DEF 14A of Huntington Ingalls Industries, Inc.
Filed Mar 19, 2024 · FY20230001193125-24-071268
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
| | 32 | How Sustainability Supports HII”s Commitment to Ethics and Integrity | | 34 | The Board of Directors | | | 41 | Director Compensation | | | | 41 | Director Compensation Program | | | 43 | 2023 Director Compensation Table | | 44 | Executive Compensation | | | | 44 | Introduction | | | 44 | Named Executive Officer Biographies | | | 46 | Compensation Discussion and Analysis | | | 67 | Compensation Committee Report | | | 68 | Executive Compensation Tables | | | 84 | Pay versus Performance | | 90 | Audit Committee Matters | | | | 90 | Audit Committee Report | | | 91 | Principal Accountant Fees and Services | | | 91 | Audit Committee Pre-Approval Policies and Procedures | | 92 | Stock Ownership Information | | | | 92 | Stock Ownership of Officers and Directors | | | 93 | Stock Ownership of Certain Beneficial Owners | | 94 | Item 1—Proposal to Elect 12 Directors | | | 95 | Item 2—Proposal to Approve Executive Compensation on an Advisory Basis | | | 96 | Item 3—Proposal to Provide an Advisory Vote on the Frequency of Future Advisory Approvals of Executive Compensation | | | 97 | Item 4—Proposal to Ratify the Appointment of Independent Auditors | | | 98 | Item 5—Stockholder Proposal Regarding Science-based Greenhouse Gas Reduction Targets and Transition Plan | | | 102 | Other Information for Stockholders | | | | 102 | Delinquent Section 16(a) Reports | | | 102 | Attending the Annual Meeting | | | 103 | Related Party Transactions | | 105 | Annex A—Definitions of Non-GAAP Financial Measures and Reconciliations to GAAP Financial Measures | |
Director Nominees
Director Nominees The Board is asking you to elect, for one-year terms ending in 2025, the 12 nominees for director named below, each of whom is currently serving as a member of the Board. Detailed information about this proposal can be found beginning on page 94. The following table provides summary information about the nominees for director, including their names, ages and occupations, whether they are independent directors, as determined by the Board, under the regulations of the Securities and Exchange Commission, the corporate governance listing standards of the New York Stock Exchange (“NYSE”) and the Board committees on which they currently serve.
Director Nominees
| | | | | | Board Committees | | | | | | Name | Age | Director Since | Principal Occupation | Independent Director | A | C | CS | F | GP | | Augustus L. Collins | 66 | 2016 | Chief Executive Officer of MINACT, Inc. | ü | ü | | ü | | | | Leo P. Denault | 64 | 2022 | Retired Chairman and Chief Executive Officer of Entergy Corporation | ü | CH | | | ü | | | Kirkland H. Donald | 70 | 2017 | Chairman of the Board | ü | | ü | ü | | | | Craig S. Faller | 62 | 2023 | Advisor and Consultant; Retired Admiral, United States Navy | ü | ü | | | ü | | | Victoria D. Harker | 59 | 2012 | Executive Vice President and Chief Financial Officer of Tegna, Inc. | ü | | CH | | ü | | | Frank R. Jimenez | 59 | 2022 | General Counsel and Corporate Secretary, GE HealthCare | ü | | ü | | | ü | | Christopher D. Kastner | 60 | 2022 | President and Chief Executive Officer of Huntington Ingalls Industries, Inc. | | | | | | | | Anastasia D. Kelly | 74 | 2011 | Senior Advisor to the Chair and Executive Director of Client Relations of DLA Piper | ü | | ü | | | ü | | Tracy B. McKibben | 54 | 2018 | Founder and Chief Executive Officer of MAC Energy Advisors LLC | ü | | | ü | | ü | | Stephanie L. O’Sullivan | 64 | 2021 | Independent Business Consultant | ü | | | CH | ü | | | Thomas C. Schievelbein | 70 | 2011 | Retired Chairman, President and Chief Executive Officer of The Brink’s Company | ü | ü | | | CH | | | John K. Welch | 74 | 2015 | Retired President and Chief Executive Officer of Centrus Energy Corp. | ü | ü | | | | CH |
Director Nominees
CH = Chairperson A = Audit Committee C = Compensation Committee CS = Cybersecurity Committee F = Finance Committee GP = Governance and Policy Committee
Director Nominees
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| AUGUSTUS L. COLLINS Chief Executive Officer of MINACT, Inc. Director since November 2016 | Business Experience: General Collins has served as Chief Executive Officer of MINACT, Inc., a business management consulting firm, since September 2016. From January 2012 to August 2016, he was a Major General in the Mississippi National Guard, serving as Adjutant General of both the Mississippi Army National Guard and the Mississippi Air National Guard. From July 2010 to January 2012, General Collins served as Executive Vice President for Strategic Planning of MINACT. From August 2007 to July 2010, he served on Mississippi’s Workers’ Compensation Commission as the commission’s representative of labor. General Collins served more than 35 years in the U.S. Army and Mississippi National Guard, which included command of the 155th Brigade Combat Team of the Mississippi National Guard, deploying to Iraq, where he was responsible for security operations in the southern and western provinces. Current Public Company Directorships: General Collins serves on the board of directors of Trustmark Corporation, a bank holding company, and is a member of its Audit Committee, Enterprise Risk Committee and Human Resources Committee. Other Directorships and Memberships and Education: General Collins serves on the board of directors of MINACT, Inc., Trustmark National Bank, Mississippi Power Company, a subsidiary of Southern Company, an electric power distribution company, and Armed Forces Benefits Association 5Star Life Insurance. He also serves on the Friends of Mississippi Veterans, a nonprofit entity serving veterans in Mississippi. He is Past President of the University of Mississippi Alumni Association. General Collins received a B.S. in Business Administration from the University of Mississippi, an M.B.A. from Jackson State University and a Master’s Degree in strategic studies from the U.S. Army War College. Experience, Qualifications, Attributes and Skills: We believe General Collins is qualified to serve as a director based upon his 35 years of senior military experience with the U.S. Army and Mississippi National Guard and his experience as a senior executive and now Chief Executive Officer of MINACT, Inc., a company that contracts with the U.S. government, as well as private sector customers. |
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| LEO P. DENAULT Retired Chairman and Chief Executive Officer of Entergy Corporation Director since December 2022 | Business Experience: From February 2013 until November 2022, Mr. Denault served as Chairman of the Board and Chief Executive Officer of Entergy Corporation. From February 2004 until January 2013, he served as Executive Vice President and Chief Financial Officer of Entergy Corporation. Mr. Denault served as Vice President, Corporate Development for Entergy Corporation from March 1999 until February 2004. Prior to that, he was Vice President, Corporate Development for Cinergy Corporation (now Duke Energy), an energy company. Other Directorships and Memberships and Education: Mr. Denault currently serves on the board of directors of Jobs for America’s Graduates. He received a B.S. from Ball State University and a M.B.A. from Indiana University. Experience, Qualifications, Attributes and Skills: We believe Mr. Denault is qualified to serve as a director based upon his chief executive leadership of a Fortune 500 public company for nearly ten years, as well as his executive experience in the chief financial officer role and, before that, the corporate development role of the same company. We believe Mr. Denault’s multiple executive leadership roles in a public company will add valuable experience and skills to the Board. We also believe his public company chief financial officer experience is an asset in his service as the Audit Committee chairperson. | | KIRKLAND H. DONALD Chairman of the Board of HII Director since January 2017 | Business Experience: Admiral Donald has served as Chairman of the Board of HII since April 2020. Prior to serving as Chairman of the Board, he worked as a business consultant from October 2015. From June 2013 to October 2015, Admiral Donald served as Chief Operating Officer and then President and Chief Executive Officer of Systems Planning and Analysis, Inc., a technical professional services company. Prior to that, Admiral Donald served 37 years in the U.S. Navy, including in his last assignment, as Director, Naval Nuclear Propulsion Program from November 2004 to November 2012. Current Public Company Directorships: Admiral Donald has served on the board of directors of Entergy Corporation since June 2013. He is Chairman of its Nuclear Committee and a member of its Finance Committee. He has also served on the board of directors of Centrus Energy Corporation, a nuclear energy company, since June 2021 and is a member of its Technology, Competition and Regulatory Committee, Audit and Finance Committee, and Compensation, Nominating and Governance Committee. Other Directorships and Memberships and Education: Admiral Donald currently serves on the boards of directors of Battelle Memorial Institute, CyberCore Technologies, LLC, a secure supply chain solutions company, and the Naval Submarine League. He is also an outside director (on a “proxy” board) of Rolls-Royce North America and Sauer Compressors USA and a CFIUS security monitor for LANXESS Corporation, all of which are suppliers to HII. Admiral Donald is a graduate of the U.S. Naval Academy, holding a B.S. in Ocean Engineering. Admiral Donald also received an M.B.A. from the University of Phoenix and completed Harvard University’s John F. Kennedy School of Government Senior Executive Fellows Program. He holds the CERT certificate in cybersecurity oversight from Carnegie Mellon University. Experience, Qualifications, Attributes and Skills: We believe Admiral Donald is qualified to serve as a director based upon his 37 years of senior military experience with the U.S. Navy, the last eight years of which he served as director of the naval nuclear propulsion program, his experience serving on the boards of directors of other public and private companies and his experience serving as a senior operating officer and chief executive officer of a private company that provides services primarily to the U.S. Department of Defense and U.S. Department of Homeland Security. |
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| CRAIG S. FALLER Advisor and Consultant; Retired Admiral, United States Navy | Business Experience: Admiral Faller retired from the United States Navy in October 2021. Since that time, he has served as a corporate director, advisor and consultant. From November 2018 until his retirement in October 2021, Admiral Faller commanded the United States Southern Command in Miami, Florida. From January 2017 until October 2018, he was the Senior Military Assistant to the Secretary of Defense. From June 2014 until January 2017, Admiral Faller served as Chief of Legislative Affairs, United States Navy. His prior experience includes command of two warships, an aircraft carrier strike group, command of the Navy’s 5,000 person recruiting organization, and Director of Operations for the United States Central Command. He is a nuclear trained surface warfare officer. Other Directorships and Memberships and Education: Admiral Faller currently serves on the board of directors of Viken Detection and Sigma Defense Systems. He serves on the advisory boards of PayCargo and Excelerate Energy; as a trustee of the Center for Naval Analysis; on the Advisory Board of the Penn State Applied Research Laboratory; as a Distinguished Fellow at the Atlantic Council; as a Senior Fellow at the National Defense University; and as a Senior Fellow at Florida International University. Admiral Faller received a B.S. from the U.S. Naval Academy and a Masters in National Security Affairs from the Naval Postgraduate School. Experience, Qualifications, Attributes and Skills: We believe Admiral Faller is qualified to serve as a director based upon his 38 years of senior military experience with our largest customer, the U.S. Navy, including his leadership experience serving as commander of one of the 11 Department of Defense unified combatant commands. We also believe his experience as Chief of Legislative Affairs for the U.S. Navy will provide the Board with valuable insights into the legislative process relative to federal funding HII’s defense programs. | | VICTORIA D. HARKER Executive Vice President and Chief Financial Officer of Tegna, Inc. Director since August 2012 | Business Experience: Ms. Harker has served as Executive Vice President and Chief Financial Officer of Tegna, Inc. (“Tegna”), a media company, since June 2015. She began serving in her current position when Tegna separated from Gannett Co., Inc. (“Gannett”). Prior to that and from July 2012, she served as Chief Financial Officer of Gannett. Ms. Harker served as Chief Financial Officer from 2006 to 2012 and as President of Global Business Services from 2011 to 2012 of The AES Corporation (“AES”), a multinational power company. Before joining AES, she was the acting Chief Financial Officer and Treasurer of MCI, Inc., a telecommunications company, from November 2002 through January 2006, and Chief Financial Officer of MCI Group, a unit of Worldcom, Inc., a communications company, from 1998 to 2002. Current Public Company Directorships: Ms. Harker serves on the board of directors of Xylem, Inc. (formerly ITT Corporation), a global water infrastructure company, and as Chair of its Audit Committee and a member of its Nominating and Governance Committee. Prior Public Company Directorships: Ms. Harker served on the board of directors and as a member of the Audit Committee of Stride, Inc., an education company, from 2020 to 2022. She served on the board of directors and as a member of the Finance and Audit Committees of the Board of Darden Restaurants, Inc. from 2009 to 2014. Other Directorships and Memberships and Education: Ms. Harker is a member of the University of Virginia’s Board of Visitors, where she chairs the Finance Committee and serves as a member of the Executive Committee, the Special Committee on Governance and the Committee on the University of Virginia’s College at Wise. She is a trustee of the University of Virginia Alumni Association’s $250M Jefferson Trust and participates as an emeritus society member of the Board of Wolf Trap Foundation for the Performing Arts. Ms. Harker received a B.A. from the University of Virginia and an M.B.A. from American University. Experience, Qualifications, Attributes and Skills: We believe Ms. Harker is qualified to serve as a director based upon the significant experience in business and finance she has accumulated serving as chief financial officer and in other senior management positions with large publicly traded companies, as well as her experience serving on boards and board committees of other publicly traded companies. |
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| FRANK R. JIMENEZ General Counsel and Corporate Secretary of GE HealthCare Director since January 2022 | Business Experience: Mr. Jimenez is General Counsel and Corporate Secretary of GE HealthCare, a medical device manufacturing and pharmaceuticals company. From April 2020 until he assumed his current position in February 2022, Mr. Jimenez served as Executive Vice President and General Counsel (April 2020 to December 2021) and Special Advisor to the Chairman and CEO (December 2021 to February 2022) of Raytheon Technologies Corporation. From January 2015 until its merger with United Technologies Corporation in April 2020, he served as Vice President, General Counsel and Corporate Secretary of Raytheon Company. From July 2012 until January 2015, Mr. Jimenez served as General Counsel, Secretary and Managing Director, Corporate Affairs of Bunge Limited. Previously, he served as Vice President and General Counsel of ITT Corporation and as Senior Vice President, General Counsel and Corporate Secretary of ITT’s spin-off, Xylem Inc. In prior public service, Mr. Jimenez served as the 21st General Counsel of the Navy, Deputy General Counsel (Legal Counsel) for the U.S. Department of Defense, Principal Deputy General Counsel of the Navy, Chief of Staff at the U.S. Department of Housing and Urban Development for Secretary Mel Martinez, and Deputy Chief of Staff and Acting General Counsel for Florida Governor Jeb Bush. Before entering government service, Mr. Jimenez was a litigation partner at Steel Hector and Davis LLP (now Squire Patton Boggs LLP). He began his legal career with a clerkship in the chambers of Judge Pamela Ann Rymer of the U.S. Court of Appeals for the Ninth Circuit in Pasadena, California. Other Directorships and Memberships and Education: Mr. Jimenez’s past and present civic service includes membership on the boards of the University of Miami, Equal Justice Works, the Pro Bono Partnership, the Atlantic Legal Foundation, the Columbia University Mailman School of Public Health, the Yale Law School Fund, the Yale Law School Association, the Yale Law School Center for the Study of Corporate Law, Pioneer Public Interest Law Center and the Miami Christian School. Mr. Jimenez received a B.S. from the University of Miami and a J.D. from Yale Law School. He also received an M.B.A. in finance and strategic management from the University of Pennsylvania’s Wharton School and an M.A. in national security and strategic studies from the U.S. Naval War College, with an emphasis in the law of armed conflict. Mr. Jimenez is admitted to the bars of Florida, the District of Columbia, New York and the U.S. Supreme Court. Experience, Qualifications, Attributes and Skills: We believe Mr. Jimenez