March 30, 2018

On behalf of the Board of Directors and management team, we cordially invite you to attend Northrop Grumman Corporation’s 20152018 Annual Meeting of Shareholders. This year’s meeting will be held on Wednesday, May 20, 201516, 2018 at our principal executive office located at 2980 Fairview Park Drive, Falls Church, Virginia 22042 beginning at 8:00 a.m., Eastern Daylight Time.

We look forward to meeting those of you who are able to attend the meeting. For those who are unable to attend, live coverage of the meeting will be available on the Northrop Grumman website atwww.northropgrumman.com.

At this meeting, shareholders will vote on matters set forth in the accompanying Notice of 2018 Annual Meeting of Shareholders and Proxy Statement. We will also provide a report on our Company and will entertain questions of general interest to the shareholders.

We are very pleased to report another year of outstanding performance for our shareholders, customers and employees. Excellent results from all three of our businesses combined to generate higher operating income, and before the impacts of the Tax Cuts and Jobs Act and our related discretionary pension contribution, higher earnings and cash generation than in 2016. Our capital deployment strategy continues to serve us and our shareholders well. Our robust capital expenditures reflect the quality of our opportunities and support our foundation for long-term profitable growth. In addition to these investments, we also took an important step to broaden our portfolio by reaching an agreement to acquire Orbital ATK. For our shareholders, we raised our quarterly dividend 11% and reduced our weighted-average diluted shares outstanding by 3%. In 2017, we returned more than $1 billion to our shareholders through dividends and share repurchases. Total shareholder return was 33.9% in 2017, another strong performance relative to our peers and the S&P 500.

In addition to strong financial and operational achievements, we continue to strengthen our corporate citizenship and sustainability efforts. For the sixth consecutive year, Northrop Grumman earned a leadership score in CDP’s 2017 climate change program; we were again included in the Dow Jones Sustainability Index for North America, and DiversityInc named us one of their Top 50 Companies for Diversity for the eighth consecutive year.

In 2017, as in prior years, we actively engaged with our shareholders on a variety of matters, including our strategy for long-term value creation and further aligning our governance, compensation and sustainability practices to support long-term profitable growth and value creation.

Your vote is important. Your proxy or voting instruction card includes specific information regarding the several ways to vote your shares. We encourage you to vote as soon as possible, even if you plan to attend the meeting. You may vote over the internet, by telephone or mobile device, by mailing a proxy or voting instruction card.card or in person at the Annual Meeting.

Thank you for your support and continued interest in Northrop Grumman Corporation.

Wes Bush

Chairman, Chief Executive Officer and President

NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT^|

Wednesday, May 20, 201516, 2018

8:00 a.m., Eastern Daylight Time

Northrop Grumman Corporation, Principal Executive Office

2980 Fairview Park Drive, Falls Church, Virginia 22042

The 2018 Annual Meeting of Shareholders (Annual Meeting) of Northrop Grumman Corporation (Company) will be held on Wednesday, May 20, 201516, 2018 at 8:00 a.m., Eastern Daylight Time, at our principal executive office located at 2980 Fairview Park Drive, Falls Church, Virginia 22042.

Shareholders of record at the close of business on March 24, 201520, 2018 are entitled to vote at the Annual Meeting. The following items are on the agenda:

All shareholders are invited to attend the Annual Meeting. To be admitted you will need proof of stock ownership and a form of photo identification. If your broker holds your shares in “street name,” you will also need proof of beneficial ownership of Northrop Grumman common stock.

We encourage all shareholders to vote on the matters described in the accompanying Proxy Statement. Please see the section entitled “Questions and Answers About the Annual Meeting” on page 169 for information about voting over the internet, by mail, telephone internet,or mobile device, by mailing a proxy or voting instruction card or by attending in person at the Annual Meeting.

By order of the Board of Directors,

Jennifer C. McGarey

Corporate Vice President and Secretary

March 30, 2018

April 6, 2015

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This summary highlights information contained elsewhere in this Proxy Statement, reflecting important business, compensation and corporate governance highlights. For additional information about these topics, please refer to the discussions contained in this Proxy Statement and in our Annual Report on Form10-K for the year ended December 31, 2014 (20142017 (2017 Form10-K) filed with the United States (U.S.) Securities and Exchange Commission (SEC) on February 2, 2015.January 29, 2018. This Proxy Statement contains certainnon-GAAP (accounting principles generally accepted in the United States of America) financial measures. We havemeasures, which are identified these measures with an asterisk; forasterisks. For more information, including definitions, reconciliations to the nearestmost directly comparable GAAP measure and why we believe these measures may be useful to investors, see “Miscellaneous“Appendix A - Use ofNon-GAAP Financial Measures.” We intend to mail a Notice of Internet Availability of Proxy Materials to shareholders of record and to make this Proxy Statement and accompanying materials available on the internet on or about March 30, 2018.

 2014 2017 Performance Highlights (page 30)34)

In 2014, we continued toOur focus on performance, cashportfolio and capital deployment continues to strengthen our foundation for long-term profitable growth and portfolio to create long-term value for our shareholders. 2014shareholders, customers and employees.

2017 was another year of strong financial performance for the Company. We improved our operating performancecompany. All three of our sectors generated excellent results that contributed to a 5% sales increase and continued to deploy our cash to create long-term shareholder value. Our diluted earnings per share (EPS) increased 17% to $9.75. Our businesses improved their profitability and increasedan 11.5% segment operating margin rate*. Excluding the impacts of 2017 tax reform and the related discretionary contribution we made to 12.9%our pension plans, diluted EPS grew by 9% to $13.28*. As a result of our strong performance our 2017 total shareholder return (TSR) was 33.9% versus 21.8% for the S&P 500, the ninth consecutive year that our TSR has outperformed the S&P 500.

Our cash generationoperations continued to be strong. We generated $2.6 billion ofgenerate strong cash flow. Before our discretionary pension contribution, cash provided by operations totaled $2.9 billion and after investing $561 million in capital spending, our free cash flow* totaled $2.0more than $2 billion. We returned approximately 160%Our strong cash generation enabled us to continue deploying cash for the benefit of our free cash flowcustomers, shareholders and employees. In 2017 our capital expenditures totaled $928 million and we invested $639 million in R&D. Our capital expenditures continue to be elevated as we invest to strengthen the foundation for long-term profitable growth and drive affordability for our shareholders through share repurchasescustomers. In addition to these investments in our business, we also reached an agreement to acquire Orbital ATK, which will enhance our position in the space, missile and dividends. missile defense market domains.

We continued to make progress towardreturn cash to shareholders. 2017 share repurchases totaled $393 million, and dividends totaled $689 million, including an 11% increase in May, our announced goal of retiring 60 million shares by the end of 2015, market conditions permitting. At the end of 2014, we had repurchased 42.2 million shares, or 70%, toward that goal. Our stock price substantially outperformed the major market indices again in 2014. Our share price increased 29% and total shareholder return (TSR) for 2014 was 31.4%. The following are some of our 2014 financial highlights:14th consecutive annual increase.

* This metric is anon-GAAP financial measure. For more information, see “Appendix A - Use ofNon-GAAP Financial Measures.”

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 2014

 2017 Executive Compensation Highlights (page 29)33)

We continuedare committed to demonstrateperformance-based executive compensation programs that align with shareholders’ interests and our commitmentstrategy of investing for and delivering long-term profitable growth. In 2017, we refined the metrics and weightings of our annual and long-term incentives to continue to drive strong performance, while ensuring we invest for long-term profitable growth and maintain alignment with shareholders’ interests through our performance-based executive compensation programs. Weinterests.

While we sustained strong financial performance in 2014, and exceeded targets2017, our 2017 Annual Incentive Plan (AIP) payout declined to 131%, from 160% in 2016. Our Long-Term Incentive Plan (LTIP) payout is 150% compared to 148% in 2016 for three out of four 2014 annual incentive plan (AIP) metrics. Our 2014 AIP payout was 146% and remainednamed executive officers (NEOs). We ranked in line with the 144% payout in 2013. We generated the top89th percentile for three-year TSR performance relative to the 2015 Performance Peer Group identified on page 3438 and ranked in the 94th96th percentile offor three-year TSR performance relative to the S&P Industrials. However, our LTIP payout declined from 159% to 150% for Corporate Policy Council (CPC) members due to new limits on LTIP payouts that were implemented starting with the 2012 grants. Following are some additional highlightsgovernance principles of our 20142017 executive compensation approach:programs:

 Board Nominees (pages6-12)

In accordance with our retirement policy, Victor H. Fazio, a director who served during 2017, will not stand forre-election at the 2018 Annual Meeting as he will have attained his 75th birthday prior to the Annual Meeting.

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 Board Nominees (pages 4-10)Nominee Highlights

The charts below reflect the tenure, independence and broad experience of our board nominees.

Name

Age

Director

Professional Background

Independent

Committee

since

Yes

No

Memberships

Wesley G. Bush

54

2009

Chairman, CEO and President, Northrop Grumman Corporation

X

—

Marianne C. Brown

56

2015

Chief Operating Officer, SunGard Financial Systems

X

Audit, Policy

Victor H. Fazio

72

2000

Senior Advisor, Akin Gump Strauss Hauer & Feld LLP; Former Member of Congress

X

Audit, Policy

Donald E. Felsinger

67

2007

Former Chairman and CEO, Sempra Energy

X

Compensation, Governance

Bruce S. Gordon

69

2008

Former President and CEO, NAACP; Former President, Retail Markets Group, Verizon Communications Inc.

X

Compensation, Policy

William H. Hernandez

67

2013

Former Senior Vice President and CFO, PPG Industries, Inc.

X

Audit, Policy

Madeleine A. Kleiner

63

2008

Former Executive Vice President and General Counsel, Hilton Hotels Corporation

X

Audit, Governance

Karl J. Krapek

66

2008

Former President and COO, United Technologies Corporation

X

Compensation, Governance

Richard B. Myers

73

2006

Retired General, United States Air Force and Former Chairman of the Joint Chiefs of Staff

X

Compensation, Policy

Gary Roughead

63

2012

Retired Admiral, United States Navy and Former Chief of Naval Operations

X

Audit, Policy

Thomas M. Schoewe

62

2011

Former Executive Vice President and CFO, Wal-Mart Stores, Inc.

X

Audit, Policy

James S. Turley

59

2015

Former Chairman and Chief Executive Officer, Ernst & Young

X

Audit, Policy

Director Tenure		Director Independence
Director Experience

 

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 Governance Highlights (pages 11-18)13-22)

We are committed to high standards of corporate governance and have a robust corporate governance program intended to promote the long-term success of our Company. Some highlights of our corporate governance practices are listed below.

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 Shareholder Engagement

We regularly engage with our shareholders to understand better their perspectives on our Company, including our strategies, operations and performance, as well as mattersissues of executive compensationgovernance and corporate governance.responsibility, and executive compensation. This ongoing dialogue, with our shareholdersin which both members of management and directors participate, has helped inform the Board’s decisionsdecision-making and has resulted in, among other things, changes to our governance and compensation practices aimed at ensuringensure our interests remain well-aligned.well-aligned with those of our shareholders.

Since our 2017 annual meeting, we have offered to engage on governance-related topics with shareholders representing approximately 60% of our outstanding shares. We intendhave met with shareholders representing more than 30% of our outstanding shares to continue this activelearn their perspectives on the Company and governance-related topics. While a number of our shareholders did not request meetings, we believe it is a best practice to offer engagement to informshareholders representing a majority of our actions.shares outstanding. These efforts are in addition to normal course outreach conducted by our Investor Relations team and members of senior management with portfolio managers and analysts, which are primarily focused on strategy and Company performance. We also meet with shareholders at investor conferences held throughout the year.

The Company has a substantial record of adopting provisions or modifying practices with the benefit of, and to reflect, shareholder input. Examples include provisions regarding proxy access, the right of shareholders to call a special meeting and the right of shareholders to act by written consent, as well as the use of full value shares and performance-based long-term incentives for our executives.

 Annual Shareholders’ Meeting

 Voting Matters and Board Recommendations

 How to Cast Your Vote (page 2)

You can vote by any of the following methods:

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI iii

iv I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT

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 Why am I receiving this Proxy Statement?

You are receiving this Proxy Statement in connection with the solicitation of proxies by the Board of Directors of Northrop Grumman Corporation for use at the 2015 Annual Meeting of Shareholders (Annual Meeting). We intend to mail a Notice of Internet Availability of Proxy Materials to shareholders of record and to make this Proxy Statement and accompanying materials available on the internet on or about April 6, 2015.

 Who is entitled to vote at the Annual Meeting?

You may vote your shares of our common stock if you owned your shares as of the close of business on March 24, 2015 (Record Date). As of March 24, 2015, there were 196,445,226 shares of our common stock outstanding. You may cast one vote for each share of common stock you hold as of the Record Date on all matters presented.

 How many votes must be present to hold the Annual Meeting?

The presence in person or by proxy of the holders of a majority of the shares entitled to vote at the Annual Meeting will constitute a quorum at the Annual Meeting. Persons returning executed proxy cards will be counted as present for purposes of establishing a quorum even if they abstain from voting on any or all proposals. Shares held by brokers who vote such shares on any proposal will be counted as present for purposes of establishing a quorum, and broker non-votes on other proposals will not affect the presence of a quorum.

 How can I receive a paper copy of the proxy materials?

Instead of mailing a printed copy of this Proxy Statement and accompanying materials to each shareholder of record, we have elected to provide a Notice of Internet Availability of Proxy Materials (Notice) as permitted by the rules of the SEC. The Notice instructs you as to how you may access and review all of the proxy materials and how you may provide your proxy. If you would like to receive a printed or e-mail copy of this Proxy Statement and accompanying materials from us, you must follow the instructions for requesting such materials included in the Notice.

 What am I being asked to vote on and what are the Board of Directors’ recommendations?

The following table lists the proposals scheduled to be voted on, the vote required for approval of each proposal and the effect of abstentions and broker non-votes:

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 1

 What is a broker non-vote?

Brokers who hold shares of common stock for the accounts of their clients may vote these shares either as directed by their clients or in their own discretion if permitted by the stock exchanges or other organizations of which they are members. Members of the New York Stock Exchange (NYSE) are permitted to vote their clients’ proxies in their own discretion on certain matters if the clients have not furnished voting instructions within ten days of the meeting. However, NYSE Rule 452 defines various proposals as “non-discretionary,” and brokers who have not received instructions from their clients do not have discretion to vote on those items. When a broker votes a client’s shares on some but not all of the proposals at a meeting, the withheld votes are referred to as “broker non-votes.” We expect the NYSE will deem Proposal Four to be discretionary such that brokers will be entitled to vote shares on behalf of their clients in the absence of instructions received ten days prior to the meeting. We expect all other votes to be non-discretionary.

 How do I vote my shares?

If you hold shares as a record holder, you may vote by proxy prior to the meeting, as discussed below, or you may vote in person at the Annual Meeting. Shares represented by a properly executed proxy will be voted at the meeting in accordance with the shareholder’s instructions. If no instructions are given, the shares will be voted according to the recommendations of the Board of Directors. Registered shareholders and plan participants may go towww.envisionreports.com/noc to view this Proxy Statement and the Annual Report.

		By Internet		Registered shareholders and plan participants may vote on the internet, as well as view the documents, by logging on towww.envisionreports.com/noc and following the instructions given.
		By Telephone		Registered shareholders and plan participants may grant a proxy by calling 800-652-VOTE (800-652-8683) (toll-free) with a touch-tone telephone and following the recorded instructions.
		By QR Code		Registered shareholders and plan participants may vote by scanning the QR code on their proxy card or notice with their mobile device.
		By Mail		Registered shareholders and plan participants must request a paper copy of the proxy materials to receive a proxy card and may vote by marking the voting instructions on the proxy card and following the instructions given for mailing. A paper copy of the proxy materials may be obtained by logging on towww.envisionreports.com/noc and following the instructions given.

If any other matters are properly brought before the meeting, the proxy card gives discretionary authority to the proxyholders named on the card to vote the shares in their best judgment. A shareholder who executes a proxy may revoke it at any time before its exercise by delivering a written notice of revocation to the Corporate Secretary or by signing and delivering another proxy that is dated later. A shareholder attending the meeting in person may revoke the proxy by giving notice of revocation to the inspector of election at the meeting or by voting at the meeting.

 How do I vote my shares if they are held by a bank, broker or other agent?

