Kathy J. Warden
NORTHROP GRUMMAN CORP /DE/About Kathy J. Warden
Chair, Chief Executive Officer and President of Northrop Grumman since January 2019; Chair of the Board since August 2019; director since July 2018; age 53 . Under her tenure, 2024 performance included record backlog of $91.5B, sales of $41.0B (+4.4% YoY), segment operating margin rate of 11.1%, diluted EPS of $28.34 and MTM-adjusted EPS of $26.08; adjusted free cash flow was $2.6B (+25% YoY) . Pay-for-performance alignment is supported by high Say‑on‑Pay support (94% in 2024; three‑year average 96%), 7x CEO stock ownership guideline and three‑year mandatory holding on 50% of net shares, with prohibitions on hedging and pledging .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Northrop Grumman | Chair | Since Aug 2019 | Board leadership; unified governance and strategic oversight |
| Northrop Grumman | CEO & President | Since Jan 2019 | Enterprise performance and capital deployment; technology leadership |
| Northrop Grumman | President & COO | 2018 | Enterprise operations; program execution |
| Northrop Grumman | President, Mission Systems | 2016–2017 | Sector performance; advanced sensors/cyber |
| Northrop Grumman | President, Information Systems (former) | 2013–2015 | Government IT, cyber and C4ISR growth |
| Northrop Grumman | VP, Cyber Intelligence Division | 2011–2012 | Cybersecurity leadership; intelligence customer delivery |
| General Dynamics; Veridian; venture internet firm; General Electric | Various leadership roles | Pre‑2008 | Multi‑industry leadership, technology and commercial execution |
External Roles
| Organization | Role | Years |
|---|---|---|
| Merck & Co., Inc. | Director | Current |
| Aerospace Industries Association | Member; former Chair | Current/Former |
| Catalyst | Chair of the Board | Current |
| Federal Reserve Bank of Richmond | Former Chair of the Board | Former |
| James Madison University | Former Board of Visitors member | Former |
Fixed Compensation
| Year | Base Salary ($) | Target Bonus (% of Salary) | Actual Annual Bonus Paid ($) |
|---|---|---|---|
| 2024 | 1,800,000 | 195% | 5,194,800 |
| 2023 | 1,750,000 | Not disclosed | 5,082,875 |
| 2022 | 1,640,388 | Not disclosed | 3,979,800 |
Performance Compensation
2024 Annual Incentive Plan (AIP)
| Metric | Weighting | 2024 Score Contribution | Notes |
|---|---|---|---|
| Adjusted Cash Flow from Operations* | 35% | 63% | Non‑GAAP; Committee adjustments noted |
| Segment Operating Income* Growth | 35% | 42% | Non‑GAAP |
| Pension‑Adjusted OM Rate* | 20% | 30% | Non‑GAAP |
| Non‑Financial: Inclusion & Belonging | 2.5% | 3% | Employee survey benchmark |
| Non‑Financial: Environmental Sustainability | 2.5% | 4% | Net‑zero pathway targets |
| Non‑Financial: Quality | 2.5% | 3% | Program defect/process targets |
| Non‑Financial: Customer Satisfaction | 2.5% | 3% | Award fees and feedback |
| Company Performance Factor (CPF) | — | 148% | Strategic & Operational Assessment = 100% |
Long‑Term Incentive Plan (LTIP) Structure and 2024 Grants (RSRs, RPSRs)
| Component | Weighting | Vesting | 2024 CEO Grant Detail |
|---|---|---|---|
| Restricted Performance Stock Rights (RPSRs) | 70% | 3‑year performance period | 24,309 target rights; max 48,618; grant date FV $11,269,918 (2/14/2024) |
| Restricted Stock Rights (RSRs) | 30% | 3‑year cliff | 11,155 units; grant date FV $4,829,892 (2/14/2024) |
RPSR Performance Metrics (2024 grant) and Recently Completed Cycle (2022–2024)
| Metric | Weighting | 2022–2024 Score Contribution | Performance Factor |