is qualified to serve as a director based upon his experience as the most senior legal officer of one of the largest aerospace and defense companies in the United States, as well as the most senior legal officer of three other S&P 500 companies. We believe Mr. Jimenez will also add skills and experience to the Board as a result of his significant experience inside the federal government, including his service as General Counsel of the Navy, our largest customer, and Deputy General Counsel for the Department of Defense. | | CHRISTOPHER D. KASTNER President and Chief Executive Officer of Huntington Ingalls Industries, Inc. Director since March 2022 | Business Experience: Mr. Kastner was elected President and Chief Executive Officer of HII effective March 1, 2022. Prior to that, he was Executive Vice President and Chief Operating Officer from February 2021. In that role, he oversaw operations at HII’s three business segments and worked closely with segment management to drive execution on the company’s historic backlog. Mr. Kastner served as Executive Vice President and Chief Financial Officer from March 2016 to February 2021. In that role, he was responsible for directing the business strategy and processes in support of business growth and profitability goals. Mr. Kastner also had responsibility for corporate business management functions, including investor relations, treasury, internal audit, contracts, accounting, financial reporting, planning and analysis, rates and budgets and mergers and acquisitions. He also provided oversight for segment business management, contracts and estimating and pricing. From August 2012 until he became Chief Financial Officer of HII, Mr. Kastner served as Corporate Vice President and General Manager, Corporate Development, responsible for strategy and development activities, including the development and integration of strategic planning efforts, as well as the analysis and entrance into new adjacent markets. Prior to that and from March 2011, he served as Vice President and Chief Financial Officer of our Ingalls Shipbuilding segment. Before that and from 2008, Mr. Kastner served as Vice President, Business Management and Chief Financial Officer of Northrop Grumman Shipbuilding, Gulf Coast, and served as Vice President, Contracts and Risk Management of Northrop Grumman Ship Systems from 2006 to 2008. Prior to that, he held several positions at other Northrop Grumman businesses, including Corporate Director of Strategic Transactions. Other Directorships and Memberships and Education: Mr. Kastner holds a B.A. in Political Science from the University of California at Santa Barbara and an M.B.A. from Pepperdine University. He serves on the board of trustees of Eastern Virginia Medical School. Experience, Qualifications, Attributes and Skills: We believe Mr. Kastner is qualified to serve as a director based upon his experience as HII’s Chief Operating Officer, Chief Financial Officer and head of corporate strategy and development, as well as his experience in operations at our Ingalls Shipbuilding segment and its predecessor company as Chief Financial Officer and, before that, Vice President, Contracts and Risk Management. |
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| ANASTASIA D. KELLY Senior Advisor to the Chair and Executive Director of Client Relations of DLA Piper Director since March 2011 | Business Experience: Ms. Kelly has served as Senior Advisor to the Chair and Executive Director of Client Relations of DLA Piper, a law firm, since April 2020. Prior to that, Ms. Kelly served as Managing Partner of DLA Piper Americas from 2018, as Co-Managing Partner from 2013 to 2018 and as a partner since 2010. Prior to joining DLA Piper, Ms. Kelly was an executive officer of American International Group, Inc. from 2006 to 2010, serving as Executive Vice President and General Counsel from 2006 to January 2009 and as Vice Chairman until December 2009, positions for which she was responsible for addressing legal, regulatory, corporate governance and risk management issues. Prior to joining American International Group, Ms. Kelly was an executive and general counsel of several large, publicly traded companies, including MCI WorldCom, Inc., Sears, Roebuck and Co. and Fannie Mae. Prior Public Company Directorships: Ms. Kelly served as a director and Chair of the Governance and Nominating Committee and a member of the Risk Committee of Owens- Illinois, Inc., the world’s largest manufacturer of glass containers, from 1992 until 2022. Other Directorships and Memberships and Education: Ms. Kelly serves on the boards of numerous philanthropic organizations and serves as a director of George Washington University Medical Faculty Associates. She is also past Chair of Equal Justice Works and a former director of Lawyers for Children America. She was a director of Saxon Capital from 2005 to 2007. Ms. Kelly received a B.A., cum laude, from Trinity University DC and a J.D., magna cum laude, from The George Washington University Law School. She is a member of the Texas Bar and the District of Columbia Bar and a Fellow of the American Bar Foundation. Experience, Qualifications, Attributes and Skills: We believe Ms. Kelly is qualified to serve as a director based upon her many years of experience as a senior executive and general counsel of several large, publicly traded companies, her experience as a director of another public company, and her varied business and legal experience. | | TRACY B. MCKIBBEN Founder & Chief Executive Officer of MAC Energy Advisors LLC Director since December 2018 | Business Experience: Ms. McKibben is the founder and has been the Chief Executive Officer since 2010 of MAC Energy Advisors LLC, an investment and consulting company that provides integrated energy solutions for investments and strategic opportunities across a global platform. She is an international energy and environmental technology expert with more than 20 years of experience in the energy sector, including alternative energy, renewable energy, green technology, water, energy efficiency and sustainability management. Prior to her current position, Ms. McKibben served as Managing Director and Head of Environmental Banking Strategy at Citicorp Global Markets from September 2007 to August 2009. Ms. McKibben served on the National Security Council at the White House from July 2003 to August 2007 as Director of European Economic Affairs and European Union Relations and as Acting Senior Director for European Affairs. Before joining the National Security Council, Ms. McKibben served in various senior advisory roles in the U.S. Department of Commerce from March 2001 to July 2003. Prior to her work in the public sector, she practiced law at Akin, Gump, Strauss & Feld LLP. Current Public Company Directorships: Ms. McKibben serves on the board of directors of Ecolab Inc., a chemicals company, and serves as a member of its Audit Committee and Finance Committee. Other Directorships and Memberships and Education: Ms. McKibben serves on the Board of Directors of United Services Automobile Association (USAA), a financial services company, where she serves on the Finance Committee, as the chair of the Audit Committee and on the Member and Technology Committee. She was also appointed to the Board of Governors of West Virginia State University. Ms. McKibben is a member of the Council on Foreign Relations. Ms. McKibben graduated from West Virginia State University and received a J.D. from Harvard Law School. Experience, Qualifications, Attributes and Skills: We believe Ms. McKibben is qualified to serve as a director based upon her experience as the founder and Chief Executive Officer of an investment and consulting company operating in the energy market and her senior leadership experience at a leading investment banking firm, as well as her experience in senior leadership positions in a presidential administration. We also believe Ms. McKibben’s experience serving on the boards of directors of other public companies and serving as a member of the audit committee and finance committee of other public company boards complements her qualifications to serve on our Board. |
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| STEPHANIE L. O’SULLIVAN Independent Business Consultant Director since January 2021 | Business Experience: Ms. O’Sullivan has served as an independent business consultant since January 2017. Prior to serving as an independent business consultant, Ms. O’Sullivan served as Principal Deputy Director of the Office of National Intelligence from February 2011 until January 2017. In that position, she assisted the Director of National Intelligence in the management of day-to-day operations of the intelligence community. From December 2009 until February 2011, Ms. O’Sullivan served as the Associate Deputy Director of the Central Intelligence Agency. Prior to that appointment, she held several management positions in the agency’s Directorate of Science and Technology, working to develop and deploy innovative technology in support of intelligence collection and analysis. Other Directorships and Memberships and Education: Ms. O’Sullivan currently serves on the boards of directors of Battelle Memorial Institute, HRL Laboratories (formerly Hughes Research Laboratories) and Accenture Federal Services (proxy board) and on the board of trustees of IQT (In-Q-Tel). She has also served on the boards of The Aerospace Corporation and the CIA Officers Memorial Fund and on advisory boards at Google, Adobe, Oak Ridge National Laboratory, Noblis, Peraton and Booz Allen Hamilton. Ms. O’Sullivan has been an adjunct faculty member at Georgetown University’s Center for Security and Emerging Technology and continues to support study activities for the Department of Defense, Office of the Director of National Intelligence and the CIA. She was elected a member of the National Academy of Engineering in 2019. Ms. Sullivan received a B.S. in Civil Engineering from Missouri Science and Technology University. Experience, Qualifications, Attributes and Skills: We believe Ms. O’Sullivan is qualified to serve as a director based upon her extensive experience with our primary customer as a long-served senior civilian in the U.S. government and her highly successful career culminating in assignments in the most senior levels of government. We believe she also adds to the Board broad experience in the fields of command, control and intelligence for the U.S. government, which are areas of importance to our Defense and Federal Solutions business unit in our growing Technical Solutions business segment. In addition, Ms. O’Sullivan is a demonstrated governance professional based upon her experience in the board environment of private organizations. | | THOMAS C. SCHIEVELBEIN Retired Chairman, President and Chief Executive Officer of The Brink’s Company Director since March 2011 | Business Experience: Mr. Schievelbein served as Chairman, President and Chief Executive Officer of The Brink’s Company, a security company, from June 2012 until his retirement in May 2016. He served as President of Northrop Grumman Newport News and was a member of the Northrop Grumman Corporate Policy Council from November 2001 until November 2004. Mr. Schievelbein served as Chief Operating Officer of Newport News Shipbuilding Inc. from 1995 until 2001 and was responsible for the design, construction and maintenance of nuclear-powered aircraft carriers and submarines. His experience includes the Virginia-class submarine program, CVN-76, CVN-77 and CVN-21 aircraft carrier programs, aircraft carrier overhaul and refueling, submarine fleet maintenance, commercial and naval ship repair and business development. Current Public Company Directorships: Mr. Schievelbein has served on the board of directors of New York Life Insurance Co. since 2006 and currently serves as the Lead Director, as well as a member of the Compensation Committee, the Investment Committee and the Governance and Policy Committee. Prior Public Company Directorships: Mr. Schievelbein previously served on the board of directors of The Brink’s Company from March 2009 until his retirement in May 2016, serving as Chairman of that board from June 2012. Before serving as Chairman, he served as a member of its Audit and Compensation Committees. Mr. Schievelbein served on the board of directors of McDermott International Inc., an engineering company, from 2004 to 2012. Other Directorships and Memberships and Education: Mr. Schievelbein is a past member of the Secretary of the Navy’s Advisory Panel and was a director of the U.S. Naval Academy Foundation from 2004 through 2012. He received a B.S. in Marine Engineering from the U.S. Naval Academy and a Master’s Degree in Nuclear Engineering from the University of Virginia. Experience, Qualifications, Attributes and Skills: We believe Mr. Schievelbein is qualified to serve as a director based upon his experience as the President and Chief Operating Officer of Northrop Grumman Newport News and Chief Operating Officer of Newport News Shipbuilding Inc., his prior experience as Chairman, President and Chief Executive Officer of a public company and his experience serving as a director of other public companies. |
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| JOHN K. WELCH Retired President and Chief Executive Officer of Centrus Energy Corp. (formerly USEC Inc.) Director since February 2015 | Business Experience: Mr. Welch served as President and Chief Executive Officer of Centrus Energy Corp. (formerly USEC Inc.) from October 2005 until his retirement in October 2014. He was previously a senior executive with General Dynamics Corporation, retiring from the company in 2003 as Executive Vice President for the Marine Systems Group, which included Bath Iron Works, Electric Boat and National Steel and Shipbuilding Company (NASSCO). During his career with General Dynamics, which began in 1989, Mr. Welch also served as President of Electric Boat, Vice President of Programs for Electric Boat, with responsibility for new construction, overhaul and repair programs, material acquisition and information technology, and Vice President for Program Development at Electric Boat, with responsibility for strategic planning, program and product marketing and high-technology program acquisition and management. Mr. Welch served over seven years on active duty with the U.S. Navy as a nuclear submarine officer and retired from the Naval Reserve. Prior Public Company Directorships: Mr. Welch served on the board of directors of Centrus Energy Corp. and its predecessor, USEC Inc., from 2005 until 2013. Other Directorships and Memberships and Education: Mr. Welch is retired Chairman of the Board of Battelle Memorial Institute and serves on the boards of Novawall Systems Incorporated and Mount St. Joseph High School. He is the Chairman of the Board for Ocean Reef Community Association. Mr. Welch received a B.S. in Aerospace Engineering from the U.S. Naval Academy, a Master’s Degree in Aeronautical Engineering from the Naval Postgraduate School and an M.B.A. from Loyola College. Experience, Qualifications, Attributes and Skills: We believe Mr. Welch is qualified to serve as a director based upon his senior executive experience at other public companies in the shipbuilding and energy markets, including his experience as executive vice president of the primary competitor to our core shipbuilding business. Mr. Welch also brings experience as a director of other public and private companies and not-for-profit entities. |
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Compensation elements for the non-employee members of our Board of Directors are designed to:
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| • | promote alignment with long-term stockholder interests; |
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| • | enable us to attract and retain outstanding directors who meet the criteria described under “Governance of the Company” above; |
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| • | recognize the substantial time commitments necessary to oversee HII’s business; and |
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| • | support the independence of thought and action expected of directors. |
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Non-employee director compensation is evaluated annually by the Compensation Committee, which makes recommendations to the full Board for consideration and approval. In 2023, the Compensation Committee’s independent compensation consultant, Exequity LLP (“Exequity”), conducted an assessment of the competitive market with respect to outside director compensation. Exequity’s assessment considered the following director compensation elements: board-related pay, committee-related pay, equity pay, total director compensation and chairman of the board compensation. Based upon an analysis of the 15 companies that comprise the peer group for our 2023 NEO compensation analysis, as well as summary data from the S&P 500 Index, Exequity concluded that the annual cash component and the equity component of HII’s outside director total compensation trailed the median of our peer group and the S&P 500 Index. To address its determination, Exequity proposed increasing the annual cash retainer for non-employee Board members from $100,000 to $120,000 and the annual equity award for non-employee Board members from $160,000 to $165,000. The Compensation Committee accepted Exequity’s recommendation and recommended that the Board approve an amended and restated directors’ compensation policy reflecting the cash compensation and equity award increases, which the Board approved. The changes to non-employee director compensation became effective January 1, 2024, and the following section sets forth director compensation under the amended and restated policy.
