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 Registrant
Filed 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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March 11, 2020
Dear Fellow Stockholders:
You are cordially invited to attend Lockheed Martin's 2020 Annual Meeting of Stockholders on Thursday, April 23, 2020, at 8:00 a.m. EDT.
Celebrating 25 Years as Lockheed Martin
On March 15, 1995, Lockheed and Martin Marietta officially combined in a “merger of equals” to form Lockheed Martin. As we celebrate 25 years as a single company, I’m proud to report that Lockheed Martin has never been stronger. Both companies brought a rich heritage with roots that reach back to the early days of aviation, when Allan and Malcolm Lockheed and Glenn Martin founded their respective companies in 1912. These pioneering businesses developed some of the most innovative technologies of the 20th century. We are honored to have furthered this legacy over the past 25 years and we will continue to shape the future of aerospace and defense for decades to come.
Record 2019 Financial Performance
In 2019, Lockheed Martin delivered another year of outstanding financial performance for our stockholders. We increased net sales and net earnings by double digit percentages year-over-year, achieving new records of $59.8 billion and $6.2 billion, respectively. Our earnings per share reached $21.95, representing a 25 percent increase over 2018. In addition, we generated $7.3 billion in cash from operations after discretionary pension contributions of $1.0 billion and returned $3.8 billion in cash to stockholders through dividends and share repurchases. We were also pleased to end the year with a record backlog of $144 billion, setting the stage for continued success in 2020. For more detailed information on our financial results, please review our proxy statement and the enclosed 2019 Annual Report.
The Power of Our People
We recognize that in order to drive innovation and operational excellence, we must attract, develop, motivate, and retain world-class talent. Through the execution of our people strategy and management succession plan, we're working to expand our talent pipeline and build a workforce with the skills necessary to thrive in the workplace of the future. Our workforce development efforts are focused on ensuring that Lockheed Martin will maintain our leadership position in the industry and continue to provide our customers with innovative solutions to emerging challenges.
Commitment to Sound Corporate Governance
We are committed to implementing best practices in corporate governance to promote accountability to our stockholders. Board refreshment is an important element of our corporate governance framework. Over the past five years, we have added seven new independent directors, reducing our average director tenure to five years. Debra L. Reed-Klages became a director in November, further enhancing the diversity of our board. Debra’s international business leadership experience, combined with her expertise in risk management and environmental sustainability, make her an excellent addition to our team. Retired Chairman of the Joint Chiefs of Staff General Joseph F. Dunford, Jr. also joined our board in February 2020. General Dunford's experience in complex, global operations and risk management, including cybersecurity threats, is a tremendous asset and will enhance board oversight in key business areas. Following the 2019 annual meeting, our independent directors elected Dan Akerson to serve as the independent Lead Director. Dan is a proven leader who will continue to provide independent oversight and expert guidance to the board.
On behalf of the entire board of directors, I want to thank you for your continued investment in Lockheed Martin. Even if you plan to attend the annual meeting in person, we urge you to promptly cast your vote in accordance with the board's recommendations.
Sincerely,
 
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Marillyn A. Hewson
Chairman, President and
Chief Executive Officer
 
“As we celebrate the 25th anniversary of the Lockheed Martin merger, I’m proud to report that our company has never been stronger. In the decades to come, we will further the rich legacies of our heritage companies by continuing to shape the future of aerospace and defense around the world.”
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www.lockheedmartin.com
2020 Proxy Statement
1



Notice of 2020 Annual Meeting of Stockholders
 
Agenda
Board Recommendation
 
 
 
 
 
 
Item 1
Election of 12 directors
FOR 
each of the director- nominees
 
Logistics
When:
Thursday, April 23, 2020, 8:00 a.m. EDT
Where:
Lockheed Martin Center for Leadership
Excellence Auditorium
6777 Rockledge Drive
Bethesda, MD 20817
Who Can Vote:
You can vote if you were a stockholder of record on February 24, 2020.
Item 2
Ratification of the appointment of Ernst & Young LLP as our independent auditors for 2020
FOR
 
Item 3
Advisory vote to approve the compensation of our named executive officers (Say-on-Pay)
FOR
 
Item 4
Management proposal to approve the Lockheed Martin Corporation 2020 Incentive Performance Award Plan
FOR
 
Item 5
Consideration of a stockholder proposal, if properly presented
AGAINST
 
 
Consideration of any other matters that may properly come before the meeting
 
 
How:
 
 
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Via the Internet:
www.investorvote.com
 
 
 
 
We have enclosed our 2019 Annual Report to Stockholders. The report is not part of the proxy soliciting materials for the 2020 Annual Meeting. The Proxy Materials or a Notice of Internet Availability were first sent to stockholders on or about March 11, 2020.
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. Submitting your proxy now will not prevent you from voting your shares at the meeting, as your proxy is revocable at your discretion.
Sincerely,
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Maryanne R. Lavan
Senior Vice President, General Counsel
and Corporate Secretary
March 11, 2020
 
 
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By Telephone:
In the United States, Canada and Puerto Rico, call 1-800-652-8683; other locations call 1-781-575-2300.
 
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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.
 
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In Person:
Attend the meeting to vote in person.
 
Admission to Meeting and Meeting Security: 
To obtain an admission ticket to attend the meeting, follow the advance registration instructions on page 96 of the Proxy Statement. Valid, government-issued photo identification is required at the meeting. All hand-carried items are subject to inspection and will be screened at the door. Cameras, cell phones, electronic devices, bags and briefcases will not be permitted in the meeting.
Important Notice Regarding the Availability of Proxy Materials for the 2020 Annual Meeting:
The 2020 Proxy Statement and 2019 Annual Report are available at www.edocumentview.com/LMT.
 

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Table of Contents
4
 
36
 
 
 
 
 
PROXY STATEMENT SUMMARY
5
 
36
 
 
 
10
 
36
10
 
37
10
 
56
11
 
61
11
 
63
17
 
64
 
 
 
64
19
 
66
Message from the Independent Lead Director
19
 
69
Board Leadership Structure
20
 
73
20
 
 
 
21
 
PROPOSAL 4: MANAGEMENT PROPOSAL TO APPROVE THE LOCKHEED MARTIN CORPORATION 2020 INCENTIVE PERFORMANCE AWARD PLAN
74
23
 
Board Role in Strategic Planning
23
 
Enterprise Risk Management
24
 
 
 
Management Succession Planning
24
 
EQUITY COMPENSATION PLAN INFORMATION

82
Board Oversight of our People Strategy
24
 
 
 
Effective Stockholder Engagement
25
 
DIRECTOR COMPENSATION
83
26
 
 
 
26
 
86
Director Overboarding Policy
26
 
27
 
 
 
Related Person Transaction Policy
27
 
DELINQUENT SECTION 16(A) REPORTS
87
Certain Relationships and Related Person Transactions of Directors, Executive Officers and 5 Percent Stockholders
28
 
 
 
 
PROPOSAL 5: STOCKHOLDER PROPOSAL TO ADOPT STOCKHOLDER ACTION BY WRITTEN CONSENT
88
Accountability to Stockholders
28
 
Majority Voting Policy for Director Elections
28
 
 
 
Stockholder Right to Amend Bylaws
29
 
90
Proxy Access
29
 
Stockholder Right to Call Special Meeting
29
 
 
 
No Poison Pill
29
 
96
 
 
 
 
 
30
 
97
 
 
 
97
33
 
 
 
 
107
33
 
 
109
35
 
 
 

www.lockheedmartin.com
2020 Proxy Statement
3


About Lockheed Martin
Lockheed Martin is a global security and aerospace company that employs 110,000 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  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
 