|---|---|---|---|
| Adjusted Cumulative FCF* | 1/3 | 38% | 107% (combined) |
| Return on Invested Capital* | 1/3 | 50% | 107% |
| Relative TSR—2022 TSR Peer Group | 1/6 within TSR | 3% | 107% |
| Relative TSR—S&P Industrials | 1/6 within TSR | 16% | 107% |
Equity Ownership & Alignment
| Item | Value |
|---|---|
| Beneficial ownership (common shares) | 212,852 |
| Shares outstanding (as of 3/21/2025) | 144,138,702 |
| Ownership (%) | 0.15% (computed from 212,852 / 144,138,702) |
| Unvested RSRs (by grant date) | 11,155 (2/14/2024) ; 10,760 (2/16/2023) ; 11,672 (2/15/2022) |
| Unvested RSRs market value (12/31/2024, $469.29) | $5,234,930 (2024 grant) ; $5,049,560 (2023 grant) ; $5,477,553 (2022 grant) |
| Unvested RPSRs (target) | 24,309 (2024 grant) ; 23,342 (2023 grant) ; 25,561 (2022 grant) |
| Unvested RPSRs market/payout value (target basis) | $11,407,971 (2024 grant) ; $10,954,167 (2023 grant) ; $11,995,522 (2022 grant) |
| 2024 Stock vested (shares; value realized) | 60,608; $27,121,437 |
| Options outstanding | None (no 2024 option grants; no options outstanding as of 12/31/2024) |
| CEO stock ownership guideline | 7x base salary |
| Holding requirement | 50% of net after‑tax shares for 3 years; continues post‑termination with limited exceptions |
| Anti‑hedging/pledging | Prohibited for directors and NEOs; no director shares pledged |
| Ownership guideline compliance | All NEOs compliant or on track (as of 12/31/2024) |
Employment Terms
| Provision | Terms |
|---|---|
| Employment contract | None (no CEO employment agreement) |
| Severance plan (qualifying termination) | Lump sum 1.5x base salary + target bonus; prorated bonus; 18 months medical/dental; tax/financial planning; outplacement up to 15% of salary |
| CEO potential severance (as of 12/31/2024) | Cash severance $7,965,000; medical/dental $19,658; financial planning $30,000; outplacement $270,000 |
| Change‑in‑control | No individual CIC agreements or excise tax gross‑ups; equity accelerates under double‑trigger or if awards not assumed; RPSR payout based on truncated performance |
| Clawback policy | Mandatory recovery upon restatement; Board discretion for illegal conduct/gross negligence/failure to supervise/report; 3‑year lookback; disclosure commitment |
| Insider trading policy | Filed as exhibit to 2024 10‑K; prohibits hedging/pledging/margin transactions and derivatives |
| Perquisites/security | Company‑required executive protection; CEO uses company aircraft; 2024 security costs $415,952 incl. $252,182 personal aircraft travel; perquisites disclosed per SEC rules |
Board Governance (dual‑role implications)
- Board leadership: Board annually reviews chair structure; concluded CEO as Chair is most appropriate; robust Lead Independent Director role with extensive authorities (agenda approvals, executive sessions, shareholder engagement, candidate interviews, succession oversight, evaluation of Chair/CEO) .
- Independence: 92% independent directors; all except Warden are independent .
- Committees: All four standing committees are fully independent; Compensation & Human Capital Committee met 7 times in 2024; Audit & Risk met 9 times; Nominating & Corporate Governance met 5 times; Policy met 4 times .
- Executive sessions and attendance: Executive sessions at each in‑person meeting; average attendance >97% across Board/committee meetings in 2024 .
- Board skills/refresh: Ongoing refreshment and security clearance requirements; broad skills in defense, technology, risk, financial literacy .
