Advisory Approval of Executive Compensation
Your Board is asking you to approve, on an advisory basis, the compensation of our named executive officers. This vote is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”), and is often referred to as a “say on pay.”
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2012 Proxy Statement Summary
(Continued)
Advisory Vote on the Frequency of Future Advisory Approvals of
Executive Compensation
Your Board is asking you to vote in favor of our having future advisory approvals of executive compensation every year. This
vote is also required by the Dodd-Frank Act, and is often referred to as a “say when on pay.” Your Board believes that a vote on the compensation of our named executive officers should be conducted every year so that stockholders may
annually express their views on our executive compensation program.
Approval of the 2012 Long-Term Incentive Stock Plan
Your Board is asking you to approve the 2012 Long-Term Incentive Stock Plan. We are asking for your approval in accordance with the requirements of the NYSE.
Approval of the Performance-Based Compensation Policy to Preserve the Tax Deductibility of Performance-Based Payments
Your Board is asking you to approve the Performance-Based Compensation Policy to preserve the tax deductibility of performance-based payments. We are asking for
your approval in accordance with the requirements of the Internal Revenue Code in order to ensure that certain payments to certain of our officers will qualify as “performance-based compensation” under Section 162(m) of the Internal
Revenue Code and therefore be fully deductible by us as a business expense in the year of payment.
Executive Compensation Elements for 2011
Key compensation elements for 2011 for our Named Executive Officers (as defined below) consist of base salaries, annual incentive awards and
long-term incentive awards.
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Base salary provides a fixed level of compensation that is competitive within the relevant market and helps attract and retain highly qualified executives.
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Annual incentive awards are provided in cash and intended to provide motivation to our executives to achieve pre-determined financial and operational targets
that are clearly aligned with our strategic goals. Under our Annual Incentive Plan, and based on achievement of the performance goals under the plan, awards were approved by the Compensation Committee for our named executive officers ranging from
162% to 200% of target.
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Long-term incentive awards are equity-based and intended to promote attainment of pre-determined performance goals aligned with long-term stockholder interests.
The Compensation Committee approved the grant of restricted performance stock rights to our named executive officers under our Long-Term Incentive Stock Plan that vest at the end of a three-year performance period if the performance criteria set by
the Compensation Committee have been achieved.
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In addition, at the time of our spin-off from Northrop Grumman Corporation in March 2011, one-time retention grants were made to each of our named executive
officers in the form of restricted stock rights that vest on the third anniversary of the grant to ensure overall business continuity and our successful transition as an independent public company.
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Compensation Best Practices
Our compensation practices are
designed to reinforce our culture and pay for performance philosophy.
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Under our compensation program in 2011, 86% of our CEO’s target compensation was at risk, and a range of 71% to 74% of the target compensation of our other
Named Executive Officers’ compensation was at risk.
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2012 Proxy Statement Summary
(Continued)
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We assess the risk of our compensation programs both internally and with the engagement of the Compensation Committee’s independent consultant on an annual
basis. For 2011, we concluded that there was no undue risk associated with the design or delivery of the compensation programs.
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Our Compensation Committee has established stock ownership guidelines, which provide that each named executive officer must own a multiple of his or her annual
base salary in our common stock. The Compensation Committee also approved stock holding requirements that require that our named executive officers hold their HII stock until the stock ownership guidelines have been met and also include subsequent
holding requirements.
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Our Compensation Committee has adopted an executive compensation recoupment policy, which allows us to seek reimbursement of all or a portion of any
performance-based short or long-term cash or equity incentive compensation paid or awarded to named executive officers in certain circumstances.
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2011 Compensation Summary
The following table summarizes the compensation of our Named Executive Officers,
which include our Chief Executive Officer, our Chief Financial Officer and our next three most highly compensated executive officers for 2011.
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Name and Title
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Salary
($)
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Stock
Awards
($)
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Non-Equity
Incentive
Plan
Compensation
($)
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Change
in
Pension
Value
($)
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All Other
Compensation
($)
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Total
($)
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C. Michael Petters
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856,731
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6,999,930
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2,250,000
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2,462,070
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339,746
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12,908,477
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President and Chief Executive Officer
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Barbara A. Niland
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488,874
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2,209,958
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770,000
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1,652,129
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57,532
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5,178,493
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Corporate Vice President, Business Management and Chief Financial Officer
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Irwin F. Edenzon
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463,800
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1,874,970
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568,750
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594,887
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73,632
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3,576,039
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Corporate Vice President and President, Ingalls Shipbuilding division
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Matthew J. Mulherin
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463,800
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1,874,970
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647,500
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942,941
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51,036
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3,980,247
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Corporate Vice President and President, Newport News Shipbuilding division
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Bruce N. Hawthorne
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359,615
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1,874,970
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700,000
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—
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148,936
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3,083,521
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Corporate Vice President, General Counsel and Secretary
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2013 Annual Meeting
Stockholder proposals submitted for potential inclusion in the proxy statement for our 2013 annual meeting must be received by us by December 4, 2012.
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General Information About the Annual Meeting and Voting
Your Board of Directors is providing you with these proxy materials in
connection with the solicitation of proxies to be voted at our 2012 Annual Meeting of Stockholders and at any postponement or adjournment of the annual meeting. In this proxy statement, Huntington Ingalls Industries, Inc. may also be referred to as
“we,” “our,” “us,” “HII” or “the company.”