 
$23.7B
 
 
 
 
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Missiles and Fire Control  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
 
 
 
$10.1B
 
 
 
 
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Rotary and Mission Systems  Provides design, manufacture, service and support for a variety of military and commercial helicopters; ship and submarine mission and combat systems; mission systems and sensors for rotary and fixed-wing aircraft; sea- and land-based missile defense systems; radar systems; the Littoral Combat Ship; the Multi-Mission Surface Combatant; simulation and training services; and unmanned systems and technologies and supports the needs of customers in cybersecurity and delivers communications and command and control capability through complex mission solutions for defense applications
 
 
$15.1B

 
 
 
 
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Space  Engaged in the research and development, design, engineering and production of satellites, space transportation systems, and strategic, advanced strike and defensive systems. Space 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. Space is also responsible for various classified systems and services in support of vital national security systems
 
 
$10.9B
 
 
 
Our 2019 Performance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Record  
Sales of 
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Record  
Backlog level of 
P39_BACKLOGICON.JPG
 
Returned to Stockholders 
through dividends and 
share repurchases
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$59.8B
 
$144B
 
$3.8B
Our Culture
Every day, our employees come to work with one focus – our customers’ missions. Whether it’s protecting citizens or advancing the boundaries of science, these missions are some of the most important and challenging in the world. We bring an unwavering commitment to help our customers succeed, and it’s that sense of purpose and opportunity to make a difference in the world that drives us every day. We are focused on the research and development of high-performance aircraft, continuously seeking innovative, low-cost design and manufacturing strategies, delivering operational readiness for our customers’ missions to ensure continued relevancy for the life cycle of our products. Lockheed Martin’s success depends on our commitment to integrity. Our core values – Do What’s Right, Respect Others and Perform with Excellence – are fundamental to who we are and what we do.

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Proxy Statement Summary
The Board of Directors (the Board) of Lockheed Martin Corporation (the Corporation) is providing the Notice of 2020 Annual Meeting of Stockholders, this Proxy Statement and proxy card (the Proxy Materials) in connection with the Corporation's solicitation of proxies for the 2020 Annual Meeting (the Annual Meeting) to be held on April 23, 2020, at 8:00 a.m. EDT, at the Lockheed Martin Center for Leadership Excellence Auditorium, 6777 Rockledge Drive, Bethesda, Maryland 20817, and at any adjournment or postponement thereof.
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 12 Director-Nominees
The Board recommends a vote FOR each of the director-nominees.

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See pages 10-16 for further information.
 
 
 
 
 
 
 
 
 
Proposal
2
Ratification of the appointment of Ernst & Young LLP as our Independent Auditors for 2020
The Board recommends a vote FOR ratification of Ernst & Young LLP for 2020.

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See pages 33-34 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 36 for further information.
 
 
 
 
 
 
 
 
 
Proposal
4
Management Proposal to Approve the Lockheed Martin Corporation 2020 Incentive Performance Award Plan (the 2020 IPAP)
The Board recommends a vote FOR the approval of the 2020 IPAP.

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See pages 74-81 for further information.
 
 
 
 
 
 
 
 
 
Proposal
5
Stockholder Proposal to Adopt Stockholder Action by Written Consent
The Board recommends a vote AGAINST proposal 5.

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See pages 88-89 for further information.
 
 
 

www.lockheedmartin.com
2020 Proxy Statement
5


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.
 
 
 
 
 
                                Committees Member: Chair: C
 
 
Name, Age, Independence and Position
Tenure
Other Public Boards
 
Audit
Classified
Business and
Security
Management
Development and Compensation
Nominating
and Corporate
Governance
 
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Daniel F. Akerson, 71, Independent Lead Director 
Retired Chairman and Chief Executive
Officer of General Motors Company
2014
CommScope Holding Company, Inc.
 
 
 
 
C
 
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David B. Burritt, 64, Independent 
President and Chief Executive Officer of
United States Steel Corporation
2008
United States Steel Corporation
 
 
 
 
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Bruce A. Carlson, 70, Independent 
Retired United States Air Force General
2015
Benchmark Electronics Inc.
 
 
 
 
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Joseph F. Dunford, Jr., 64, Independent 
Retired United States Marine Corps General
Former Chairman of the Joint Chiefs of Staff
2020
None
 
 
 
 
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James O. Ellis, Jr., 72, Independent 
Retired President and Chief Executive Officer of
Institute of Nuclear Power Operations
2004
Dominion Energy, Inc.
 
C
 
 
 
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Thomas J. Falk, 61, Independent 
Retired Chairman and Chief Executive Officer of Kimberly-Clark Corporation
2010
None
 
C
 
 
 
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Ilene S. Gordon, 66, Independent 
Retired Chairman and Chief Executive Officer of
Ingredion Incorporated
2016
International Paper Company
 
 
C
 
 
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Marillyn A. Hewson, 66
Chairman, President and Chief Executive Officer of
Lockheed Martin Corporation
2012
Johnson & Johnson
 
 
 
 
 
 
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Vicki A. Hollub, 60, Independent 
President and Chief Executive Officer of
Occidental Petroleum Corporation
2018
Occidental Petroleum
Corporation
 
 
 
 
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Jeh C. Johnson, 62, Independent 
Partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP Former Secretary of Homeland Security
2018
None
 
 
 
 
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Debra L. Reed-Klages, 63, Independent 
Retired Chairman, President and Chief Executive Officer of Sempra Energy
2019
Chevron Corporation; Caterpillar Inc.
 
 
 
 
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James D. Taiclet, Jr., 59, Independent 
Chairman, President and Chief Executive Officer of
American Tower Corporation
2018
American Tower
Corporation
 
 
 
 
 
Board Diversity 
42%
Gender and Ethnic Diversity
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CEO Leadership Experience
 
8
Directors are current or former public company CEOs who add to the effectiveness of the Board through leadership experience in large, complex organizations and expertise in corporate governance, strategic planning and risk management.
 
4 Female Directors
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1 African-American Director
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Global Experience
 
Board Refreshment
7 New Directors in Past 5 Years
12
Directors have board leadership experience with multinational companies or internationally.
 
7 Directors 0-5 years
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Financial Experts
 
3 Directors 6-10 years
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7
Directors meet the Securities and Exchange Commission’s (SEC) criteria as independent “audit committee financial experts.”
 
2 Directors 10+ years
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Average Tenure
5 Years
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Government Experience
 
Average Age 65
4
Directors have served in senior government or military positions and provide industry experience and insight into our core customers and governments around the world.
 
2 50 – 60
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8 61 – 70
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Veterans of the U.S. Armed Forces
 
2 71 – 75
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6
Directors are military veterans.
 