DIRECTOR COMPENSATION PROGRAM
DIRECTOR COMPENSATION PROGRAM Our director compensation program for non-employee directors is comprised of both cash retainers and equity awards in the form of either restricted stock units or shares of our common stock, in each case granted under our 2022 Long-Term Incentive Stock Plan.
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DIRECTOR COMPENSATION PROGRAM
The following table sets forth the annual cash retainers for the non-employee members of our Board:
DIRECTOR COMPENSATION PROGRAM
| | Annual Cash Retainer* | | Non-employee Directors | $120,000 | | Non-Executive Chairman of the Board | $350,000 | | Chairpersons of our Standing Board Committees | | | Audit | $25,000 | | Compensation | $20,000 | | Cybersecurity | $20,000 | | Governance and Policy | $20,000 | | Finance | $20,000 | | Other Members of our Standing Board Committees | | | Audit | $17,500 | | Compensation | $7,500 | | Cybersecurity | $7,500 | | Governance and Policy | $7,500 | | Finance | $7,500 |
DIRECTOR COMPENSATION PROGRAM
| * Cash retainers are paid on a quarterly basis at the end of each quarter in arrears. |
DIRECTOR COMPENSATION PROGRAM
Non-employee directors may elect to receive their annual cash retainers in the form of stock units payable upon termination of the director’s board service. Non-employee directors who elect to receive their annual cash retainers in the form of stock units and own shares of our common stock having a value of at least five times the director’s annual cash retainer may elect to receive for the following calendar year either shares of our common stock, or stock units that are payable in the fifth calendar year after the year in which the stock units are earned (or, if earlier, upon termination of the director’s board service). The common stock or stock units are fully vested on the date of grant. Non-employee directors also receive an annual equity award of restricted stock units or shares of our common stock, valued at $165,000. On the first trading day of each quarter, each non-employee director is granted a number of restricted stock units or shares determined by dividing $41,250 by the per share closing price of our common stock on the NYSE on the date of grant, rounded down to the nearest whole unit or share. Restricted stock unit awards are fully vested at date of grant but do not generally become payable until 30 days following the date a non-employee director ceases to serve on the Board. Non-employee directors receive dividend equivalents on their outstanding and unpaid restricted stock units. Dividend equivalents are paid in the form of a credit of additional restricted stock units and are subject to the same vesting, payment and other provisions as the underlying restricted stock units. If a non-employee director owns shares of our common stock having a value of at least five times the director’s annual cash retainer, the director may elect to receive his or her annual equity award in the form of either shares of our common stock, or stock units that are payable in the fifth calendar year after the year in which the annual equity award is earned (or, if earlier, upon termination of the director’s board service). The common stock or stock units are fully vested on the date of grant.
DIRECTOR COMPENSATION PROGRAM
| 42 | Huntington Ingalls Industries, Inc. |
2023 DIRECTOR COMPENSATION TABLE
2023 DIRECTOR COMPENSATION TABLE The following table sets forth the compensation for the year ended December 31, 2023, of our non-employee directors who served during any part of 2023. The only employee member of the Board (our CEO) received no additional compensation for his service on the Board.
2023 DIRECTOR COMPENSATION TABLE
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | | Augustus L. Collins | —(3) | 284,167(4) | 1,741 | 285,908 | | Leo P. Denault | —(3) | 288,963(5) | — | 288,963 | | Kirkland H. Donald | 350,000 | 159,680 | — | 509,680 | | Craig S. Faller | 31,250 | 39,837 | — | 71,087 | | Victoria D. Harker | 127,500 | 159,680 | — | 287,180 | | Frank R. Jimenez | 115,000 | 159,680 | — | 274,680 | | Anastasia D. Kelly | 115,000 | 159,680 | — | 274,680 | | Tracy B. McKibben | 115,000 | 159,680 | — | 274,680 | | Stephanie L. O’Sullivan | 127,500 | 159,680 | — | 287,180 | | Thomas C. Schievelbein | 137,500 | 159,680 | — | 297,180 | | John K. Welch | 137,500 | 159,680 | — | 297,180 | | Stephen R. Wilson | 44,773 | 79,880 | — | 124,653 |
2023 DIRECTOR COMPENSATION TABLE
| (1) The values for stock awards represent the grant date fair values of restricted stock units or shares of common stock granted in 2023, computed in accordance with FASB ASC Topic 718. Information about the assumptions used to value these awards can be found in Note 18 of the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. As of December 31, 2023, our non-employee directors held the following number of restricted stock units: Collins—8,173, Denault—1,333, Donald—4,921, Faller—198, Harker—7,419, Jimenez—1,542, Kelly—16,990, McKibben—3,747, O’Sullivan—2,254, Schievelbein—20,427 and Welch—5,843; and the following number of shares of common stock: Harker—3,166, Kelly—914, Schievelbein—5,847 and Welch—1,545. |
2023 DIRECTOR COMPENSATION TABLE
| (2) Represents value of spousal travel to board- or company-related events. |
2023 DIRECTOR COMPENSATION TABLE
| (3) Gen. Collins and Mr. Denault elected to receive their 2023 cash retainers in the form of stock units. |
2023 DIRECTOR COMPENSATION TABLE
| (4) $124,487 of this amount represents stock units issued in lieu of 2023 cash retainers. |
2023 DIRECTOR COMPENSATION TABLE
| (5) $129,283 of this amount represents stock units issued in lieu of 2023 cash retainers. |
2023 DIRECTOR COMPENSATION TABLE
| 2024 Notice and Proxy Statement | 43 |
Commitment to Compensation Best Practices
| WHAT WE DO | | | Consideration of Annual “Say-on-Pay” Advisory Vote | The Compensation Committee considers the results of the annual stockholder “Say-on-Pay” advisory vote on executive compensation. | | Pay for Performance | Our executive compensation program is heavily weighted toward variable, performance-based elements, and toward long-term and equity-based elements. Variable compensation is tied to the achievement of performance goals and includes annual cash incentive awards and long-term restricted performance stock rights, which are described in detail in this CD&A. | | Compensation Risk Assessment | We assess the risk of our compensation programs on an annual basis both internally and with the engagement of the Compensation Committee’s independent compensation consultant. The Compensation Committee agreed with the consultant’s report that there was no undue risk associated with the design or delivery of the programs in 2023. | | Dodd-Frank Compensation Recovery Policy | Our Dodd-Frank Compensation Recovery Policy requires us to recover erroneously awarded “incentive compensation” received by certain current or former executive officers or vice presidents of the company. | | Targeted Compensation Benchmarking | HII is a unique business with few direct competitors. The Compensation Committee therefore strikes a balance between internal equity and external benchmarking when setting executive pay levels. |
Commitment to Compensation Best Practices
| WHAT WE DO | | | Independent Compensation Consultant | The Compensation Committee engages an independent compensation consultant to assess the market for the determination of our executive compensation elements and performance targets on an annual and ongoing basis. | | Executive Stock Ownership Guidelines | Our stock ownership guidelines provide that each NEO must own a multiple of his or her annual base salary in our common stock, and we have instituted holding requirements prohibiting our NEOs from selling HII common stock received as compensation until their stock ownership requirements have been met. | | Incorporation of Director Stock Ownership in Director Compensation Plan | Although our directors do not have specific stock ownership requirements, the restricted stock units our non-employee directors receive do not become payable until a director ceases to serve on the Board. Non-employee directors who own shares of our common stock having a value of at least five times the amount of their annual cash retainer may elect, on an annual basis, to receive their annual equity award directly in shares of our common stock or stock units that are payable in the fifth calendar year after the year in which the annual equity award is earned (or, if earlier, upon termination of the director’s board service). In addition, non-employee directors may elect to receive their annual cash retainers in the form of stock units or, in the case of directors who own shares of common stock having a value of at least five times the amount of their annual cash retainer, common stock or stock units that are payable in the fifth calendar year after the year in which the annual cash retainer is earned (or, if earlier, upon termination of the director’s board service). |
Commitment to Compensation Best Practices
| WHAT WE DON’T DO | | | No Employment Agreements for Executives | None of our NEOs have employment agreements, so each NEO is employed by the company “at will.” We maintain a severance plan that provides for the payment of severance benefits in limited termination circumstances. | | No Change-in-Control Agreements for Executives | We have no change-in-control agreements or related executive tax gross-up benefits. The only change-in-control provision in our compensation plans, which applies to all employees who hold equity awards, is the possible acceleration of equity vesting in certain limited circumstances within the parameters of a change-in-control transaction, as defined in the related plans. | | No Hedging or Pledging by Officers or Directors | Officers, directors and certain other employees are prohibited from engaging in speculative transactions in our securities, pledging our securities as collateral for a loan or other transaction or engaging in any hedging transactions involving our securities. | | No Dividends or Dividend Equivalents on Unearned Restricted Performance Stock Rights (RPSRs) or Restricted Stock Rights (RSRs) | No dividends or dividend equivalents are paid out on restricted performance stock rights or restricted stock rights during the performance period. Dividend equivalent units are paid only at the time and to the extent that the underlying shares vest and are paid. |
Executive Compensation Principles
| • | Compensation programs will be designed to influence outcomes and will provide a balance between short- and long-term performances. |
Executive Compensation Principles
| • | Compensation and benefits will be competitive within the market. Alignment with peer companies will be considered when developing programs and goals, but measures oriented to promoting strong improvements in our own business results will be the predominant factor. |
Executive Compensation Principles
| • | To promote alignment of management and stockholder interests, elected officers will meet stock ownership guidelines in the following multiples of base salary: CEO and President, seven times; all other elected officers reporting to the CEO, three times. The Committee will monitor attainment of the ownership guidelines on an annual basis. The restricted stock units our non-employee directors receive do not become payable until a director ceases to serve on the Board. Non-employee directors who own shares of our common stock having a value of at least five times the amount of their annual cash retainer may elect, on an annual basis, to receive their annual equity award directly in shares of our common stock or stock units that are payable in the fifth calendar year after the year in which the annual equity award is earned (or, if earlier, upon termination of the director’s board service). In addition, non-employee directors may elect to receive their annual cash retainers in the form of stock units or, in the case of directors who own shares of common stock having a value of at least five times the amount of their annual cash retainer, common stock or stock units that are payable in the fifth calendar year after the year in which the annual cash retainer is earned (or, if earlier, upon termination of the director’s board service). |
Executive Compensation Principles
| • | The mix of long-term awards, selection of performance criteria and oversight of compensation programs, together with other features, such as our stock ownership guidelines, will be designed to discourage excessive risk taking by emphasizing a long-term focus on compensation and financial performance. |
Executive Compensation Principles
| • | Our NEO compensation strategy will be consistently applied for all incentive plan participants to promote proper alignment, accountability and line-of-sight regarding commitments and priorities. |
Pay for Performance
The design of our annual and long-term incentive compensation plans also supports our pay-for-performance philosophy. A significant portion of the potential compensation of our executives is at risk, and that risk corresponds with each executive’s level of responsibility. Exceeding our financial, operational and strategic leadership goals can result in a payout of up to 200% of the original target awards under our annual incentive compensation and long-term incentive stock plans, while failure to meet our goals can result in no incentive compensation payouts.
