William J. Lynn III
About William J. Lynn III
William J. Lynn III is Chairman and Chief Executive Officer of Leonardo DRS (CEO since January 2012; Chairman since 2021) and a director since 2012. He is 71 years old and is a former U.S. Deputy Secretary of Defense (2009–2011), with prior leadership roles at Raytheon and the Department of Defense across finance, acquisition and strategy, bringing deep national security and defense industry expertise to DRS . Under Lynn’s leadership in 2024, DRS delivered 14% revenue growth, 23% YoY adjusted EBITDA growth, record $8.5B backlog, $4.1B bookings (1.3x book-to-bill), and a 61% increase in share price; pay-versus-performance shows cumulative TSR since public listing of $294 on a $100 initial investment by 12/31/2024, demonstrating strong shareholder value creation during 2024 in particular . Governance note: Lynn is both Chairman and CEO; the Board mitigates this dual role with a Lead Independent Director (Frances Townsend) and a majority-independent board .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| U.S. Department of Defense | Deputy Secretary of Defense | 2009–2011 | Senior civilian leader overseeing DoD policy, procurement, and operations; national security stewardship |
| Raytheon Company | SVP, Government Operations & Strategy | 2002–2009 | Government strategy and operations leadership at a major defense prime, deepening industry network and capture capabilities |
| U.S. Department of Defense | Under Secretary of Defense (Comptroller), CFO | 1997–2001 | Fiscal management and budget oversight; financial controls and efficiency focus |
| U.S. DoD | Director, Program Analysis & Evaluation | 1993–1997 | Portfolio analysis and capital allocation across programs |
| U.S. Senate | Counsel, Senate Armed Services Committee (Sen. Ted Kennedy) | 1987–1993 | Legislative strategy and defense policy formation |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Accenture Federal Services | Director | N/A | Board service in federal IT/services |
| USO Foundation | Director | N/A | Military community support |
| Atlantic Council | Director | N/A | Geo-strategy and security policy network |
| Center for a New American Security | Director | N/A | Defense policy thought leadership |
Fixed Compensation
| Item | 2024 Detail |
|---|---|
| Base Salary | $1,157,249 |
| Target Annual Bonus (ICP) | 120% of base salary for 2024 (contract minimum 110%) |
| Actual Annual Bonus Paid (2024 ICP) | $2,209,800 (159% achievement) |
| Perquisite Allowance | $50,000 (Executive Allowance Program) |
| Company 401(k) Contribution | $16,691 |
| Company-Paid Life Insurance | $23,680 (individual term policy in place since 2019) |
Performance Compensation
Annual Incentive (ICP) – 2024 Metrics and Outcomes
| Metric | Weight | 2024 Target ($mm) | 2024 Actual ($mm) | % Achieved | Payout Factor | Weighted Factor |
|---|---|---|---|---|---|---|
| Adjusted EBITDA | 30% | 388 | 400 | 103% | 115% | 34.5% |
| Free Cash Flow | 30% | 187 | 190 | 102% | 110% | 33.0% |
| Bookings | 20% | 3,280 | 4,077 | 124% | 200% | 40.0% |
| Revenue | 20% | 2,968 | 3,234 | 109% | 190% | 38.0% |
| Company Financial Achievement | 145.5% | |||||
| CEO Individual Performance | 25% of ICP | 200% | ||||
| CEO Earned ICP Award | $2,209,800; 159% of target |
Notes: 2024 design changes increased focus on revenue/FCF, removed discretion, and raised minimum thresholds (e.g., revenue 90% min) .