Persons who own stock beneficially through a bank, broker or other agent may not vote directly and will need to instruct the record owner to vote their shares using the procedure identified by the bank, broker or other agent. Beneficial owners who hold our common stock in “street name” through a broker receive voting instruction forms from their broker. Most beneficial owners will be able to provide voting instructions by telephone or on the internet by following the instructions on the form they receive from their broker. Beneficial owners may view this Proxy Statement and the Annual Report on the internet by logging on towww.edocumentview.com/noc. A person who beneficially owns shares of our common stock through a bank, broker or other agent can vote his or her shares in person only if he or she obtains from the bank, broker or other nominee a proxy, often referred to as a “legal proxy,” to vote those shares, and presents the proxy to the inspector of election at the meeting together with his or her ballot.

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 How do I vote my shares held under a Northrop Grumman savings plan?

If shares are held on an individual’s behalf under any of our savings plans, the proxy will serve to provide confidential instructions to the plan Trustee or Voting Manager who then votes the participant’s shares in accordance with the individual’s instructions. For those participants who do not vote their plan shares, the applicable Trustee or Voting Manager will vote their plan shares in the same proportion as shares held under the plan for which voting directions have been received, unless the Employee Retirement Income Security Act (ERISA) requires a different procedure.

Voting instructions from savings plan participants must be received by the applicable plan Trustee or Voting Manager by 11:59 p.m. Eastern Daylight Time on May 17, 2015 in order to be used by the plan Trustee or Voting Manager to determine the votes cast with respect to plan shares.

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 20152018 Nominees for Director

Our Board has nominated 12 directors for election at the Annual Meeting. Each of the director nominees has consented to serve, and we do not know of any reason why any of them would be unable to serve, if elected. If a nominee becomes unavailable or unable to serve before the Annual Meeting (for example, due to serious illness), the Board may determine to leave the position vacant, reduce the number of authorized directors or designate a substitute nominee. If any nominee becomes unavailable for election to the Board, an event which is not anticipated, the proxyholders will have full discretion and authority to vote, or refrain from voting, for any other nominee in accordance with their judgment.

The following pages contain biographical and other information about each of the nominees. In addition, we have provided information regarding some of the particular experiences, qualifications, attributes and skills that led the Board to conclude that each nominee should serve as a director.

Unless instructed otherwise, the proxyholders will vote the proxies received by them for“FOR” the election of the director nominees listed below.

WESLEY G. BUSH, 5456
		Chairman and Chief Executive Officer, Northrop Grumman Corporation. Director since 2009

Mr. Wesley G. Bush was elected Chief Executive Officer and President of the Company effective January 1, 2010 and Chairman of the Board of Directors effective July 19, 2011. Mr. Bush served as President and Chief Operating Officer of the Company from March 2007 through December 2009, as President and Chief Financial Officer from May 2006 through March 2007, and as Corporate Vice President and Chief Financial Officer from March 2005 to May 2006. Following the acquisition of TRW Inc. (TRW) by the Company, he was named Corporate Vice President and President of the Space Technology sector. Mr. Bush joined TRW in 1987 and during his career with that company held various leadership positions including President and CEO of TRW Aeronautical Systems. He is a director of Norfolk Southern Corporation. He serves on the boards of several non-profit organizations, including the Aerospace Industries Association, the Business Higher Education Forum, Conservation International, INOVA Health Systems, the Naval Academy Foundation and the Congressional Medal of Honor Foundation.

Attributes, Skills and Qualifications

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MARIANNE C. BROWN, 5659
		Co-Chief Operating Officer, Global Financial Solutions, Fidelity National Information Services, Inc., a financial services technology solutions provider. Director since 2015 Member of the Audit Committee and Policy Committee

Ms. Marianne C. Brown has served as Chief Operating Officer of SunGard Financial Systems since February 2014.provider, from February 2014 to November 2015. Prior to that, Ms. Brown was the CEO and president of Omgeo, a global financial services technology company, from March 2006 to February 2014. Before joining Omgeo, she was the CEO of the Securities Industry Automation Corporation. Ms. Brown began her career at Automatic Data Processing (ADP) and progressed through a series of positions of increasing responsibility culminating in her role as general manager of ADP’s Brokerage Processing Services business, which was subsequently spun off to become Broadridge Financial Solutions. Ms. Brown is a director of the New York Women’s Forum Education Fund, is President of Careers for People with Disabilities and is a Senior Advisor to Pro Mujer.

Attributes, Skills and Qualifications

VICTOR H. FAZIO, 72DONALD E. FELSINGER, 70
		Senior Advisor, Akin Gump Strauss Hauer & Feld LLP, a law firm. Director since 2000 Member of the Audit Committee and Policy Committee

Mr. Victor H. Fazio was named Senior Advisor at Akin Gump Strauss Hauer & Feld LLP in May 2005 after serving as senior partner at Clark & Weinstock since 1999. Prior to that, Mr. Fazio was a Member of Congress for 20 years representing California’s third congressional district. During that time, he served as a member of the Armed Services, Budget and Ethics Committees and was a member of the House Appropriations Committee where he served as Subcommittee Chair or ranking member for 18 years. Mr. Fazio was a member of the elected leadership in the House from 1989 to 1998 including four years as Chair of his Party’s Caucus, the third ranking position. From 1975 to 1978, Mr. Fazio served in the California Assembly and was a member of the staff of the California Assembly Speaker from 1971 to 1975. He is a member of the board of directors of various private companies and non-profit organizations including Energy Future Coalition, the United States Association of Former Members of Congress, the Campaign Finance Institute, the Committee for a Responsible Federal Budget, Center for Strategic and Budgetary Assessments, The Information Technology and Innovation Foundation, UC Davis Medical School Advisory Board and the National Parks Conservation Association.

Attributes, Skills and Qualifications

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DONALD E. FELSINGER, 67
		Lead Independent Director of the Board of Directors, Northrop Grumman Corporation.   Former Chairman and Chief Executive Officer, Sempra Energy, an energy services holding company.   Director since 2007   Member of the Compensation Committee and Governance Committee

Mr. Donald E. Felsinger is the former Chairman and Chief Executive Officer of Sempra Energy. From July 2011 through his retirement in November 2012, he served as Executive Chairman of the Board of Directors of Sempra Energy, and from February 2006 through June 2011, he was Sempra’s Chairman and CEO. Prior to that, Mr. Felsinger was President and Chief Operating Officer of Sempra Energy from January 2005 to February 2006 and a member of the Board of Directors. From 1998 through 2004, he was Group President and Chief Executive Officer of Sempra Global. Prior to the merger that formed Sempra Energy, he served as President and Chief Operating Officer of Enova Corporation, the parent company of San Diego Gas & Electric (SDG&E). Prior positions included President and Chief Executive Officer of SDG&E, Executive Vice President of Enova Corporation and Executive Vice President of SDG&E. Mr. Felsinger serves on the board of Archer Daniels Midland.