Retention of Independent Compensation Consultant
Retention of Independent Compensation Consultant The Committee continued in 2023 to engage an independent compensation consultant, Exequity, to assist the Committee in carrying out its responsibilities under its charter. Under the terms of its charter and the agreement between the Committee and the consultant, the Committee has the exclusive right to select, retain and terminate Exequity, as well as to approve any fees, terms or other conditions of Exequity’s service. Exequity reports directly to the Committee. When directed to do so by the Committee, the consultant also works collaboratively with company management to develop analyses and proposals for presentations to the Committee. The Committee reviews the performance of the independent consultant on an annual basis and determines whether to continue the engagement. Exequity attended several Committee meetings during 2023 and presented analyses and key recommendations for Committee consideration, discussed emerging trends and technical issues and reviewed and commented on management’s proposals, as appropriate. In addition, the consultant responded to miscellaneous Committee requests.
Compensation Consultant Independence Assessment
Compensation Consultant Independence Assessment In accordance with SEC rules and NYSE listing standards, the Committee requested and received information from Exequity relating to the consultant’s independence and potential conflicts of interest, including information regarding the following: (1) other services provided to us by the consultant; (2) fees paid by us as a percentage of the consulting firm’s total revenue; (3) policies or procedures maintained by the consulting firm designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the Committee; (5) any company stock owned by the individual consultants involved in the engagement; and (6) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement. Based upon an assessment of these factors, including information gathered from our directors and executive officers relating to business and personal relationships with the consulting firm and the individual consultants, the Committee concluded that the consultant is independent and that the work of the consultant did not raise any conflict of interest.
Peer Group Development
Peer Group Development The Committee believes our total compensation program (base salary, target annual cash incentive awards, target long-term incentive awards and benefits) should provide aggregate compensation at approximately the 50th percentile of the relevant market. Based upon an analysis conducted by Exequity and reviewed with the Committee, the Committee determined that our NEO base pay generally approximates the median of the peer companies and long-term incentive compensation is generally in the third or fourth quartile among the peer companies. This compensation mix is consistent with both management’s and the Committee’s philosophy that a significant portion of an executive’s overall compensation package should be based on the performance of the company and therefore be at risk. HII is a unique business with few directly comparable peer companies. As such, our current peer group is comprised of heavy manufacturing, engineering and defense companies that have annual revenues generally between $2 billion and $20 billion and that most closely match our company in terms of market cap, strategic interest, workforce similarities and/or business type. The median annual revenues for peer group companies was $6.6 billion, compared to our 2023 revenues of $11.5 billion.
Peer Group Development
| 2024 Notice and Proxy Statement | 53 |
Peer Group Development
The targeted peer group for our 2023 NEO compensation analysis consisted of the following 15 companies:
Peer Group Development
| BWX Enterprises, Inc. | Moog Inc. | | Curtiss-Wright Corporation | Oshkosh Corporation | | Dover Corporation | Parker Hannifin Corporation | | Howmet Aerospace Inc. | Spirit AeroSystems Holdings, Inc. | | Jacobs Engineering Group, Inc. | Teledyne Technologies Incorporated | | KBR Inc. | Textron Inc. | | L-3 Harris Technologies, Inc. | TransDigm Group | | Leidos Holdings, Inc. | |
Peer Group Development
The Committee analyzed the business landscape in the markets in which HII operates and has decided to modify this peer group for 2024 by adding Booz Allen Hamilton Holding Corporation.
Compensation Risk Assessment
| • | Our lack of employment agreements discourages management entrenchment and increases our flexibility to make management changes as necessary; |
Compensation Risk Assessment
| • | Our long-term incentive compensation plan includes a relative performance component, mitigating risk and inherent forecasting uncertainty of relying solely on budget-based goals; |
Compensation Risk Assessment
| • | Long-term incentive compensation payouts are capped at 200%, preventing possible windfall awards resulting from unforeseen circumstances; and |
Compensation Risk Assessment
| • | Long-term performance-based incentive compensation awards are earned over a three-year performance period and reduce any incentive to engage in business tactics that improve short-term performance at the expense of long-term success. |
2023 Key Compensation Decisions
| • | Targets as a percentage of base salary for annual incentive awards for 2023 under our AIP were unchanged from 2022, with the exception of Mr. Kastner, whose target as a percentage of base salary increased from 125% to 135%. Based on our performance for 2023, as well as the individual performances of our NEOs, payout awards to NEOs under our AIP were approved at levels that ranged from 158% to 192% of targets. |
2023 Key Compensation Decisions
| • | Targets for long-term incentive awards for 2023 were unchanged from 2022. All long-term incentive awards were in the form of restricted performance stock rights, which vest only upon achievement of performance metrics measured over a three-year period. |
Creation of Annual Incentive Plan (“AIP”) and Long-Term Incentive Stock Plan (“LTIP”) Goals
Creation of Annual Incentive Plan (“AIP”) and Long-Term Incentive Stock Plan (“LTIP”) Goals The Committee approved financial metric goals and strategic leadership goals under our AIP for the corporate office, as well as a combination of financial metric, operational metric and strategic leadership goals for each of our three operating divisions. The guiding principle behind all of our performance goals is that they drive the desired outcomes to promote customer satisfaction and increase stockholder value. Division operational goals based on clear and measurable results were developed collaboratively between division management and corporate management. Shipbuilding division operational goals fall into the categories of safety, quality, cost, schedule, diversity and inclusion, division-specific challenges and opportunities and cross-shipbuilding collaboration. Mission Technologies division operational goals fall into the categories of growth and hiring, diversity and inclusion, cross business synergy and compliance. Corporate and division strategic leadership goals based on clear and measurable results were developed collaboratively between division management and corporate management and include the categories of leadership, sustainability, cybersecurity and compliance.
Creation of Annual Incentive Plan (“AIP”) and Long-Term Incentive Stock Plan (“LTIP”) Goals
| 2024 Notice and Proxy Statement | 55 |
Creation of Annual Incentive Plan (“AIP”) and Long-Term Incentive Stock Plan (“LTIP”) Goals
The Committee approved financial goals for the LTIP to reward performance in three-year increments. The performance metrics for all participants under the LTIP for 2023 were pension adjusted return on invested capital (“ROIC”), earnings before interest, taxes, depreciation, amortization and pension (“EBITDAP”) and relative EBITDAP growth over the performance period from January 1, 2023 through December 31, 2025. ROIC is a measure of our ability to use cash flows to generate returns. ROIC is calculated as Adjusted Free Cash Flow divided by average Invested Capital. Adjusted Free Cash Flow represents cash flow available to HII’s equity and debt stakeholders, calculated as Free Cash Flow (cash from operations less capital expenditures net of related grant proceeds) plus after-tax interest. Average Invested Capital is equal to total debt, plus equity, less goodwill and the impact of any Accumulated Other Comprehensive Income/Loss. EBITDAP is a key indicator of our financial performance and calculated as Net Earnings, plus interest, taxes, depreciation and amortization, less Net Pension/Post Retirement Benefit/Expense. Relative EBITDAP growth is defined as our EBITDAP ending balance less our EBITDAP beginning balance, divided by the EBITDAP beginning balance, measured against EBITDAP growth of the S&P Aerospace and Defense Select Index (SPSIAD), which consists of more than 30 companies.
Annual Incentive Compensation Awards
Annual Incentive Compensation Awards The Committee approves annual incentive compensation targets as a percentage of base salary for each NEO position. Targets vary with relevant market benchmarks, individual job level, job scope and overall influence on our business results. The Committee considers both the recommendations of its compensation consultant and those of management in determining appropriate annual incentive targets for our NEOs. The target incentive award (“Target Bonus”) is based on a percentage of each NEO’s base salary and provides a basis upon which a final award amount is determined by the Committee based upon its assessment of performance against pre-determined performance criteria after the year has ended. The annual incentive compensation targets for our NEOs expressed as a percentage of base salary tend to fall into the third quartile of the relevant market data.
2023 Annual Incentive Plan
2023 Annual Incentive Plan Annual incentive awards for Messrs. Kastner, Stiehle and Boudreaux for 2023 were evaluated based upon Operating Margin (“OM”) and Operating Cash Flow (“OCF”) for the entire enterprise and strategic leadership goals to arrive at a company performance factor (“CPF”), as well as an individual performance factor (“IPF”) for each executive. OM is equal to segment operating income as a percentage of total revenues. Segment operating income is equal to operating income before the Operating FAS/CAS Adjustment and non-current state income taxes. OCF represents cash from operating activities before discretionary pension contributions, capital expenditures and excess cash flow. Strategic leadership goals are based on four strategic metrics: leadership, sustainability, cybersecurity and compliance. Achievement of the maximum performance criteria results in a CPF of 2.0. If the CPF for the corporate office is less than 0.5, no annual incentive award is paid. Individual IPFs can range from 0 to 1.5. No annual incentive award can exceed 200% of an individual’s Target Bonus. The annual incentive award formula for the corporate office for the 2023 performance period was: Base Salary x Target % = Target Bonus Target Bonus x CPF x IPF = Final Bonus Award The 2023 annual incentive award for Mr. Green was evaluated based on his division performance factor (“DPF”), which includes division financial metric goals, consisting of revenue, EBITDA and OCF,
2023 Annual Incentive Plan
| 56 | Huntington Ingalls Industries, Inc. |
2023 Annual Incentive Plan
and division non-financial goals, which include growth and hiring, diversity and inclusion, cross business synergy and compliance, and strategic leadership goals, as well as an individual IPF. The 2023 annual incentive award for Ms. Wilkinson was evaluated based on her DPF, which includes division financial metric goals, consisting of OM and OCF, and division non-financial goals, which include safety, quality, cost, schedule, diversity and inclusion, division management and cross-shipbuilding collaboration, and strategic leadership goals, as well as an individual IPF. Achievement of the maximum division performance criteria results in a DPF of 2.0, and no annual incentive award is paid to division AIP participants if the CPF with reference to the corporate goals is less than 0.5. Individual IPFs can range from 0 to 1.5. No annual incentive award can exceed 200% of an individual’s Target Bonus. The annual incentive award formula for the operating divisions for the 2023 performance period was: Base Salary x Target % = Target Bonus Target Bonus x DPF x IPF = Final Bonus Award At the conclusion of each calendar year, our CEO conducts an annual performance evaluation for each NEO as a basis for recommending an IPF score for each NEO. These evaluations are reviewed with the Committee. Each NEO’s individual performance is evaluated based upon the following factors:
2023 Annual Incentive Plan
| • | Financial performance of our company as a whole and the division(s) (where applicable); |
2023 Annual Incentive Plan
| • | Performance on non-financial goals, including enterprise-wide goals and division-specific operating goals; |
2023 Annual Incentive Plan
| • | Strategic leadership and vision; |
2023 Annual Incentive Plan
| • | Program execution and performance; |
2023 Annual Incentive Plan
| • | Customer relationships; and |
2023 Annual Incentive Plan
| • | Peer and employee relationships/engagement. |
2023 Annual Incentive Plan
The Committee reviews and considers the recommendations from the CEO and all performance information, including a comparison to the 2023 peer group data. The Committee then approves annual incentive compensation payouts for all NEOs, subject to ratification by the independent members of the Board with respect to the CEO’s compensation.