Long-Term Incentive (ECP) – 2024 Grant Design
| Component | Weight | Performance Period | Key Details |
|---|---|---|---|
| Relative TSR (vs S&P Aerospace & Defense Select Industry) | 40% | 2024–2026 | 60-day averages at start/end; rank vs fixed index cohort; linear interpolation 50–200% |
| 3-yr Avg Adjusted Diluted EPS | 40% | 2024–2026 | Adjusted for specified non-operational items; aligns to profitable growth |
| 3-yr Avg ROIC | 20% | 2024–2026 | NOPAT / Invested Capital with defined adjustments |
| CEO Target LTI Value (2024 ECP) | — | — | $4,100,000 split 50% PRSUs / 50% RSUs |
| RSU Vesting | — | — | Time-based, ratable over 3 years from grant |
| PRSU Vesting | — | — | Cliff after period; 2024 grant scheduled to vest April 1, 2027, 0–200% earned |
2022 PRSU Cohort (Vested March 15, 2025): Earned at 164.42% of target; Lynn earned 298,189 shares (target 181,358) .
2024 Grants (select CEO details)
| Grant Type | Grant Date | Target/Units | Notes |
|---|---|---|---|
| PRSUs (2024 cycle) | 4/16/2024 | 95,260 target | Grant date FV $2,346,254 |
| RSUs | 4/16/2024 | 95,260 | Grant date FV $2,049,043 |
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Beneficial Ownership (4/7/2025) | 367,382 shares; <1% of outstanding |
| Shares Outstanding (Record Date) | 266,087,957 |
| Stock Ownership Guidelines | CEO 5x salary; all NEOs met requirements as of 12/31/2024 |
| Hedging/Pledging | Prohibited for officers and directors (no margin/pledge) |
| Vested vs Unvested (12/31/2024) | Unvested RSUs: 95,260 (2024 grant), 92,722 (2023), 60,452 (2022); PRSUs: 2023 cycle at max 139,083 (vest 4/1/2026), 2024 cycle at max 95,260 (vest 4/1/2027); 2022 PRSUs vested 3/15/2025 |
| 2024 Stock Vested (realized value) | 463,958 shares; $14,743,738 value |
Implication for selling pressure: Meaningful PRSU vest events occurred on 3/15/2025 (298,189 shares to CEO) with additional PRSU cliffs in 2026 and 2027; time-vested RSUs vest annually, creating periodic liquidity windows that may necessitate 10b5-1 planning and tax withholding sales .
Employment Terms
| Provision | Key Terms |
|---|---|
| Employment Agreement | Effective Nov 28, 2022; CEO and Chairman; base not less than $1,157,249; ICP target 110% (program set 120% in 2024); ECP target ≥$3,580,000; 5 weeks vacation; $50,000 executive allowance; individual life insurance |
| Non-Compete / Non-Solicit | 1-year non-compete (post-termination when receiving severance); 2-year non-solicit; confidentiality and non-disparagement |
| Severance (No CIC) | 2.5x (base + ICP target) lump-sum; continued RSU vesting; pro-rata PRSUs (performance-based); 18 months COBRA reimbursement |
| Severance (Double-Trigger CIC) | Severance Plan: 2.5x (base + ICP target) lump-sum; pro-rated target ICP for year; COBRA reimburse up to 30 months; immediate vesting of equity at target |
| Death/Disability | Pro-rated ICP at committee discretion; ECP awards vest at target |
| Illustrative Payouts (12/31/2024 price $32.31) | CIC termination total: $29,357,793; No-CIC involuntary/material breach: $25,749,560; Retirement: $12,178,889; Death/Disability: $23,668,002 |
| Clawback | Dodd-Frank-compliant clawback adopted 10/2/2023; 3-year lookback; plan-level clawbacks also apply |
| Hedging/Pledging Policy | Prohibited (hedging, margin, pledging) |
Board Governance (Director Service, Roles, Independence)
- Board service: Director since 2012; Chairman since 2021; member of Government Security Committee; not independent under Nasdaq rules .
- Combined Chairman/CEO role offset by Lead Independent Director (Frances Townsend) effective Jan 1, 2023; Board believes structure provides clear strategic leadership with independent oversight .
- Board and Committee attendance: Board met 9 times in 2024; all directors attended ≥90% of meetings; Lynn serves on Government Security Committee alongside proxy holders and key officers .
- Controlled company status: Majority-owned by Leonardo S.p.A.; nonetheless Compensation and Nominating Committees are fully independent; all directors other than the CEO are independent .