Mr. Donald E. Felsinger is the former Chairman and Chief Executive Officer of Sempra Energy. From July 2011 through his retirement in November 2012, he served as Executive Chairman of the Board of Directors of Sempra Energy, and from February 2006 through June 2011, he was Sempra’s Chairman and CEO. Prior to that, Mr. Felsinger was President and Chief Operating Officer of Sempra Energy from January 2005 to February 2006 and a member of the Board of Directors. From 1998 through 2004, he was Group President and Chief Executive Officer of Sempra Global. Prior to the merger that formed Sempra Energy, he served as President and Chief Operating Officer of Enova Corporation, the parent company of San Diego Gas & Electric (SDG&E). Prior positions included President and Chief Executive Officer of SDG&E, Executive Vice President of Enova Corporation and Executive Vice President of SDG&E. Mr. Felsinger serves on the boards of Archer-Daniels-Midland (Lead Independent Director) and Gannett Co., Inc. Attributes, Skills and Qualifications   —· Extensive business experience as Chief Executive Officer, a board member and Chairman of other Fortune 500 companies in regulated industries   —· Significant experience in corporate governance and strategy, and as Lead Independent Director of a Fortune 250 company   ·—   In-depth In-depth knowledge of executive compensation and benefits       NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|7  PROPOSAL ONE: ELECTION OF DIRECTORS ANN M. FUDGE, 66 Former Chairman and Chief Executive Officer, Young & Rubicam Brands, a marketing communications company. Director since 2016 Member of the Audit Committee and Policy Committee Ms. Ann M. Fudge served as Chairman and Chief Executive Officer of Young & Rubicam Brands at WPP Group PLC from May 2003 to December 2006. Prior to that, she served in various leadership positions at Kraft Foods from 1986 to 2001, including President of Beverages, Desserts and Post Divisions, and President of Maxwell House Coffee and Kraft General Foods. From 1977 to 1986, Ms. Fudge held a variety of marketing positions at General Mills. She is a director of Unilever NV and Novartis AG, and served as a director of General Electric Company and Infosys Limited during the last five years. Ms. Fudge also serves as a trustee of WGBH Public Media and the Brookings Institution. Ms. Fudge also serves on the Advisory Board of the Smithsonian Museum of African American History and Culture, and as Chair of the U.S. Programs Advisory Panel of the Gates Foundation. Attributes, Skills and Qualifications ·   Extensive business experience as former Chief Executive Officer and former president of leading consumer products business units ·   Substantial international experience through service as an executive and director of a large multinational company and a director of other large multinational companies ·   Significant public company board experience BRUCE S. GORDON, 6972      Former President & CEO, NAACP and Former President, Retail Markets Group, Verizon Communications Inc., a telecommunications company.company, and Former President & CEO, NAACP.   Director since 2008   Member of the Compensation Committee and Policy Committee (Chair) Mr. Bruce S. Gordon served as President and Chief Executive Officer of the National Association for the Advancement of Colored People from June 2005 to March 2007. In 2003, Mr. Gordon retired from Verizon Communications Inc., where he had served as President, Retail Markets Group since 2000. Prior to that, Mr. Gordon served as Group President of the Enterprise Business Unit, President of Consumer Services, Vice President of Marketing and Sales and Vice President of Sales for Bell Atlantic Corporation (Verizon’s predecessor). He is a member of the board of directors of the Newport Festival Foundation and a member of the Executive Leadership Council. Mr. Gordon is a director of CBS Corporation and the Non-Executive Chair of The ADT Corporation. Mr. Bruce S. Gordon served as President and Chief Executive Officer of the National Association for the Advancement of Colored People from June 2005 to March 2007. In 2003, Mr. Gordon retired from Verizon Communications Inc., where he had served as President, Retail Markets Group since 2000. Prior to that, Mr. Gordon served as Group President of the Enterprise Business Unit, President of Consumer Services, Vice President of Marketing and Sales and Vice President of Sales for Bell Atlantic Corporation (Verizon’s predecessor). He is a member of the board of directors of the Newport Festival Foundation and a member of the Executive Leadership Council. Mr. Gordon is a director of CBS Corporation, and served as theNon-Executive Chair of The ADT Corporation during the last five years. He currently serves as a diversity consultant to several Fortune 500 companies. Attributes, Skills and Qualifications   —· Extensive leadership and business skills acquired from his experience with corporate andnon-profit enterprises   —· National leader on issues of diversity and inclusion   —· Significant board experience, including asnon-executive chair       68 I|NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  PROPOSAL ONE: ELECTION OF DIRECTORS     WILLIAM H. HERNANDEZ, 6769      Former Senior Vice President and Chief Financial Officer, PPG Industries, Inc., a manufacturer of chemical and industrial products.   Director since 2013   Member of the Audit Committee (Chair) and PolicyGovernance Committee Mr. William H. Hernandez served as Senior Vice President, Finance, and Chief Financial Officer of PPG Industries, Inc. (PPG), from 1995 until his retirement in 2009. Prior to that, he was PPG’s corporate controller from 1990 to 1994. Mr. Hernandez previously held a number of positions with Borg-Warner Corporation and Ford Motor Company. Mr. Hernandez is a certified management accountant and has taught finance and management courses at Marietta College. He is a member of the board of directors of Albermarle Corporation, Black Box Mr. William H. Hernandez served as Senior Vice President, Finance, and Chief Financial Officer of PPG Industries, Inc. (PPG), from 1995 until his retirement in 2009. Prior to that, he was PPG’s corporate controller from 1990 to 1994. Mr. Hernandez previously held a number of positions with Borg-Warner Corporation and Ford Motor Company. Mr. Hernandez is a certified management accountant and has taught finance and management courses at Marietta College. He is a member of the board of directors of Albemarle Corporation and USG Corporation and served as director of Black Box Corporation and Eastman Kodak during the last five years. Attributes, Skills and Qualifications   —· Extensive experience and expertise in areas of finance, accounting and business management acquired as Chief Financial Officer of PPG Industries   —· Significant experience in areas of risk management   —· Audit committee financial expert       MADELEINE A. KLEINER, 6366      Former Executive Vice President and General Counsel, Hilton Hotels Corporation, a hotel and resort company.   Director since 2008   Member of the Audit Committee and Governance Committee (Chair) Ms. Madeleine A. Kleiner served as Executive Vice President, General Counsel and Corporate Secretary for Hilton Hotels Corporation from January 2001 until February 2008. From 1999 through 2001, she served as a director of a number of Merrill Lynch mutual funds operating under the Hotchkis and Wiley name. Ms. Kleiner served as Senior Executive Vice President, Chief Administrative Officer and General Counsel of H.F. Ahmanson & Company and its subsidiary, Home Savings of America, until the company was acquired in 1998, and prior to that was a partner at the law firm of Gibson, Dunn and Crutcher where she advised corporations and their boards primarily in the areas of mergers and acquisitions, corporate governance and securities transactions and compliance. Ms. Kleiner currently serves on the board of directors of Jack in the Box Inc. Ms. Kleiner is the chair of the UCLA Medical Center Board of Advisors and a member of the board of the New Village Charter School. Attributes, Skills and Qualifications   —· Expertise in corporate governance, implementation of Sarbanes-Oxley controls, risk management, securities transactions and mergers and acquisitions   —· Significant experience from past roles as general counsel for two public companies, outside counsel to numerous public companies and through service on another public company board   —· Audit committee financial expert       NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT I| 79  PROPOSAL ONE: ELECTION OF DIRECTORS     KARL J. KRAPEK, 6669      Former President and Chief Operating Officer, United Technologies Corporation, an aerospace and building systems company.   Director since 2008   Member of the Compensation Committee (Chair) and Governance Committee Mr. Karl J. Krapek served as President and Chief Operating Officer of United Technologies Corporation from 1999 until his retirement in January 2002. At United Technologies Corporation, he served for 20 years in various management positions, including Executive Vice President and director in 1997; President and Chief Executive Officer of Pratt & Whitney in 1992; Chairman, President and Chief Executive Officer of Carrier Corporation in 1990; and President of Otis Elevator Company in 1989. Prior to joining United Technologies Corporation, he was Manager of Car Assembly Operations for the Pontiac Motor Car Division of General Motors Corporation. In 2002, Mr. Krapek became a co-founder of The Keystone Companies, which develops residential and commercial real estate. He chairs the Strategic Planning Committee for the board of directors at St. Francis Care, Inc. Mr. Krapek is the lead director of Prudential Financial, Inc. He was also a director of The Connecticut Bank and Trust Company and Visteon Corporation during the past five years. Mr. Karl J. Krapek served as President and Chief Operating Officer of United Technologies Corporation from 1999 until his retirement in January 2002. At United Technologies Corporation, he served for 20 years in various leadership positions, including Executive Vice President and director in 1997, President and Chief Executive Officer of Pratt & Whitney in 1992, Chairman, President and Chief Executive Officer of Carrier Corporation in 1990 and President of Otis Elevator Company in 1989. Prior to joining United Technologies Corporation, he was Manager of Car Assembly Operations for the Pontiac Motor Car Division of General Motors Corporation. In 2002, Mr. Krapek became aco-founder of The Keystone Companies, which develops residential and commercial real estate. He chairs the Strategic Planning Committee for the board of directors at Trinity Health of New England. Mr. Krapek is a director of Prudential Financial, Inc. and Pensare Acquistion Corp. Attributes, Skills and Qualifications   —· Extensive industry experience and leadership skills   —· Deep operational experience in aerospace and defense, domestic and international business operations and technology and lean manufacturing   —· Significant public company board experience, including serving as Lead Independent Director        RICHARD B. MYERS, 73GARY ROUGHEAD, 66      General, United States Air Force (Ret.) and Former Chairman of the Joint Chiefs of Staff. Director since 2006 Member of the Compensation Committee and Policy Committee General Richard B. Myers retired from his position as the fifteenth Chairman of the Joint Chiefs of Staff, the U.S. military’s highest ranking officer, in September 2005 after serving in that position for four years. In this capacity, he served as the principal military advisor to the President, the Secretary of Defense and the National Security Council. Prior to becoming Chairman, he served as Vice Chairman of the Joint Chiefs of Staff from March 2000 to September 2001. As the Vice Chairman, General Myers served as the Chairman of the Joint Requirements Oversight Council, Vice Chairman of the Defense Acquisition Board, and as a member of the National Security Council Deputies Committee and the Nuclear Weapons Council. During his military career, General Myers’ commands included Commander in Chief, North American Aerospace Defense Command and U.S. Space Command; Commander, Air Force Space Command; Commander Pacific Air Forces; and Commander of U.S. Forces Japan and 5th Air Force at Yokota Air Base, Japan. General Myers is a director of Deere & Company, United Technologies Corporation and Aon Corporation and is Chairman of the Board of Governors of the USO. He is also Foundation Professor of Military History and Leadership at Kansas State University and occupies the Colin L. Powell Chair for National Security Ethics, Leadership and Character at the National Defense University. General Myers serves on the Board of Rivada Networks and is Chairman of the Board of Trustees of the Kansas State University Foundation. Attributes, Skills and Qualifications — Extensive career as a senior military officer and Chairman of the Joint Chiefs of Staff, having held leadership positions at the highest levels of the United States armed forces — Leading expert on national security and global geo-political issues — Extensive experience with Department of Defense operations and requirements and in-depth knowledge on issues related to the intelligence community 8 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  PROPOSAL ONE:  ELECTION OF DIRECTORS  GARY ROUGHEAD, 63   Admiral, United States Navy (Ret.) and Former Chief of Naval Operations.   Director since 2012   Member of the AuditCompensation Committee and PolicyGovernance Committee Admiral Gary Roughead retired from his position as the 29th Chief of Naval Operations in September 2011, after serving in that position for four years. The Chief of Naval Operations is the senior military position in the United States Navy. As Chief of Naval Operations, Admiral Roughead stabilized and accelerated ship and aircraft procurement plans and the Navy’s capability and capacity in ballistic missile defense and unmanned air and underwater systems. He restructured the Navy to address the challenges and opportunities in cyber operations. Prior to becoming the Chief of Naval Operations, he held six operational commands (including commanding both the Atlantic and Pacific Fleets). Admiral Roughead is a Distinguished Fellow at the Hoover Institution. He also serves as a director of Theranos, Inc. and a trustee of the Dodge and Cox Funds. He is a director of the Center for a New American Society, the Darden School of Business Foundation, CNA, a not-for-profit research and analysis organization, and the Woods Hole Oceanographic Institution and is a member of the Council on Foreign Relations. Admiral Gary Roughead retired from his position as the 29th Chief of Naval Operations in September 2011, after serving in that position for four years. The Chief of Naval Operations is the senior military position in the United States Navy. As Chief of Naval Operations, Admiral Roughead stabilized and accelerated ship and aircraft procurement plans and the Navy’s capability and capacity in ballistic missile defense and unmanned air and underwater systems. He restructured the Navy to address the challenges and opportunities in cyber operations. Prior to becoming the Chief of Naval Operations, he held six operational commands (including commanding both the Atlantic and Pacific Fleets). Admiral Roughead is a Robert and Marion Oster Distinguished Military Fellow at the Hoover Institution. He is a director of Maersk Lines, Ltd. He also serves as a trustee of the Dodge and Cox Funds. He is a director of the Center for a New American Security, and serves on the Board of Managers of the Johns Hopkins University Applied Physics Lab. Attributes, Skills and Qualifications   —· Extensive career as a senior military officer with the United States Navy, including numerous operational commands, as well as leadership positions, most recently as the 29th Chief of Naval Operations   —· Significant expertise in national security, information warfare, cyber operations and global security issues   —· Broad experience in leadership and matters of global relations, particularly in the Pacific region, Europe and the Middle East   10 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  PROPOSAL ONE: ELECTION OF DIRECTORS     THOMAS M. SCHOEWE, 6265      Former Executive Vice President and Chief Financial Officer,Wal-Mart Stores, Inc., an operator of retail stores.   Director since 2011   Member of the AuditCompensation Committee and Policy Committee Mr. Thomas M. Schoewe was Executive Vice President and Chief Financial Officer of Wal-Mart Stores Inc. from 2000 to 2011. Prior to his employment with Wal-Mart, he held several roles at the Black and Decker Corporation, including Senior Vice President and Chief Financial Officer from 1996 to 1999, Vice President and Chief Financial Officer from 1993 to 1999, Vice President of Finance from 1989 to 1993 and Vice President of Business Planning and Analysis from 1986 to 1989. Before joining Black and Decker, Mr. Schoewe worked for Beatrice Companies, where he was Chief Financial Officer and Controller of one of its subsidiaries, Beatrice Consumer Durables Inc. Mr. Schoewe serves on the Boards of Directors of General Motors Corporation and Kohlberg Kravis Roberts and Company. He also served as a director of PulteGroup Inc. during the last five years. Mr. Thomas M. Schoewe was Executive Vice President and Chief Financial Officer ofWal-Mart Stores Inc. from 2000 to 2011. Prior to his employment withWal-Mart, he held several roles at the Black and Decker Corporation, including Senior Vice President and Chief Financial Officer from 1996 to 1999, Vice President and Chief Financial Officer from 1993 to 1999, Vice President of Finance from 1989 to 1993 and Vice President of Business Planning and Analysis from 1986 to 1989. Before joining Black and Decker, Mr. Schoewe worked for Beatrice Companies, where he was Chief Financial Officer and Controller of one of its subsidiaries, Beatrice Consumer Durables Inc. Mr. Schoewe serves on the Boards of Directors of General Motors Corporation and Kohlberg Kravis Roberts and Company. Mr. Schoewe also serves on the board of the Ladies Professional Golf Association. Attributes, Skills and Qualifications   —· Extensive financial experience acquired through positions held as the Chief Financial Officer of large public companies, as well as expertise in implementation of Sarbanes-Oxley controls, risk management and mergers and acquisitions   —· Significant international experience through his service as an executive of large public companies with substantial international operations   ·   Experience at—Wal-Mart and Black and Decker on large-scale transformational enterprise information technology implementations · Extensive experience as a member of the audit committeeand risk committees of other public companies; audit committee financial expertcompanies   NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 9  PROPOSAL ONE:  ELECTION OF DIRECTORS     JAMES S. TURLEY, 5962      Former Chairman and Chief Executive Officer, Ernst & Young, a professional services organization.   Director since 2015   Member of the Audit Committee and PolicyGovernance Committee Mr. James S. Turley served as Chairman and Chief Executive Officer of Ernst & Young from 2001 until his retirement in 2013. Mr. Turley joined Ernst & Young in 1977 and held various positions there until being named regional managing partner for the Upper Midwest in 1994, and for New York in 1998. He was named Deputy Chairman in 2000. He currently serves on the Boards of Directors for Citigroup, Emerson Electric Company and Intrexon corporation. He also serves on the Board of Directors of the Boy Scouts of America and the Board of Trustees for Rice University. He is Chair of the National Corporate Theatre Fund and serves on the Committee for Economic Development. Mr. James S. Turley served as Chairman and Chief Executive Officer of Ernst & Young from 2001 until his retirement in 2013. Mr. Turley joined Ernst & Young in 1977 and held various positions there until being named regional managing partner for the Upper Midwest in 1994, and for New York in 1998. He was named Deputy Chairman in 2000. He currently serves on the Boards of Directors of Citigroup, Emerson Electric Company and Intrexon Corporation. He also serves on the Board of Directors of the Boy Scouts of America. Mr. Turley is a board member of Kohler Co. and serves asNon-Executive Chair of Sita Capital Partners LLP. Attributes, Skills and Qualifications   —· Extensive experience and expertise in areas of finance, accounting and business management acquired over 35-year36-year career at Ernst & Young, including serving as Chairman and Chief Executive Officer of Ernst & Young   —· Significant experience in areas of risk management   —· Extensive experience as a member of the audit committee of other public companies; auditcompanies ·   Audit committee financial expert     NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|11  PROPOSAL ONE: ELECTION OF DIRECTORS MARK A. WELSH III, 64 Dean of the Bush School of Government and Public Service, Texas A&M University; General, United States Air Force (Ret.); Former Chief of Staff, United States Air Force. Director since 2016 Member of the Audit Committee and Policy Committee General Mark A. Welsh III was appointed as the new Dean of the Bush School of Government and Public Service effective August 15, 2016. Prior to his current position, General Welsh served as Chief of Staff of the United States Air Force, the senior uniformed Air Force officer responsible for the organization, training and equipping of active-duty, Guard, Reserve and civilian forces serving in the United States and overseas. During his long career, General Welsh also served as a member of the Joint Chiefs of Staff, Commander of the United States Air Forces in Europe and Commander of NATO’s Air Command, Associate Director for Military Affairs at the Central Intelligence Agency and Commandant of the United States Air Force Academy. General Welsh is a member of the Board of Managers of Peak NanoSystems, LLC. He is also a director of the Air Force Association. Attributes, Skills and Qualifications ·   Extensive career as a senior military officer and member of the Joint Chiefs of Staff, having held leadership positions at the highest levels of the United States Air Force ·   Extensive experience andin-depth knowledge of issues related to global security and the intelligence community ·   Broad leadership experience and international experience, particularly in Europe Vote Required To be elected, a nominee must receive more votes cast “for” than votes cast “against” his or her election. Abstentions and brokernon-votes will have no effect on this proposal. If a nominee is notre-elected, he or she will remain in office until a successor is elected or until his or her earlier resignation or removal.   THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” “FOR” THE 12 NOMINEES FOR DIRECTOR LISTED ABOVE.   