Mandatory Retirement Age
75
 

www.lockheedmartin.com
2020 Proxy Statement
6


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
 
Boards should adopt structures and practices that enhance their effectiveness
    Annual election of directors
    Majority voting standard for uncontested director elections
    Directors not receiving majority support tender resignation to Board for consideration
    Market-standard proxy access right for stockholders
    No poison pill
    Fully disclose corporate governance practices
 
    11 of 12 directors are independent
    4 of our directors are women
    Significant Board refreshment
    Directors reflect a diverse mix of skills and experience
    All Board committees are fully independent
    Annual Board and committee self-assessments
    Board access to officers and employees
    2019 Board attendance greater than 98%
    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
 
Boards should have strong, independent leadership
    Proactive, year-round engagement with stockholders, including participation of independent Lead Director
    Engagement topics included Board refreshment, executive compensation, and environmental, social and governance (ESG) matters
 
    Empowered independent Lead Director
    Annual review of Board leadership structure
    Independent chairs of all Board committees 
Stockholders should be entitled to voting rights in proportion to their economic interest
 
Boards should develop management incentive structures that are aligned with the long-term strategy of the company
    One class of voting stock
    “One share, one vote” standard
 
    Compensation programs actively reviewed by the Board and include short- and long-term goals tied to the long-range plan and that underpin our long-term strategy
Board Effectiveness
Our Board takes a multi-faceted approach to continually assess Board composition and evaluate effectiveness.
Practices Contributing to Board Effectiveness
 
Ø    Identification of Diverse Board Candidates
 
Meaningful Refreshment
The Board has added 7 new directors in the past 5 years.
Skills enhanced in past 5 years:
    Enterprise risk management
    Environment, safety and health, and sustainability expertise
    Global organization experience
    Innovation, information technology and cybersecurity
    Industry and customer experience
 
 
 
 
 
 
Ø    Rotation of Board Committee Assignments
 
 
 
 
 
Ø    Annual Performance Assessments
 
 
 
 
 
Ø    Robust Onboarding and Continuing Education
 
 
 
 
 
Ø    Tenure and Overboarding Guidelines
 
Stockholder Outreach
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 2019, we contacted 47 of our largest institutional investors, stockholders and other significant stakeholders, representing over 45 percent of our outstanding shares, and invited them to engage on various topics including board composition, executive compensation, human capital management, ESG matters, as well as any other topics of interest. We engaged by telephone conference or written correspondence with over 30 of the stakeholders contacted, including stockholders representing approximately 39 percent of our outstanding shares.
 
30+
Engagements
25+
Stockholders
39%
Outstanding Stock (as of December 31, 2019)

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Proxy Statement Summary

Compensation Highlights
2019 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, backlog, segment operating profit, and earnings per share for the year, our 2019 annual and 2017-2019 long-term incentive plans paid out above the targets.
 
 
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1-, 3- and 5-Year Total Stockholder Returns
 
P10_TSRBAR.JPG
 
 
 
*
See Non-GAAP terms in Appendix B for an explanation of “Segment Operating Profit,” “Return on Invested Capital (ROIC),” and “Performance Cash” and our forward-looking statements concerning future performance or goals for future performance.
Compensation Best Practices
 
 
 
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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
    Incentive payouts deteriorate more rapidly between minimum and target as compared to target and maximum
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


www.lockheedmartin.com
2020 Proxy Statement
8


Proxy Statement Summary

Enterprise Risk and Sustainability
Sustainability Governance Structure
We take an integrated approach to managing a spectrum of corporate culture, ethics and business integrity, governance and sustainability 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, environmental stewardship, corporate culture, philanthropy, workforce diversity, health and safety.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 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
 
 
 
P9_GOVSTRUCTURE.JPG
 
Relevant Issues and Strategic Priorities
Through 2020, we are focusing on five core sustainability issues and objectives, set forth below. These five core issues include ESG topics that represent stakeholder priorities and drivers of long-term value creation. In 2019, we underwent a core issues assessment and surveyed our stakeholders to inform our sustainability priorities beyond 2020. We also established the next generation of our Go Green environmental stewardship goals. Refer to page 32 for further details.
 
 
P31_CORESUSTAINABILITY.JPG
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Our independent directors who serve on the Governance Committee review performance against the Sustainability Management Plan (SMP), a set of targets that correspond to objectives associated with our five core issues listed above. 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 (www.lockheedmartin.com/en-us/who-we-are/sustainability.html).
 
 
 
 
 
 
 
 
 
 
 

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Proposal
1
Election of Directors
WHITEBG_CHECKICON.JPG
•    Diverse slate of directors with broad leadership and customer experience.
•    All nominees are independent, except the Chairman.
•    Average director tenure is five years with seven 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. 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. Diversity in skills and backgrounds ensures that the widest range of options and viewpoints are expressed in the boardroom.
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 oversight of the Corporation, 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.
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CEO LEADERSHIP EXPERIENCE
8
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SENIOR GOVERNMENT / MILITARY EXPERIENCE
6
CEO public company leadership that contributes to the understanding and oversight of large complex organizations
 
Contributes to an understanding of our customers and the ability to understand policy issues
 
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ENVIRONMENTAL, SAFETY & SUSTAINABILITY
6
P12_INTLEXPERIENCEICON.JPG
GLOBAL EXPERIENCE
12
Contributes to the oversight and commitment to our environmental, safety and sustainability initiatives
 
Contributes to the understanding of operations and business strategy abroad
 
P12_HUMANCAPITALICON.JPG
HUMAN CAPITAL MANAGEMENT
12
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ENGINEERING, TECHNOLOGY & INNOVATION

6
Contributes to our ability to attract, motivate and retain a highly qualified workforce, including executives
 
Contributes to the understanding of key technology imperatives
 
P12_FINEXPERTICON.JPG
FINANCIAL EXPERT
7
P12_RISKMGTICON.JPG
RISK MANAGEMENT
12
Meets the Securities and Exchange Commission's (SEC) criteria as an independent “audit committee financial expert”
 
Contributes to the identification, assessment and mitigation of risks
 
P12_MANUFACTURINGICON.JPG
MANUFACTURING
9
P12_CYBERSECURITYICON.JPG
CYBERSECURITY / INFORMATION TECHNOLOGY
5
Contributes to the understanding of the challenges of complex manufacturing
 
Contributes to the understanding and oversight of cybersecurity threats and digital transformation
 

10
FOOTER_LOGO.JPG


Proposal 1: Election of Directors

Board Attendance
In 2019, the Board met a total of eight times. All directors on the Board during 2019 attended more than 75 percent of the total Board and committee meetings to which they were assigned and overall attendance was greater than 98 percent. Board members are encouraged to attend the annual meeting of stockholders and nine of ten incumbent directors attended the 2019 annual meeting.
Director-Nominees
Daniel F. Akerson
Independent Lead Director
Director since 2014
 
 
 
 
 
 
 
 
 
 
 
 
P2320_AKERSONBIOPHOTO.JPG
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. He previously served on the board of directors of KLDiscovery Inc. from December 2019 until January 2020.
Age 71
Current Committees
    Executive
    Nominating and Corporate Governance, Chair
Other Current Public Boards
CommScope Holding Company, Inc.

 
 
 
Skills, Qualifications and Core Competencies
 
P13_ACKERSONSKILLSICON.JPG
    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

David B. Burritt
Independent Director
Director since 2008
 
 
 
 
 
 
 
 
 
 
 
 
P2336_BURRITTBIOPHOTO.JPG
Biography
President and Chief Executive Officer of United States Steel Corporation since May 2017. Mr. Burritt also was named to United States Steel Corporation's board of directors at that time. Mr. Burritt previously served as President and Chief Operating Officer of United States Steel Corporation 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.
Age 64
Current Committees
    Audit
    Nominating and Corporate Governance
Other Current Public Boards
United States Steel Corporation
 
 
 
Skills, Qualifications and Core Competencies
 
P13_BURRITTSKILLSICON.JPG
    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 United States Steel Corporation and CFO and Controller at Caterpillar Inc.
    Over 40 years’ experience with the demands and challenges of the global marketplace from his positions at United States Steel Corporation and Caterpillar Inc.

11
FOOTER_LOGO.JPG


Proposal 1: Election of Directors


Bruce A. Carlson
Independent Director
Director since 2015
 
 
 
 
 
 
 
 
 
 
 
 
P23_CARLSONBIOPHOTO.JPG
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.
Age 70
Current Committees
    Classified Business and Security
    Nominating and Corporate Governance
Other Current Public Boards
Benchmark Electronics Inc.
 
