Phebe N. Novakovic
GENERAL DYNAMICSAbout Phebe N. Novakovic
Chairman and CEO of General Dynamics since 2013 (director since 2012), age 67, with 12 years in the CEO role as of the 2025 proxy. Track record includes record 2024 revenue ($47.7B), record EPS ($13.63), free cash flow of $3.2B, and a 3-year TSR of 34.9% vs 29.3% for the S&P 500; 2023 also delivered record cash flow and a 3-year TSR of 87.4% that outpaced the S&P A&D and S&P 500 indices .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| General Dynamics | Chairman & CEO | 2013–Present | Led capital allocation and long-term strategy; record backlog and strong multi-year ROIC/TSR driving PSU payouts |
| General Dynamics | President & COO | 2012 | Operational leadership across segments |
| General Dynamics | EVP, Marine Systems | 2010–2012 | Accountability for shipbuilding programs; facility investments and performance improvement |
| General Dynamics | SVP, Planning & Development | 2005–2010 | Strategy and customer alignment; global market development |
| General Dynamics | VP, Strategic Planning | 2002–2005 | Strategic planning, portfolio direction |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| JPMorgan Chase & Co. | Director | 2020–Present | Public company governance and capital markets insight |
| Abbott Laboratories | Director | 2010–2021 | Governance experience in regulated industries |
Fixed Compensation
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary ($) | 1,700,000 | 1,700,000 | 1,700,000 |
| Target Annual Incentive (% of Salary) | 185% | 185% | 185% |
| Annual Incentive Payout ($) | 4,089,000 | 4,287,000 | 3,383,000 |
Performance Compensation
| Metric | Weight | Target Range (FY 2023) | Actual (FY 2023) | Payout (FY 2023) |
|---|---|---|---|---|
| Diluted EPS | 25% | $12.40–$12.64 | $12.02 | 89.8% |
| Free Cash Flow ($M) | 25% | $3,356–$3,500 | $3,806 | 187.4% |
| Operating Margin (%) | 20% | 10.8–10.9 | 10.0 | 50.0% |
| Strategic & Operational | 30% | 100% target framework | CEO score 190% | Individual score |
| Metric | Weight | Target Range (FY 2024) | Actual (FY 2024) | Payout (FY 2024) |
|---|---|---|---|---|
| Diluted EPS | 25% | $14.21–$14.41 | $13.63 | 86.4% |
| Free Cash Flow ($M) | 25% | $3,700–$3,800 | $3,196 | 65.9% |
| Operating Margin (%) | 20% | 10.7–10.9 | 10.1 | 62.5% |
| Strategic & Operational | 30% | 100% target framework | CEO score 190% | Individual score |
| Long-Term Incentives | Program Detail | Performance/Payout |
|---|---|---|
| PSU metric/vesting | 3-yr average ROIC, rTSR modifier; 3-yr cliff vest | 2021–2023 PSU payout 160% (ROIC 12.3% at 120%; rTSR 84th percentile, 133.3% modifier) |
| PSU target (2024–2026) | ROIC target 13.2% (up 60 bps vs prior cycle) | Modifier can adjust ±33%, range 0–200% |
| LTI mix | 50% PSUs; 30% stock options; 20% restricted stock | Retains and aligns executives over multi-year periods |
Equity Ownership & Alignment
| Item | Value |
|---|---|
| Shares owned | 805,397 |
| Options exercisable within 60 days | 798,565 |
| Total beneficial ownership (SEC table) | 1,603,962; <1% of outstanding shares |
| Stock ownership guideline (CEO) | 15x base salary; sales restricted until met; options exercised shares must be held until guideline met |
| Anti-hedging/anti-pledging | Hedging and pledging prohibited; blackout windows and derivatives/short sales prohibited; no margin accounts |
| Option exercises (2024) | 211,620 shares; value realized $15,661,996 |
| Stock vested (2024) | 90,803 shares; value realized $24,936,157 |
Vesting Schedules and Upcoming Releases
| Instrument | Schedule/Key Dates |
|---|---|
| Restricted stock | 3-year cliff vest; next releases: Mar 3, 2025 (12,880 shares), Mar 9, 2026 (13,620), Mar 8, 2027 (12,205) |
| Stock options | 50% exercisable at 2 years; 50% at 3 years; 2024 grant exercisable Mar 6, 2026 (41,585), Mar 6, 2027 (41,585); earlier grants exercisable in 2025–2026 per schedule |
| PSUs | 2022–2024 released Mar 5, 2025 (46,675 units earned); 2023–2025 and 2024–2026 may release in Q1 2026/2027 subject to performance |
Employment Terms
| Provision | Detail |
|---|---|
| Employment agreements | None for NEOs |
| Change-in-control (CIC) | Double-trigger; no excise tax gross-ups; best-net cutback if 280G applies |
| New severance policy | Shareholder approval required for cash severance >2.99x salary+annual incentive (adopted Feb 2024) |
| CEO CIC illustrative | Total $33,117,115 including severance $19,484,834, annual incentive $4,816,667, equity (PSUs) $8,541,556, benefits/outplacement/financial counseling |
| Termination without cause/retirement | RS release $10,198,380; PSUs prorated $8,924,406; options value $5,294,557; retiree life insurance estimate $399,408; no retiree medical/dental eligibility |
Board Governance
- Dual role: Chairman & CEO; Board annually evaluates leadership structure and studies separation at CEO transition. Strong independent Lead Director (Laura Schumacher) with robust authorities including agenda approval, performance assessments, calling executive sessions, and shareholder liaison .
