Proxy Blog

Northrop Grumman Corporation 

May 6, 2019

The annual proxy for this defense contractor had the following proposals: 

  1. Proforma votes on directors, appointment of auditors, and “say-on-pay” advisory vote 
  2. Shareholder proposals on independent chairman and reporting on human rights policy 

Magni voted as follows: 

  1. For and against proforma proposals.
    -For directors – The board has a majority of independent directors and some have CEO/CFO experience with other companies. The compensation of directors is disclosed with a meaningful portion in equity where the equity has restrictions to align director incentives with long-term value creation. 
    -For auditors – There appear to be no controversies with the financial statements of the company.
    -Against say-on-pay” – The company discloses shareholder engagement efforts, though compensation is not one of the items included in the engagement effortsThe proxy lists two peer groups. The performance peer group is set with objective criteria. The compensation peer group has a mix of objective and subjective criteria (e.g., “generally similar revenue”). The proxy should disclose the relevant metrics for every firm in the peer group and document the reasons for any companies that were excluded.  
  2. For and against the shareholder proposals. 
    -For an independent chairman – Magni wrote a position paper regarding shareholder proposals for an independent chairman. 
    -Against reporting on human rightsThe shareholder proposal appears to be in actuality a request to make the company accountable for the behavior of one of the company’s customers. The proposal acknowledges generally good practices by the company. The only part of the proposal documenting any deficiency by the company is the sale of some products to the US government where the shareholder submitting the proposal objects to the government’s efforts. The company has won many awards for its human rights policies and efforts. Making a company responsible for the actions of its customers is very complex. It is only at the extremes where it is easy. Magni does not deem the potential misuse of the company products to be sufficiently material to burden the company with a lot of extra reporting.