 
 
Skills, Qualifications and Core Competencies
 
P14_CARLSONSKILLSICON.JPG
    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

Joseph F. Dunford, Jr.
Independent Director
Director since 2020
 
 
 
 
 
 
 
 
 
 
 
 
DUNFORD_BIOPHOTO.JPG
Biography
Retired 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. Commissioned in 1977, General Dunford served as an infantry officer at all levels, including commanding the 5th Marine Regiment during Operation Iraqi Freedom.
Age 64
Current Committees
    Classified Business and Security
    Nominating and Corporate Governance
Other Current Public Boards
None
 
 
 
Skills, Qualifications and Core Competencies
 
P17_JOHNSONSKILLSICON.JPG
    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


www.lockheedmartin.com
2020 Proxy Statement
12


Proposal 1: Election of Directors

James O. Ellis, Jr.
Independent Director
Director since 2004
 
 
 
 
 
 
 
 
 
 
 
 
P2435_ELLISBIOPHOTO.JPG
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 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.
Age 72
Current Committees
     Audit
     Classified Business and
      Security, Chair
     Executive
Other Current Public Boards
Dominion Energy, Inc.
 
 
 
Skills, Qualifications and Core Competencies
 
P14_ELLISSKILLSICONA01.JPG
    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

Thomas J. Falk
Independent Director
Director since 2010
 
 
 
 
 
 
 
 
 
 
 
 
P143536_FALKBIOPHOTO.JPG
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.
Age 61
Current Committees
    Audit, Chair
    Executive
    Management Development and Compensation
Other Current Public Boards
None
 
 
 
Skills, Qualifications and Core Competencies
 
P15_FALKSKILLSICON.JPG
    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

13
FOOTER_LOGO.JPG


Proposal 1: Election of Directors


Ilene S. Gordon
Independent Director
Director since 2016
 
 
 
 
 
 
 
 
 
 
 
 
P243536_GORDONBIOPHOTO.JPG
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.
Age 66
Current Committees
    Audit
    Executive
    Management Development and Compensation, Chair
Other Current Public Boards
International Paper Company
 
 
 
Skills, Qualifications and Core Competencies
 
P15_GORDONSKILLSICON.JPG
    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

Marillyn A. Hewson
Chairman, President & CEO
Director since 2012
 
 
 
 
 
 
 
 
 
 
 
 
P16_HEWSONBIOA01.JPG
Biography
Chairman, President and Chief Executive Officer of Lockheed Martin since January 2014. Having served 37 years at Lockheed Martin in roles of increasing responsibility, Ms. Hewson held the positions of Chief Executive Officer and President from January 2013 to December 2013; and President and Chief Operating Officer from November 2012 to December 2012. Ms. Hewson formerly served as a director of DowDuPont Inc. from 2007 to March 2019.
Age 66
Current Committees
    Executive, Chair
Other Current Public Boards
Johnson & Johnson
 
 
 
Skills, Qualifications and Core Competencies
 
P16_HEWSONSKILLSICON.JPG
    Broad insight and knowledge into the complexities of global business management, strategic planning, finance, supply chain and leveraged services based on more than three decades of experience in executive and operational roles with the Corporation and in our industry
    Expertise in government relations, government contracting, manufacturing, marketing and human capital management
    Corporate governance and audit expertise derived from service on boards of other multinational corporations and nonprofit organizations

www.lockheedmartin.com
2020 Proxy Statement
14


Proposal 1: Election of Directors

Vicki A. Hollub
Independent Director
Director since 2018
 
 
 
 
 
 
 
 
 
 
 
 
P25_HOLLUBBIOPHOTO.JPG
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.
Age 60
Current Committees
    Management Development and Compensation
    Nominating and Corporate Governance
Other Current Public Boards
Occidental Petroleum Corporation
 
 
 
Skills, Qualifications and Core Competencies
 
P16_HOLLUBSKILLSICON.JPG
    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

Jeh C. Johnson
Independent Director
Director since 2018
 
 
 
 
 
 
 
 
 
 
 
 
P25_JOHNSONBIOPHOTO.JPG
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.
Age 62
Current Committees
    Classified Business and Security
    Nominating and Corporate Governance
Other Current Public Boards
None
 
 
 
Skills, Qualifications and Core Competencies
 
P17_JOHNSONSKILLSICON.JPG
    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

15
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Proposal 1: Election of Directors


Debra L. Reed-Klages
Independent Director
Director since 2019
 
 
 
 
 
 
 
 
 
 
 
 
BIOPHOTO_REEDKLAGES.JPG
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.
Age 63
Current Committees
    Audit
    Management Development 
and Compensation
Other Current Public Boards
Chevron Corporation
Caterpillar Inc.
 
 
 
Skills, Qualifications and Core Competencies
 
P17_REEDKLAGESSKILLSICON.JPG
    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

James D. Taiclet, Jr.
Independent Director
Director since 2018
 
 
 
 
 
 
 
 
 
 
 
 
P2636_TAICLETBIOPHOTO.JPG
Biography
Chairman, President and Chief Executive Officer of American Tower Corporation. Mr. Taiclet was appointed President and Chief Operating Officer in September 2001; named Chief Executive Officer in October 2003; and selected as Chairman of the Board in February 2004. 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.
Age 59
Current Committees
    Classified Business and Security
    Management Development and Compensation
Other Current Public Boards
American Tower Corporation
 
 
 
Skills, Qualifications and Core Competencies
 
P18_TAICLETSKILLSICON.JPG
    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


www.lockheedmartin.com
2020 Proxy Statement
16


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.
Effective November 1, 2019, the Board appointed Debra L. Reed-Klages to the Board and effective February 10, 2020, the Board appointed Joseph F. Dunford, Jr. to the Board (see Ms. Reed-Klages' and Mr. Dunford's biographies on pages 16 and 12, respectively). Using publicly available data and director networks, our internal executive search team compiled a list of prospective director candidates reflecting the Board's criteria, qualifications and experience, which was focused on identifying directors with relevant public company experience, global expertise, government experience and diverse perspectives given recent retirements. Ms. Reed-Klages and Mr. Dunford were identified from this source pool by the Chairman and the Governance Committee and were 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 included candidates with diverse backgrounds and the election of Ms. Reed-Klages further enhanced the Board's diversity.
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. 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 upon its recommendation, the Board approved the consolidation of the Strategic Affairs Committee into the Audit Committee effective immediately following the 2019 annual meeting.
 
 
 
 

17
FOOTER_LOGO.JPG


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:
 
 
1
Annual Written Questionnaire
Open-ended questions to solicit candid feedback. Topics covered include:
Board meeting content
Board culture
Board leadership structure
Board composition, selection and diversity
Potential skills gaps for identifying board candidates
Committee effectiveness
Evaluation of risks
Peer assessment
 
 
2
One-on-One Discussions with Independent Lead Director
Every few years, including in 2019, the independent Lead Director conducts separate, one-on-one discussions with each director to discuss any additional feedback or perspectives.
 
 
3
Committee/Board Private Sessions
The Governance Committee and each other committee and the full board review the results of the evaluations in private session. The board discussion is led by the independent Lead Director.
 
 
4
Feedback Incorporated
2018 and 2019 Committee consolidations
Moved oversight of cybersecurity (other than classified cyber) to the full Board
Added additional directors with CEO and senior military experience
New independent Lead Director and committee leadership selections
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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. 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 Tenure Guidelines
Mandatory Retirement Age
A director must retire at the annual meeting following his or her 75th birthday.
Term Limits
We do not have term limits for directors as we believe implementing term limitations may prevent the Board from taking advantage of insight that longer tenure brings.
Employment Change
Directors should expect to resign upon any significant change in principal employment or responsibilities.
Failed Election
Directors must offer to resign as a result of a failed stockholder vote under majority voting policy.

www.lockheedmartin.com
2020 Proxy Statement
18


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.
 