1012 I|NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  CORPORATE GOVERNANCE      Overview     We are committed to maintaining high standards of corporate governance, consistent with our core values of sustainable performance, ethics and compliance. With strong oversight from the Board, our corporate governance regime is intended to promote the long-term success of our Company We are committed to maintaining high standards of corporate governance, consistent with our core values of sustainable performance, ethics and compliance. With strong oversight from the Board, our corporate governance regime is intended to promote the long-term success of our Company to benefit our shareholders, customers and employees. Our Company has adoptedPrinciples of Corporate Governance andStandards of Business Conduct to help guide and promote our good corporate governance and responsible business practices. Our Principles of Corporate Governance outline the role and responsibilities of our Board, set forth additional independence requirements for our directors and provide guidelines for Board leadership and Board and committee membership, among other items. The Board reviews these principles at least annually and considers opportunities for improvement and modification. Our Standards of Business Conduct apply to our directors, officers and all employees. Among other things, they:   — Our Principles of Corporate Governance outline the role and responsibilities of our Board and the high standards our directors maintain. They set forth additional independence requirements for our directors and provide guidelines for Board leadership and Board and Committee membership, among other items. The Board reviews these principles at least annually and considers opportunities for improvement and modification. Our Standards of Business Conduct reflect and reinforce our commitment to integrity and ethics in all we do. They apply to our directors, officers and all employees. Among other things, our Standards of Business Conduct: ·   require high ethical standards in all aspects of our business; · require strict adherence to all applicable laws and regulations; · reflect our commitment to maintaining a culture that values diversity and inclusion; · reinforce the need for avoiding actual or apparent conflicts of interest and require the responsible use of Company resources; · reinforce our commitment to being a responsible corporate citizen; · reflect our commitment to our work environment and the global communities where we live, work and serve; · require the consistent production of quality results; and · call upon all employees freely to seek guidance regarding business conduct and to raise any issues of concern (including on an anonymous basis). We report amendments to provisions of our Standards of Business Conduct on our website. We disclose in a Form8-K waivers of the provisions of our Standards of Business Conduct that apply to our directors or our executive officers (that is, Corporate Vice Presidents who are members of the Corporate Policy Council and our Chief Accounting Officer). There were no waivers from any provisions of our Standards of Business Conduct or amendments applicable to any director or executive officer in 2017.  Role of the Board The primary responsibility of our Board is to foster the long-term success of the Company, promoting the interests of our shareholders. Our directors exercise their business judgment in a manner they reasonably believe to be in the best interests of the Company and our shareholders and in a manner consistent with their fiduciary responsibilities. The responsibilities of the Board include, but are not limited to, the following: · oversee our long-term business strategies, operations and performance; · select the Chief Executive Officer and elect officers of the Company; · oversee our risk management activities; · oversee senior executive succession planning; · elect directors to fill vacant positions between Annual Meetings; · review and approve executive compensation; · review and approve significant corporate actions; · oversee and evaluate management and Board performance; NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|13  CORPORATE GOVERNANCE   — · oversee our ethics and compliance programs; · ensure effective corporate governance practices; and · provide advice to management. Board’s Role in Risk Oversight As noted above, the Board is responsible for overseeing our risk management activities, among other duties. Each of our Board committees assists the Board in this role. ·   require strict adherence to all applicable laws and regulations; — reinforce the need for avoiding actual or apparent conflicts of interest and require the responsible use of Company resources; — reinforce our commitment to being a responsible corporate citizen; — reflect our commitment to our work environment and the global communities where we live, work and serve; — require the consistent production of quality results; and — call upon all employees freely to seek guidance regarding business conduct and to raise any issues of concern (including on an anonymous basis).  Role of the Board The primary responsibility of our Board is to foster the long-term success of the Company, promoting the interests of our shareholders. Our directors exercise their business judgment in a manner they reasonably believe to be in the best interests of the Company and our shareholders and in a manner consistent with their fiduciary responsibilities. The responsibilities of the Board include, but are not limited to, the following: — oversee our long-term business strategies, operations and performance; — select the Chief Executive Officer and elect officers of the Company; — oversee our risk management activities; — oversee senior executive succession planning; — elect directors to fill vacant positions between Annual Meetings; — review and approve executive compensation; — review and approve significant corporate actions; — oversee and evaluate management and Board performance; — oversee our ethics and compliance programs; and — provide advice to management. Board’s Role in Risk Oversight As noted above, the Board is responsible for overseeing our risk management activities, among other duties. Each of our Board committees assists the Board in this role. The Audit Committee focuses on risks that could impact our financial performance. The Audit Committee periodically receives a report from the Chief Financial Officer and members of the Finance Department addressing NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 11  CORPORATE GOVERNANCE our financial risk management processes, systems and systems,internal controls, the nature of the material financial risks the Company faces and how the Company responds to and mitigates these risks. The Audit Committee periodically receives a report from our General Counsel on legal and other compliance risks and how the Company is addressing and mitigating those risks. The Audit Committee receives an annual report from our Chief Compliance Officer on the Company’s compliance program overall. The Audit Committee also receives quarterly reports from the Vice President, Global Corporate Responsibility on trends in ethics reporting. · The Compensation Committee reviews at least annually a risk assessment of the Company’s compensation programs and, together with its independent compensation consultant, evaluates the mix of at riskat-risk compensation linked to stock appreciation. · The Policy Committee assists the Board in identifying and evaluating global security, political and budgetary issues and trends that could impact the Company’s business. The Policy Committee periodically receives a report from the Vice President, Global Corporate Responsibility on the Company’s ethics and corporate responsibility programs. · The Governance Committee regularly reviews the Company’s corporate governance policies and practices, and considers issues of succession and composition of the Board, recommending any proposed changes to the full Board for approval. The Board and its Committees provide oversight of the Company’s risk management processes, including the Enterprise Risk Management Council (ERMC). The ERMC is comprised of all members of the Corporate Policy Council, the Chief Accounting Officer, Chief Compliance Officer, Secretary, head of Internal Audit and Treasurer. The ERMC seeks to ensure that the Company has identified the most significant risks and implemented effective mitigation plans for each. The full Board has responsibility for oversight of cyber and other security risks, and receives periodic briefings from our Vice President and Chief Information Security Officer.  Board Leadership Structure   The Board believes that it is in the best interests of the Company and our shareholders to have flexibility in determining the most effective leadership structure to serve the interests of the Company and our shareholders. Chairperson of the Board Our Bylaws provide that our directors will designate a Chairperson of the Board from among its members. The Chairperson presides at all Board and shareholder meetings. The Chairperson interacts directly with all members of the Board and assists the Board to fulfill its responsibilities. The Principles of Corporate Governance provide that the Board believes it is in the best interests of the Company and the shareholders for the Board to have flexibility to determine the best director to serve as Chairperson of the Board at the time, based on consideration of all relevant factors. As discussed below, the Board believes that the appropriate leadership structure at this time is for Mr. Bush, our Chief Executive Officer, to serve as Chairman. Mr. Bush has served as Chairman since July 2011. The Board believes that having the Chief Executive Officer serve as Chairman best positions the Company to be innovative, compete successfully and advance shareholder interests in today’s environment. The Board believes that Mr. Bush’s deep understanding of the Company’s business,day-to-day operations, growth opportunities, challenges and risk management practices gained through various leadership positions enables him to provide strong and effective leadership to the Board and to ensure that the Board is informed of important issues facing the Company. The Board consists entirely of independent directors other than Mr. Bush and it continues to exercise a strong, independent oversight function, with fully independent Board Committees and a strong Lead Independent Director with clearly articulated responsibilities. The Board evaluates the leadership structure of the Board on an ongoing basis to ensure that it continues to best meet the needs of the Company. Lead Independent Director If the Chairperson is not independent, the independent directors will designate annually from among them a Lead Independent Director. Following our 2017 Annual Meeting, the independent directors designated Mr. Felsinger as Lead Independent Director. 14 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  CORPORATE GOVERNANCE Our Principles of Corporate Governance set forth specific duties and responsibilities of the Lead Independent Director, which include the following: · preside at meetings of the Board from among its members. The Chairperson presides at all Board and shareholder meetings. The Chairperson interacts directly with all members of the Board and assists the Board to fulfill its responsibilities. Mr. Bush, our Chief Executive Officer and President, has served as Chairman since July 2011. Lead Independent Director Ifwhich the Chairperson is not independent,present, including executive sessions of the independent directors, will designate annually from among them a Lead Independent Director. Following our 2014 Annual Meeting,and advise the independent directors designated Mr. FelsingerChairperson and CEO on decisions reached and suggestions made; · advise the Chairperson on and approve meeting agendas and information sent to the Board; · advise the Chairperson on and approve the schedule of Board meetings, assuring there is sufficient time for discussion of all agenda items; · provide the Chairperson with input as Lead Independent Director. Our Principlesto the preparation of Corporate Governance set forth specific dutiesBoard and responsibilitiescommittee meeting agendas, taking into account the requests of the Lead Independent Director, which include the following:other Board and committee members; — ·   preside at meetings of the Board at which the Chairperson is not present, including executive sessions of the independent directors, and advise the Chairperson and CEO on decisions reached; — advise the Chairperson on and approve meeting agendas and the information sent to the Board; — advise the Chairperson on and approve the schedule of Board meetings to assure there is sufficient time for discussion of all agenda items; — provide the Chairperson with input as to the preparation of Board and committee meeting agendas, taking into account the requests of the other Board and committee members; — interview, along with the Chairperson and the Chairperson of the Governance Committee, Board candidates and make recommendations to the Governance Committee and the Board; — call meetings of the independent directors; — serve as liaison between the Chairperson and the independent directors; and — if requested by major shareholders, ensure that he is available for consultation and direct communication. 12 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  CORPORATE GOVERNANCE  Committees of the Board of Directors The Board has four standing committees: the Audit Committee, the Compensation Committee, the Governance Committee and the Policy Committee. The membership of these committees is typically determined at the organizational meeting of the Board held in conjunction with the Annual Meeting. All the committees are composed entirely of independent directors. The primary responsibilities of each of the committees are summarized below, together with a table listing the membership and chairperson of each committee as of December 31, 2014. The charters for each standing committee can be found on the Investor Relations section of our website (www.northropgrumman.com). Audit Committee Roles and Responsibilities 2014 Committee Members* Assist the Board in its oversight of (1) the integrity of the Company’s financial statements and the Company’s accounting and financial reporting processes; (2) the Company’s overall compliance with legal and regulatory requirements; (3) financial risk assessment and management; (4) the qualifications, performance and independence of the Company’s independent auditor, (5) the performance of the Company’s internal audit function; and (6) the Company’s system of disclosure controls and procedures and internal control over financial reporting, by: —   appointing, retaining, overseeing, evaluating and terminating, if necessary, the independent auditor —   reviewing and pre-approving audit and non-audit services and related fees for the independent auditor —   reviewing and discussing the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q —   reviewing and discussing management’s assessment of, and report on, the effectiveness of the Company’s internal control over financial reporting at least annually and the independent auditor’s related report —   reviewing with the General Counsel, at least annually, the status of significant pending litigation and various other significant legal, compliance or regulatory matters —   reviewing with the Chief Compliance Officer, at least annually, the Company’s compliance program —   discussing guidelines and policies regarding risk assessment and risk management —   reviewing any significant issues raised by the internal audit function and, as appropriate, management’s actions for remediation —   establishing and periodically reviewing and discussing with management the Company’s procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters William H. Hernandez (chair) Victor H. Fazio Madeleine A. Kleiner Gary Roughead Thomas M. Schoewe Number of meetings in 2014:9 Independence, Financial Literacy and Audit Committee Financial Experts All members are independent and financially literate Ms. Kleiner and Messrs. Hernandez and Schoewe each qualifies as an Audit Committee Financial Expert. *James S. Turley, who joined the Board and Audit Committee in February 2015, also qualifies as an Audit Committee Financial Expert. Compensation Committee Roles and Responsibilities 2014 Committee Members Assist the Board in overseeing the Company’s compensation policies and practices by: —   approving the compensation for elected officers (other than the Chief Executive Officer, whose compensation is recommended by the Committee and approved by all the independent directors) —   establishing stock ownership guidelines and reviewing ownership levels on an annual basis —   administering incentive and equity compensation plans and approving payments or grants under these plans for elected officers (other than the Chief Executive Officer) —   recommending for approval compensation for the non-employee directors —   producing an annual report on executive compensation for inclusion in the proxy statement —   providing support to the Board in carrying out its overall responsibilities related to executive compensation Kevin W. Sharer (chair)* Donald E. Felsinger Bruce S. Gordon Karl J. Krapek Richard B. Myers Number of meetings in 2014:7 Independence All members are independent *The Board named Mr. Krapek as chairperson effective March 2, 2015. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 13  CORPORATE GOVERNANCE Governance Committee Roles and Responsibilities 2014 Committee Members Assist the Board in overseeing the Company’s corporate governance practices by: —   regularly reviewing the Company’s corporate governance policies and practices, including the Principles of Corporate Governance, and recommending changes to the Board —   reviewing and determining whether a director’s service on another board or elsewhere is likely to interfere with the director’s duties and responsibilities as a member of the Board —   reviewing and making recommendations to the Board regarding the composition and size of the Board —   reviewing and making recommendations to the Board regarding the criteria for Board membership, which should include among other things, diversity, experience and integrity —   identifying and recommending to the Board qualified potential candidates to serve on the Board and its committees —   coordinating the process for the Board to evaluate its performance Karl J. Krapek (chair)* Donald E. Felsinger Madeleine A. Kleiner Kevin W. Sharer Number of meetings in 2014: 4 Independence All members are independent *The Board named Ms. Kleiner as chairperson effective March 2, 2015. Policy Committee Roles and responsibilities 2014 Committee Members Assist the Board in overseeing policy, government relations, corporate responsibility and other matters by: —   identifying and evaluating global security, budgetary and other issues and trends that could impact the Company’s business activities and performance —   reviewing and providing oversight over the Company’s ethics and corporate responsibility policies and programs —   reviewing the Company’s public relations and advertising strategy —   reviewing and monitoring the Company’s government relations strategy and political action committee —   reviewing the Company’s community relations activities —   reviewing and providing oversight of the Company’s environmental sustainability program Bruce S. Gordon (chair) Victor H. Fazio William H. Hernandez Richard B. Myers Gary Roughead Thomas M. Schoewe Number of meetings in 2014:4 Independence All members are independent  Board Meetings and Executive Sessions The Board meets no less than on a quarterly basis. Special meetings of the Board may be called from time to time as appropriate. On an annual basis, the Board holds an extended meeting to review our long-term strategy. The Board holds its meetings at Company locations other than our corporate headquarters on a regular basis to provide the directors with a first-hand view of different elements of our business and an opportunity to interact with local management. The Board meets in executive session (with the directors only and then with the independent directors only) following each in-person Board meeting and on other occasions as needed. The non-executive Chairperson or the Lead Independent Director presides over the executive sessions of the independent directors. The Audit Committee meets in executive session at each in-person Audit Committee meeting, and regularly requests separate executive sessions with representatives of our independent auditor and our senior management, including our Chief Financial Officer, General Counsel and our Vice President, Internal Audit. The Compensation Committee also meets in executive session on a regular basis and may request a report from the Compensation Committee’s compensation consultant in executive session. The Governance and Policy Committees also meet in executive session as they deem necessary.  Meeting Attendance During 2014, the Board held nine meetings. Each incumbent director serving in 2014 attended 75% or more of the total number of Board and committee meetings he or she was eligible to attend. Board members are expected to attend the Annual Meeting, except where the failure to attend is due to unavoidable circumstances. All directors who were members of the Board in May 2014 attended the 2014 Annual Meeting. 14 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  CORPORATE GOVERNANCE  Director Independence The Board has established an objective that at least 75% of our directors be independent directors. The Board and Governance Committee annually review the relevant relationships or arrangements between the Company and our directors or parties related to the directors in determining whether such directors are independent. No director is considered independent unless the Board of Directors has determined that the director meets the independence requirements under applicable NYSE and SEC rules and under our categorical independence standards. Our Principles of Corporate Governance provide that a director may be found not to qualify as an independent director if the director: — has within the prior three years been a director, executive officer or trustee of a charitable organization that received annual contributions from the Company exceeding the greater of $1 million or 2% of the charitable organization’s annual gross revenues, where the gifts were not normal matching charitable gifts, did not go through normal corporate charitable donation approval processes or were made “on behalf of” a director; — has, or has an immediate family member who has, within the prior three years been employed by, a partner in or otherwise affiliated with any law firm or investment bank in which the director’s or the immediate family member’s compensation was contingent on the services performed for the Company or in which the director or the immediate family member personally performed services for the Company and the annual fees paid by the Company during the preceding fiscal year exceeded the greater of $1 million or 2% of the gross annual revenues of such firm; and — has, or has an immediate family member who has, within the prior three years owned, either directly or indirectly as a partner, shareholder or officer of another company, more than 5% of the equity of an organization that has a material business relationship with (including significant purchasers of goods or services), or more than 5% ownership in, the Company. Independence Determination In connection with its annual independence review, the Board and Governance Committee considered the following relationships with organizations to which we have made payments in the usual course of our business in 2014. — Mr. Fazio’s service as a member of the board of directors of the Center for Strategic and Budgetary Assessments; — Mr. Felsinger’s service as a member of the board of directors of Archer Daniels Midland; — Mr. Hernandez’s service as a member of the board of directors of Black Box Corporation; — General Myers’ service as a member of the board of directors of Aon Corporation and United Technologies Corporation; and — Mr. Turley’s service as a member of the board of directors of Citigroup and Emerson Electric Company. The Board of Directors also considered that Mr. Fazio, Mr. Gordon, Ms. Kleiner, Mr. Krapek, General Myers, Admiral Roughead, Mr. Sharer and Mr. Turley serve as members of the boards of, or are otherwise affiliated with, organizations to which the Company and/or the Northrop Grumman Foundation (Foundation) made contributions during 2014 in the usual course of our charitable contributions program, as well as in connection with our matching gifts program (which limits the contributions to $10,000 per year per director). The amounts paid to these organizations were below the applicable thresholds under NYSE rules and our Principles of Corporate Governance. Following its review and the recommendation of the Governance Committee, the Board affirmatively determined that all of the active directors, except Mr. Bush, are independent. The independent directors constitute approximately 92% of the members of our Board. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 15  CORPORATE GOVERNANCE  Election Process Our Bylaws and Certificate of Incorporation provide for the annual election of directors. Each director will hold office until the next annual meeting of shareholders or until their earlier resignation or removal. Generally, in order to be elected, a director must receive more votes cast for than against his or her election, unless one or more shareholders provide notice of an intention to nominate one or more candidates to compete with the Board’s nominees for election in accordance with the procedures set forth in the Company’s corporate governance documents.  