual award agreements require pre-specified adjustments to ensure that the ultimate payouts are not impacted to the benefit or detriment of management by specified events that would result in a difference between planned and actual financial results, such as unplanned pension contributions, changes in accounting (GAAP) standards, the impact of an acquisition or divestiture valued at more than $1 billion, or changes in tax law or interpretations related to amortization for research and experimental expenditures.
In September 2020, the Compensation Committee approved changes to current and future LTI award agreements to allow the Corporation to adjust for the impact, if any, from the CARES Act provisions on payroll tax deferrals and progress payment class deviation changes. The Compensation Committee approved these amendments to outstanding long term incentive award agreements to ensure that the ultimate payouts are not impacted to a participant’s benefit or detriment by government stimulus and assistance programs enacted in response to COVID-19. No adjustments were made to our 2018-2020 results given the Corporation used the accelerated progress payments from the U.S. Government and payroll tax benefit to accelerate payments to our suppliers during 2020. Our deferral of payroll taxes under the CARES Act from 2020 to future periods now will not have the unintended effect of increasing our cash performance during 2020 (and corresponding decrease in cash in future periods) and the acceleration of progress payments to us by the U.S. Government under the CARES Act will also not have the unintended effect of increasing our cash performance during 2020. The amendments adopted in September 2020 also allow the Corporation to adjust for non-cash settlement charges associated with pension risk transfer transactions. We have in recent years entered into pension risk transfer transactions to manage our pension liabilities through the purchase of group annuity contracts for portions of our outstanding defined benefit pension obligations and future transactions could result in a non-cash settlement charge to earnings that should not affect the payout to management.
The Compensation Committee does not have discretion to adjust the results of the PSU and LTIP awards beyond the adjustments specified in the award agreements.
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Executive Compensation
2020-2022 Performance Goals
Relative TSR (50%)*Performance Cash (25%)ROIC (25%)
Percentile RankPayout FactorGoalsPayout FactorGoalsPayout Factor
75th – 100th200%Plan + ≥ $2.0B200%Plan + ≥ 160 bps200%
60th150%Plan + $1.5B175%Plan + 120 bps175%
50th100% (Target)Plan + $1.0B150%Plan + 80 bps150%
40th50%Plan + $0.5B125%Plan + 40 bps125%
35th25%Plan100%Plan100%
< 35th0%Plan  - $0.2B75%Plan  - 10 bps75%
*    2020-2022 Relative TSR performance is measured against our industry peers in the S&P 500 Aerospace & Defense Index (S&P Aerospace) and other publicly traded U.S. Government Contractors, totaling 14 industry peers (See Page 52 for Relative TSR Comparators).
Plan  - $0.5B50%Plan  - 20 bps50%
Plan  - $0.7B25%Plan  - 30 bps25%
Below Plan  - $0.7B0%Below Plan  - 30 bps0%
2018-2020 LTIP and PSU Awards
The cash-based LTIP and share-based PSU payouts for the three-year performance period ended December 31, 2020 shown below were calculated by comparing actual corporate performance for each metric for the period January 1, 2018 through December 31, 2020, against a table of payment levels from 0% to 200% (with the 100% payout level being considered target) established at the beginning of the performance period in February 2018. Except as discussed above in relation to government stimulus and assistance programs enacted in response to COVID-19 and pension risk transfer transactions, we have not made any modifications to our compensation programs or to our targets or goals, in response to COVID-19 or the CARES Act.
Measure
Performance Target
Performance Result
Weighting
Payout Factor
Relative TSR
50th Percentile
78th Percentile
50%200%
Performance Cash*$17.0B$20.9B25%200%
ROIC*20.7%23.1%25%200%
*    See Appendix A for definition of Non-GAAP terms.
2018-2020 LTIP Payouts
Based on a weighted payout factor of 200%, the following table shows the payouts under the 2018-2020 LTIP made in 2021.
