Governance

Our board of directors is committed to the principle that good corporate governance enhances shareholder value. Through strong corporate governance practices, we promote a culture of ethics and integrity, and empower leaders at all levels to do what is right for our customers, suppliers, employees and communities.

Our deeply engaged and experienced board is central to our company’s culture of accountability and continuous improvement. Our board reflects a diverse and well-qualified group of business leaders and aerospace and defense industry experts, as well as financial and strategic advisers.

Other than our CEO, all of our directors are independent. Each of our board committees is chaired by an independent director. Our board includes directors who are or have: 

• Significant financial background or expertise
• Experience in leading complex operating and manufacturing organizations
• Prior top leadership posts in the military or U.S. Department of Defense
• Women or racial or ethnic minorities
• Current or former public company directors
• Current or past CEOs of complex, global and/or public companies
• Experience in corporate sustainability matters and reporting

The General Dynamics Corporate Governance Guidelines provide a framework for effective governance of the board and the company. The board’s commitment is demonstrated by key corporate governance practices, including: 

• Strong board independence
• An independent lead director
• A majority voting standard for the election of directors, coupled with a director resignation policy
• Shareholders’ right to call a special meeting
• Shareholders’ right to act by written consent
• Shareholders’ ability to nominate director candidates and have those nominees included in the company’s proxy statement, a process known as “proxy access”
• Annual board and committee self-assessments
• A robust shareholder engagement program
• Disclosure of corporate political contributions and trade association dues

Board Oversight of Risk

Our comprehensive risk management program is conducted by senior management and overseen by the board of directors. In particular, the board oversees management’s identification and prioritization of risks. The full board reviews and approves a corporate policy addressing the delegation of authority and assignment of management responsibility annually. This ensures that the responsibilities and authority delegated to senior management are appropriate from an operational and risk management perspective.

The following summarizes the key elements of the roles of the board, senior management and external advisers in our risk management program:

• The board oversees risk management, focusing on the most significant risks facing the company, including strategic, operational, financial, legal, environmental, cyber and reputational.
• Each board committee is integral to risk management and reports specific risk management matters as necessary to the full board.
• The board’s Sustainability Committee oversees sustainability practices and management, including those relating to environmental, health and safety, human rights, and
  social matters.
• Senior management is responsible for day-to-day risk management and conducts a thorough assessment through internal management processes and controls.
• The chief executive officer and senior management team provide the board with a dedicated and comprehensive briefing of material risks at least twice per year, and the board is briefed as needed throughout the year on specific risks as they arise, allowing the board to frequently reassess the company’s risk environment.
• External advisers provide independent advice on specific risks, and review and comment on risk management processes and procedures as necessary.

The board continuously focuses on material risks and opportunities, including those related to sustainability matters. It takes these risks and opportunities into account as it exercises its duties. The Sustainability Committee is responsible for assisting the board in fulfilling its oversight duties.

In 2021, the board established a Sustainability Committee to oversee sustainability management and practices, including those related to environmental, health and safety, human rights, and social matters.

The Sustainability Committee is chaired by an independent director with expertise and unique experience in the environmental, social and governance (ESG) field, including as a former board co-chair of the Value Reporting Foundation, now part of the International Financial Reporting Standards (IFRS) Foundation.

Climate-related risks and opportunities are typically briefed by business unit presidents or the cognizant executive vice presidents (EVPs) for the relevant business line. They may also be briefed by the chair of our corporate functional area councils, including the Environment, Health and Safety (EHS) Committee of the Manufacturing Council. This EHS Committee, sponsored by an EVP, provides an annual briefing of EHS-related risks to the board.

General Dynamics Corporation does not make political contributions.

We offer eligible employees (as determined by federal election laws) in the United States the opportunity to make political contributions through  a political action committee (PAC). The General Dynamics employee PAC is organized and operated on a strictly voluntary, nonpartisan basis and is registered with the Federal Election Commission.

Our employee PAC invests contributions in candidates based on:

• Support for national security and aerospace

• Representation in districts/states where General Dynamics facilities, suppliers or employees are located

• Membership on key committees legislating issues important to General Dynamics

• Leadership positions

• Prior military or aerospace industry experience

The PAC’s political contributions are reported monthly to the Federal Election Commission, where they become a matter of public record and are available for review online. PAC contributions are subject to a robust internal review process to ensure they represent the best interests of the company, its employees and its shareholders. In addition, internal financial controls exist to ensure company compliance with federally mandated contribution limits.

As a guiding principle of our employee PAC, we stay above the normal fray of partisan politics, remaining focused on national security and on advocating for success of General Dynamics and our employees. That means we give to members of both parties, and we delink our support from issues unrelated to our core business. That philosophy has served our industry well over the years, as we have enjoyed strong bipartisan support.

We do not contribute to presidential campaigns, “super PACs,” or other 527 or 501(c)(4) organizations. Our employee PAC will not support members of Congress who provoke or incite violence or similar unlawful conduct.

To ensure compliance with all applicable laws relating to political activities and effective corporate governance, we follow a strict policy governing lobbying practices. This includes tracking and reporting lobbying costs and expenses as nondeductible for tax purposes and unallowable for purposes of U.S. government contracts.

We deliver fair market-based compensation. Our businesses evaluate all job categories and levels, comparing compensation for similar positions to ensure there are no inadvertent disparate pay conditions, and if any are found, promptly raise pay to remediate the situation.

Our executive compensation is rooted in a longstanding pay-for-performance philosophy. To incentivize this focus on creating long-term value, our executive compensation is tied to defined financial and nonfinancial performance metrics that align with creating shareholder value. These defined metrics also include a stakeholder-centric strategic and operational component, which incorporates environmental, human and socialcapital sustainability objectives. 

We demonstrate our commitment to aligning management with stockholders by emphasizing a culture of stock ownership, with some of the strictest stock ownership guidelines in the S&P 500 for our executive officers. Our shareholders provide feedback on executive compensation with an annual say-on-pay vote, and in 2021, our say-on-pay vote was 97% in favor.