Director Nominations The Governance Committee carefully considers all director nominee candidates on the basis of the candidate’s background, qualifications and experience, and recommends to the Board the nominees for election. The Governance Committee identifies and evaluates director candidates and may employ a third-party search firm to assist in this process. Board members also suggest director candidates to the Governance Committee for consideration. The Governance Committee considers shareholder nominees nominated in accordance with our Principles of Corporate Governance and in generally the same manner as any other candidates brought to the attention of the Governance Committee. Shareholder nominations made pursuant to our Principles of Corporate Governance must be addressed to the Governance Committee in care of the Corporate Secretary. Shareholders may also directly nominate director candidates in accordance with our Bylaws.  Director Qualifications The Governance Committee is responsible for establishing the criteria for Board membership. In nominating directors, the Governance Committee bears in mind that the foremost responsibility of a director is to represent the interests of our shareholders as a whole. The activities and associations of candidates are reviewed for any legal impediment, conflict of interest or other consideration that might prevent or interfere with service on our Board. In evaluating candidates, the Governance Committee considers: — the personal integrity and the professional reputation of the individual; — the education, professional background and particular skills and experience most beneficial to service on the Board; and — whether a director candidate is willing to submit to and obtain a background check necessary for obtaining and retaining a top secret clearance. We do not have a formal policy outlining the diversity standards to be considered when evaluating director candidates. Our objective is to foster diversity of thought on our Board. To accomplish that objective, the Governance Committee seeks to achieve diversity including in race, gender and national origin, as well as in perspective, professional experience, education, skill and other qualities that contribute to our Board. All new directors to the Board receive an orientation that is individually tailored, taking into account the director’s experience, background, education and committee assignments.  Board Membership and External Relationships Directors are required to ensure that their other commitments, including for example, other board memberships, employment, partnerships and consulting arrangements, do not interfere with their duties and responsibilities as members of the Board. Directors must provide notice to the General Counsel prior to accepting an invitation to serve on the board of any other organization, and the General Counsel will advise the chairperson of the Governance Committee (or the chairperson of the Board, if notice is from the chairperson of the Governance Committee). A director should not accept service on such other board until being advised by the Chairperson of the Governance Committee, (or Chairperson of the Board as appropriate) that such engagement will not unacceptably create conflicts of interest or regulatory issues, conflict with Company policies or otherwise interfere with the director’s dutiescandidates and responsibilities as a member of the Board. Directors are also required promptly to inform the General Counsel if an actual or potential conflict of interest arises, or they are concerned that a conflict may arise or circumstances could otherwise interfere with their duties and responsibilities as a director. Directors should seek to avoid even an appearance of a conflict of interest. Directors may not serve on more than three other boards of publicly traded companies in addition to our Board without the written approval of the Chairperson of the Governance Committee (or Chairperson of the Board, as appropriate). A director who is a full-time 16 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  CORPORATE GOVERNANCE employee of our Company may not serve on the board of more than two other public companies unless approved by the Board. When a director’s principal occupation or business association changes substantially during his or her tenure as a director, the Board expects the director to tender his or her resignation for consideration by the Governance Committee, which subsequently will recommendmake recommendations to the Board what action to take. We have a retirement policy whereby a director will retire at the Annual Meeting following his or her 72nd birthday, unless the Board determines, based on special circumstances, that it is in the Company’s best interest to request that the director serve beyond such date.  Effect of Failure to Receive the Required Vote or Obtain and Retain Security Clearance Each director is required to tender a resignation that will be effective upon (i) the failure to receive the required vote at any future meeting at which such director faces re-election, the failure to obtain top secret security clearance within 12 months of appointment or election to the Board or the failure to retain a top secret security clearance once obtained and (ii) the Board’s acceptance of such resignation. If an incumbent director fails to receive the required vote for re-election or fails to obtain and retain a top secret security clearance, the Governance Committee will consider whether the Board should accept the director’s resignation and will submit a recommendation for prompt consideration by the Board. The Board will decide whether to accept or reject a resignation within 90 days, unless the Board determines that compelling circumstances require additional time. The Governance Committee and the Board; · call meetings of the independent directors; · serve as liaison between the Chairperson and the independent directors; and · if requested by major shareholders, ensure that he or she is available for consultation and direct communication.  Committees of the Board of Directors The Board has four standing committees: the Audit Committee, the Compensation Committee, the Governance Committee and the Policy Committee. The membership of these committees is typically determined at the organizational meeting of the Board held in conjunction with the annual meeting. All the committees are composed entirely of independent directors. The primary responsibilities of each of the committees are summarized below, together with a table listing the membership and chairperson of each committee. The charters for each standing committee can be found on the Investor Relations section of our website (www.northropgrumman.com). Audit Committee Roles and Responsibilities Committee Members Assist the Board may consider any factor they deem relevant in deciding whether to accept a resignation, including, without limitation, any harm to our Company that may result from acceptingoverseeing (1) the resignation,integrity of the underlying reasonsCompany’s financial statements and the Company’s accounting and financial reporting processes; (2) the Company’s overall compliance with legal and regulatory requirements; (3) financial risk assessment and management; (4) the qualifications, performance and independence of the Company’s independent auditor; (5) the performance of the Company’s internal audit function; and (6) the Company’s system of disclosure controls and procedures and internal control over financial reporting, by: · appointing, retaining, overseeing, evaluating and terminating, if necessary, the independent auditor · reviewing andpre-approving audit and permittednon-audit services and related fees for the action at issueindependent auditor · reviewing and whether action in lieu of acceptingdiscussing the resignation would address the underlying reasons. Company’s Annual Reports on Form Board10-K and Committee Self-EvaluationQuarterly Reports on Form10-Q   The Board· reviewing and discussing management’s assessment of, Directors and each Committee conducts annually a thorough self-assessment process. The self-assessmentreport on, the effectiveness of the Board is overseen byCompany’s internal control over financial reporting at least annually and the Governance Committee. As part of this assessment, the Lead Independent Director and chairperson of the Governance Committee facilitate a broad discussion of Board performance, held in executive session. Among other topics, the Board considers: — the Board’s effectiveness in evaluating and monitoring the Company’s business plan, long-term strategy and risks; — whether strategic and critical issues are being addressed by the Board in a timely manner; — whether the Board’s expectations and concerns are openly communicated to and discussed with the CEO; — whether the directors collectively operate effectively as a Board; — whether the individual directors have the appropriate mix of attributes and skills to fulfill their duties as directors of the Company; and — whether there are adequate opportunities to raise questions and comments on issues, both inside and outside of Board meetings. Following this review, the Board discusses the results and identifies opportunities for improvement, including any necessary steps to implement such improvements. Also as part of the annual self-assessment process, each director completes an individual director evaluation for each of the other directors. These assessments include, among other topics, each director’s: — understanding of the Company’s overall business and risk profile and its significant financial opportunities and plans; — engagement during meetings; — analysis of benefits and risks of courses of action considered by the Board; and — appropriate respect for the views of other Board members. The Lead Independent Director or the Chairperson meets with each director individually to discuss the results of his or her assessment. The Lead Independent Director or the Chairperson also reports generally on the overall results of these discussions to the Board in executive session. In addition, each of the Committees conducts an annual self-assessment. During an executive session led by the Committee chairperson, the Committee discusses, among other topics, whether the quality of participation and discussion at the Committeeindependent auditor’s related report   NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT· I 17  CORPORATE GOVERNANCE meetings is effective in facilitating the Committee’s obligations under its charter; the opportunity to engage in strategic discussion; and whether the Committee is covering the right topics in the right amount of detail. Following this discussion, the Committee develops and implements a list of action items, as appropriate.  Succession Planning The Board believes that providing for continuity of leadership is critical to the success of our Company. Therefore, processes are in place: — to evaluate the Chief Executive Officer annually based on a specific set of performance objectives; — for the Chief Executive Officer annually to provide an assessment of persons considered potential successors to various senior management positions and discuss the results of these reviews with the Board; and — to support continuity of top leadership and Chief Executive Officer succession, including through annual reports to the Board.  Departure and Election of Directors During 2014, the following changes occurred with respect to the composition of our Board: In accordance with our retirement policy described above, Stephen Frank and Aulana Peters, directors who served during 2013, did not stand for reelection at the 2014 Annual Meeting. The Board determined that it is in the best interest of the Company and our shareholders for Mr. Fazio and General Myers to continue to serve as directors beyond their 72nd birthday and stand for reelection in 2015. In February 2015, Kevin Sharer notified the Board of his decision not to seek re-election at the Annual Meeting. He will retire from the Board effective the day of the Annual Meeting. Also in February 2015, James S. Turley was elected to the Board. In March 2015, Marianne C. Brown was elected to the Board.  Communicationsreviewing with the BoardGeneral Counsel, at least annually, the status of Directors significant pending litigation and various other significant legal, compliance or regulatory matters   Any interested person may communicate· reviewing with any of our directors, our Board as a group, our non-employee directors as a group or our Lead Independent Director through the Corporate Secretary by writing toChief Compliance Officer, at least annually, the following address:Office of the Corporate Secretary, Northrop Grumman Corporation, 2980 Fairview Park Drive, Falls Church, Virginia 22042. The Corporate Secretary will forward correspondence to the director or directors to whom it is addressed, except for job inquiries, surveys, business solicitations or advertisements and other inappropriate material. The Corporate Secretary may forward certain correspondence elsewhere within our Company for review and possible response.Company’s compliance program Interested persons may report· discussing guidelines and policies regarding risk assessment and risk management · reviewing any concerns relating tosignificant issues raised by the internal audit function and, as appropriate, management’s actions for remediation · establishing and periodically reviewing and discussing with management the Company’s procedures for the receipt, retention and treatment of complaints regarding accounting, matters, internal accounting controls or auditing matters to non-management directors confidentially or anonymously by writing directly to the Chairperson William H. Hernandez (chair) Marianne C. Brown Victor H. Fazio Ann M. Fudge Madeleine A. Kleiner James S. Turley Mark A. Welsh III Number of themeetings in 2017:9 Independence, Financial Literacy and Audit Committee, Northrop Grumman Board of Directors c/o Corporate Ethics Office, 2980 Fairview Park Drive, Falls Church, Virginia 22042. Financial Experts   18 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION OF DIRECTORS All members are independent and financially literate   The Compensation Committee is responsible for reviewing and recommending the compensation of the members of our Board. In May 2014, the Compensation Committee recommended to the Board, and the Board approved, the current non-employee director fee structure, effective May 21, 2014. The table below lists the annual fees payable to our non-employee directors from January 1, 2014 to May 20, 2014 under the prior fee structure and the annual fees payable under the current fee structure effective May 21, 2014.  Compensation Element    Amount ($) (1/1/14 - 5/20/14)          Amount ($) (5/21/14 - 12/31/14)      Annual Cash Retainer      115,000         120,000     Annual Retainer for Lead Independent Director      25,000         25,000     Audit Committee Retainer      10,000         10,000     Audit Committee Chair Retainer      20,000         20,000     Compensation Committee Chair Retainer      15,000         15,000     Governance Committee Chair Retainer      10,000         15,000     Policy Committee Chair Retainer      7,500         7,500     Annual Equity Grant*      130,000         135,000    * The annual equity grant is deferred into a stock unit account pursuant to the 2011 Long-Term Incentive Stock Plan (2011 Plan) as described below. The Northrop Grumman Equity Grant Program for Non-Employee Directors sets forth the terms and conditions of the equity awards granted to non-employee directors under the 2011 Plan. Retainer fees are paid on a quarterly basis at the end of each quarter. To encourage directors to have a direct and material investment in shares of our common stock, non-employee directors are awarded an annual equity retainer of $135,000 in the form of deferred stock units (Automatic Stock Units). The Automatic Stock Units are paid out in the form of common stock at the conclusion of the director’s Board service, or earlier, as specified by the director, after he or she has completed five years of service on the Board of Directors. Each director may also elect to defer payment of all or a portion of his or her remaining annual cash retainer and other annual committee retainer fees into a deferred stock unit account (Elective Stock Units). The Elective Stock Units are paid at the conclusion of Board service or earlier as specified by the director, regardless of years of service. Beginning in 2015, directors may elect to defer to a later year all or a portion of their remaining annual cash retainer and any other fees payable for their Board service into alternative investment options similar to the options available under the Company’s Savings Excess Plan. Deferral elections are made prior to the beginning of the year for which the retainer and fees will be paid. Directors are credited with dividend equivalents in connection with the accumulated stock units until the shares of common stock related to such stock units are issued. Non-employee directors are eligible to participate in our Matching Gifts Program for Education. Under this program, the Northrop Grumman Foundation matches director contributions, up to $10,000 per year per director, to eligible educational programs in accordance with the program.  Stock Ownership Requirements and Anti-Hedging and Pledging Policy Non-employee directors are required to own common stock of the Company in an amount equal to five times the annual cash retainer, with such ownership to be achieved within five years of the later of (i) May 18, 2011 or (ii) the director’s election to the Board. Deferred stock units and Company stock owned outright by the director count towards this requirement. Company policy prohibits members of the Board of Directors from pledging or engaging in hedging transactions with respect to any of their Company stock, continuing to align the interest of our Board of Directors with those of our shareholders. None of the shares of Company common stock held by our directors are pledged or subject to any hedging transaction. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 19  COMPENSATION OF DIRECTORS  2014 Director Compensation The table below provides information on the compensation of our non-employee directors for the year ended December 31, 2014.  Name      Fees Earned  or Paid in Cash ($) (1)        Stock Awards ($) (2)        All Other Compensation ($) (3)               Total  ($)        Marianne C. Brown (4)        0           0           0                  0     Victor H. Fazio        131,164           130,000           16,835                  277,999     Donald E. Felsinger        143,082           133,082           7,521                  283,685     Stephen E. Frank (5)        51,542           50,714           11,220                  113,476     Bruce S. Gordon        128,664           130,000           2,897                  261,561     William H. Hernandez        148,387           130,000           12                  278,399     Madeleine A. Kleiner        131,164           130,000           7,897                  269,061     Karl J. Krapek        131,164           133,082           9,547                  273,793     Richard B. Myers        121,164           130,000           15,274                  266,438     Aulana L. Peters (5)        48,764           50,714           11,181                  110,659     Gary Roughead        131,164           130,000           301                  261,465     Thomas M. Schoewe        131,164           130,000           502                  261,666     Kevin W. Sharer        133,082           133,082           23,017                  289,181     James S. Turley (6)        0           0           0                      0    (1) Amounts shown in the “Fees Earned or Paid in Cash” column reflect the annual retainer paid to each director, including any applicable annual committee and committee chair retainers and any applicable Lead Independent Director or Chairperson retainers. As described above, a director may elect to defer all or a portion of his or her annual retainer into a deferred stock unit account. Amounts deferred as Elective Stock Units are reflected in this column. (2) Amounts in this column represent the target value of Automatic Stock Units awarded to each of our non-employee directors in 2014 under the 2011 Plan. The amount reported for each director reflects the aggregate fair value of the Automatic Stock Units on the grant date, as determined under Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation, excluding any assumed forfeitures. The grant date fair value assumes the value of dividend equivalents accrued directly on the awarded units. Assumptions used to calculate these amounts are included in Note 13 of our consolidated financial statements included in our 2014 Form 10-K. The aggregate number of Automatic Stock Units and Elective Stock Units held by each director as of December 31, 2014 is provided in the Deferred Stock Units table below. (3) Amounts reflected in the “All Other Compensation” column include the estimated dollar value of additional stock units credited to each non-employee director as a result of dividend equivalents earned, directly or indirectly, on reinvested dividend equivalents as such amounts are not assumed in the grant date fair value of the Automatic Stock Units shown in the “Stock Awards” column. Amounts shown also include matching contributions made through our Matching Gifts Program for Education discussed above as follows: Mr. Fazio, $8,500; Mr. Frank, $10,000; Ms. Kleiner $5,000; Mr. Krapek, $5,000; General Myers, $10,000; Ms. Peters, $10,000 and Mr. Sharer, $10,000. (4) Ms. Brown was elected to the Board of Directors effective March 19, 2015. (5) Ms. Peters and Mr. Frank attained the Board’s retirement age of 72 prior to the 2014 Annual Meeting and did not stand for reelection at the 2014 Annual Meeting. (6) Mr. Turley was elected to the Board of Directors effective February 19, 2015. 20 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION OF DIRECTORS Deferred Stock Units As of December 31, 2014, the non-employee directors had the following aggregate number of deferred stock units accumulated in their deferral accounts for all years of serviceMessrs. Hernandez and Turley each qualifies as a director, including additional stock units credited as a result of dividend equivalents earned on the stock units.  Name    Automatic Stock   Units        Elective Stock     Units        Total               Marianne C. Brown*      0           0           0     Victor H. Fazio      13,097           7,245           20,342     Donald E. Felsinger      16,412           13,958           30,370     Bruce S. Gordon      13,221           0           13,221     William H. Hernandez      1,346           0           1,346     Madeleine A. Kleiner      13,221           0           13,221     Karl J. Krapek      13,244           9,004           22,248     Richard B. Myers      18,208           0           18,208     Gary Roughead      4,386           0           4,386     Thomas M. Schoewe      5,525           0           5,525     Kevin W. Sharer      20,110           18,659           38,769     James S. Turley*      0           0           0    * Ms. Brown and Mr. Turley were elected to the Board of Directors effective March 19, 2015 and February 19, 2015, respectively. Director Equity Plan Under the Northrop Grumman Non-Employee Directors Equity Participation Plan (Director Equity Plan), non-employee directors had an amount equal to 50% of their annual retainer credited to an equity participation account and converted into stock units based on the then fair market value (as defined in the Director Equity Plan) of our common stock. No new participants have been added to the Director Equity Plan since May 31, 2005, and no new new annual accruals have been credited to the then-existing participants in the Director Equity Plan since that time. However, directors that served on the Board in and before 2005 continue to be credited with dividend equivalents on the cumulative stock units held in their equity participation accounts until the director terminates service on the Board. Messrs. Fazio and Sharer are the only directors that earn dividend equivalents under the Director Equity Plan. No other current director participates in the Director Equity Plan. Generally, if a participating non-employee director terminates service on the Board of Directors after completion of at least three consecutive years of service or retires from the Board of Directors as a result of a total disability or a debilitating illness as defined in the Director Equity Plan, the participant will be entitled to receive the full balance of the participant’s equity participant account in annual installments. Upon a change in control of the Company, as defined in the Director Equity Plan, the participant will immediately be entitled to receive the full balance of the equity participation account under the Director Equity Plan regardless of the number of years of consecutive service, although payment of his or her benefits will not commence until the termination of his or her service. No new annual accruals have been credited to the Director Equity Plan; however, the remaining director participating in the Director Equity Plan receives quarterly dividend accruals on the balance held in his equity participation accounts. 