Target Bonus Amounts
Target Bonus Amounts Based on analyses of relevant market benchmarks and peer group data, no adjustments were made to the annual incentive compensation targets as a percentage of base salary except for Mr. Kastner. The 2023 Target Bonus amounts were as follows:
Target Bonus Amounts
| Name | Incentive Target as % of Base Salary (%) | 2023 Target Bonus ($) | | Christopher D. Kastner (1) | 135 | 1,620,000 | | Thomas E. Stiehle | 80 | 460,000 | | Chad N. Boudreaux | 80 | 456,000 | | Edgar A. Green III | 80 | 424,367 | | Kara R. Wilkinson | 80 | 436,000 |
Target Bonus Amounts
| 1 | Mr. Kastner’s incentive target as a percentage of base salary was increased in 2023 from 125% to 135%. |
Target Bonus Amounts
| 2024 Notice and Proxy Statement | 57 |
2023 Annual Incentive Plan Goals and Results
2023 Annual Incentive Plan Goals and Results For Messrs. Kastner, Stiehle and Boudreaux, 2023 annual incentive compensation awards were based upon overall enterprise performance and corporate strategic leadership performance. For Mr. Green and Ms. Wilkinson, 2023 annual incentive compensation awards were based upon the performance of the Mission Technologies division and Ingalls Shipbuilding division, respectively. The corporate AIP score was based 90% on our overall financial score and 10% on the corporate strategic leadership score, as described below. The Mission Technologies division performance score was based 30% on the division operational score, 60% on the division financial score and 10% on the division strategic leadership score. For purposes of determining the division performance factor under the AIP for Mission Technologies, performance criteria for Mission Technologies were weighted as follows:
2023 Annual Incentive Plan Goals and Results
| | Metric | Description | Individual Weight | Overall Weight | | OPERATIONAL* | Growth and Hiring | Focused on operational or financial goals or goals relating to winning contracts or any other area in which our CEO desires to drive performance. Goals are recommended by our CEO and approved by the Committee at the beginning of the performance year and are specific to the division’s opportunities and challenges | 50% | 30% | | | Diversity and Inclusion | Measured using program-specific objectives related to the creation of development plans and placements for diverse candidates | 20% | | | | Cross Business Synergy | Measured using program-specific objectives related to winning new synergy business pursuits | 15% | | | | Compliance | Measured based on execution of the 2023 compliance program, centralized compliance employee resource site and the implementation of effective SOX controls | 15% | | | FINANCIAL | Revenue | Measured as division total sales | 33% | 60% | | | EBITDA | Measured as division operating income before interest, taxes, depreciation and amortization | 33% | | | | Operating Cash Flow | Measured as division OCF before capital expenditures | 34% | | | STRATEGIC | Strategic Leadership | Measured based on four metrics (leadership, compliance, cybersecurity and social) | 100% | 10% |
2023 Annual Incentive Plan Goals and Results
| * The operational criteria were recommended by our CEO and approved by the Committee at the beginning of the performance year. |
2023 Annual Incentive Plan Goals and Results
| 58 | Huntington Ingalls Industries, Inc. |
2023 Annual Incentive Plan Goals and Results
The Ingalls Shipbuilding division performance score was based 40% on the division operational score, 40% on the division financial score, 10% on the combined operating margins (“SOM”) of the two shipbuilding divisions and 10% on the division strategic leadership score. For purposes of determining the division performance factor under the AIP for Ingalls, the performance criteria for Ingalls were weighted as follows:
2023 Annual Incentive Plan Goals and Results
| | Metric | Description | Individual Weight | Overall Weight | | OPERATIONAL* | Safety | Measured by a combination of elements, including total case rate, lost total case rate and lost work days rate | 16% | 40% | | | Quality | Measured by integrating elements such as defect rates, process quality, planning quality and other appropriate criteria for program type and phase | 14% | | | | Cost | Measured using program-specific objectives related to achievement of cost factors that include Cost Performance Index and overhead rates | 14% | | | | Schedule | Measured using program-specific objectives related to achievement of quarterly schedule targets | 14% | | | | Cross-Shipbuilding Collaboration | Measured based on five areas (program management, supply chain management, planning, engineering and operations) | 14% | | | | Diversity and Inclusion | Measured using a combination of the following elements: hiring, promotional and developmental opportunities and placements for diverse candidates | 14% | | | | Division Management | Focused on operational or financial goals or goals relating to environmental, human capital or any other area in which our CEO desires to drive performance. Goals recommended by our CEO and approved by the Committee at the beginning of the performance year are specific to each division’s opportunities and challenges | 14% | | | FINANCIAL | Return on Sales | Measured as division OM before other post-employment retirement benefits and FAS/CAS net pension expense | 50% | 40% | | | Operating Cash Flow | Measured as division OCF before discretionary pension contributions, capital expenditures and excess cash flow | 50% | | | OPERATING MARGIN | Combined Shipbuilding Operating Margin | Measured as the combined OM of the shipbuilding divisions | 100% | 10% | | STRATEGIC | Strategic Leadership | Measured based on four metrics (leadership, sustainability, cybersecurity and compliance) | 100% | 10% |
2023 Annual Incentive Plan Goals and Results
| * The operational criteria were recommended by our CEO and approved by the Committee at the beginning of the performance year. |
2023 Annual Incentive Plan Goals and Results
All of the AIP goals for the corporate office and our three divisions, which cover the NEOs, are recommended by our CEO and then approved by the Committee.
2023 Annual Incentive Plan Goals and Results
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2023 Annual Incentive Plan Goals and Results
AIP goals are plan-based, with minimum and maximum limits based on clear targets connected to our annual operating plan. The AIP goals are based upon metrics that are customer focused and stockholder friendly with clear line-of-sight financial and operational metrics. Final AIP performance metrics for 2023, as determined by the Committee, were as follows:
Corporate 2023 Metrics for Messrs. Kastner, Stiehle and Boudreaux
| Corporate 2023 Metrics | Goals @ 0% | Goals @ 100% | Goals @ 200% | Performance Results | Points Earned | Weighting | Final AIP Points | | Financial Metrics | | | | | | | | | OM—Performance (%) | 5.51 | 6.66 | 7.56 | 7.31 | 172 | 45% | 78 | | OCF—Performance ($M) | 879 | 1,079 | 1,166 | 1,288 | 200 | 45% | 90 | | Financial Performance | | | | | | | 168 | | Strategic Leadership Metrics | 0 | 100 | 200 | 174 | 174 | 10% | 17 | | Total Performance (CPF) | | | | | Total AIP Score | | 185 |
Mission Technologies 2023 Metrics for Mr. Green
| MT 2023 Metrics | Goals @ 0% | Goals @ 100% | Goals @ 200% | Performance Results | Points Earned | Weighting | Final AIP Points | | Operational Metrics | | | | | | | | | Operational Performance (Growth and Hiring, Diversity and Inclusion, Cross-Business Synergy and Compliance) | 0 | 100 | 200 | 175 | 175 | 30% | 52 | | Financial Metrics | | | | | | | | | Revenue ($M) | 2,402 | 2,552 | 2,610 | 2,699 | 66 | | | | EBITDA ($M) | 178 | 208 | 215 | 237 | 66 | | | | Operating Cash Flow ($M) | 157 | 197 | 204 | 279 | 68 | | | | Financial Performance | | | | | 200 | 60% | 120 | | Strategic Leadership Metrics | 0 | 100 | 200 | 200 | 200 | 10% | 20 | | Total Performance (DPF) | | | | | Total AIP Score | | 192 |
Ingalls Shipbuilding 2023 Metrics for Ms. Wilkinson
| Ingalls 2023 Metrics | Goals @ 0% | Goals @ 100% | Goals @ 200% | Performance Results | Points Earned | Weighting | Final AIP Points | | Operational Metrics | | | | | | | | | Operational Performance (Safety, Quality, Cost, Schedule, Cross- Shipbuilding Collaboration, Diversity and Inclusion, President Specific) | 0 | 100 | 200 | 117 | 117 | 40% | 47 | | Financial Metrics | | | | | | | | | OM—Performance (%) | 9.40 | 10.50 | 11.30 | 13.15 | 100 | | | | OCF—Performance ($M) | 255 | 315 | 345 | 434 | 100 | | | | Financial Performance | | | | | 200 | 40% | 80 | | Shipbuilding Operating Margin Metric | | | | | | | | | Combined Shipbuilding OM (%) | 7.00 | 8.00 | 9.00 | 8.34 | 134 | 10% | 13 | | Strategic Leadership Metrics | 0 | 100 | 200 | 181.00 | 181 | 10% | 18 | | Total Performance (DPF) | | | | | Total AIP Score | | 158 |
Long-Term Incentive Compensation Awards
Long-Term Incentive Compensation Awards Our long-term incentive compensation goals are intended to reward three-year performance increments based primarily upon the achievement of financial metrics. Long-term incentive compensation for our NEOs is provided in the form of Restricted Performance Stock Rights (“RPSRs”). Each RPSR represents the right to receive one share of our common stock, or cash of equivalent value, subject to vesting as provided in the award. Vesting occurs when the Committee determines the extent to which the applicable performance criteria for the performance period have been achieved. Earned RPSRs may be paid out in shares of our common stock or, at the discretion of the Committee, cash. RPSRs include dividend equivalent units (“DEUs”) that are credited to the RPSRs following payment by the company of a cash dividend on our common stock. These DEUs remain subject to the terms and conditions of the underlying RPSR grants and are paid only to the extent the underlying RPSRs vest upon satisfaction of the applicable performance criteria. The Committee determines long-term incentive compensation target values for our NEOs based upon a peer group analysis, applying value-based guidelines that focus on the award value, rather than the number of shares granted (share-based guidelines). The Committee believes value-based guidelines more effectively deliver long-term incentive compensation awards that are consistent with awards received by individuals holding comparable positions at peer companies.
2023 Long-Term Incentive Compensation Awards
2023 Long-Term Incentive Compensation Awards Long-term incentive compensation awards in 2023 were granted under our stockholder-approved Huntington Ingalls Industries, Inc. 2022 Long Term Incentive Stock Plan (the “2022 Plan”). All long-term incentive compensation awards granted to our NEOs in 2023 were in the form of RPSRs and
2023 Long-Term Incentive Compensation Awards
| 2024 Notice and Proxy Statement | 61 |
2023 Long-Term Incentive Compensation Awards
cover the performance period from 2023 through 2025. The Committee and management review and evaluate RPSR performance goals to ensure they are aligned with our long-term objectives. For the 2023 grants, the Committee and management determined that performance for long-term incentive compensation awards to our NEOs would be measured using ROIC, EBITDAP and relative EBITDAP. The number of shares that ultimately vest and are issued to an NEO under an RPSR award can vary from 0% to 200% of the original number of shares granted plus accrued dividends. For 2023, the long-term incentive compensation target values for our NEOs were approved by the Committee as follows:
2023 Long-Term Incentive Compensation Awards
| Name | 2023 Long-Term Incentive Compensation Target ($) | Actual Award ($) | | Christopher D. Kastner | 5,800,000 | 5,799,855 | | Thomas E. Stiehle | 1,500,000 | 1,499,944 | | Chad N. Boudreaux | 1,150,000 | 1,149,814 | | Edgar A. Green III | 1,150,000 | 1,149,814 | | Kara R. Wilkinson | 1,150,000 | 1,149,814 |
2023 Long-Term Incentive Compensation Awards
The target dollar amounts are grant date theoretical values and not based upon any actual calculation or estimate of payout. An NEO is not guaranteed to receive any payout as a result of the 2023 grants.
2021-2023 Long-Term Incentive Plan Goals and Results
2021-2023 Long-Term Incentive Plan Goals and Results During the first quarter of each year, the Committee reviews our financial performance over the prior three years against approved long-term incentive compensation goals to determine payout multiples for RPSRs with a performance period that ended December 31 of the prior year. At the February 2024 meeting, the Committee reviewed performance for the January 1, 2021 through December 31, 2023 performance period. The performance score for the 2021 LTIP equity grants, as approved by the Committee, was calculated as follows:
2021-2023 Long-Term Incentive Plan Goals and Results
| | HII 2021-2023 Goals | | | Actual Performance (Adj.) | | | | | | Goals @ 0% | Goals @ 100% | Goals @ 200% | Performance Results | Score | Weighting | CPF | | EBITDAP ($M) (1) | 2,851 | 3,001 | 3,151 | 3,010 | 106 | 40% | 42 | | ROIC (%) (2) | 39.77 | 42.86 | 45.95 | 44.45 | 152 | 40% | 61 | | Relative EBITDAP (%) (3) | 25.00 | 55.00 | 75.00 | 67.00 | 160 | 20% | 32 | | Total | | | | Total LTIP Score | | | 135 |
2021-2023 Long-Term Incentive Plan Goals and Results
| (1) Net Earnings before interest, taxes, depreciation, amortization and Net Pension/Post Retirement Expense. |
2021-2023 Long-Term Incentive Plan Goals and Results
| (2) Cumulative FCF divided by average invested capital. |
2021-2023 Long-Term Incentive Plan Goals and Results
| (3) HII EBITDAP ending balance less HII EBITDAP beginning balance, divided by the EBITDAP beginning balance, measured against EBITDAP growth of the S&P Aerospace and Defense Select Index. |
2021-2023 Long-Term Incentive Plan Goals and Results
The 2021 LTIP awards paid out at 135% of target, and earned RPSRs were issued on February 26, 2024.
2021-2023 Long-Term Incentive Plan Goals and Results
| 62 | Huntington Ingalls Industries, Inc. |
2024 Changes to Long-Term Incentive Plan Awards
2024 Changes to Long-Term Incentive Plan Awards Beginning in 2024, long-term incentive compensation for our NEOs will be provided in the form of both RPSRs and ratable vesting Restricted Stock Rights (“RSRs”). The Committee added RSRs to our long-term incentive compensation to provide a time-based compensation element to align HII’s incentive compensation more closely to the market and peer companies and to respond to the changing needs of our company. Each RSR represents a right to receive one share of our common stock, or cash of equivalent value, subject to vesting as provided in the award. Vesting occurs over three years, with 33 1/3% vesting upon each of the first, second and third anniversaries of the grant date. RSRs may be paid out in shares of our common stock or, at the discretion of the Committee, cash. RSRs include DEUs that are credited to the RSRs following payment by the company of a cash dividend on our common stock. These DEUs remain subject to the terms and conditions of the underlying RSR grants and are paid only to the extent the underlying RSRs vest upon satisfaction of the applicable vesting criteria.
