Off by $2 million at Northrup Grumman

Northrup Grumman has been something of a frequent flyer here at footnoted. All the way back in 2005, we wrote about its thrice (now quadruple-retired) CFO Charles Noski. There’s also been overly generous consulting deals for other top executives, elite health benefits for former executives, and other lavish retirements.

So when we came across this 8-K that the company filed on Monday, we couldn’t help but take a closer look. In the filing, the company notes that it made mistakes on several calculations for post-retirement benefits for several executives. The errors aren’t a few dollars here or there. Rather, they range from $2.3 million to $2.7 million.

In the 8-K, as well as the amended proxy that Northrup Grumman filed on Monday, the company describes it like this:

On page 54 of the Proxy Statement, the Company addresses “Possible Accelerated Equity Vesting Due to Change in Control.”  The summary in the Proxy Statement incorrectly states that the terms of the RPSR equity awards provide for prorated payments when the Company is involved in certain types of change in control events, and the amounts included in the related tables also incorrectly assume prorated payments in such events.”

While $2.4 million may not seem like a lot, given Northrup Grumman’s size, it more than doubles the amount for all of the executives named in the original proxy. For example, CFO James Palmer went from $1.7 million to $4.1 million.

The filing goes on to note that this doesn’t impact Chairman and CEO Wesley Bush because he has elected to “forgo any additional amounts that could have been paid to him as a result of the change from prorated payment to full payment for the 2011 and 2012 awards in the event of a change in control.”

Of course, that’s the text. But as we often do, we have to wonder what the subtext is. The original proxy was filed on April 5. So what prompted the company to figure out that something wasn’t right five weeks later? While there were extensive changes to the proxy between 2012 and 2013, the company did have plenty of time to make those changes. Which makes us wonder if someone else caught the mistake.