Proxy Statement Analysis
Introduction
The Northrop Grumman Corporation was formed in 1939.The company provides technologically advanced and high quality services to the US Government, local customers, foreign governments and international customers in four segments, which are Technical Services, Aerospace Systems, Information Systems and Electronic Systems. Due to providing assistance in defense programs of the US and other countries, the risk related to its operations is very high. (CORPORATION, For the fiscal year ended December 31, 2014)
Dollar Tree, Inc. is famous for providing merchandise at discount stores at a fixed price of a $1 and it followsthe low cost strategy in order to remain competitive againstsuch giant competitors.It is expected that by the end of January 2015, the company will beoperating 5367 stores both in the US and Canada. The optimal size of the company’s store is about 8000 to 10000 square feet.The average selling square footage is increasing continuously and it is expected that by adding freezers and coolers, then average selling square footage will increase, howeverthe company’s strategy is to open new stores for the purpose of growth. (DOLLAR TREE, For the Fiscal Year Ended January 31, 2015)
On the other hand, the case is presenting proxy statements of both companies and the purpose is to evaluate the Executives and Directors compensation plan of both companies.
Executive Compensation Philosophies
The compensation philosophy of the Northrop Grumman Corporation is to provide a complementary set of compensation programs to the NEOs of the company so that it should be more than to other competitors in order to retain theNEOs. Therefore, Northrop Grumman is providing flexible, attractive and competitive compensation plan which is also aligned with the long term and short term performance of the executives for the best interest of the shareholders.
On the other hand,the compensation philosophy of the company is to provide the appropriate balance of each executive compensation plan, which involves cash and non-cash components and both long term and short term components. The company is paying compensation to its executives on pay per performance policy and combined with the stock ownership program in order to align the benefits of the executives with the benefits of the shareholders. Therefore, Dollar tree, Inc. is also providing flexible, attractive and competitive compensation plan which is also aligned with the long term and short term performance of the executives for the best interest of the shareholders and in order to retainthe executives for a longer time period.
Major Components of Executive Compensation
The philosophy of the Northrop Grumman Corporation is to provide a healthy compensation plan to Executives in order to enhance their performance for the best interest of the shareholders. Therefore the major components comprise of both fixed component and performance based component.
The fixed component contains base salary, which is competitive as compared to the Executives of the other companies and it is fairwith respect to both Executives and shareholders along with30% of long term incentive plan in order to align the interest of the executives with the interest of the shareholders or organization. Fixed components of the compensation plan are healthy in order to retain executives or to retain the best talent in the organization for a longer period of time.
The performance related components of the compensation plan includethe annual incentive plan in order to create motivation among the executives and 70% of long term incentive plan in order to align the interest of the executives with the interest of the organization.
Similar to Northrop Grumman Corporation, The Dollar Tree Inc. is also offering compensation plans to its executives on both fix and performance basis.An executive compensation program of the company consists of mainly three components that are base salary, cash bonus incentives and long-term incentives, which are in the form of cash and restricted stock units.........................
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