- Committees: All Board committees are fully independent; CEO serves on no committees .
- Independence/attendance: 12 of 13 director nominees independent; average attendance 99.6% in 2024; executive sessions held after each Board meeting .
- Director stock ownership guideline: Non-management directors required to hold 5x annual retainer; CEO subject to 15x salary guideline and stringent retention rules .
Say-on-Pay & Shareholder Feedback
- Say-on-Pay support: 96.2% in 2023; 95.7% in 2024, reflecting alignment of program with shareholder priorities .
- Shareholder engagement: Outreach to holders representing ~65% of shares; discussions included compensation, governance, sustainability, succession .
Compensation Peer Group & Philosophy
- Peer groups include aerospace/defense leaders and large-cap industrial/tech firms (e.g., LMT, RTX, NOC, BA, CAT, HON, CSCO, DE, ETN, EMR, TXT). GD’s 2024 peer benchmarking places it 51st percentile for revenue, 31st percentile for market cap, and 73rd percentile for employee population; program targets “market-competitive” pay with heavy performance-based equity (50% PSUs) .
Director Compensation (for governance context)
- Non-management director annual cash retainer $125,000; lead director $42,500; committee chair/members additional retainers; annual equity ~$170,000; typical total ~$300–370K per director; options and restricted stock granted under shareholder-approved plan .
Risk Indicators & Red Flags
- Positive: Strict anti-hedging/anti-pledging and 15x CEO ownership requirement; clawback policy compliant with SEC/NYSE; double-trigger CIC; no option repricing .
- Watch items: Significant personal aircraft/security perquisites ($867,464 in 2024; including $404,775 aircraft and $418,390 security); large annual equity realizations from option exercises/vestings can influence selling pressure, though retention rules constrain disposals until ownership guidelines are met .
Performance & Track Record
- Financial outcomes: 2024 record revenue ($47.7B), EPS ($13.63), backlog ($90.6B), FCF $3.2B; prudent capital deployment (dividends + buybacks), and continued backlog strength; 2023 record cash generation and backlog .
- Long-term metrics: PSU cycles paid out above target (2021–2023 at 160%; 2022–2024 at 136%) driven by ROIC and rTSR .
Investment Implications
- Pay-for-performance: Heavy PSU weighting with ROIC+rTSR and three-year vesting, plus stringent ownership and anti-hedging/pledging, aligns CEO incentives with long-term value creation; strong multi-year PSU payouts reflect execution .
- Selling pressure: 2024 option exercises and stock vesting were sizable, but retention rules and 15x ownership requirement materially limit discretionary selling; monitor Form 4s near vesting/exercise dates and blackout windows for potential supply .
- Retention/transition risk: No employment contract; CIC protections are robust but double-trigger; new severance policy limits excessive cash severance; Board succession oversight and independent lead director mitigate dual-role governance risk .
- Governance quality: High director independence, attendance, and structured risk oversight increase confidence in compensation alignment and strategic execution .
All data cited from General Dynamics 2025 and 2024 DEF 14A proxy statements and related sections: and 2024 proxy: .