NEO*Target ($) Payout ($)
Ms. Hewson2,447,0004,894,000
Mr. Possenriede**300,000600,000
Mr. St. John720,0001,440,000
Mr. Ambrose720,0001,440,000
Ms. Evans**380,000760,000
*    Excludes Mr. Taiclet who did not receive a 2018 - 2020 LTIP award.
**    Reflects targets and payouts associated with the 2018-2020 awards received in prior Vice President roles.
2018-2020 PSU Awards
The 2018-2020 target PSU award value was allocated to each performance measure based on the pre-defined weightings, namely 50% to Relative TSR, 25% to ROIC, and 25% to Performance Cash. PSU awards earned are calculated by multiplying the payout factor for each performance metric by the target number of units for each performance metric. The actual value realized by the NEOs at vesting also depends on our stock price, which may be higher or lower than the grant date fair market value.
2018-2020 Target PSUs (#)Total Shares
Distributed/Earned
NEO**Relative TSRPerformance Cash*ROIC*
Ms. Hewson7,2704,3134,31331,792
Mr. Possenriede***905353392
Mr. St. John2,1401,2691,2699,356
Mr. Ambrose2,1401,2691,2699,356
Ms. Evans***1146767472
*    See Appendix A for definition of Non-GAAP terms.
**    Excludes Mr. Taiclet who did not receive a 2018 - 2020 PSU award.
***    Reflects targets and payouts associated with the 2018-2020 awards received in prior Vice President roles. For Ms. Evans, shares earned were prorated to reflect time served as an active employee during the three-year vesting period.
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Executive Compensation
2021 Incentives
2021 Annual Incentive Goals
There were no changes to our annual incentive plan design for the 2021 performance year, although the Board of Directors, acting upon the recommendation of the Compensation Committee, in February 2021 approved the Lockheed Martin Corporation 2021 Management Incentive Compensation Plan to replace the existing MICP. The 2021 MICP eliminates provisions in the prior MICP that were intended to qualify MICP payments as performance-based compensation subject to an exemption to the deductibility limit of Section 162(m) of the Internal Revenue Code, which was repealed in 2017. The 2021 MICP also aligns the pro-ration provisions to our broad-based incentive plan, which provides for daily pro-ration of payouts.
The Compensation Committee approved the key corporate commitments set forth below for purposes of assessing 2021 performance.
2021 Financial Goals (Weight 70%)
The financial commitments are consistent with our long-range plan commitments, and are the same ranges we provided as public guidance in January 2021 in our year-end earnings release. These commitments for 2021 are set forth below.
2021 CommitmentsWeighting2021 Goals ($)
Sales20%67,100 - 68,500M
Segment Operating Profit40%7,355 - 7,495M
Cash from Operations40% ≥ 8,300M
For the purposes of assessing performance under our annual incentive program, Cash from Operations results are adjusted for unplanned pension contributions so that the impact on incentive compensation is not a factor in the decision to make additional pension contributions.
2021 Strategic and Operational Goals (Weight 30%)
Focus Programs: Shape and secure Key Focus Program wins and achieve Keep Sold Program milestones
International: Continue international expansion through increased orders and sales
Mission Success: Achieve Mission Success milestones
Enterprise Performance: Achieve customer commitments and increase stockholder value through program performance, product deliveries, supply chain performance, affordability and sustainability
Portfolio Shaping / Enterprise Initiatives: Assess the Corporation portfolio on an ongoing basis to maximize stockholder value, including M&A activity, cost competitiveness and other Enterprise-wide initiatives
Innovation: Execute 21st Century Warfare strategy to include technology development, demonstrations, and commercial partnerships. Drive infrastructure modernization, technology development and functional capability adoption to digitally transform the enterprise
Talent Management: Attract, develop and retain the workforce needed to deliver commitments to customers, employees and stockholders
2021 Long-Term Incentive Award Opportunities
For 2021, the LTI award mix is the same as last year and for the CEO and other NEOs is allocated 50% toward PSUs, 20% toward LTIP and 30% toward RSUs.