1993 Directors’ Plan Under the Northrop Grumman 1993 Stock Plan for Non-Employee Directors, as amended (the 1993 Plan), directors could elect to defer payment of all or a portion of their retainer fees not automatically paid in shares of common stock. This deferred compensation was payable in shares of common stock at the conclusion of a director-specified deferral period. In 2005, the 1993 Plan was amended. Dividend equivalents are paid on amounts deferred prior to the 2005 amendment. Mr. Sharer is the only director that continues to earn dividend equivalents on amounts deferred under the 1993 Plan prior to this date. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 21  TRANSACTIONS WITH RELATED PERSONS AND CONTROL PERSONS  Related Person Transaction Policy The Company has a written policy and procedures for the review, approval and ratification of transactions among our Company and our directors, executive officers and related persons, approved by the Board. A copy of the policy is available on the Investor Relations section of our website (www.northropgrumman.com). The policy requires that all related person transactions be reviewed and approved or ratified, as applicable, by the Governance Committee. The GovernanceAudit Committee may approve or ratify related person transactions at its discretion if the transaction is deemed fair and reasonable to the Company. The policy defines a related person transaction as any transaction in which the Company was, is or will be a participant, where the amount involved exceeds $120,000, and in which a related person had, has or is expected to have a direct or indirect material interest. A “related person” includes: — any of our directors or executive officers;Financial Expert   — any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|15  CORPORATE GOVERNANCE   — Compensation Committee an immediate family member of any such person; or   — any firm, corporation, or other entity controlled by any such person. The Corporate Secretary may determine that a transaction in an amount less than $120,000 should nonetheless be deemed a related person transaction. If this occurs, the transaction would also be required to be submitted to the Governance Committee for reviewRoles and approval or ratification. The policy requires each director and executive officer to complete an annual questionnaire to identify his or her related interests and persons and to notify the Corporate Secretary of any changes to that information. If the Governance Committee does not recommend ratification of a related person transaction or the Board of Directors does not ratify a related person transaction that is pending or ongoing, the Governance Committee will refer the transaction to management for amendment or termination and determine whether other action is appropriate.  Related Person TransactionsResponsibilities   In 2014, none of our directors or executive officers was a participant in or had a relationship regarded as a related person transaction, as considered under our Related Person Transaction Policy and applicable regulations of the SEC and the NYSE listing standards.  Compensation Committee Interlocks and Insider Participation During 2014, Messrs. Felsinger, Gordon, Krapek, Myers and Sharer served as members of the Compensation Committee. During 2014, no member of the Compensation Committee had a relationship with the Company or any of our subsidiaries, other than as directors and shareholders, and no member was an officer or employee of the Company or any of our subsidiaries, a participant in a related person transaction or an executive officer of another entity, where one of our executive officers serves on the board of directors that would constitute a related party transaction or raise concerns of a compensation committee interlock.  Indemnification Agreements Our Bylaws require us generally to indemnify our directors and executive officers to the fullest extent permitted by Delaware law. Additionally, as permitted by Delaware law, we have entered into indemnification agreements with each of our directors and elected officers. Under the indemnification agreements, we have agreed to hold harmless and indemnify each indemnitee, generally to the fullest extent permitted by Delaware law, against expenses, liabilities and loss incurred in connection with threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative to which the indemnitee is made a party by reason of the fact that the indemnitee is or was a director or officer of the Company or any other entity at our request, provided however, that the indemnitee acted in good faith and in a manner reasonably believed to be in the best interests of our Company. 22 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who own more than ten percent of our common stock, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Based on our review of Forms 3, 4 and 5 we have received or have filed on behalf of our executive officers and directors, and of written representation from those persons that they were not required to file a Form 5, we believe that all required filings were made on a timely basis during the year ended December 31, 2014. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 23  VOTING SECURITIES AND PRINCIPAL HOLDERS  Stock Ownership of Certain Beneficial Owners The following entities beneficially owned, to the best of our knowledge, more than five percent of the outstanding common stock as of December 31, 2014. All information shown is based on information reported by the filer on a Schedule 13G filed with the SEC on the dates indicated in the footnotes below.   Name and Address of Beneficial Owner    Amount and Nature of Beneficial Ownership of Common Stock      Percent of Class     BlackRock, Inc.      18,158,299   (1)       9%      55 East 52nd Street, New York, NY 10022         State Street Corporation      17,030,668   (2)       9%      One Lincoln Street, Boston, MA 02111         The Vanguard Group      12,026,720   (3)       6%      100 Vanguard Blvd., Malvern, PA 19355                   (1) This information was provided by BlackRock, Inc. (BlackRock) in a Schedule 13G/A filed with the SEC on January 15, 2015. According to BlackRock, as of December 31, 2014, BlackRock had sole voting power over 15,694,039 shares and sole dispositive power over 18,158,299 shares. (2) This information was provided by State Street Corporation (State Street) in a Schedule 13G filed with the SEC on February 12, 2015. According to State Street, as of December 31, 2014, State Street had shared voting and dispositive power over 17,030,668 shares. This total includes 13,423,493 shares held in the Defined Contributions Master Trust for the Northrop Grumman Savings Plan and the Northrop Grumman Financial Security and Savings Program, for which State Street Bank and Trust Company acts as trustee and investment manager. (3) This information was provided by The Vanguard Group (Vanguard), in a Schedule 13G/A filed with the SEC on February 10, 2015. According to Vanguard, as of December 31, 2014, Vanguard had sole voting power over 349,462 shares, sole dispositive power over 11,696,567 shares and shared dispositive power over 330,153 shares. 24 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  VOTING SECURITIES AND PRINCIPAL HOLDERS  Stock Ownership of Officers and Directors The following table shows beneficial ownership of our common stock as of March 24, 2015 by each of our current directors, our NEOs and all directors and executive officers as a group. As of March 24, 2015, there were 196,445,226 shares of our common stock outstanding. None of the persons named below beneficially owns in excess of 1% of our outstanding common stock. Unless otherwise indicated, each individual has sole investment power and sole voting power with respect to the shares owned by such person.      Shares of Common Stock Beneficially Owned     Share Equivalents (1)      Shares Subject To Options (2)      Total     Non-Employee Directors            Marianne S. Brown      0              0         0         0          Victor H. Fazio      17,347       (3)      17,804         0         35,151          Donald E. Felsinger      4,640       (4)      30,370         0         35,010          Bruce S. Gordon      0              13,221         0         13,221          William H. Hernandez      1,000              1,346         0         2,346          Madeleine A. Kleiner      0              13,221         0         13,221          Karl J. Krapek      4,304              20,293         0         24,597          Richard B. Myers      1,011              17,197         0         18,208          Gary Roughead      0              4,386         0         4,386          Thomas M. Schoewe      3,160              5,525         0         8,685          Kevin W. Sharer      2,995              38,769         0         41,764          James S. Turley      0              0         0         0            Named Executive Officers            Wesley G. Bush (5)      466,269       (6)      5,293         0         471,562          James F. Palmer      222,074              0         0         222,074          Gloria A. Flach      35,364              0         64,256         99,620          Linda A. Mills      143,264       (7)      0         32,544         175,808          Thomas E. Vice      57,651              0         14,344         71,995          Other Executive Officers      300,133              15,274         5,845         321,252            All Directors and Executive Officers as a   Group (28 persons)                   1,259,212              182,699         116,989         1,558,900       (8)  (1) Share equivalents for directors represent non-voting deferred stock units acquired under the 2011 Plan and the 1993 Directors Plan, some of which are paid out in shares of common stock at the conclusion of a director-specified deferral period, and others are paid out upon termination of the director’s service on the Board of Directors. Certain of the NEOs hold share equivalents with pass-through voting rights in the Northrop Grumman Savings Plan or the Northrop Grumman Financial Security and Savings Program. (2) These shares subject to options are either currently exercisable or exercisable within 60 days of March 24, 2015. (3) Includes 932 shares held in our Dividend Reinvestment Plan. (4) Includes 770 shares each held in the Courtney Strickland and Stephanie Strickland trust, respectively, for which Mr. Felsinger’s wife serves as trustee and 1,550 shares each held in the Gregory Felsinger and Michael Felsinger trust, respectively, for which Mr. Felsinger serves as trustee. (5) Mr. Bush is also Chairman of the Board of Directors. (6) Includes 304,780 shares held in the W.G. and N.F. Bush Family Trust, 50,744 shares held in the Bush Trust Number 4 Trust, and 50,745 shares held in the Wesley G. Bush Revocable Trust, each of which Mr. Bush and his wife serve as trustees. (7) These shares are held in the Linda Anne Mills Living Trust. (8) Total represents 0.8% of the outstanding common stock as of March 24, 2015. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 25  EQUITY COMPENSATION PLAN INFORMATION  Equity Compensation Plan Information We currently maintain four equity compensation plans: the 2011 Plan, the 2001 Long-Term Incentive Stock Plan (2001 Plan), the 1995 Directors Plan and the 1993 Directors Plan. Each of these plans has been approved by our shareholders. The following table sets forth the number of shares of our common stock subject to outstanding stock options, the weighted-average exercise price of the outstanding stock options and the number of shares remaining available for future award grants under these equity compensation plans as of December 31, 2014.   Plan category    Number of shares of common stock to be issued upon exercise of  outstanding options and payout of outstanding awards (1)      Weighted-average exercise price of outstanding options (2) ($)      Number of shares of common stock remaining available for future issuance under equity compensation plans (excluding shares reflected in the first column) (3)         Equity compensation plans approved byshareholders      6,329,366         54         24,738,172      Equity compensation plans not approved byshareholders      N/A         N/A         N/A                   6,329,366         54         24,738,172        (4 )  (1) Of these shares, 301,949 were subject to stock options then outstanding under the 2001 Plan. In addition, this number includes 2,649,634 shares that were subject to outstanding stock awards granted under the 2011 Plan, 158,756 shares that were subject to outstanding stock awards granted under the 2001 Plan, and reflects 1,884,839 awards earned at year end but pending distribution subject to final performance adjustments, and 167,636 shares subject to outstanding stock units credited under the 1993 Directors Plan. Additional performance shares of 1,166,552 reflect the number of shares deliverable under payment of outstanding restricted performance stock rights, assuming maximum performance criteria have been achieved. (2) This number reflects the weighted-average exercise price of outstanding stock options and has been calculated exclusive of outstanding restricted performance stock right and restricted stock right awards and exclusive of stock units credited under the 2011 Plan, the 2001 Plan and the 1993 Directors Plan. (3) Of the aggregate number of shares that remained available for future issuance, 24,738,172 were available under the 2011 Plan as of December 31, 2014. No new awards may be granted under the 1993 Directors Plan or the 2001 Plan. (4) After giving effect to our February 2015 awards, the number of shares of common stock remaining for future issuance would be 21,657,707 (assuming maximum payout of such awards). 26 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  PROPOSAL TWO:  ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS We are providing our shareholders with the opportunity to cast a non-binding, advisory vote on the compensation of our NEOs. This advisory vote, commonly known as “say on pay,” gives our shareholders the opportunity to express their view on our 2014 executive compensation programs and policies for our NEOs. The vote does not address any specific item of compensation and is not binding on the Board; however, as an expression of our shareholders’ view, the Compensation Committee seriously considers the vote when making future executive compensation decisions. We believe our compensation programs reflect responsible, measured practices that effectively incentivize our executives to dedicate themselves fully to value creation for our shareholders, customers and employees. Our pay practices are aligned with our shareholders’ interests and with industry practice and are governed by a set of strong policies and practices. Examples include: — Double-trigger provisions for change in control situations, and no excise tax gross-ups for payments upon termination after a change in control; — A recoupment policy applicable to cash and equity incentive compensation payments; — Stock ownership guidelines of 7x base salary for the CEO and 3x base salary for other NEOs, and stock holding requirements of three years from the vesting date; and — Prohibitions on hedging or pledging of company stock. For a more extensive list of our best practices, refer to page 29 of this Proxy Statement. In addition, our Compensation Discussion and Analysis (CD&A) provides a detailed discussion of our performance-based approach to executive compensation. We encourage you to read the CD&A, this Proxy Statement and our 2014 Form 10-K, which describes our business and 2014 results in more detail. Recommendation The compensation of our executives is aligned to performance, is sensitive to shareholder returns, appropriately motivates and retains our executives, and is a competitive advantage in attracting and retaining the high caliber talent necessary to drive our business forward and build sustainable value for our shareholders. Accordingly, the Board recommends that shareholders approve the following resolution: “RESOLVED, that, as an advisory matter, the shareholders of Northrop Grumman Corporation approve the compensation paid to the Company’s named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.” Vote Required Approval of Proposal Two requires that the votes cast “for” the proposal exceed the votes cast “against” the proposal. Abstentions and broker non-votes will have no effect on this proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL TWO. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 27  COMPENSATION DISCUSSION AND ANALYSIS In this Compensation Discussion and Analysis (CD&A), we provide an overview of our executive compensation programs and the underlying philosophy used to develop the programs. This section details the material components of our executive compensation programs for our 2014 Named Executive Officers (NEOs) and explains how and why the Compensation Committee of our Board (the Compensation Committee) arrived at certain specific compensation policies and decisions involving the NEOs. The 2014 compensation of our NEOs is provided in the Summary Compensation Table and other compensation tables contained in this Proxy Statement. 2014 NEOs WESLEY G. BUSH JAMES F. PALMER GLORIA A. FLACH LINDA A. MILLS THOMAS E. VICE  Compensation Committee Report The Compensation Committee reviewed and discussed the CD&A as required by Item 402(b) of Regulation S-K of the Securities and Exchange Commission with management. Based on such review and discussion, the Compensation Committee recommended to the Board that this CD&A be included in this Proxy Statement. The Board has approved the recommendation. COMPENSATION COMMITTEE KARL J. KRAPEK, CHAIRMAN DONALD E. FELSINGER BRUCE S. GORDON KEVIN W. SHARER RICHARD B. MYERS 28 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS | EXECUTIVE SUMMARY  Summary of Our Executive Compensation Programs Our executive compensation philosophy is to provide a complementary set of compensation programs to our NEOs with attractive, flexible and market-based total compensation tied to annual and long-term relative performance and aligned with the interests of our shareholders. The key elements of our executive compensation programs for our NEOs are summarized below. Compensation Element Purpose Key Characteristics Fixed Component Base Salary Compensate fairly and competitively Determined by responsibility, level of position, competitive pay assessment and individual performance Long-Term Incentive Plan (LTIP) Restricted Stock Rights (RSRs) Link the interests of our executive officers to shareholders and retain executive talent 30% of annual LTIP grant Three-year cliff vesting Performance-Based Component Annual Incentive Plan (AIP) Motivate and reward achievement of annual business objectives Financial Metrics*: Pension-adjusted Operating Margin (OM) Rate, Free Cash Flow Conversion Rate, Awards (Book-to-bill), and Pension-adjusted Net Income Subject to downward adjustment for failure to achieve non-financial objectives LTIP Restricted Performance Stock Rights (RPSRs) Link the interests of our executive officers to shareholders and retain executive talent 70% of annual LTIP grant Three-year performance period Actual shares earned based on TSR relative to Performance Peer Group and S&P Industrials * Some of these financial metrics are non-GAAP financial measures. For more information, see “Miscellaneous - Use of Non-GAAP Financial Measures.”  Our Compensation Pay Practices (pages 32-42) Our compensation programs incorporate best practices, including the following: Best Practices ü Pay for Performance ü Annual Peer Group Review ü No Hedging or Pledging of Company Stock ü Above Target and Maximum Annual Incentive Payouts Only When We Outperform Our Peer Benchmarks ü Independent Consultant Reports Directly to the Compensation Committee ü No Dividend Equivalents Paid Prior to Vesting (Dividend Equivalents Starting with 2012 Grants) ü Long-Term Incentives Based on Relative TSR ü Double Trigger Provisions for Change in Control ü No Individual Change in Control Agreements ü Cap on Annual Bonuses and Performance-Based Long-Term Incentive Share Payouts ü Recoupment Policy on Incentive Compensation Payments ü No Excise Tax Gross-ups for Payments Received Upon Termination After a Change in Control ü Total Direct Target Compensation Aimed at Market Median ü Stock Ownership Guidelines and Stock Holding Requirements ü Regular Risk Assessments Performed ü No Employment Contracts for CEO or NEOs NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 29  COMPENSATION DISCUSSION AND ANALYSIS | EXECUTIVE SUMMARY  2014 Performance Highlights Our focus on performance resulted in another year of strong financial results. Diluted EPS increased 17% to $9.75. We improved our pension-adjusted operating margin rate 20 basis points to 12.2%; cash provided by operations totaled approximately $2.6 billion and free cash flow totaled $2.0 billion. We continued to use our cash to repurchase shares. We repurchased 21.4 million shares for $2.7 billion, reducing weighted average shares outstanding by 9%. We raised our quarterly dividend 15% to an annualized rate of $2.80 per share, our eleventh consecutive annual dividend increase. In total we returned $3.2 billion to shareholders through dividends and share repurchases, or approximately 160% of 2014 Free Cash Flow. EPS Growth —     2014 Diluted EPS grew 17% —     2014 Pension-adjusted Diluted EPS grew 13% —     EPS grew despite lower sales —     EPS growth reflects strong operating performance and 9% reduction in weighted average shares outstanding Per Share Cash Metrics —     2014 Free Cash Flow per Share up 6% —     $15.23 per share distributed to shareholders through dividends and share repurchases —     Quarterly dividend increased 15% to $2.80 annualizedMembers   30 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS | EXECUTIVE SUMMARY Assist the Board in overseeing the Company’s compensation policies and practices by:    Performance Against Incentive Compensation Metrics· For AIP, 2014 performance exceeded targets approving the compensation for three out ofelected officers (other than the four financial metrics, with the following results: — Pension-adjusted OM Rate: 12.2% — Free Cash Flow Conversion Rate: 98% — Awards (Book-to-bill): 104% — Pension-adjusted Net Income: $1.89 billion For LTIP, our three-year TSR score was in the 100th percentile as measured against the Performance Peer Group identified on page 34 and the 94th percentile as measured against the S&P industrials.  