Additional Benefits
Because Messrs. Boudreaux and Green were hired after June 30, 2008, they are not eligible to participate in the company’s qualified and nonqualified defined benefit pension plans, but they receive the SEP and ORAC benefits described above. Our other NEOs do not receive ORAC benefits. Additional information about the SEP and the ORAC is provided in the Nonqualified Deferred Compensation table. Perquisites. Our NEOs are eligible for certain executive perquisites, which include financial planning, dental insurance, physical exams, personal liability insurance and relocation benefits. These perquisites are common within our industry and comprise an important component of our total compensation package. Management and the Committee review perquisites and benefits on an annual basis to ensure they are appropriate. Severance Benefits. Management and the Committee believe severance benefits are appropriate for a reasonable amount of time following certain terminations of employment, including a termination without cause. In addition to providing a severance plan for all employees, we maintain The Severance Plan for Elected and Appointed Officers of Huntington Ingalls Industries. Benefits under this plan for our NEOs include the following:
Additional Benefits
| • | Lump Sum Cash Severance Payment—A lump sum equal to one and one half (1.5) times the sum of annual base salary and Target Bonus; |
Grant Date for Equity Compensation Awards
Grant Date for Equity Compensation Awards Our annual grant cycle for long-term incentive compensation equity awards occurs simultaneously with annual salary increases and annual incentive compensation awards. We expect this to occur in the first two and one-half months of each year. This timing allows management and the Committee to make decisions on all three compensation elements at the same time to promote a total compensation approach.
Stock Holding Requirement
Stock Holding Requirement To supplement our stock ownership guidelines, we adopted stock holding requirements for our NEOs and other officers. Under the holding requirements, our NEOs and other officers must hold at least 50% of the total number of shares of our common stock received as compensation until the earlier of (a) the third anniversary of the date such shares are issued or (b) the date that employment terminates due to death or disability. The holding requirement continues upon termination or retirement for a one-year period after separation from the company and applies to any equity compensation award vesting in that one-year period. Any equity compensation award vesting or stock options exercised after the one-year anniversary of retirement or termination are not subject to the holding requirement. The stock holding requirement has been eliminated for equity awards granted on or after January 1, 2024.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name & Principal Position | Year | Salary ($) (1) | Stock Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) (3) | Change in Pension Value and Non-Qualified Deferred Compensation Earnings (4) | All Other Compensation ($) (5) | Total ($) | | Christopher D. Kastner, | 2023 | 1,180,384 | 5,799,855 | 2,997,000 | 3,962,861 | 160,519 | 14,100,619 | | President and Chief | 2022 | 1,023,077 | 4,399,840 | 1,832,443 | 363,888 | 123,018 | 7,742,266 | | Executive Officer | 2021 | 683,424 | 1,999,976 | 1,260,000 | — | 54,552 | 3,997,952 | | Thomas E. Stiehle, | 2023 | 575,000 | 1,499,944 | 851,000 | 1,823,692 | 65,757 | 4,815,393 | | Executive Vice President and | 2022 | 571,154 | 1,499,890 | 676,200 | 664,774 | 108,586 | 3,520,604 | | Chief Financial Officer | 2021 | 502,281 | 999,988 | 825,000 | 546,756 | 43,621 | 2,917,646 | | Chad N. Boudreaux, | 2023 | 570,001 | 1,149,814 | 843,600 | — | 160,846 | 2,724,261 | | Executive Vice President and | 2022 | 563,077 | 1,149,977 | 670,320 | — | 174,005 | 2,557,379 | | Chief Legal Officer | 2021 | 520,385 | 949,855 | 787,500 | — | 108,903 | 2,366,643 | | Edgar A. Green III, | 2023 | 530,458 | 1,149,814 | 814,784 | — | 115,846 | 2,610,902 | | Executive Vice President and | 2022 | 523,029 | 1,149,977 | 394,661 | — | 460,779 | 2,528,447 | | President, Mission Technologies (6) | 2021 | 515,008 | 1,149,852 | 409,431 | — | 144,508 | 2,218,800 | | Kara R. Wilkinson, | 2023 | 535,022 | 1,149,814 | 688,880 | 1,494,869 | 56,909 | 3,925,494 | | Executive Vice President and | 2022 | 512,314 | 1,149,977 | 638,600 | — | 48,735 | 2,349,626 | | President, Ingalls Shipbuilding (7) | | | | | | | |
Summary Compensation Table
| (1) The amounts in this column represent salary earned during the year and include amounts deferred under the savings and nonqualified deferred compensation plans. |
Summary Compensation Table
| (2) The dollar values shown in this column are equal to the grant date fair values of equity awards made during the year, computed in accordance with FASB ASC Topic 718. Information about the assumptions used to value these awards can be found in Note 18 of the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. |
Summary Compensation Table
| The grant date values of 2023 RPSRs for each NEO, assuming maximum performance, were: |
Summary Compensation Table
| Christopher D. Kastner | $11,599,710 | | Thomas E. Stiehle | $2,999,888 | | Chad N. Boudreaux | $2,299,627 | | Edgar A. Green III | $2,299,627 | | Kara R. Wilkinson | $2,299,627 |
Summary Compensation Table
| (3) The amounts reported in this column are attributable to the AIP awards earned for 2021, 2022 and 2023, but paid in 2022, 2023 and 2024, respectively. See the Grants of Plan-Based Awards table for more information regarding the range of AIP awards that could have been earned for 2023. |
Summary Compensation Table
| (4) The amounts reported in this column represent the changes in actuarial present values of the accumulated benefits under defined benefit pension plans, determined by comparing the prior completed year-end amount to the covered year-end amount. We do not have any deferred compensation plans that provide for above market or preferential earnings. |
Summary Compensation Table
| (5) Detailed information on the amounts reported in this column is included in the All Other Compensation table below. |
Summary Compensation Table
| (6) Mr. Green was a named executive officer for the years ended December 31, 2021 and December 31, 2022. Due to an error in calculating his perquisites for the year ended December 31, 2022, Mr. Green was inadvertently omitted from the disclosure in the proxy statement for our 2023 Annual Meeting of Stockholders. Mr. Green’s compensation for 2022 is |
Summary Compensation Table
| 68 | Huntington Ingalls Industries, Inc. |
Summary Compensation Table
| included here, and his 2021 compensation was previously disclosed in the proxy statement for our 2022 Annual Meeting of Stockholders. |
Summary Compensation Table
| (7) Ms. Wilkinson first became a NEO in 2022. Under SEC rules, we are only required to provide 2022 and 2023 information for Ms. Wilkinson. |
2023 CEO Pay Ratio
2023 CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K promulgated under the Securities Exchange Act of 1934, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. Companies may apply a variety of different methodologies, assumptions, adjustments and estimates in compliance with Item 402(u) of Regulation S-K; as such, the information provided should not be used as a basis for comparisons between different companies. For 2023, the annual total compensation of the median employee of our company was $84,115 and the annual total compensation of our CEO, as reported in the Summary Compensation Table above, was $14,100,619. Based upon this information, the ratio of the annual total compensation of our CEO in 2023, Mr. Kastner, to the median of the annual total compensation of all employees was 168 to 1.
2023 CEO Pay Ratio
| Summary Total Compensation and Pay Ratio | CEO | Median Employee | Pay Ratio | | | $14,100,619 | $84,115 | 168 |
2023 CEO Pay Ratio
Our process for identifying the median of the annual total compensation of all our employees, as well as determining the annual total compensation of our median employee and our CEO, was as follows: We determined that, as of December 31, 2023, our employee population consisted of approximately 44,261 individuals. For purposes of determining our median employee, we excluded 9 employees located in the United Kingdom and Australia. The remaining workforce (excluding our CEO) was 44,251 employees. This population consisted of our full-time, part-time, temporary and seasonal employees. Our practice is to perform the median employee analysis each year. December 31, 2023, was selected as the date upon which we would identify the “median employee,” because it allowed us to identify our median employee in a reasonably efficient and economical manner. To identify the median employee, we compared 2023 W-2 taxable Medicare wages (Box 5) as reported to the Internal Revenue Service. This compensation measure was consistently applied to all employees included in the calculation. As a result of our analysis, we identified a new median employee for 2023. Once we identified the median employee, we calculated annual total compensation for such employee using the same methodology we use for reporting compensation of our NEOs on the 2023 Summary Compensation Table above. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of the table.
2023 CEO Pay Ratio
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2023 Grants of Plan Based Awards
2023 Grants of Plan Based Awards The following table provides additional information about equity and non-equity incentive compensation awards we granted to our NEOs during the year ended December 31, 2023.
2023 Grants of Plan Based Awards
2023 Grants of Plan Based Awards
2023 Grants of Plan Based Awards
| | | | | | | | | | Grant Date Fair Value of Stock Option Awards (3) ($) | | | | | Estimated Potential Payouts Under Non Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | | | Name | Grant Type | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | Christopher D. Kastner | Annual Incentive Plan | | 0 | 1,620,000 | 3,240,000 | | | | | | | Long-term Incentive (RPSR) | 2/28/2023 | | | | 0 | 26,951 | 53,902 | 5,799,855 | | Thomas E. Stiehle | Annual Incentive Plan | | 0 | 460,000 | 920,000 | | | | | | | Long-term Incentive (RPSR) | 2/28/2023 | | | | 0 | 6,970 | 13,940 | 1,499,944 | | Chad N. Boudreaux | Annual Incentive Plan | | 0 | 456,000 | 912,000 | | | | | | | Long-term Incentive (RPSR) | 2/28/2023 | | | | 0 | 5,343 | 10,686 | 1,149,814 | | Edgar A. Green III | Annual Incentive Plan | | 0 | 424,367 | 848,734 | | | | | | | Long-term Incentive (RPSR) | 2/28/2023 | | | | 0 | 5,343 | 10,686 | 1,149,814 | | Kara R. Wilkinson | Annual Incentive Plan | | 0 | 436,000 | 872,000 | | | | | | | Long-term Incentive (RPSR) | 2/28/2023 | | | | 0 | 5,343 | 10,686 | 1,149,814 |
2023 Grants of Plan Based Awards
| (1) Amounts in these columns show the ranges of payouts that were possible under our Annual Incentive Plan based on performance during 2023, as described in the Compensation Discussion and Analysis. The amounts actually earned for 2023 are included in the Summary Compensation Table. |
2023 Grants of Plan Based Awards
| (2) These amounts reflect RPSRs granted in 2023 under the 2022 Plan. Each RPSR represents the right to receive a share of our common stock upon vesting of the RPSR. These RPSRs and accrued DEUs are earned based upon ROIC, EBITDAP and relative EBITDAP performance over a three-year performance period commencing January 1, 2023 and ending December 31, 2025, with payout occurring in early 2026, ranging from 0% to 200% of the shares awarded. Accrued DEUs will be paid only to the extent the underlying shares vest based upon achievement of performance goals. Generally, an executive must remain employed through the performance period to earn an award, although vesting will be prorated if employment terminates earlier due to retirement, death or disability. |
2023 Grants of Plan Based Awards
| (3) The amounts reported in this column represent the full grant date fair values of the equity awards computed in accordance with the FASB ASC Topic 718. |
2023 Grants of Plan Based Awards
| 70 | Huntington Ingalls Industries, Inc. |
Outstanding Equity Awards at 2023 Year-End
Outstanding Equity Awards at 2023 Year-End The following table summarizes the equity compensation awards made to our NEOs that were outstanding as of December 31, 2023.
Outstanding Equity Awards at 2023 Year-End
Outstanding Equity Awards at 2023 Year-End
Outstanding Equity Awards at 2023 Year-End
| Name | Number of Securities of Underlying Unexercised Options Exercisable (#) | Grant Date | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (#) (1) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested ($) (2) | | Christopher D. Kastner | | 2/28/2023 | | | | | 27,409 | 7,116,525 | | | | 3/1/2022 | | | | | 22,401 | 5,816,307 | | | | 3/1/2021 | | | | | 11,922 | 3,095,406 | | Thomas E. Stiehle | | 2/28/2023 | | | | | 7,088 | 1,840,458 | | | | 3/1/2022 | | | | | 7,637 | 1,982,759 | | | | 3/1/2021 | | | | | 5,961 | 1,547,703 | | Chad N. Boudreaux | | 2/28/2023 | | | | | 5,434 | 1,410,841 | | | | 3/1/2022 | | | | | 5,855 | 1,520,195 | | | | 3/1/2021 | | | | | 5,662 | 1,470,111 | | Edgar A. Green III | | 2/28/2023 | | | | | 5,434 | 1,410,841 | | | | 3/1/2022 | | | | | 5,855 | 1,520,195 | | | | 3/1/2021 | | | | | 6,854 | 1,779,651 | | Kara R. Wilkinson | | 2/28/2023 | | | | | 5,434 | 1,410,841 | | | | 3/1/2022 | | | | | 5,855 | 1,520,195 | | | | 4/1/2021 | | | | | 3,327 | 863,731 |
Outstanding Equity Awards at 2023 Year-End
| (1) The numbers in this column assume target performance levels for RPSRs. The RPSR award granted in February 2023, if earned, will vest based upon performance for the three-year period ending on December 31, 2025. The RPSR award granted in March 2022, if earned, will vest based upon performance for the three-year period ending on December 31, 2024. The RPSR award granted in March 2021 vested based upon performance for the three-year period that ended on December 31, 2023. See “2021-2023 Long-Term Incentive Plan Goals and Results” for actual vesting amounts. The number of shares reflected in the table for the 2023, 2022 and 2021 awards also includes DEUs accrued through December 31, 2023. DEUs vest only to the extent the underlying performance award vests. |
Outstanding Equity Awards at 2023 Year-End
| (2) The market values are based on the closing price of our common stock on December 29, 2023 of $259.64. |
Outstanding Equity Awards at 2023 Year-End
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Option Exercises and Stock Vested in 2023
Option Exercises and Stock Vested in 2023 The following table provides additional information about the value realized by our NEOs on vesting of stock awards during the year ended December 31, 2023. We did not have any stock options outstanding in 2023.