 
Message from the Independent Lead Director
The Board believes that having a strong, independent Lead Director role is important to sound corporate governance. I was elected in April 2019 upon the retirement of my predecessor in this role, Nolan Archibald. 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;
P2320_AKERSONBIOPHOTO.JPG
Daniel F. Akerson, Independent Lead Director
    determine the frequency and timing of executive sessions of non-management directors and report to the Chairman on all relevant matters arising from those sessions;
    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 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 a member of the Executive Committee 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.
In addition to my review of Board and committee agendas, the committee chairs also review and discuss the agendas for the meetings in advance of distribution of the agendas and related Board or committee material.
I look forward to continuing to work closely with our Chairman 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.

 
 

www.lockheedmartin.com
2020 Proxy Statement
19


Corporate Governance

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 model that best fits the then-current situation. As a result, the roles of Chairman and CEO have been split from time to time to facilitate leadership transitions, while at other times the roles have been combined. The Board believes that, at the present time, the Corporation is best served by allocating governance responsibilities between a combined Chairman and CEO and an independent Lead Director with robust responsibilities. Ms. Hewson's extensive knowledge of the Corporation and the aerospace and defense industry gained through her 37 years of experience in various executive leadership positions is valuable to the Board in the role as Chairman. This structure allows the Corporation to present a single face to our customers through the combined Chairman and CEO position while at the same time providing an active role and voice for the independent directors through the independent Lead Director.
In connection with the retirement of our former independent Lead Director, Nolan D. Archibald, at the 2019 annual meeting, the Governance Committee reviewed the current leadership structure and determined that it continues to provide effective independent oversight and to meet the needs of the Corporation. 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 support the generation of stockholder value over the long-term.
Each year, our Bylaws and 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 (NYSE) listing standards.
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 Chairman and 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.

www.lockheedmartin.com
2020 Proxy Statement
20


Corporate Governance

Committees of the Board of Directors
The Board has five standing committees: Audit, Classified Business and Security (CBS Committee), Executive, Management Development and Compensation (Compensation Committee) and Nominating and Corporate Governance (Governance Committee). 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.
Committee Consolidations
Effective immediately following the 2019 annual meeting, the Board's former Strategic Affairs Committee was consolidated into the Audit Committee, which followed the consolidation in 2018 of our Ethics and Sustainability Committee with our Governance Committee. Our recent committee consolidations have made our meetings more efficient by eliminating redundancies and providing more time for discussion of topics in the remaining committees. In addition, certain matters involving strategy that were previously covered by the Strategic Affairs Committee were determined to be matters that would be best covered by the full Board. The consolidation of the committees has not resulted in less coverage of the items within the jurisdiction of the consolidated committees or the Board and has not overburdened any committee. The Board believes the Board oversight and strategic guidance of the respective issues has been enhanced.
Messrs. Burritt, Ellis, Ralston and Taiclet served on the Strategic Affairs Committee until its consolidation with the Audit Committee in April 2019. There were no Strategic Affairs Committee meetings held in 2019.
Audit Committee
 
 
 
 
 
 
Members1:
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.
 
2019 Focus Areas
Meetings in 2019: 6
 
 
    Enterprise Risk Management and Internal Audit Plan Implementation
    Assessment of Critical Audit Matters Considered for Inclusion in Ernst & Young's 2019 Audit Report 
    Oversight of Ernst & Young and Transition of New Audit Partner
 
 
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 and capital expenditures. 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 35.
 
 
 
 
 
 
 
1    Mr. Akerson served on the Committee until April 2019; Mr. Ellis joined the Committee in April 2019; and Ms. Reed-Klages joined the Committee in November 2019.
 
 
 

21
FOOTER_LOGO.JPG


Corporate Governance

Classified Business and Security Committee
 
 
 
 
 
 
 
 
 
 
 
Members1:
James O. Ellis, Jr., Chair
Bruce A. Carlson
Joseph F. Dunford, Jr.
Jeh C. Johnson
James D. Taiclet, Jr.
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.
 
2019 Focus Areas
Meetings in 2019: 2
 
 
    Classified Business and Related Financials
    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.
 
 
 
 
 
1    Messrs. Akerson and Ralston served on the Committee until April 2019; Mr. Taiclet joined in April 2019; 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
James D. Taiclet, Jr.
All members of the Compensation Committee are independent within the meaning of the NYSE listing standards, applicable SEC regulations and our Governance Guidelines.
 
2019 Focus Areas
Meetings in 2019: 3
 
 
    Oversight of Human Capital Management
    Executive Succession Planning and Recruitment and Retention of Critical Talent
    Incentive Pay Linkage to Stockholder Interests and Long-Term Value Creation
 
 
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 36, “Compensation Discussion and Analysis (CD&A)” beginning on page 37 and “Other Compensation Matters” on page 52.
 
 
 
 
 
1    Mr. Akerson chaired, and Mr. Archibald served on the Committee until April 2019; Mr. Taiclet joined the Committee in April 2019; and Ms. Reed-Klages joined the Committee in November 2019.
 

www.lockheedmartin.com
2020 Proxy Statement
22


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.
 
2019 Focus Areas
Meetings in 2019: 4
 
 
    Oversight of Environmental, Social and Governance Matters
    Board Composition and Identification of New Director Candidates
    Board and Committee Effectiveness and Performance
    Board Responsiveness to Investor Feedback
 
 
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.
 
 
 
 
 
1    Mr. Archibald chaired, and Mr. Taiclet served on the Committee until April 2019; Mr. Akerson became chair, and Mr. Burritt joined the Committee in April 2019; and Mr. Dunford joined in February 2020.
 
 
Executive Committee
The Board also has an Executive Committee chaired by the Chairman and CEO, and including the independent Lead Director and the chairs of the other standing committees. The Executive Committee can act on certain limited matters for the full Board in intervals between meetings of the Board. The Executive Committee meets as necessary, and all actions by the Executive Committee are reported and ratified at the next Board meeting. The Executive Committee did not meet in 2019.
 
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 Chairman, 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;
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 31.
Management 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. Our CEO provides the Board with her views and recommendations on potential CEO and other senior management talent and reviews development opportunities for these leaders. CEO succession planning discussions are led by the independent Lead Director and the directors have direct access to and interaction with members of senior management and high potential future leaders as part of this succession planning. This includes informal and one-on-one settings to enable directors to personally assess potential candidates and cultivate future leaders. The Board of Directors maintains a succession plan for the CEO and other key members of management and has a contingency plan if the CEO were to depart unexpectedly.
The 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.
 
Board Oversight of our People Strategy
The Board is actively engaged in oversight of human capital management. 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. The Board also reviews our annual employee engagement survey results. The Board is updated on the Corporation’s People Strategy on an annual basis, which is refined based on business drivers, the changing internal and external environment, and the future of work. Board members also are active partners, engaging and spending time with our high potential leaders throughout the year at Board meetings and other events.

