Lockheed hit as new chief resigns

Succession plans at Lockheed Martin were thrown into disarray on Friday when the the US’s biggest military contractor by sales announced the resignation of its incoming chief executive over a “close personal relationship” with a subordinate.

Christopher Kubasik, Lockheed Martin’s chief operating officer, had been due to take over on January 1 from Bob Stevens, who is retiring as chief executive.

The company said a board meeting on Friday had instead appointed Marillyn Hewson, vice-president of electronic systems, to be the next chief executive. She was immediately promoted to be chief operating officer.

The change of plan comes as Lockheed and other large military contractors face acute uncertainty over future military spending levels. The Department of Defense is to absorb 50 per cent of the spending cuts set to come into force in early January under the deal reached last year to avert a crisis over the raising of the US’s debt ceiling.

Spending on most military programmes would be automatically cut by about 10 per cent if the swingeing cuts – which both political sides want to avoid – come into force.

Mr Stevens said he was “disappointed and saddened” by Mr Kubasik’s behaviour, which he said was “inconsistent with our values and standards”. However, his departure would have no effect on the company’s operations, Mr Stevens said.

“We believe that strategically, operationally and financially we will not miss a beat,” Mr Stevens said.

Loren Thompson, a military analyst at the Virginia-based Lexington Institute, said the switch might ultimately prove beneficial to Lockheed by highlighting high standards of corporate governance.

“The lesson is the rules apply equally to everybody at Lockheed Martin,” he said.

Ms Hewson was “a very capable executive,” he added. “She’s probably more capable than Kubasik.”

The company had brought in outside investigators to investigate after an employee came to the company with concerns over the relationship in late October, Mr Stevens said.

“That investigation concluded with today’s board meeting,” he said.

Mr Stevens declined to answer questions about how long the relationship had gone on, whether the company should have discovered the relationship earlier or whether vetting of senior executives had missed the it. Those were all private matters, he said. The subordinate with whom Mr Kubasik had had the relationship had also left the company, Mr Stevens said.

“We have acted clearly and decisively with regard to the action that we have taken,” he said.

The company had always sought to ensure it had as many “ready-now” replacement executives as possible, according to Mr Stevens. Ms Hewson was a product of the company’s policy of rotating executives regularly between challenging assignments to ensure they were ready for promotion, he said.

Ms Hewson said she intended to continue following the transition plan the company originally set out in April. She will work closely with Mr Stevens, who will become executive chairman and remain in post throughout 2013 to ensure a smooth transition.

The change was announced after the market closed. Lockheed shares rose 0.07 per cent in after-market trading to $90.04.

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