2023 Stock Vested
2023 Stock Vested
2023 Stock Vested
| | Option Awards | | Stock Awards | | | Name & Principal Position | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (1) (#) | Value Realized on Vesting (2) ($) | | Christopher D. Kastner | 0 | 0 | 8,255 | 1,776,141 | | Thomas E. Stiehle | 0 | 0 | 1,484 | 319,377 | | Chad N. Boudreaux | 0 | 0 | 6,110 | 1,314,700 | | Edgar A. Green III | 0 | 0 | 6,328 | 1,361,621 | | Kara R. Wilkinson | 0 | 0 | 1,205 | 259,265 |
2023 Stock Vested
| (1) The numbers in this column represent shares that were received in 2023 based upon the achievement of performance goals on RPSRs for the three-year period from 2020 through 2022. |
2023 Stock Vested
| (2) The values in this column are calculated by multiplying the number of RPSRs vested by the closing price of our common stock on the NYSE on the date of vesting. |
2023 Pension Benefits
2023 Pension Benefits The following table shows the present value of accumulated benefits payable to each of our NEOs under the qualified defined benefit pension plans and nonqualified defined benefit pension plans that we sponsor.
2023 Pension Benefits
2023 Pension Benefits
2023 Pension Benefits
| Name & Principal Position | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit ($) (1) | Payments During Last Fiscal Year ($) | | Christopher D. Kastner (2) | OSERP | 32.917 | 2,391,654 | — | | | HII Supplemental Plan 2—ERISA 2 | 32.917 | 9,367,722 | — | | | HII Retirement Plan “B” | 32.917 | 1,878,161 | — | | Thomas E. Stiehle (2) | OSERP | 37.000 | 2,718,185 | — | | | HII Supplemental Plan 2—ERISA 2 | 37.000 | 3,086,721 | — | | | HII Retirement Plan “B” | 37.000 | 1,652,503 | — | | Chad N. Boudreaux (3) | — | — | — | — | | Edgar A. Green III (4) | — | — | — | — | | Kara R. Wilkinson (2) | OSERP | 27.583 | 3,576,247 | — | | | HII Litton Restoration Plan | 27.583 | 307,870 | — | | | HII Retirement Plan “B” | 27.583 | 474,113 | — |
2023 Pension Benefits
| (1) While benefits may be spread over different plans, it is our policy that an executive’s total benefit under these plans is essentially limited to 60% of such executive’s final average pay. |
2023 Pension Benefits
| 72 | Huntington Ingalls Industries, Inc. |
2023 Pension Benefits
| (2) As of December 31, 2014, the HII Litton Industries, Inc. Restoration Plan was consolidated with other nonqualified defined benefit pension plans to form the Huntington Ingalls Industries Omnibus Supplemental Retirement Plan. As of December 31, 2019, the OSERP and Huntington Ingalls Industries Supplemental Plan 2—ERISA 2 were merged into the Huntington Ingalls Industries Omnibus Supplemental Retirement Plan, which was subsequently renamed the Huntington Ingalls Industries Consolidated Supplemental Retirement Plan. |
2023 Pension Benefits
| (3) Mr. Boudreaux was hired in August 2011 and was, therefore, not eligible to participate in any historical defined benefit pension plans, which were closed to new participants in 2008. Mr. Boudreaux does, however, participate in company sponsored defined contribution plans. |
2023 Pension Benefits
| (4) Mr. Green was hired in March 2011 and was, therefore, not eligible to participate in any historical defined benefit pension plans, which were closed to new participants in 2008. Mr. Green does, however, participate in company sponsored defined contribution plans. |
2023 Pension Benefits
The pension values represent the present values of the benefits expected to be paid in the future. They do not represent actual lump sum values that may be paid from a plan. The amount of future payments is based on the current accrued pension benefit as of December 31, 2023. Pursuant to SEC disclosure rules, (i) the actuarial assumptions used to calculate amounts for this table are the same as those used for our financial statements, and (ii) all pension values are determined assuming the NEO works until the specified retirement age, which is the earliest unreduced retirement age (as defined in each plan).
General Explanation of the Pension Benefits Table
General Explanation of the Pension Benefits Table Individual employees may be covered by several different pension plans as a result of our history as a division of Northrop Grumman. However, an executive’s total benefit under the pension plans is essentially limited to 60% of his or her final average pay. The accrued tax qualified pension benefit cannot be reduced or taken away under applicable law, so all historical pension plans have been maintained. Pension plans provide income during retirement, as well as benefits in special circumstances, including death and disability. In general, the plans are structured to reward and retain employees of long service and recognize higher achievement levels through increases in annual pay. The term “qualified plan” generally means a plan that qualifies for favorable tax treatment under IRC Section 401. Savings plans (also known as 401(k) plans) and traditional pension plans are examples of qualified plans. Qualified plans apply to a broad base of employees. The term “nonqualified plan” generally means a plan that is limited to a specified group of management personnel. Our nonqualified plans supplement our qualified plans and (1) provide benefits that would be provided under our qualified plans if there were no limitations imposed by the IRC and (2) provide a minimum level of pension benefits to our executives in recognition of their higher levels of responsibility. The amounts in the table are based upon the specific provisions of each plan, which are described in more detail below. Two basic types of pension benefits are reflected in the Pension Benefits table: traditional benefits and cash balance benefits. For purposes of computing amounts in the table, traditional benefits are determined based on the annual pension earned as of December 31, 2023, and include any supplemental payments. Cash balance benefits are based upon the account balance as of December 31, 2023, plus a future interest credit, converted to an annuity using the applicable conversion factors. Messrs. Stiehle and Kastner participate in the Huntington Ingalls Industries Retirement Plan “B” and the Huntington Ingalls Industries Supplemental Plan 2—ERISA Supplemental Program 2 (“ERISA 2”). Ms. Wilkinson participates in the Huntington Ingalls Industries Retirement Plan “B” and the HII Litton Industries, Inc. Restoration Plan. Messrs. Boudreaux and Green participate in the Huntington Ingalls Industries Officers Retirement Account Contribution Plan (“ORAC”). Each NEO, except Messrs. Boudreaux and Green, also participates in the Officers Supplemental Executive Retirement Program (“OSERP”).
General Explanation of the Pension Benefits Table
| 2024 Notice and Proxy Statement | 73 |
General Explanation of the Pension Benefits Table
Effective December 31, 2014, the HII Litton Industries, Inc. Restoration Plan was consolidated with other nonqualified defined benefit pension plans to form the Huntington Ingalls Industries Omnibus Supplemental Retirement Plan. The consolidation does not affect the benefit amounts payable to the participants. Effective December 31, 2019, the Huntington Ingalls Industries Officers Supplemental Executive Retirement Program (the “OSERP”) and Huntington Ingalls Industries Supplemental Plan 2—ERISA 2 were merged into the Huntington Ingalls Industries Omnibus Supplemental Retirement Plan, which was subsequently renamed the Huntington Ingalls Industries Consolidated Supplemental Retirement Plan. This merger does not affect the benefit amounts payable to the participants. The changes in pension values shown in the Summary Compensation Table include the effects of:
General Explanation of the Pension Benefits Table
| • | an additional year of service from December 31, 2022 to December 31, 2023; |
General Explanation of the Pension Benefits Table
| • | changes in eligible pension pay; |
General Explanation of the Pension Benefits Table
| • | changes in applicable pay cap limits; and |
General Explanation of the Pension Benefits Table
| • | changes in actuarial assumptions. |
Description of Qualified Plans
Description of Qualified Plans Huntington Ingalls Industries Retirement Plan “B”. The general benefit structure for each participant is similar except for the historical benefit formulas, the transition benefit formulas and the timing of the transition period, all of which are described below. The plans are qualified under IRC Section 401 and provide up to three component pieces of benefits depending on when a participant is hired and terminates. The following chart illustrates the component pieces (described in more detail after the chart):
Description of Qualified Plans
| | | Part B (5-Year Transition Benefit) Benefit based on a formula similar to the one under the historical plan formula during the transition period | | | | | | Part A Benefit under the historical plan formula before the transition period | + | or (if greater) | + | Part D Benefit under the cash balance formula after the transition period | = | Pension Benefit | | | | Part C (5-Year Transition Benefit) Benefit under the cash balance formula during the transition period | | | | |
Description of Qualified Plans
The components are the historical benefit (the Part A benefit), the transition benefit (the greater of the Part B benefit or the Part C benefit) and the cash balance benefit (the Part D benefit). Eligible employees who joined a plan after the transition date associated with their pension plan accrue only the cash balance benefit (Part D) from their first date of participation. The qualified benefit for each NEO is the sum of these three benefits (Part A + Max (Part B or C) + Part D). The transition period for the Huntington Ingalls Industries Retirement Plan “B” was July 1, 2003 through June 30, 2008. During the transition period, each eligible participant earned the greater of (i) the benefit calculated under a formula similar to his or her historical plan (Part B) or (ii) the cash balance formula benefit (Part C). The cash balance formula (Parts C and D benefits) uses a participant’s points (age plus years of service) to determine a pay-based credit amount (a percentage of eligible pay) on a monthly basis. Interest is credited monthly on the amount in the participant’s hypothetical individual account. At normal retirement age, a participant’s balance in the hypothetical account is converted into an annuity payable for life, using specified factors. There are various forms of annuities from which the participant can choose, including a single-life annuity or a joint-and-survivor annuity.
Description of Qualified Plans
| 74 | Huntington Ingalls Industries, Inc. |
Description of Qualified Plans
Specific Elements of the Plans. The following paragraphs describe specific elements of the qualified plans in which our NEOs participate.
Description of Qualified Plans
| • | Formulas Under Historical Plans: |
Description of Qualified Plans
| • | HII Northrop Grumman Retirement Plan—This plan is a legacy part of the Huntington Ingalls Industries Retirement Plan “B” and provides a benefit equal to 1.6667% of final average pay (as limited by IRC Section 401(a)(17)) multiplied by benefit service up to a maximum of 30 years. Final average pay is the average of the three highest-paid years during which the participant was an eligible employee of Northrop Grumman after 1996. Mr. Kastner has historical (Part A) benefits under this formula. |
Description of Qualified Plans
| • | HII Grumman Pension Plan—This plan is a legacy part of the Huntington Ingalls Industries Retirement Plan “B” and provides a benefit equal to 1.6667% of final average pay (as limited by IRC Section 401(a)(17)) multiplied by benefit service after December 31, 1994, plus the frozen accrued benefit as of December 31, 1994. Final average pay is the average of the three highest-paid years during which the participant was an eligible employee of the company after 1996. Messrs. Stiehle and Kastner have historical (Part A) benefits under this formula. |
Description of Qualified Plans
| • | HII Ingalls Shipbuilding, Inc. Retirement Plan—This plan is a legacy part of the Huntington Ingalls Industries Retirement Plan “B” and provides a benefit equal to the greater of (1) and (2), reduced by (3): |
Description of Qualified Plans
| 1) | 60% of pre-tax deposits to the Huntington Ingalls Industries Financial Security and Savings Program (“FSSP”) retirement account and after-tax contributions to the plan. |
Description of Qualified Plans
| 2) | 85% of pre-tax deposits to the FSSP retirement account and after-tax contributions to the plan minus 75% of the estimated primary social security benefit multiplied by the ratio of after-tax contributions to the plan and pre-tax FSSP retirement account deposits divided by after-tax contributions to the plan plus pre-tax FSSP retirement account deposits plus imputed deposits (4% of eligible pay). |
Description of Qualified Plans
| 3) | The annuity equivalent of the pre-tax FSSP retirement account deposits and after-tax contributions to the plan. |
Description of Qualified Plans
Ms. Wilkinson has historical (Part A) benefits under this formula. Part B is determined using the above formula with imputed deposits instead of pre-tax deposits to the FSSP retirement account and after-tax contributions.