In 2019, Lockheed Martin transitioned from the term “Human Capital Management” to “People Strategy” which conveys our commitment to expanding our talent pipeline and critical skills to build our future workforce. Lockheed Martin's People Strategy is tightly aligned with our business needs and technology strategy. We continue to respond with agile solutions to internal and external environmental shifts, which includes delivering a robust pipeline of talent to support future business growth, remain competitive and to attract, develop, motivate and retain our workforce.
 

www.lockheedmartin.com
2020 Proxy Statement
24


Corporate Governance

Effective Stockholder Engagement
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. Accountability to our stockholders is an important component of the Corporation’s success. We recognize the value of building informed and meaningful relationships with our investors that promote further transparency and accountability. Our Governance Guidelines outline our stockholder engagement program.
We believe that proactive engagement with our stockholders can be an effective and impactful means to address stockholders' questions and concerns and to seek feedback on our policies and practices. Stockholders' views are continuously 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.
Topics discussed during engagements over the past year include:
the independent Lead Director's and Board's independent oversight of management
how the Board thinks about its composition and refreshment
the Board's role in overseeing strategy and human capital management
our commitment to sound compensation practices and pay-for-performance
how sustainability goals are linked to executive pay with pre-set metrics and goals under our annual incentive program
our equity grant practices and the proposed provisions of the new equity plan as described in Proposal 4
our integrated approach to managing corporate culture, ethics and business integrity, governance and sustainability
These investor and stakeholder discussions yielded valuable feedback that was incorporated into the Board's deliberations.
Stockholder Engagement Cycle
 
BLUEARROWRIGHT.JPG
 
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
 
 
BLUEARROWUP.JPG
 
BLUEARROWDOWN.JPG
 
BLUEARROWLEFT.JPG
 
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 company stock;
•    Majority voting for the election of directors and resignation procedures for directors who fail to receive a majority vote;
•    Process for director compensation review, specifically use of competitive data and input from independent compensation consultant; and
•    Stockholder engagement program; our independent Lead Director will consider requests to speak to investors and will designate (in consultation with the 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.

www.lockheedmartin.com
2020 Proxy Statement
26


Corporate Governance

Director Independence
All of our directors are independent under applicable NYSE listing standards, except Ms. Hewson. 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, Debra L. Reed-Klages and James D. Taiclet, Jr. The Board determined that Nolan D. Archibald and Joseph W. Ralston who retired in April 2019 were independent while they served on the Board. Marillyn A. Hewson is an employee of the Corporation and is not independent under the NYSE listing standards or our Governance Guidelines. 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 28, which it determined were 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. and Utah State University Research Foundation); Mr. Dunford (K&L Gates LLP (family member's employer)); Mr. Ellis (Blue Origin, LLC (family member’s employer), The Charles Stark Draper Laboratory, Dominion Energy Inc., and Stanford University); Ms. Gordon (International Paper Company and The MIT Corporation); and Ms. Reed-Klages (The Boeing Company (family member’s employer), Caterpillar Inc., Chevron Corporation, the University of Southern California and Virgin Galactic (family member's former employer)). 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 110,000 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 2019 base salary was $166,155 and he received an annual cash incentive award of $19,939. His base salary was increased to $169,478 for 2020 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 2019 base salary was $144,840 and he received an annual cash incentive award of $17,381. His base salary was increased to $148,026 for 2020 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 2019.
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 2019, the Corporation paid approximately $10,265,874 to State Street Corporation and its affiliates (including State Street Bank and Trust Company) (collectively, State Street) for investment management, custodial, benefit plan administration fees and credit facility fees; approximately $1,087,012 to BlackRock, Inc. and its affiliates for investment management fees; approximately $2,842,126 to Capital Guardian, an affiliate of Capital World Investors, for investment management fees; and approximately $320,722 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.
Joseph W. Ralston, a former director who retired at the 2019 annual meeting, was employed during 2019 as Vice Chairman of The Cohen Group, a consulting business that performs services for the Corporation. In 2019, we paid The Cohen Group $631,820 for consulting services and related expenses. Mr. Ralston’s compensation earned at The Cohen Group was not impacted by the consulting services delivered to the Corporation. The Board assessed and approved these relationships.
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.

www.lockheedmartin.com
2020 Proxy Statement
28


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 95.
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
Oversight of ESG matters follows our formal sustainability governance structure. This structure includes our 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, environmental stewardship, corporate culture, philanthropy, workforce diversity, health and safety.
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.
Stakeholder Engagement and Core Issues Assessment
As described on page 9, our core sustainability issues represent stakeholder priorities and drivers of long-term value creation. To ensure we continue focusing on issues that are of greatest relevance to our stakeholders, we periodically ask for feedback through a series of core issues assessment roundtables. Our most recent roundtables and other engagement activities informed the continued evolution of our Sustainability Management Plan (SMP) for beyond 2020. In 2019, we held six stakeholder workshops, conducted surveys, and leveraged artificial intelligence-based analytical tools to collect and analyze feedback from eight different stakeholder segments in the U.S. and Europe: academia, customers, employees, government, industry peers, investors, non-governmental organizations, and suppliers. More than 60 employees and 30 external stakeholders participated, which resulted in an over 30% increase in overall engagement as compared with our previous core issues assessment in 2015. Through structured discussions and survey input, we learned more about their expectations and explored current and emerging trends facing our stakeholders and our sectors.
We analyzed stakeholder feedback on 40 sustainability issues informed by external benchmarking data and internal risk and strategy information. We clustered closely related issues of importance to stakeholders and to our business success, and ultimately identified four sustainability priorities and 14 core issues for our next SMP as described below. The process also informed the goals and key metrics that will guide us from 2020.
Updated Performance Measures Beyond 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Evolving Our Sustainability Priorities and Core Issues 2020+
 
 
 
 
 
 
 
 
 
 
 
 
 
Advancing Resource Stewardship
•    Energy Management
•    Total Cost of Ownership
•    Hazardous Chemicals/Materials
•    Resources/Substance Supply Vulnerability
•    Counterfeit Parts Prevention
 
 
Elevating Digital Responsibility
•    Data Privacy/Protection
•    Artificial Intelligence
•    Intellectual Property Protection
 
 
Fostering Workforce Resiliency
•    Workplace Safety
•    Inclusion and Equity
•    Harassment Free Workplace
 
 
Modeling Business Integrity
•    Anti-Bribery and Corruption
•    Ethical Business Practices
•    Safe Products
 
 
 
 
 
 
 
 
 
 
 
 
 
Since the timeline for our current set of goals will be completed at the end of 2020, we are reviewing and updating our sustainability strategy, using what we learned while delivering on SMP objectives in the current cycle. This updated core issue model, previewed above, focuses our efforts in the areas that provide the greatest value to our stakeholders and our business. During 2021, we will share 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.
Sustainability Highlights
Lockheed Martin's commitment to addressing business-related climate change risks while delivering stockholder value is best illustrated by our actions, progress, and the associated recognition we have received. In 2019, Lockheed Martin:
Published its eighth annual Sustainability Report;
Received an “A-” CDP Climate Change score;
Was named as an industry leader by Forbes and JUST Capital within the JUST 100, representing America’s most JUST Companies;

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Enterprise Risk and Sustainability