Compensation Mix We have a balanced pay for performance compensation structure that places an appropriate level of compensation at risk, based on our financial and non-financial performance measures and relative TSR. The AIP award is determined by our financial performance and is subject to a downward only adjustment for performance against non-financial goals. For NEOs, the value of LTIP RPSRChief Executive Officer, whose compensation is determinedrecommended by relative TSR. Achievement of both annual incentive goalsthe Committee and increased shareholder value will result in individual awards commensurate with results; however, if absolute TSR is negative,approved by all the maximum RPSR payout is capped at 100%, even if the relative TSR would have resulted in a higher score. The following charts show performance-based compensation elements at target values. independent directors)   NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT· I 31  COMPENSATION DISCUSSION AND ANALYSIS | KEY PRINCIPLES establishing stock ownership guidelines and reviewing ownership levels on an annual basis    Compensation Philosophy and Objectives· We provide an attractive, flexible and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of executives and other key employees capable of achieving top performance and generating value for our shareholders, customers and employees. Our goal is to lead our industry in sustainable performance, while maintaining strong, enduring values. The targets and thresholds of our AIP are based on the performance of our peers. Our LTIP is based on total shareholder return relative to our Performance Peer Group and the S&P Industrials. For each plan, we have selected metrics that drive shareholder value and measure our performance against our competitors. Our executive compensation and benefit programs are guided by the following principles: Pay for Performance —    Incentive plans are based on peer-benchmarked performance metrics. Leadership Retention and Succession —    Compensation is designed to be competitive within our industry and retentive. —    Programs are designed to motivate and reward NEOs for delivering operational and strategic performance over time. Sustained Performance —    Our AIP includes both financial and non-financial metrics to ensure we are building a strong foundation for long-term sustainability and shareholder value. Alignment with Shareholder Interests —    Our compensation structure places an appropriate amount of compensation at risk. —    At-risk compensation is based on financial and non-financial performance measures and relative TSR. —    A significant portion of compensation is delivered in equity, the value of which provides alignment with shareholder returns. —    Stock ownership guidelines, holding requirements for equity awards and our recoupment policy further align executive and shareholder interests. Benchmarking —    Compensation programs and financial objectives are evaluated on an annual basis and are modified in accordance with industry and business conditions. —    We seek to outperform our peers (a group of top global defense companies identified on page 34 of this Proxy Statement we refer to as the “Performance Peer Group”). —    We use a “Target Industry Peer Group” for broader market executive compensation analyses that includes companies based on a peer-of-peers analysis. Risk Management —    The Board evaluates the risk profile of the Company’s compensation programs on an ongoing basis, in part to mitigate concerns of executives being overly incentivized to achieve near-term stock price growth. —    Both the Compensation Committee and its independent compensation consultant evaluate the mix of at-risk compensation linked to stock appreciation. —    The Compensation Committee annually reviews the design of our compensation programs, practices and policies, and together with the independent compensation consultant assesses its risk. Based on the review, the Compensation Committee determined that the risk profile is appropriate and that substantial risk management features are incorporated into our compensation programs. 32 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS | KEY PRINCIPLES  How We Make Compensation Decisions Role of the Compensation Committee The Compensation Committee is responsible for overseeing our compensation policies, administering incentive and equity compensation plans and approving payments or grants under these plans for elected officers (other than the CEO)Chief Executive Officer) · recommending for approval compensation for thenon-employee directors, after consultation with the independent compensation consultant · producing an annual report on executive compensation for inclusion in the proxy statement · providing support to the Board in carrying out its overall responsibilities related to executive compensation Karl J. Krapek (chair) Donald E. Felsinger Bruce S. Gordon Gary Roughead Thomas M. Schoewe Number of meetings in 2017:7 Independence All members are independent Governance Committee Roles and Responsibilities Committee Members Assist the Board in overseeing the Company’s corporate governance practices by: · regularly reviewing the Company’s corporate governance policies and practices, including the Principles of Corporate Governance and the Company’s Bylaws · regularly reviewing and considering corporate governance developments, emerging trends and best practices and recommending changes to the Board · reviewing and making recommendations with respect to shareholder proposals and the results of shareholder proposals, if any, voted on at a shareholders meeting · regularly reviewing and making recommendations to the Board regarding the composition and size of the Board and the criteria for Board membership, which should include, among other things, diversity, experience and integrity · providing effective board succession planning, identifying and recommending to the Board qualified potential candidates to serve on the Board and its committees and, if applicable, meeting with proxy access nominees nominated through the Company’s proxy access bylaw provision · reviewing and determining whether a director’s service on another board or elsewhere is likely to interfere with the director’s duties and responsibilities as a member of the Board · reviewing and recommending board, director and committee evaluation processes and coordinating the process for the Board to evaluate its performance Madeleine A. Kleiner (chair) Donald E. Felsinger William H. Hernandez Karl J. Krapek Gary Roughead James S. Turley Number of meetings in 2017:5 Independence All members are independent Policy Committee Roles and Responsibilities Committee Members Assist the Board in overseeing policy, government relations and corporate responsibility by: · identifying and evaluating global security, budgetary and other issues and trends that could impact the Company’s business activities and performance · reviewing and providing oversight over the Company’s ethics and corporate responsibility policies and programs · reviewing the Company’s public relations and advertising strategy · reviewing and monitoring the Company’s government relations strategy and political action committee · reviewing the Company’s community relations activities · reviewing and providing oversight of the Company’s environmental sustainability program Bruce S. Gordon (chair) Marianne C. Brown Victor H. Fazio Ann M. Fudge Thomas M. Schoewe Mark A. Welsh III Number of meetings in 2017:4 Independence All members are independent 16 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  CORPORATE GOVERNANCE  Board Meetings and Executive Sessions The Board meets no fewer than nine times each year (including via telephonic meetings). Special meetings of the Board may be called from time to time as appropriate. On an annual basis, the Board holds an extended meeting to review our long-term strategy. The Board holds its meetings at Company locations other than our corporate headquarters on a regular basis to provide the directors with a first-hand view of different elements of our business and an opportunity to interact with local management. The Board meets in executive session (with the directors only and then with the independent directors only) following eachin-person Board meeting and on other occasions as needed. Thenon-executive Chairperson or the Lead Independent Director presides over the executive sessions of the independent directors. The Audit Committee meets in executive session at eachin-person Audit Committee meeting, and regularly requests separate executive sessions with representatives of our independent auditor and our senior management, including our Chief Financial Officer, General Counsel and our Vice President, Internal Audit. The Compensation Committee also meets in executive session from time to time and regularly receives a report from the Compensation Committee’s independent compensation consultant. The Governance and Policy Committees also meet in executive session as they deem necessary.  Meeting Attendance During 2017, the Board held 14 meetings. Each incumbent director serving in 2017 attended 75% or more of the total number of Board and committee meetings he or she was eligible to attend. Board members are expected to attend the Annual Meeting, except where the failure to attend is due to unavoidable circumstances. All of our then-serving directors attended the 2017 Annual Meeting.  Director Independence The Board has established an objective that at least 75% of our directors be independent directors. The Board and the Governance Committee annually review the relevant relationships or arrangements between the Company and our directors or parties related to the directors in determining whether such directors are independent. No director is considered independent unless the Board has determined that the director meets the independence requirements under applicable New York Stock Exchange (NYSE) and SEC rules and under our categorical independence standards, which are described in our Principles of Corporate Governance. For a director to be considered independent, the Board must determine that a director has no material relationship with the Company other than as a director. Our Principles of Corporate Governance provide that a director may be found not to qualify as an independent director if the director: · has within the prior three years been a director, executive officer or trustee of a charitable organization that received annual contributions from the Company exceeding the greater of $1 million or 2% of the charitable organization’s annual gross revenues, where the gifts were not normal matching charitable gifts, did not go through normal corporate charitable donation approval processes or were made “on behalf of” a director; · has, or has an immediate family member who has, within the prior three years been employed by, a partner in or otherwise affiliated with any law firm or investment bank in which the director’s or the immediate family member’s compensation was contingent on the services performed for the Company or in which the director or the immediate family member personally performed services for the Company and the annual fees paid by the Company during the preceding fiscal year exceeded the greater of $1 million or 2% of the gross annual revenues of such firm; or · has, or has an immediate family member who has, within the prior three years owned, either directly or indirectly as a partner, shareholder or officer of another company, more than 5% of the equity of an organization that has a material business relationship with (including significant purchasers of goods or services), or more than 5% ownership in, the Company. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|17  CORPORATE GOVERNANCE Independence Determination In connection with their annual independence review, the Board and Governance Committee considered the following relationships with organizations to which we have made payments in the usual course of our business in 2017. · Mr. Fazio’s service as a member of the board of directors of the Center for Strategic and Budgetary Assessments; · Mr. Felsinger’s service as a member of the board of directors of Archer-Daniels-Midland; · Mr. Gordon’s service as a member of the board of directors of CBS Corporation; · Mr. Hernandez’s service as a member of the board of directors of Black Box Corporation; · Admiral Roughead’s service as a member of the board of directors of the Center For a New American Security and a member of the board of managers of Johns Hopkins University Applied Physics Lab; and · Mr. Turley’s service as a member of the board of directors of Citigroup. The Board of Directors considered that Mr. Fazio, Ms. Fudge, Mr. Gordon, Ms. Kleiner, Mr. Krapek, Mr. Turley and General Welsh serve as members of the boards of, or are otherwise affiliated with, organizations to which the Company and/or the Northrop Grumman Foundation (Foundation) made contributions during 2017 in the usual course of our charitable contributions program, as well as in connection with our matching gifts program (which limits the contributions to $10,000 per year per director). The amounts paid were below the applicable thresholds under NYSE rules and our Principles of Corporate Governance. In addition, the Board considered that Mr. Fazio’s daughter is employed by us in anon-executive position. Her compensation is below the threshold required for disclosure by the SEC, and the Board determined that her employment does not interfere with Mr. Fazio’s independence. Following its review and the recommendation of the Governance Committee, the Board affirmatively determined that all of the directors, except Mr. Bush, are independent. The independent directors constitute approximately 92% of the members of our Board. The Board previously determined that General Richard B. Myers, who served as a director until his retirement from the Board effective the date of the 2017 Annual Meeting, was independent during the time he was a director.  Director Election Process Our Bylaws and Certificate of Incorporation provide for the annual election of directors. Each director will hold office until the next annual meeting of shareholders or until his or her earlier resignation or removal. Generally, in order to be elected, a director must receive more votes cast “for” than “against” his or her election, unless one or more shareholders provide notice of an intention to nominate one or more candidates to compete with the Board’s nominees for election in accordance with the procedures set forth in the Company’s corporate governance documents.  Board Composition and Director Nominations The Governance Committee actively considers the composition of the Board to ensure it is well positioned to serve the best interests of the Company and our shareholders. The Governance Committee regularly assesses what skills and experiences can best contribute to the effective operation of the Board, particularly in light of potential retirements and the evolving needs of the Company. The Governance Committee identifies director candidates from a wide range of sources and may employ a third-party search firm to assist in the process. The Governance Committee evaluates potential director candidates on the basis of the candidate’s background, qualifications and experience. The Governance Committee carefully considers whether each potential candidate would be able to fulfill his or her duties to the Company consistent with Delaware law and the Company’s governing documents, including the Principles of Corporate Governance. The Committee recommends to the full Board nominees for election. Shareholders may recommend director candidates for consideration by the Governance Committee pursuant to our Principles of Corporate Governance. The Governance Committee considers such director candidates recommended by shareholders similarly to other potential director candidates brought to the attention of the Governance Committee. Shareholder recommendations for director candidates under our Principles of Corporate Governance must be addressed to the Governance Committee in care of the Corporate Secretary. In addition, and as discussed immediately below, shareholders may also directly nominate director candidates in accordance with our Bylaws. 18 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  CORPORATE GOVERNANCE The Board carefully considered and adopted a strong and balanced proxy access framework For more than a year, the Board carefully considered the issue of proxy access. The Board and management engaged extensively with shareholders and monitored developments and best practices regarding proxy access. Management solicited and received input from shareholders, our customers and other stakeholders. The Board amended our Bylaws to provide our shareholders the right to proxy access, reflecting this extensive consideration and input. Under the Company’s proxy access bylaws, a shareholder, or a group of up to 20 shareholders, that has maintained continuous ownership of 3% or more of the Company’s outstanding common stock for at least three years may include in the Company’s proxy materials director nominees constituting up to the greater of two nominees or nominees constituting 20% of the number of directors in office. Director nominees may receive compensation from third parties for their candidacy, up to the total annual compensation paid to directors of the Company, as well as reimbursement for reasonable expenses, provided there is full disclosure of such compensation. Under the Company’s proxy access bylaw provisions, directors are treated similarly, whether nominated through proxy access or otherwise, and held to the same high fiduciary standards to serve all shareholders. The Company’s Bylaws provide our shareholders with broad and meaningful access to the Company’s proxy materials while enhancing transparency, protecting the interests of all shareholders and ensuring good governance. The terms of the Company’s proxy access bylaw provisions are also broadly consistent with the terms of proxy access bylaws adopted by other Fortune 500 companies, reflecting best practices.  Director Qualifications The Governance Committee is responsible for establishing the criteria for Board membership. In nominating directors, the Governance Committee bears in mind that the foremost responsibility of a director is to represent the interests of our shareholders as a whole. The activities and associations of candidates are reviewed for any legal impediment, conflict of interest or other consideration that might prevent or interfere with service on our Board. In evaluating candidates, the Governance Committee considers: · the personal integrity and the professional reputation of the individual; · the education, professional background and particular skills and experience most beneficial to service on our Board; · how the nominee brings diversity, experience and skills valuable to the Company and Board at the time; and · whether a director candidate is willing to submit to and obtain a background check necessary for obtaining and retaining a top secret security clearance. In evaluating director candidates, the Governance Committee aims to foster diversity of thought on our Board. The Governance Committee seeks to achieve diversity, including in race and gender, as well as in perspective, professional experience, education, skill and other qualities that contribute to our Board and the long-term interests of our Company and shareholders.  Director Orientation and Continuing Education All new directors to the Board receivein-person orientation and training that is individually tailored, taking into account the director’s experience, background, education and committee assignments. The orientation program is led by members of senior management and covers a review of our strategy and operating plans, financial statements, corporate governance and key policies and practices, as well as the roles and responsibilities of our directors. All directors receive regularin-person training on Company policies and procedures. Members of senior management regularly review with the Board the operating plan for each of our business sectors and the Company as a whole. The Board also conducts periodic site visits to our facilities as part of its regularly scheduled Board meetings. These visits allow directors to interact with a broader group of our executives and employees and gain firsthand insights into our operations. Directors may also attend outside director and other continuing education programs to assist them in staying current on developments in corporate governance, our industry, the global environment and issues critical to the operation of public company boards. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|19  CORPORATE GOVERNANCE  Board Membership and External Relationships Directors are required to ensure that their other commitments, including for example, other board memberships, employment, partnerships and consulting arrangements, do not interfere with their duties and responsibilities as members of the Board. Directors must provide notice to the General Counsel prior to accepting an invitation to serve on the board of any other organization, and the General Counsel will advise the Chairperson of the Governance Committee (or the Chairperson of the Board, if notice is from the Chairperson of the Governance Committee). A director should not accept service on such other board until being advised by the Chairperson of the Governance Committee (or Chairperson of the Board, as appropriate) that such engagement will not unacceptably create conflicts of interest or regulatory issues, conflict with Company policies or otherwise interfere with the director’s duties and responsibilities as a member of the Board. Directors are also required promptly to inform the General Counsel if an actual or potential conflict of interest arises, or they are concerned that a conflict may arise or circumstances could otherwise interfere with their duties and responsibilities as a director. Directors should seek to avoid even an appearance of a conflict of interest. Directors may not serve on more than three other boards of publicly traded companies in addition to our Board without the written approval of the Chairperson of the Governance Committee (or Chairperson of the Board, as appropriate). A director who is a full-time employee of our Company may not serve on the board of more than two other public companies unless approved by the Board. When a director’s principal occupation or business association changes substantially during his or her tenure as a director, the Board expects the director to tender his or her resignation for consideration by the Governance Committee, which subsequently will recommend to the Board what action to take. We have a retirement policy whereby a director will retire at the annual meeting following his or her 75th birthday, unless the Board determines, based on special circumstances, that it is in the Company’s best interest to request that the director serve beyond such date.  Effect of Failure to Receive the Required Vote or Obtain and Retain Security Clearance Each director is required to tender a resignation that will be effective upon (i) the failure to receive the required vote at any future meeting at which such director facesre-election, the failure to obtain top secret security clearance within 12 months of election or appointment to the Board or the failure to retain a top secret security clearance once obtained and (ii) the Board’s acceptance of such resignation. If an incumbent director fails to receive the required vote forre-election or fails to obtain and retain a top secret security clearance, the Governance Committee will consider whether the Board should accept the director’s resignation and will submit a recommendation for prompt consideration by the Board. The Board will decide whether to accept or reject a resignation within 90 days, unless the Board determines that compelling circumstances require additional time. The Governance Committee and the Board may consider any factor they deem relevant in deciding whether to accept a resignation, including, without limitation, any harm to our Company that may result from accepting the resignation, and the underlying reasons for the action at issue.  