Director Compensation (for context; Warden is an employee director)
| Fee Component | Jan 1–May 15, 2024 ($) | May 15–Dec 31, 2024 ($) |
|---|---|---|
| Annual Cash Retainer | 140,000 | 145,000 |
| Lead Independent Director Retainer | 50,000 | 50,000 |
| Committee Chair Retainer | 25,000 | 25,000 |
| Audit & Risk Committee Retainer | 15,000 | 15,000 |
| Annual Equity Grant (Deferred Stock Units) | 175,000 | 182,500 |
| Notes: Program applies to non‑employee directors; Warden’s compensation is captured in NEO tables, and she does not appear in director compensation table . Director stock ownership guideline is 5x cash retainer, achieved within five years; anti‑hedging/pledging applies to directors . |
Compensation Peer Group & Say‑on‑Pay
- Performance Peer Group: Boeing, General Dynamics, L3Harris, Lockheed Martin, RTX (used for target setting and evaluation) .
- TSR Peer Group (examples for 2022 awards): BAE Systems, Boeing, GD, Huntington Ingalls, L3Harris, Leidos, Leonardo, Lockheed Martin, RTX, Thales; paired with S&P Industrials composite .
- Target Industry Peer Group (TIPG): 22 large industrial/tech companies; includes direct peers Boeing, Lockheed, RTX, General Dynamics, L3Harris, Honeywell (executive comp benchmarking) .
- Director comp benchmark level: approx. 50th percentile of TIPG .
- Say‑on‑Pay votes: 94% approval in 2024 ; consistent support, three‑year average ~96% .
Expertise & Qualifications
- Extensive operational leadership in aerospace and defense, cybersecurity and technology; prior NOC sector leadership roles and COO experience; multi‑industry background (GE, GD, Veridian, venture) .
- Industry recognition noted by Board (AIA “Voice of Industry” award) .
Equity Award Detail (granular vesting and grant data)
| Award Type | Grant Date | Units/Shares | Grant‑Date Fair Value ($) |
|---|---|---|---|
| RPSR (CEO) | 02/14/2024 | 24,309 target; max 48,618 | 11,269,918 |
| RSR (CEO) | 02/14/2024 | 11,155 | 4,829,892 |
| RPSR (2022–2024 cycle) | Vested Feb 2025 | CEO earned 27,350 shares | Not separately disclosed |
| Stock vested in 2024 (all awards) | 2024 | 60,608 shares; $27,121,437 value |
Retirement & Deferred Compensation
| Plan | Years Credited | Present Value ($) | 2024 Company Contributions ($) |
|---|---|---|---|
| OSERP II (CEO) | 16.3 | 4,023,097 | Included in “All Other Compensation” total: $1,007,512 (details include plan contributions) |
| Savings Excess (CEO) | — | Aggregate balance $8,056,305; 2024 exec contr. $522,261; registrant contr. $261,700; earnings $1,191,875 | |
| ORAC (CEO) | — | Aggregate balance $2,261,974; 2024 registrant contr. $274,930; earnings $290,702 |
Related Policies and Shareholder Inputs
- No individual CIC agreements; no excise tax gross‑ups; recoupment policy robust and NYSE/SEC compliant .
- 2025 shareholder proposal sought expanded clawback triggers and reporting; Board recommended voting “AGAINST” citing breadth and potential chilling effects; reiterated comprehensive existing recoupment framework .
Investment Implications
- Strong pay‑for‑performance alignment: High CPF (148%) and RPSR factor (107%) tie payouts to cash generation, ROIC and rTSR; three‑year holding and 7x ownership guideline reduce near‑term selling pressure despite large vesting events (e.g., $27.1M realized in 2024) .
- Retention risk appears well managed: Competitive fixed pay, significant at‑risk equity, robust severance program (1.5x salary+target bonus), and no CIC gross‑ups; anti‑hedging/pledging enhances alignment .
- Governance mitigates dual‑role concerns: CEO as Chair offset by a strong Lead Independent Director framework, fully independent committees, and high attendance, which should support oversight while maintaining strategic continuity .
- Shareholder sentiment supportive: 94% Say‑on‑Pay and sustained engagement; any future tightening of clawback via shareholder pressure would be incremental given existing policy breadth .
- Performance track record: Sustained organic sales growth (+30% over 5 years), record backlog, expanding segment margin, and robust cash generation underpin long‑term value creation during Warden’s tenure .