Earned, and 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 and environmental, social and economic benchmarks. This is Lockheed Martin's sixth consecutive year on the Dow Jones Sustainability World Index, and its seventh consecutive year on the North American Index; and
Received the United States Environmental Protection Agency’s Energy Star Partner of the Year Award, an award representing organizations that have made outstanding contributions to protecting the environment through superior energy efficiency.
Enterprise Risk and Sustainability Priorities
To build integrated assurance, enterprise risk and sustainability are managed jointly in 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 heat map index and our internal audit plan) we 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.
These linkages extend to operational elements of our business. Our Employee Wellbeing core issue emphasizes talent recruitment and talent development, two factors essential to identifying critical skills and helping employees reach their full potential. In alignment with our Information Security core issue, we educate and direct suppliers to resources to strengthen their abilities to counter data security and privacy threats, which are integral to our buying decisions. We teach small and disadvantaged businesses how to increase operational efficiency and manage ethics and sustainability impacts as stressed in our Business Integrity core issue.
Enterprise Risk Management Highlights
A prominent oversight responsibility of the Board concerns 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; assessments of risks that may impact achievement of strategy and business objectives; risk disclosures and reporting; and management evaluations of risk mitigation performance. Other Board committees also supervise management's execution of additional subject-specific risk elements relevant to their responsibilities, such as compliance with laws and regulations, cybersecurity and ethical business conduct.
Risk Governance
Board Committee
Risk Mitigation Purview
Audit
Financial and compliance risks and risk identification process; risks related to business strategy and identified enterprise risk
Classified Business and Security
Classified programs and security of personnel, facilities and data-related risks including classified cybersecurity
Nominating and Corporate Governance
Board composition, corporate governance, employee safety and health, ethical conduct, culture, human capital and environmental risks
Compensation
Talent, workforce and incentive compensation risks
Our enterprise risk management process involves providing the Board with regular, periodic reports on:
The categories of risks the Corporation faces, including significant drivers to meeting strategic objectives or compliance standards;
A clear framework for accountability that illustrates mitigating measures and action plans, and how the Chairman and 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 prioritizations 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

 
 
Environmental Stewardship
Our Go Green initiative promotes environmental stewardship through reductions in carbon, energy, water, and waste, which yields operational efficiency and cost avoidance. To drive improvement, we emphasize energy efficiency efforts, water reduction projects, and waste minimization activities at our facilities. Our Go Green reductions for water, carbon emissions, and facility energy are measured against 2010 levels and waste is measured against a 2014 level. Reductions in energy and water use slowed in 2019 due to an increase in production activity.
2020
GOALS
(Against Baseline)
 
REDUCE WATER
 
REDUCE CARBON
 
REDUCE FACILITY
 
REDUCE TOTAL
 
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ENERGY AND WATER COST AVOIDANCE
$32M IN 2019
COMPARED T0 2010

 
30%
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EMISSIONS
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ENERGY
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WASTE
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35%
 
25%
 
7%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2019
PERFORMANCE
(Against Baseline)
 
REDUCED
 
REDUCED
 
REDUCED
 
REDUCED
 
 
20%
 
39%
 
22%
 
12%
 
Next Gen Go Green Goals
We recently established our fourth generation of Go Green goals, to reduce carbon emissions to outperform the science-based target methodology to prevent 1.5°C warming through 2030 by cutting scope 1 and 2 emissions by 70% compared to 2015 levels. Setting this target will help to ensure a lean and efficient infrastructure, process and operations that will result in lowering our carbon emissions from our operations and allow us to adapt to a changing business and regulatory environment.
2030
GOALS
 
 
 
 
2025
GOALS
 
 
 
 
 
 
 
 
REDUCE CARBON
 
 
REDUCE ENERGY
 
 
REDUCE WASTE
 
EMISSIONS PER $ GROSS PROFIT BY
 
 
PER OCCUPANT BY
 
 
PER OCCUPANT BY
 
70%
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14%
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11%
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*2015 baseline
 
 
*2016 baseline
 
 
*2016 baseline
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplier Engagement and Social Impact
Lockheed Martin partners with suppliers, the community and nongovernmental organizations (NGOs) to strengthen our communities and foster responsible growth. Lockheed Martin's efforts and accomplishments in these areas this past year(1) include the following:
Supplier Engagement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
>18.4 percent
of supplier partnerships selected were small businesses
 
Earned an “exceptional” 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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>$5.3 billion
spent with approximately 6,950 small businesses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
>$994.4 million spent with woman-owned businesses
 
>$693.0 million spent with approximately 715 veteran-owned small businesses
 
>$102.8 million spent with Alaskan Native and Tribally Owned Corporations
 
>$377.7 million spent with 212 service-disabled, veteran-owned small businesses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Social Impact
 
 
 
 
 
 
 
 
 
 
 
 
 
 
>$10.3 million recorded in employee donations by over 21,000 employees to nearly 5,000 organizations
 
Awarded 200 renewable STEM scholarships of $10,000 per year for college students majoring in engineering or computer science

 
Announced in 2020 a commitment to award 150 vocational scholarships up to $6,600 each to fund degrees at accredited vocational-technical schools to prepare students for careers in technology that do not require a bachelor’s or advanced degree

 
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(1) Supplier Engagement figures are reported for the year ending September 30, 2019. Social Impact figures are reported for the year ending December 31, 2019.

www.lockheedmartin.com
2020 Proxy Statement
32


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 2020.
 
 
 
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, 2020. 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 page 34.
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.

www.lockheedmartin.com
2020 Proxy Statement
33


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 2019 and 2018. 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.
 
2018
2019
 
($)
($)
Audit Fees(a)
23,150,000
22,775,000
Audit-Related Fees(b)
75,000
175,000
Tax Fees(c)
2,000,000
2,300,000
All Other Fees(d)
15,000
20,000
(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. Audit fees for 2018 include fees related to the Corporation's adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), as amended, which the Corporation adopted on January 1, 2019.
(b) 
Audit-related fees are 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.
(d) 
All other fees are primarily for subscriptions to Ernst & Young’s online research tools and training courses for professional qualifications.

www.lockheedmartin.com
2020 Proxy Statement
34


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, 2019, 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, 2019 be included in Lockheed Martin Corporation’s Annual Report on Form 10-K for 2019 for filing with the SEC. The Audit Committee also reappointed Ernst & Young to serve as the Corporation’s independent auditors for 2020, 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. Burritt
James O. Ellis, Jr.
Ilene S. Gordon
Debra L. Reed-Klages

35
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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 2019 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 37 and the Executive Compensation Tables beginning on page 56, 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 2020 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. Falk
Vicki A. Hollub
Debra L. Reed-Klages
James D. Taiclet, Jr.

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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 56.
2019 Leadership Changes
In 2019, there were the following leadership changes affecting the NEOs:
Bruce L. Tanner  - transitioned to an advisory role effective February 11, 2019, after serving as Executive Vice President and Chief Financial Officer since September 2007; retired in August 2019
Kenneth R. Possenriede  - promoted to Executive Vice President and Chief Financial Officer, effective February 11, 2019, succeeding Bruce L. Tanner
Dale P. Bennett  - transitioned to an advisory role effective August 26, 2019 after serving as Executive Vice President, Rotary and Mission Systems since December 2012; retired in January 2020
Frank A. St. John  - transitioned from Executive Vice President, Missiles and Fire Control to Executive Vice President, Rotary and Mission Systems, effective August 26, 2019, succeeding Dale P. Bennett
We did not enter into any transitional agreements or special compensation arrangements with any of our NEOs in connection with their aforementioned advisory roles. Although they were not executive officers at the end of 2019, Mr. Tanner and Mr. Bennett are included among our 2019 NEOs.
NEO
Title
Years of Service
At End of 2019
(rounded)
Marillyn A. Hewson
Chairman, President and Chief Executive Officer
37 years
Kenneth R. Possenriede
Executive Vice President and Chief Financial Officer
33 years
Bruce L. Tanner
Retired Executive Vice President and Chief Financial Officer
37 years
Richard F. Ambrose
Executive Vice President, Space
19 years
Dale P. Bennett
Retired Executive Vice President, Rotary and Mission Systems
39 years
Michele A. Evans
Executive Vice President, Aeronautics
33 years
Frank A. St. John
Executive Vice President, Rotary and Mission Systems
33 years
 
 
 
 
To assist stockholders in finding important information in the CD&A, sections are highlighted as follows:
Page(s)
 
 
38
 
Our 2019 Performance
39
 
2019 CEO Compensation
41
 
2019 Comparator Group Companies
43
 
2019 Core Compensation Elements
44-46
 
2019 Annual Incentive
47-49
 
2019 Long-Term Incentive Compensation
49-50
 
2017-2019 LTIP and PSU Awards
51-52
 
2020 Compensation Decisions
52-55
 
Other Compensation Matters
 
 
 
 
2019 Say-on-Pay Vote
At our 2019 annual meeting, more than 94% of the votes cast by our stockholders approved our Say-on-Pay proposal. We meet with our key investors throughout the year to understand the topics that matter most to them as they relate to executive compensation. We sought the views of our stockholders with respect to our existing policies and practices, but also regarding our equity grant practices and provisions in our new equity plan proposed for stockholders' approval this year. (Please see Effective Stockholder Engagement on page 25 for more specific details). Investors we engaged with during 2019 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 2020.