Description of Qualified Plans
| • | Cash Balance Formula. Table 1 shows the percentage of pay credit specified at each point level for the Part C benefit for each NEO. Interest is credited monthly based upon the 30-year Treasury bond rate in effect four months prior to the crediting month. |
Description of Qualified Plans
| • | For the Part D benefit, the cash balance formula for each NEO is based upon Table 2. Interest is credited monthly based on the 30-year Treasury bond rate in effect four months prior to the crediting month. |
Description of Qualified Plans
| 2024 Notice and Proxy Statement | 75 |
Description of Nonqualified Plans
Description of Nonqualified Plans Huntington Ingalls Industries Supplemental Plan 2—ERISA Supplemental Program 2. This plan is a nonqualified plan that provides benefits that would have been paid under the Huntington Ingalls Industries Retirement Plan “B” but for the IRC Section 401(a)(17) limit on the amount of compensation that must be taken into account under a qualified plan. The definition of compensation under this plan also includes compensation under deferred compensation plans. Benefits under this plan are subject to a general limitation of 60% of final average pay (reduced for early retirement, if applicable, according to the rules of the OSERP) for all company pension benefits. Optional forms of payment are generally the same as those from the qualified plan, plus a 13-month delayed lump sum option on a portion of the benefit. Reductions for early retirement apply in the same manner as under the associated qualified plan. Messrs. Stiehle and Kastner began participating in the plan when they reached applicable pay grades for inclusion in the plan. HII Litton Industries, Inc. Restoration Plan. This plan is a nonqualified plan that provides benefits that would have been paid under the Huntington Ingalls Industries Retirement Plan “B” but for the IRC Section 401(a)(17) limit on the amount of compensation that must be taken into account under a qualified plan. The definition of compensation under this plan also includes compensation under deferred compensation plans. Benefits under this plan are subject to a general limitation for all company pension benefits of 60% of final average pay (reduced for early retirement, if applicable, according to the rules of the OSERP). Optional forms of payment are generally the same as those under the qualified plan, plus a 13-month delayed lump sum option on a portion of the benefit. Reductions for early retirement apply in the same manner as under the associated qualified plan. Ms. Wilkinson began participating in the HII Litton Industries, Inc. Restoration Plan when she reached applicable pay grades for inclusion in the plan. Officers Supplemental Executive Retirement Program. The OSERP is a nonqualified plan frozen to new entrants on July 1, 2008. Accordingly, officers hired on or after this date and any promoted officers who do not participate in a qualified defined benefit pension plan are not allowed to participate in the program. On December 31, 2018, this program was also closed to those officers whose hire date was prior to July 1, 2008, but promotion date occurred on or after January 1, 2019. Instead, officers who were hired on or after July 1, 2008, or promoted on or after January 1, 2019, participate in the
Description of Nonqualified Plans
| 2024 Notice and Proxy Statement | 77 |
Description of Nonqualified Plans
Huntington Ingalls Industries Officers Retirement Account Contribution Plan, which is a defined contribution plan arrangement. Messrs. Stiehle and Kastner and Ms. Wilkinson participate in the Huntington Ingalls Industries Officers Supplemental Executive Retirement Program, which provides a total pension benefit equal to a percentage of final average pay (the average pay without the IRC Section 401(a)(17) limit and including deferred compensation in the three highest-paid plan years during the greater of (i) the last ten consecutive years of participation or (ii) all consecutive years of participation since January 1, 1997) where the percentage is determined by the following formula: 2% for each year of service up to ten years, 1.5% for each subsequent year up to 20 years and 1% for each additional year over 20 and less than 45, less any other HII pension benefits. Under the OSERP, all years of service with HII are used to determine the final percentage. The OSERP benefit, when combined with all HII pension benefits, cannot exceed the general limit of 60% of final average pay (reduced for early retirement, if applicable, according to the rules of the OSERP). Optional forms of payment are generally the same as those under the qualified plan, plus a 13-month delayed lump sum option on a portion of the Huntington Ingalls Industries Officers Supplemental Executive Retirement Program benefit.
Description of Nonqualified Plans
| • | Normal Retirement: Age 65. |
Description of Nonqualified Plans
| • | Early Retirement: Age 55 and completion of ten years of service. Benefits are reduced by the lesser of 2.5% for each year between retirement age and age 65, or 2.5% for each point less than 85 at retirement. Points are equal to the sum of age and years of service. |
Description of Nonqualified Plans
| • | Vesting: Participants vest in their OSERP benefits upon attaining age 55 and completion of ten years of service or attaining age 65 and completion of five years of service. These milestones must be attained prior to termination from HII. |
Description of Nonqualified Plans
Huntington Ingalls Industries Consolidated Supplemental Retirement Plan. Effective December 31, 2014, the HII Litton Industries, Inc. Restoration Plan was consolidated with other nonqualified defined benefit pension plans to form the Huntington Ingalls Industries Omnibus Supplemental Retirement Plan. The consolidation does not affect the benefit amounts payable to the participants. Effective December 31, 2019, the OSERP and ERISA 2 were merged into the Huntington Ingalls Industries Omnibus Supplemental Retirement Plan, which was subsequently renamed the Huntington Ingalls Industries Consolidated Supplemental Retirement Plan. This merger does not affect the benefit amounts payable to the participants. Section 409A Restrictions on Timing and Optional Forms of Payment. Under IRC Section 409A, employees who participate in company-sponsored nonqualified plans, such as the Huntington Ingalls Industries Supplemental Plan 2—ERISA Supplemental Program 2, the HII Litton Industries, Inc. Restoration Plan and the OSERP, are subject to special rules regarding the timing and forms of payment for benefits earned or vested after December 31, 2004 (“post-2004 benefits”). Payment of post-2004 benefits must begin on the first day of the month coincident with or following the later of attainment of age 55 and termination from the company. The optional forms of payment for post-2004 benefits are limited to a single life annuity or a selection of joint and survivor options. Specific Assumptions Used to Estimate Present Values. The following assumptions were used to estimate the present values in the Pension Benefits table:
Description of Nonqualified Plans
| • | Assumed Retirement Age: For all plans, pension benefits are assumed to begin at the earliest retirement age that the participant can receive an unreduced benefit payable from the plan. OSERP benefits are first unreduced once an NEO reaches age 55 and accumulates 85 points or reaches |
2023 Nonqualified Deferred Compensation
2023 Nonqualified Deferred Compensation The following table summarizes the compensation of our NEOs under our nonqualified deferred compensation plans.
2023 Nonqualified Deferred Compensation
2023 Nonqualified Deferred Compensation
2023 Nonqualified Deferred Compensation
| Name | Plan Name | Executive Contributions in Last FY (1) ($) | Registrant Contributions in Last FY (2) ($) | Aggregate Earnings in Last FY (3) ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE (4) ($) | | Christopher D. Kastner | Deferred Compensation | — | — | — | — | — | | | Savings Excess | 214,041 | 107,021 | 280,500 | — | 2,172,302 | | Thomas E. Stiehle | Deferred Compensation | — | — | — | — | — | | | Savings Excess | 92,120 | 36,848 | 207,017 | — | 1,051,854 | | Chad N. Boudreaux | Savings Excess | 81,929 | 81,929 | 115,385 | — | 893,652 | | | ORAC | — | 49,613 | 63,568 | — | 448,485 | | Edgar A. Green III | Savings Excess | 5,951 | 35,707 | 277,692 | — | 1,618,933 | | | ORAC | — | 37,005 | 56,350 | — | 456,037 | | Kara R. Wilkinson | Deferred Compensation | — | — | — | — | — | | | Savings Excess | 421,811 | 33,745 | 260,476 | — | 1,406,680 |
2023 Nonqualified Deferred Compensation
| (1) Executive contributions in this column also are included in the salary and non-equity incentive plan columns of the 2023 Summary Compensation Table. |
2023 Nonqualified Deferred Compensation
| (2) Company contributions in this column are included under the All Other Compensation column in the 2023 Summary Compensation Table and under the 2023 All Other Compensation table. |
2023 Nonqualified Deferred Compensation
| (3) Aggregate earnings in the last fiscal year are not included in the 2023 Summary Compensation Table because they are not above market or preferential. |
2023 Nonqualified Deferred Compensation
| (4) The only amounts reflected in this column that previously were reported as compensation to the NEO in the Summary Compensation Table are executive and company contributions for the respective fiscal year-end and only if the NEO was reported as an NEO for each respective year. Aggregate earnings in this column were not reported previously in the Summary Compensation Table. |
2023 Nonqualified Deferred Compensation
| • | Mr. Kastner’s aggregate SEP account balance consists of $976,290 in employee contributions. |
2023 Nonqualified Deferred Compensation
| • | Mr. Stiehle’s aggregate SEP account balance consists of $507,995 in employee contributions. |
2023 Nonqualified Deferred Compensation
| • | Mr. Boudreaux’s aggregate SEP account balance consists of $360,883 in employee contributions. |
2023 Nonqualified Deferred Compensation
| • | Mr. Green’s aggregate SEP account balance consists of $719,406 in employee contributions. |
2023 Nonqualified Deferred Compensation
| • | Ms. Wilkinson’s aggregate SEP account balance consists of $1,106,890 in employee contributions. |
2023 Nonqualified Deferred Compensation
The material terms of the deferred compensation plans in which our NEOs participate are summarized below:
2023 Nonqualified Deferred Compensation
| • | The “Deferred Compensation Plan” was the Northrop Grumman Deferred Compensation Plan, which was closed to future contributions at the end of 2010. Prior to 2011, eligible executives were allowed to defer a portion of their salary and bonus. No company contributions were made to the plan. |
2023 Nonqualified Deferred Compensation
| • | The “Savings Excess Plan” is described below. No above market earnings are provided under the plan. |
2023 Nonqualified Deferred Compensation
| • | The Savings Excess Plan allows eligible participants to defer between 1% and 75% of salary and annual incentive payments above the limits mandated by the IRS. The company may provide a matching contribution of up to 4%, based upon a participant contribution rate of 8%. Participants are immediately 100% vested in their accounts and are allowed to make elections regarding how their account balances will be deemed invested for purposes of crediting earnings to the account by selecting investments from a limited list of investment options selected by the plan administrator. |
2023 Nonqualified Deferred Compensation
| 80 | Huntington Ingalls Industries, Inc. |
2023 Nonqualified Deferred Compensation
| • | Based upon an advance election, payment is made in a lump sum or installments over a period of up to 15 years. Neither in-service distributions nor hardship withdrawals are allowed under this plan. |
2023 Nonqualified Deferred Compensation
| • | The “ORAC” covers the majority of those elected and appointed officers hired on or after July 1, 2008, who are not eligible for defined benefit retirement plans. Enrollment is automatic, and the company contributes an amount equal to 4% of the officer’s eligible compensation. |
2023 Nonqualified Deferred Compensation
All deferred compensation that was not earned and vested before January 1, 2005, is subject to the requirements of IRC Section 409A. Those requirements largely restrict an executive’s ability to control the form and timing of distributions from nonqualified plans such as those listed in this table.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control The tables below provide estimated payments and benefits that we would have provided each NEO if his or her employment had terminated on December 31, 2023, for specified reasons. This information is based upon the assumption that employment terminated on December 31, 2023, and uses the closing price of our common stock of $259.64 on the NYSE as of December 29, 2023. These payments and benefits are provided under the following plans:
Potential Payments Upon Termination or Change in Control
| • | The Severance Plan for Elected and Appointed Officers |
Potential Payments Upon Termination or Change in Control
| • | The 2012 Long-Term Incentive Stock Plan and 2022 Long-Term Incentive Stock Plan and terms and conditions of equity awards |
Potential Payments Upon Termination or Change in Control
We summarize below these plans before providing the estimated payment and benefit amounts in the tables. Due to the many factors that affect the nature and amount of any benefits provided upon the termination events discussed below, any actual amounts paid or distributed to our NEOs may be different. Factors that may affect these amounts include timing during the year of the occurrence of the event, our stock price and the NEO’s age. The amounts described in the tables below are in addition to each NEO’s benefits described in the Pension Benefits and Nonqualified Deferred Compensation tables, as well as benefits generally available to our employees such as distributions under our 401(k) plan, disability and life insurance benefits and accrued vacation.
Potential Payments upon Termination of Employment
Potential Payments upon Termination of Employment The following tables show the values of payments and other benefits due to our NEOs under the Severance Plan, the 2012 Plan and the 2022 Plan, assuming a termination of employment as of December 31, 2023.
Pay Versus Performance
Pay Versus Performance As required by Item 402(v) of Regulation S-K under the Securities Exchange Act of 1934, we are providing the following information about the relationship between compensation actually paid (“CAP”) as calculated pursuant to Item 402(v) and performance. This disclosure has been prepared in accordance with Item 402(v) of Regulation S-K and does not necessarily reflect value actually realized by the executives or how the Compensation Committee evaluates compensation decisions in light of company or individual performance. For further information concerning HII’s variable pay-for-performance philosophy and how the company aligns executive compensation with the company’s performance, see “Compensation Discussion and Analysis” above.
Pay Versus Performance
| | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year (a) | Summary Compensation Table Total for first PEO 1 (b) | Summary Compensation Table Total for second PEO 1 (b) | Compensation Actually Paid to first PEO 2 (c) | Compensation Actually Paid to second PEO 2 (c) | Average Summary Compensation Table Total for Non-PEO NEOs 3 (d) | Average Compensation Actually Paid to Non-PEO NEOs 4 (e) | Total Shareholder Return 5 (f) | Peer Group Total Shareholder Return 6 (g) | Net Income (millions) 7 (h) | EBITDAP (millions) 8 (i) | | 2023 | $14,100,619 | n/a | $14,030,077 | n/a | $3,519,012 | $3,969,418 | $113 | $129 | $681 | $1,211 | | 2022 | $7,742,266 | $3,635,247 | $9,452,779 | $7,011,842 | $2,739,014 | $3,404,890 | $98 | $104 | $579 | $1,060 | | 2021 | $7,714,067 | n/a | $10,473,486 | n/a | $2,769,626 | $3,287,420 | $78 | $109 | $544 | $972 | | 2020 | $6,440,417 | n/a | $1,676,179 | n/a | $3,077,970 | $1,219,510 | $70 | $106 | $696 | $796 |
Pay Versus Performance
| 1. | The PEO for 2023 is Christopher D. Kastner. During 2022, two individuals served as HII’s Principal Executive Officer (“PEO”). The first PEO included in the table for 2022 is Mr. Kastner, and the second PEO is C. Michael Petters. The PEO for 2021 and 2020 is Mr. Petters. |
Pay Versus Performance
| 2. | The dollar amounts reported in columns (c) represent the amount of CAP to the first PEO and the second PEO (for 2022), as computed in accordance with SEC rules. The dollar amounts do not reflect the actual amount of compensation earned by or paid to the PEO during the applicable year. The following adjustments were made to the PEO’s total compensation for each applicable year to determine the compensation actually paid in accordance with SEC rules: |
Second PEO
| (c) The amounts included in this column are the amounts reported in the “Change in Pension and Nonqualified Deferred Compensation” column of the Summary Compensation Table for each applicable year. |