ITEMS OF BUSINESS TO BE
CONSIDERED AT THE ANNUAL MEETING
Your Board is asking you to vote on the following items at the annual meeting:
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Ratify the appointment of our independent auditors;
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Advisory approval of executive compensation;
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Advisory vote on the frequency of future advisory approvals of executive compensation;
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Approve the 2012 Long-Term Incentive Stock Plan; and
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Approve the Performance-Based Compensation Policy to preserve the tax deductibility of performance-based payments.
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APPOINTMENT OF PROXY HOLDERS
Your
Board asks you to appoint Bruce N. Hawthorne, George M. Simmerman, Jr. and Charles R. Monroe, Jr. as your proxy holders to vote your shares at the annual meeting. You make this appointment by completing and returning the proxy card provided to you
or using one of the voting methods described below.
If appointed by you, the proxy holders will vote your shares as you direct on the matters described
in this proxy statement. If you complete and return a proxy card, but do not provide voting directions, they will vote your shares as recommended by your Board.
RECORD DATE AND VOTING
Stockholders owning our common stock at the close of business
on March 13, 2012, the record date, or their legal proxy holders are entitled to vote at the annual meeting. Your Board strongly encourages you to vote. Your vote is important. Voting early helps ensure that we receive a quorum of shares
necessary to hold the annual meeting. Many stockholders do not vote, so the stockholders who do vote influence the outcome of the matters on which they vote in greater proportion than their percentage ownership of HII.
There are two types of stockholders: stockholders of record and “street name” stockholders. Stockholders of record are stockholders who own their shares
in their own names on the company’s books. Stockholders of record can vote by telephone, on the Internet or by mail as described below. Street name stockholders are stockholders who own their shares through a bank, broker or other holder of
record. Street name stockholders can vote by the methods explained on the voting instruction card or other information you receive from the bank, broker or other holder of record through which you hold your shares.
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General Information About the Annual Meeting and Voting
(Continued)
We encourage stockholders of record to vote on the Internet or by telephone. Both are convenient and save us significant postage and processing costs. In addition, when you vote on the Internet or by telephone
prior to the meeting date, your vote is recorded immediately and there is no risk that postal delays will cause your vote to arrive late and therefore not be counted. The Internet and telephone voting procedures are designed to verify that you are a
stockholder of record by use of a control number and to allow you to confirm that your voting instructions have been properly recorded. If you vote by Internet or telephone, you do not need to return your proxy card. Internet and telephone voting
facilities for stockholders of record are available 24 hours a day and will close at 11:59 p.m. Eastern Daylight Time on Tuesday, May 1, 2012.
Voting on the Internet
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Stockholders of record may vote by proxy on the Internet at
www.envisionreports.com/HII
. As with telephone voting, you
can confirm that your instructions have been properly recorded. If you vote on the Internet, you can request electronic delivery of future proxy materials.
Voting by Telephone
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Stockholders of record may vote by proxy by using the toll-free number listed on your proxy card. Easy-to-follow voice prompts allow you to vote your shares and confirm that your
instructions have been properly recorded.
Voting by Mail
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Stockholders of record may vote by proxy by completing, signing, dating and
returning your proxy card in the preaddressed, postage-paid envelope provided.
Voting in Person at the Annual Meeting
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If you are a
stockholder of record, you may vote in person at the annual meeting. If you are a street name stockholder, you must obtain a proxy, executed in your favor, from the bank, broker or other holder of record through which you hold your shares to be able
to vote in person at the annual meeting. Your Board recommends that you vote using one of the other voting methods, since it is not practical for most stockholders to attend the annual meeting. However, the method by which you vote your proxy will
not limit your right to vote at the annual meeting if you decide to attend in person.
Revoking Your Voting Instructions to Your Proxy
Holders
.
If you are a stockholder of record and you vote by proxy using any method, you may later revoke your proxy instructions by:
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sending a written statement to that effect to Huntington Ingalls Industries, Inc., Attn: Corporate Secretary, 4101 Washington Avenue, Newport News, Virginia
23607;
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submitting a proxy card with a later date and signed as your name appears on the stock account;
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voting at a later time by Internet or telephone; or
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voting in person at the annual meeting.
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If
you are a street name stockholder, you may later revoke your voting instructions by informing the bank, broker or other holder of record in accordance with that entity’s procedures.
Confidential Voting.
We treat your vote as confidential in order to protect the privacy of our stockholders’ votes. Ballots, proxy cards and voting instructions returned to banks, brokers and other
holders of record are kept confidential. Only the proxy solicitor, the proxy tabulator and the inspector of election have access to the ballots, proxy cards and voting instructions.
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General Information About the Annual Meeting and Voting
(Continued)
QUORUM, VOTE REQUIRED AND METHOD OF COUNTING
At the close of business on the record
date, there were 48,837,489 shares of our common stock outstanding and entitled to vote at the annual meeting. Each outstanding share is entitled to one vote.
A quorum, which is a majority of the outstanding shares as of the record date, must be present to hold the annual meeting. A quorum is calculated based on the number of shares represented at the meeting, either by
the stockholders attending in person or by the proxy holders. If you indicate an abstention as your voting preference in all matters, your shares will be counted toward a quorum but will not be voted on any matter.
If you are a street name stockholder and do not vote your shares, your bank, broker or other holder of record can vote your shares at its discretion only on
Items 2 and 6 on the proxy card. If you do not give your bank, broker or other holder of record instructions on how to vote your shares on Item 1 or Items 3 through 5, your shares will not be voted on those matters.
If you have shares in an employee benefit plan and do not vote those shares, your trustee may vote your shares in accordance with the terms of the plan.
The required vote and method of calculation for the various business matters to be considered at the annual meeting are as follows:
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