The terms and performance measures of the 2021-2023 PSUs and LTIP awards are similar to the 2020-2022 awards (see pages 51-53). The 2021-2023 PSU and LTIP award agreements require specified adjustments to ensure that the ultimate payouts are not impacted to the benefit or detriment of management by specified events that would result in a difference between planned and actual financial results, including the impact of CARES Act provisions on payroll tax deferrals and progress payment changes, pension risk transfer transactions, or changes in tax law or interpretations related to amortization for research and experimental expenditures.
In February 2021, the Compensation Committee approved a new Relative TSR Comparators peer group beginning with the 2021-2023 performance cycle. While the S&P Aerospace & Defense peers and other large government contractors has been, in our judgment, the preferred peer group against which to compare our Relative TSR, it has been impacted by multiple business transactions and exhibited significant volatility in the number of its constituents over the past several years. To moderate the potential effect of corporate
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Executive Compensation
transactions on the peer group, the Compensation Committee approved an expanded peer group of 27 companies that meet the following parameters as of January 1, 2021:
Global Industry Classification Standard - GICS 2010 - Capital Goods
Listed on a major US index
Revenue >$10B and Market cap >$5B
Other Compensation Matters
Our Use of Independent Compensation Consultants
The independent compensation consultant provides important information about market practices, the types and amounts of compensation offered to executives generally and the role of corporate governance considerations in making compensation decisions. The Compensation Committee’s charter authorizes it to retain outside advisors that it believes are appropriate to assist in evaluating executive compensation.
For 2020, the Compensation Committee continued to retain Meridian as an independent compensation consultant. In connection with its retention of Meridian, the Compensation Committee considered the following factors in assessing Meridian’s independence:
Meridian’s services for the Corporation are limited to executive and director compensation.
The compensation paid to Meridian is less than 1% of Meridian’s revenues.
Meridian has business ethics and insider trading and stock ownership policies, which are designed to avoid conflicts of interest.
Meridian employees supporting the engagement and their immediate family members do not own Lockheed Martin securities.
Meridian employees supporting the engagement have no business or personal relationships with members of the Compensation Committee or with any Lockheed Martin executive officer.
At its February 2021 meeting, the Compensation Committee renewed the engagement of Meridian. At that time, Meridian confirmed the continuing accuracy of each of the factors described above.
The nature and scope of Meridian’s engagement was determined by the Compensation Committee and not limited in any way by management.
Policy Regarding Timing of Equity Grants
We have a corporate policy statement concerning the grant of equity awards. Under that policy:
The Compensation Committee is responsible for determining the grant date of all equity awards to executive officers.
No equity award may be backdated. A future date may be used if, among other reasons, the Compensation Committee’s action occurs in proximity to the release of earnings or during a trading blackout period.
Proposed equity awards are presented to the Compensation Committee in February of each year. Off-cycle awards may be considered in special circumstances, which may include hiring, retention or acquisition transactions.
In addition, our equity plans explicitly prohibit repricing of stock options or paying cash for underwater stock options.
Clawback and Other Protective Provisions
The Governance Guidelines include a clawback policy, which provides that if the Board of Directors determines that an officer’s intentional misconduct, gross negligence or failure to report such acts by another person was a contributing factor in requiring us to restate any of our financial statements or constituted fraud, bribery or another illegal act (or contributed to another person’s fraud, bribery or other illegal act) which adversely impacted our financial position or reputation, then the Board shall take such action as it deems in the best interest of the Corporation and necessary to remedy the misconduct and prevent its recurrence. Among other actions, the Board may seek to recover or require reimbursement of any amount awarded to the officer after January 1, 2008, in the form of an annual incentive bonus or LTI award.