Compensation Structure Analysis (Signals)
- Cash vs equity mix: CEO LTI target $4.1M split 50/50 RSUs and PRSUs; continued emphasis on at-risk equity aligns with long-term performance vs pure options (company does not currently grant options) .
- Metric evolution: 2024 ICP replaced working capital with revenue; increased thresholds; PRSU framework shifted from revenue growth to adjusted EPS plus ROIC and rTSR vs indexed peer benchmark, tightening line-of-sight to profitable growth and relative outperformance .
- Governance guardrails: No single-trigger CIC; no excise tax gross-ups; incentive awards capped at 2x; robust clawback; anti-hedging/pledging; strong say-on-pay support (98% in 2024) .
Performance & Track Record
- 2024 operating execution: 14% revenue growth, 23% YoY adjusted EBITDA growth, record $8.5B backlog; book-to-bill 1.3x; free cash flow $190M; share price +61% in 2024; CEO’s goals emphasized program execution, supply-chain mitigation, and cost initiatives (APEX savings = 2.6% of revenue; +90 bps operating margin) .
- Pay-for-performance: 2024 ICP company factor 145.5%; CEO individual 200%; 2022 PRSUs paid out at 164.42% (CEO earned 298,189 shares), driven by 100th percentile rTSR and strong ROIC performance .
Equity Ownership & Alignment (Supplemental)
| Item | Detail |
|---|---|
| Director compensation (as director) | Employee directors receive no board pay (comp only through executive program) |
| Anti-hedging/pledging | Strict prohibition; reinforces alignment and reduces forced-sale risk |
Compensation Peer Group and Say-on-Pay
- Peer group: 16 A&D/industrial peers including BWXT, HEICO, Hexcel, Moog, CACI, Teledyne, SAIC, Woodward, Crane, Mercury Systems, etc.; revised in 2023 for 2024 benchmarking .
- Policy posture: “Above-median pay for above-median performance,” not targeting a fixed market percentile; independent consultant (Exequity) advises; no committee interlocks .
- Say-on-pay: ~98% approval at 2024 annual meeting; committee kept structure broadly consistent while tightening metrics/thresholds .
Risk Indicators & Red Flags
- Controlled company with FOCI mitigation: Proxy Agreement governs security, governance structures; Government Security Committee oversight; related-party services with Leonardo managed under AOP and RPT policy; majority ownership 71.3% by Leonardo S.p.A./US Holding .
- Equity overhang/vesting cadence: Significant PSUs vested in March 2025; additional cliffs in 2026/2027 may create trading windows/supply; however, anti-pledging and stock ownership guidelines mitigate alignment risk .
- Governance safeguards: No hedging/pledging; double-trigger CIC; clawback policy; independent committees despite controlled status; all suggest measured risk posture .
Director Board Service History and Dual-Role Implications
- Board history: Director since 2012; Chairman since 2021; Government Security Committee member .
- Committee roles: Participates in Government Security Committee; not on Audit/Compensation/Nominating (those are independent-only) .
- Dual-role governance: Combined CEO/Chair balanced by Lead Independent Director and regular executive sessions without management; board majority independent; independence criteria confirm Lynn is the sole non-independent director .
Investment Implications
- Alignment and incentives: High at-risk, multi-year equity with rTSR/EPS/ROIC metrics and strict anti-hedging/pledging plus 5x ownership guideline indicate strong alignment; 2024 outperformance translated into high ICP and PSU realizations, consistent with pay-for-performance .
- Retention and transition risk: Contractual protections (2.5x CIC severance; continued vesting; non-compete/non-solicit) reduce abrupt transition risk; vesting schedule concentration (2026–2027 PSU cliffs) could drive orderly selling via plans but warrants monitoring for supply effects around vest dates .
- Governance considerations: Controlled-company dynamics and FOCI Proxy Agreement introduce structural complexities but are mitigated by independent committee composition, a Lead Independent Director, and clear government security governance; say-on-pay support (98%) suggests investor comfort with framework .
- Execution track record: 2024’s strong growth, margin expansion, and bookings underpin multi-year revenue visibility; incentive metrics and payouts reinforce confidence in delivery against plan, supporting a positive management quality assessment .