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Executive Compensation

Executive Summary
Our 2019 Performance
 
 
 
 
 
 
 
 
 
 
 
Record  
Sales of 
$59.8B
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Record Segment 
Operating Profit* of
$6.6B
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Record  
Backlog level of 
$144B
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Record Earnings 
per Share of 
$21.95
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Lockheed Martin continued to exhibit strong growth across its diverse portfolio, as manifested in its 2019 financial and operational results. In 2019, the Corporation achieved records for sales, segment operating profit*, backlog and earnings per share. Lockheed Martin’s net sales in 2019 were $59.8 billion versus $53.8 billion in 2018, an increase of 11% and a record-setting amount for the Corporation. We generated cash from operations of $7.3 billion in 2019 after $1.0 billion of discretionary pension contributions. In addition, we ended 2019 with orders of $72.6 billion, driving a record backlog of $144 billion. Our net earnings in 2019 were $6.2 billion, or $21.95 per share, which was also a record. Our segment operating profit* for 2019 was $6.6 billion, up 12 percent versus 2018.
Operationally, during 2019, we delivered 134 F-35s, exceeding the joint government and industry delivery target of 131 aircraft for the year. This milestone represents a 47% increase over 2018 and a nearly 200% production increase over 2016. It is the third consecutive year we have met our annual delivery target. The F-35 program also celebrated several international milestones, as Japan, the United Kingdom, and Norway all declared Initial Operational Capability for their respective F-35s.
The Corporation also had strategic and operational accomplishments across our other business segments in 2019. In March, we received a $1.1 billion contract for our highly successful Guided Multiple Launch Rocket System - a system that helps our service members address threats quickly and reduce collateral damage on the battlefield. Also in March, we celebrated the first flight of the SB>1 DEFIANT helicopter. We also received a $1.3 billion contract from the U.S. Navy to build 12 CH-53K King Stallions. During 2019, we celebrated four successful launches, including the launch of the fifth Advanced Extremely High Frequency satellite. Strategically, Lockheed Martin continued to develop critical emerging technologies with progress in areas of hypersonics and directed energy and continued to focus on attracting and retaining the workforce needed for the future.
We also continued our efforts to return cash to stockholders through dividends and share repurchases. During 2019, we returned $3.8 billion of cash from operations to our stockholders, with $1.2 billion in share repurchases and $2.6 billion paid in cash dividends. Lockheed Martin delivered strong one-, three- and five-year total stockholder returns both on an absolute and relative basis, reflecting these financial, strategic and operational accomplishments.
*    See Appendix B for an explanation of Non-GAAP terms.
 
1-Year TSR
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3-Year TSR
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5-Year TSR
P41_5YRSTSRBARCHART.JPG
 
 

www.lockheedmartin.com
2020 Proxy Statement
38


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 41. 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 2019 annual incentive program paid out at 200% of target and the 2017-2019 LTIP paid out at 171.9% of target for all NEOs.
2019 CEO Compensation
2019 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 2019, Ms. Hewson’s base salary was set at $1,798,000.
2019 Annual Incentive. Ms. Hewson’s target annual incentive amount for 2019 was 175% of salary or $3,146,500.
2019-2021 Long-Term Incentives. In 2019, Ms. Hewson was granted an LTI award of approximately $14.3 million, which was 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). RSUs will cliff-vest after three years, while the vesting of PSUs and LTIP will be based upon our results at the end of the three-year vesting period relative to the three-year performance goals that were established in the beginning of 2019.
Benefit and Retirement Plans. Ms. Hewson 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. Our pension formula is based on years of service and pension eligible compensation, which is similar to the formula offered by other companies with defined benefit plans. The compensation element of the pension calculation was frozen effective January 1, 2016, so only the service element of the pension calculation resulted in an increase in Ms. Hewson’s accrued pension benefit during 2019.  Effective January 1, 2020, the pension benefit is fully frozen. The change in pension value for Ms. Hewson reported in the Summary Compensation Table for 2019 was also significantly affected by the change in the discount rate, as well as changes in life expectancy (longevity) assumptions.
 
CEO Target Opportunity Mix *
 
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* Fixed vs. variable and cash vs. equity components are designated in the Core Compensation Elements table on page 43. 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.

39
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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 company 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.
Independent Pay Governance
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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.
Role
Management
Chairman,
President & CEO
Management
Compensation
Consultant
(1)
Independent
Compensation
Consultant
(2)
Compensation
Committee
Independent
Board
Members
Peer Group / External Market Data and Best Practices for Compensation Design and Decisions
Reviews
Reviews
Develops
Develops/
Reviews
Reviews
Annual NEO Target Compensation
Recommends
Reviews
Approves
Ratify
Annual CEO Target Compensation
Advises
Recommends
Approve
Annual and Long-Term Incentive Measures, Performance Targets and Performance Results
Develops
Reviews
Reviews
Approves
Ratify
Long-Term Incentive Grants, Dilution, Burn Rate
Develops
Reviews
Reviews
Approves
Ratify
Risk Assessment of Incentive Plans
Reviews
Reviews
Develops
Reviews
Succession Plans
Develops
Reviews
Review
(1) 
Aon and Willis Towers Watson.
(2) 
Meridian Compensation Partners (Meridian).

www.lockheedmartin.com
2020 Proxy Statement
40


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. All of the 2019 comparator group companies participated in the Aon survey. Our 2019 revenues represented the 53rd percentile of the comparator group, excluding DowDuPont Inc., which split into multiple separate entities during 2019.
In light of the split of DowDuPont Inc. and the announced merger transaction between Raytheon Company and United Technologies Corporation during 2019, the Compensation Committee will review, as it does each year, and may approve changes to the comparator group in 2020.
2019 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.

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Executive Compensation

Consideration of Internal Pay Equity
Consistent with past practice, the Compensation Committee reviewed the pay relationship of the CEO to the other NEOs as part of its annual compensation review in 2019. This material was presented to the Compensation Committee by Meridian in its capacity as the Committee’s independent compensation consultant.
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.

www.lockheedmartin.com
2020 Proxy Statement
42


Executive Compensation

2019 Named Executive Officers’ Compensation
2019 Target Compensation
Our NEOs’ target compensation for 2019 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 February 11, 2019, Mr. Possenriede was appointed Executive Vice President and Chief Financial Officer and in connection with his promotion from a Vice President role, the Compensation Committee approved an increase to his annual incentive target from 70% to 105% of his base salary.
 
 
Annual Incentive
 
 
NEO
Base
Salary
($)
Target
%
Target
Amount
($)
2019
LTI Grant
($)
Total Target Direct
Compensation
($)
Ms. Hewson