In February 2019, the Compensation Committee enhanced the clawback policy to ensure that it has the most appropriate level of discretionary authority and powers to protect the Corporation and its stockholders' interests. These enhancements were the result of the Compensation Committee's consideration of a number of highly publicized events involving high-level executives of other companies. Following the Compensation Committee’s proactive analysis of the Corporation's policies in light of these events, the
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Executive Compensation
Compensation Committee amended the clawback policy to add two additional situations in which incentive compensation paid to an officer could be clawed back: (1) an officer’s intentional misconduct or gross negligence that causes severe reputational or financial harm to the Corporation and (2) an officer’s misappropriation of Lockheed Martin Proprietary Information that causes, or is intended to cause, severe reputational or financial harm to the Corporation. These additional situations apply to incentive compensation awarded in 2019 and thereafter.
The clawback policy is incorporated into our annual incentive plan and in the award agreements for the long-term incentive awards, covering all variable incentive compensation. There were no events requiring Board consideration of a clawback action during 2020. In the event the Board recoups incentive compensation under the policy, management intends to disclose the aggregate amount of incentive compensation recovered, so long as the underlying event has already been publicly disclosed in our filings with the SEC. This disclosure would appear in the proxy statement following any such Board action and would provide the aggregate amount of recovery for each event if there is more than one applicable event. The award agreements for the NEOs also contain post-employment restrictive covenants. The post-employment restrictions were incorporated into all executive-level award agreements beginning in 2011, and compensation awarded under those agreements may be subject to clawback in the event an executive breaches any of the post-employment restrictive covenants.
Anti-Hedging and Pledging Policy
Our policies prohibit hedging and pledging of Lockheed Martin stock by all directors, officers and employees. Under our policies, Lockheed Martin directors, officers and employees may not purchase or sell derivative securities based on Lockheed Martin common stock or other Lockheed Martin securities. This policy also prohibits hedging or monetization transactions such as forward-sale contracts, equity swaps, collars and exchange funds, that are designed to hedge or offset any decrease in the market value of equity securities, lock in then-current market gains without the sale of the underlying security, or transactions in which the director or employee may divest aspects of the risks and rewards of ownership. This policy applies both to shares of Lockheed Martin common stock (1) that are granted to directors, officers or employees by Lockheed Martin as part of their compensation and (2) held, directly or indirectly, by directors, officers or employees.
Stock Ownership Requirements for Key Employees
To better align their interests with the long-term interests of our stockholders, we expect our officers (including the NEOs) and other members of management to maintain an ownership interest in the Corporation based on the following guidelines:
6x
base salary for CEO and Chairman
4x
base salary for Chief Financial Officer and Chief Operating Officer
3x
base salary for Executive Vice Presidents
2x
base salary for Senior Vice Presidents and Elected Vice Presidents
NEOs are required to achieve ownership levels within five years of assuming their role and must hold net shares from vested RSUs and PSUs and net shares from options exercised until the value of the shares equals the specified multiple of base salary. The securities counted toward their respective target threshold include common stock, unvested RSUs, and stock units under our 401(k) plans and other deferral plans. Unvested PSUs at target are not counted towards ownership levels. As of December 31, 2020, each of our NEOs had exceeded their respective ownership requirements.
chart-5c7237e9e15e409b8e41.jpg
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Executive Compensation
Benefit, Retirement and Perquisite Programs
We offer other compensatory arrangements to our NEOs. The purpose for these benefits is to ensure security of executives, provide assistance with business-related expenses, and be competitive with the other companies in our industry. Below is a summary of programs available to our NEOs. Further details are described in footnotes to the Summary Compensation Table on page 58.
Health, Welfare and Retirement Benefits. Our NEOs are eligible for savings, pension, medical, disability, and life insurance benefits under the plans available to salaried, non-union employees. We offer supplemental pension and savings plans to make up for benefits that otherwise would be unavailable due to Internal Revenue Service (IRS) limits on qualified plans. These plans are restorative and do not provide an enhanced benefit. We also offer a plan for the deferral of short-term and long-term cash performance incentive compensation. Pension and supplemental pension plans that the NEOs participate in were completely frozen effective January 1, 2020.