Board and Committee Self-Evaluation The Board and each Committee conduct annually a thorough self-assessment process. The self-assessment of the Board is overseen by the Governance Committee. As part of this assessment, the Lead Independent Director and Chairperson of the Governance Committee facilitate a broad discussion of Board performance, held in executive session. Among other topics, the Board considers: · the Board’s effectiveness in evaluating and monitoring the Company’s business plan, long-term strategy and risks; · whether strategic and critical issues are being addressed by the Board in a timely manner; · whether the Board’s expectations and concerns are openly communicated to and discussed with the Chief Executive Officer; · whether there is adequate contact between the Board and members of senior management; · whether the directors collectively operate effectively as a Board; · whether the individual directors have the appropriate mix of attributes and skills to fulfill their duties as directors of the Company; · whether there are adequate opportunities to raise questions and comments on issues, both inside and outside of Board meetings; 20 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  CORPORATE GOVERNANCE · whether the Board has focused adequately on succession planning; and · whether the Board is adequately responsive to shareholder communication. Following this review, the Board discusses the results and identifies opportunities for improvement, including any necessary steps to implement such improvements. Also as part of the annual self-assessment process, each director completes an individual director evaluation for each of the other directors. These assessments include, among other topics, each director’s: · understanding of the Company’s overall business and risk profile and its significant financial opportunities and plans; · engagement during meetings and other board functions; · analysis of benefits and risks of courses of action considered by the Board; and · appropriate respect for the views of other Board members. The Lead Independent Director or the Chairperson of the Governance Committee meets with each director individually to discuss the results of his or her assessment, including comments provided by other directors. The Lead Independent Director or the Chairperson of the Governance Committee reports generally on the overall results of these discussions to the Board in executive session. These evaluations assist the Governance Committee with its recommendation for directors to be renominated for election to the Board of Directors. In addition, each of the Committees conducts an annual self-assessment. During an executive session led by the Committee chairperson, the Committee discusses, among other topics: whether the quality of participation and discussion at the Committee meetings is effective in facilitating the Committee’s obligations under its charter; the opportunity to engage in strategic discussion; and whether the Committee is covering the right topics in the right amount of detail. Following this discussion, the Committee develops and implements a list of action items, as appropriate.  Succession Planning The Board believes that providing for continuity of leadership is critical to the success of our Company. Therefore, processes are in place: · to evaluate the Chief Executive Officer annually based on a specific set of performance objectives; · for the Chief Executive Officer annually to provide an assessment of persons considered potential successors to various senior management positions and discuss the results of these reviews with the Board; and · to support continuity of top leadership and Chief Executive Officer succession, including through annual reports to the Board.  Departure and Election of Directors General Richard B. Myers, a director who served during 2017, did not stand forre-election at the 2017 Annual Meeting and retired from the Board effective the date of the 2017 Annual Meeting. In accordance with the retirement policy described above, Mr. Fazio, a director who served during 2017, will not stand forre-election at the 2018 Annual Meeting as he will have attained his 75th birthday prior to the Annual Meeting. Upon Mr. Fazio’s retirement, the Board intends to reduce the number of members on the Board from 13 to 12 members.  Communications with the Board of Directors Any interested person may communicate with any of our directors, our Board as a group, ournon-employee directors as a group or our Lead Independent Director through the Corporate Secretary by writing to the following address:Office of the Corporate Secretary, Northrop Grumman Corporation, 2980 Fairview Park Drive, Falls Church, Virginia 22042. The Corporate Secretary will forward correspondence to the director or directors to whom it is addressed, except for job inquiries, surveys, business solicitations or advertisements and other inappropriate material. The Corporate Secretary may forward certain correspondence elsewhere within our Company for review and possible response. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|21  CORPORATE GOVERNANCE Interested persons may also report any concerns relating to accounting matters, internal accounting controls or auditing matters tonon-management directors (including anonymously) by writing directly to the Chairperson of the Audit Committee,Northrop Grumman Board of Directors c/o Corporate Ethics Office, 2980 Fairview Park Drive, Falls Church, Virginia 22042.  Corporate Responsibility and Sustainability Corporate responsibility and sustainability are critical to our business and long-term value creation for our shareholders, customers and employees. Our strong culture — founded in ethics, integrity, diversity and inclusion, and focused on performance, accountability, effective governance and responsible citizenship — enables our success. Strong environmental, social and governance (ESG) programs and practices help us attract and maintain the best talent, perform for our customers and create value for our shareholders. The Policy Committee of our Board provides leadership and oversight of our ESG practices. The Committee provides oversight of our policies and programs related to both corporate responsibility and sustainability, and regularly reviews our community relations activities, among other responsibilities. We engage with a variety of stakeholders and regularly obtain feedback on our ESG performance. In 2017, we published our ninth annual corporate responsibility report (CRR). Using the GRI G4 Sustainability Reporting Guidelines, we continued to report to our stakeholders on our progress in meeting various environmental, social and governance performance indicators. You may view a copy of our annual CRR atcrreport.northropgrumman.com. For the seventh consecutive year, we incorporatednon-financial sustainability performance metrics into our annual incentive compensation program. See page 41 in the Compensation Discussion and Analysis section. We are proud that our corporate responsibility and sustainability programs received various notable recognitions in 2017. They include: · earning a leadership score ofA- in CDP’s 2017 climate change program for the sixth consecutive year; · earning an A rating from MSCI for environmental, social and governance management and performance; · being named to the Dow Jones Sustainability North America Index for the second consecutive year; and · being named one of DiversityInc’s Top 50 Companies for Diversity for the eighth year in a row. 22 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION OF DIRECTORS The Compensation Committee, with the assistance of its independent compensation consultant, is responsible for reviewing and recommending for approval the compensation of thenon-employee directors. At the request of the Compensation Committee, the independent compensation consultant prepares annually a comprehensive benchmarking of ournon-employee director compensation program against the compensation programs offered by our Target Industry Peer Group (the same peer group against which executive compensation is compared). Consistent with this benchmarking, the overarching approach fornon-employee director compensation is to target the 50th percentile of the Target Industry Peer Group. In May 2017, the Compensation Committee recommended to the Board, and the Board approved, the currentnon-employee director fee structure, effective May 17, 2017. The table below lists the annual fees payable to ournon-employee directors from January 1, 2017 to May 16, 2017 under the prior fee structure and the annual fees payable under the current fee structure effective May 17, 2017.   Compensation Element        Amount ($) (1/1/17 - 5/16/17)          Amount ($)   (5/17/17 - 12/31/17)       Annual Cash Retainer                122,500                      122,500         Lead Independent Director Retainer                35,000                      35,000         Audit Committee Retainer                10,000                      10,000         Audit Committee Chair Retainer                20,000                      20,000         Compensation Committee Chair Retainer                20,000                      20,000         Governance Committee Chair Retainer                15,000                      15,000         Policy Committee Chair Retainer                7,500                      7,500         Annual Equity Grant (1)                145,000                      150,000       (1) The annual equity grant is deferred into a stock unit account pursuant to the 2011 Long-Term Incentive Stock Plan (2011 Plan) as described below. The Northrop Grumman Equity Grant Program forNon-Employee Directors (Director Program) sets forth the terms and conditions of the equity awards granted tonon-employee directors under the 2011 Plan. Retainer fees are paid on a quarterly basis at the end of each quarter. To encourage directors to have a direct and material investment in shares of our common stock,non-employee directors are awarded an annual equity grant of $150,000 in the form of deferred stock units (Automatic Stock Units). The Director Program was amended and restated effective January 1, 2016 (the Amended Director Program). Directors received an annual equity grant of Automatic Stock Units on May 18, 2016, which vested on May 18, 2017, and an annual equity grant of Automatic Stock Units on May 17, 2017, which will vest on the one year anniversary of the grant date. Under the Amended Director Program, directors may elect to have all or any portion of their Automatic Stock Units paid on (A) the earlier of (i) the beginning of a specified calendar year after the vesting date or (ii) their separation from service as a member of the Board, or (B) the vesting date. Directors may elect to defer to a later year all or a portion of their remaining cash retainer or committee retainer fees into a stock unit account as Elective Stock Units or in alternative investment options. Elective Stock Units are awarded on a calendar quarterly basis. Directors may elect to have all or a portion of their Elective Stock Units paid on the earlier of (i) the beginning of a specified calendar year or (ii) their separation from service as a member of the Board. Stock units awarded under the Amended Director Program will be paid out in an equivalent number of shares of our common stock. Deferral elections are made prior to the beginning of the year for which the retainer fees will be paid. Directors are credited with dividend equivalents in connection with the accumulated stock units until the shares of common stock related to such stock units are issued. Non-employee directors are eligible to participate in our Matching Gifts Program for Education. Under this program, the Northrop Grumman Foundation matches director contributions, up to $10,000 per year per director, to eligible educational programs in accordance with the program.  Stock Ownership Requirements and Anti-Hedging and Pledging Policy Non-employee directors are required to own common stock of the Company in an amount equal to five times the annual cash retainer, with such ownership to be achieved within five years of the director’s election to the Board. Deferred stock units and Company stock owned outright by the director count towards this requirement. Company policy prohibits members of the Board of Directors from pledging or engaging in hedging transactions with respect to any of their Company stock, continuing to align the interests of our Board of Directors with those of our shareholders. None of the shares of Company common stock held by our directors are pledged or subject to any hedging transaction. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|23  COMPENSATION OF DIRECTORS  2017 Director Compensation The table below provides information on the compensation of ournon-employee directors for the year ended December 31, 2017.     Name        Fees Earned or Paid in Cash (1) ($)          Stock Awards (2) ($)          All Other Compensation (3) ($)          Total   ($)       Marianne C. Brown                132,500                      150,000                      177                      282,677           Victor H. Fazio                132,500                      150,000                      25,690                      308,190           Donald E. Felsinger                157,500                      150,000                      17,307                      324,807           Ann M. Fudge                132,500                      150,000                      8,073                      290,573           Bruce S. Gordon                130,000                      150,000                      17,086                      297,086           William H. Hernandez                152,500                      150,000                      447                      302,947           Madeleine A. Kleiner                147,500                      150,000                      17,022                      314,522           Karl J. Krapek                142,500                      150,000                      19,287                      311,787           Richard B. Myers (4)                30,625                      —                      2,517                      33,142           Gary Roughead                122,500                      150,000                      1,500                      274,000           Thomas M. Schoewe                122,500                      150,000                      2,027                      274,527           James S. Turley                132,500                      150,000                      155                      282,655           Mark A. Welsh III                132,500                      150,000                      13                      282,513         (1) Amounts reflect the annual cash retainer paid to each director, including any applicable annual committee and committee chair retainers and any applicable Lead Independent Director or Chairperson retainer. As described above, a director may elect to defer all or a portion of his or her annual cash retainer into a deferred stock unit account. Amounts deferred as Elective Stock Units or deferred into alternative investment options are reflected in this column. (2) Amounts represent the target value of Automatic Stock Units awarded to each of ournon-employee directors in 2017 under the 2011 Plan pursuant to the Amended Director Program. The amount reported for each director reflects the aggregate fair value of the Automatic Stock Units on the grant date, as determined under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Stock Compensation, excluding any assumed forfeitures. The grant date fair value assumes the value of dividend equivalents accrued directly on the awarded units. The aggregate number of Automatic Stock Units and Elective Stock Units held by each director as of December 31, 2017 is provided in the Deferred Stock Units table below. (3) Amounts reflect (i) the estimated dollar value of additional stock units credited to eachnon-employee director as a result of dividend equivalents earned, directly or indirectly, on reinvested dividend equivalents as such amounts are not assumed in the grant date fair value of the Automatic Stock Units shown in the “Stock Awards” column, and (ii) matching contributions made through our Matching Gifts Program for Education discussed above as follows: Mr. Fazio, $10,000; Ms. Fudge, $8,000; Mr. Gordon, $10,000; Ms. Kleiner, $10,000; and Mr. Krapek, $10,000. (4) General Myers did not stand for reelection at the 2017 Annual Meeting. 24 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION OF DIRECTORS Deferred Stock Units As of December 31, 2017, thenon-employee directors had the following aggregate number of deferred stock units accumulated in their deferral accounts for all years of service as a director, including additional stock units credited as a result of dividend equivalents earned on the stock units.     Name            Automatic Stock     Units            Elective Stock     Units                    Total                  Marianne C. Brown                2,250                    1,121                    3,371         Victor H. Fazio                12,694                    7,611                    20,305         Donald E. Felsinger                19,677                    14,663                    34,340         Ann M. Fudge                1,312                    474                    1,786         Bruce S. Gordon                16,325                    —                    16,325         William H. Hernandez                3,851                    —                    3,851         Madeleine A. Kleiner                15,339                    —                    15,339         Karl J. Krapek                16,368                    5,840                    22,208         Richard B. Myers (1)                —                    —                    —         Gary Roughead                7,045                    —                    7,045         Thomas M. Schoewe                8,241                    —                    8,241         James S. Turley                2,319                    —                    2,319         Mark A. Welsh III                889                    —                    889       (1) General Myers did not stand for reelection at the 2017 Annual Meeting. All stock units were paid out to General Myers in the form of common stock after his retirement from the Board in May 2017. Director Equity Plan Under the Northrop GrummanNon-Employee Directors Equity Participation Plan (Director Equity Plan),non-employee directors had an amount equal to 50% of their annual retainer credited to an equity participation account and converted into stock units based on the then fair market value (as defined in the Director Equity Plan) of our common stock. No new participants have been added to the Director Equity Plan since May 31, 2005, and no new annual accruals have been credited to the then-existing participants in the Director Equity Plan since that time. However, directors that served on the Board in and before 2005 continue to be credited with dividend equivalents on the cumulative stock units held in their equity participation accounts until the director terminates service on the Board. Mr. Fazio is the only director that earns dividend equivalents under the Director Equity Plan. No other current director participates in the Director Equity Plan. Generally, if a participatingnon-employee director terminates service on the Board after completion of at least three consecutive years of service or retires from the Board as a result of a total disability or a debilitating illness as defined in the Director Equity Plan, the participant will be entitled to receive the full balance of the participant’s equity participant account in annual installments. Upon a change in control of the Company, as defined in the Director Equity Plan, the participant will immediately be entitled to receive the full balance of the equity participation account under the Director Equity Plan regardless of the number of years of consecutive service, although payment of his or her benefits will not commence until the termination of his or her service. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|25  TRANSACTIONS WITH RELATED PERSONS AND CONTROL PERSONS  Related Person Transactions The Company has a written policy approved by the Board, for the review, approval and ratification of transactions between our Company and our directors, executive officers and other related persons (Related Person Transactions Policy). A copy of the policy is available on the Investor Relations section of our website (www.northropgrumman.com). The policy provides for all related person transactions to be reviewed in advance and approved or ratified, as applicable, by the Board of Directors, the Governance Committee or the Chairperson of the Governance Committee. A related person transaction may be approved if, after reviewing the relevant facts and circumstances, the reviewing party concludes that approving the related person transaction is in the best interests of the Company and its shareholders. The policy defines a related person transaction as any transaction in which the Company was, is or will be a participant, where the amount involved exceeds $120,000, and in which a related person had, has or is expected to have a direct or indirect material interest. A “related person” includes: · any of our directors or executive officers; · any person who is known to be the beneficial owner of more than 5% of our common stock; · an immediate family member of any such persons; or · any firm, corporation, or other entity controlled by any such persons. The Corporate Secretary may determine that, based on facts and circumstances, a transaction in an amount less than $120,000 should nonetheless be deemed a related person transaction. If this occurs, the transaction would be submitted for review and approval or ratification in accordance with the policy. Under exceptional circumstances, if a related person transaction has not been approved in advance, the Governance Committee will recommend to the Board of Directors such action as the Governance Committee deems appropriate, including ratification, amendment or termination of the transaction. The policy requires each director and executive officer to complete an annual questionnaire to identify his or her related interests and to notify the Corporate Secretary of any changes in their information. In 2017, none of our directors or executive officers was a participant in or had a relationship regarded as a related person transaction, as considered under applicable regulations of the SEC and the NYSE listing standards.  Compensation Committee Interlocks and Insider Participation During 2017, Messrs. Felsinger, Gordon, Krapek, Myers, Roughead and Schoewe served as members of the Compensation Committee. During 2017, no member of the Compensation Committee had a relationship with the Company or any of our subsidiaries, other than as directors and shareholders, and no member was an officer or employee of the Company or any of our subsidiaries, a participant in a related person transaction or an executive officer of another entity, where one of our executive officers serves on the board of directors that would constitute a related person transaction or raise concerns of a Compensation Committee interlock.  Indemnification Agreements Our Bylaws require us generally to indemnify our directors and executive officers to the fullest extent permitted by Delaware law. Additionally, as permitted by Delaware law, we have entered into indemnification agreements with each of our directors and elected officers. Under the indemnification agreements, we have agreed to hold harmless and indemnify each indemnitee, generally to the fullest extent permitted by Delaware law, against expenses, liabilities and loss incurred in connection with threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative to which the indemnitee is made a party by reason of the fact that the indemnitee is or was a director or officer of the Company or any other entity at our request, provided however, that the indemnitee acted in good faith and in a manner reasonably believed to be in the best interests of our Company. 26 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended (Exchange Act), requires our directors and executive officers, and persons who own more than ten percent of our common stock, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. Based on our review of Forms 3, 4 and 5 we have received or have filed on behalf of our executive officers and directors, and written representations from those persons that they were not required to file a Form 5, we believe that all required filings, other than one delayed filing for Mrs. Fudge (which resulted from an administrative error by a third party) were made on a timely basis during the year ended December 31, 2017. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|27  VOTING SECURITIES AND PRINCIPAL HOLDERS  Stock Ownership of Certain Beneficial Owners The following entities beneficially owned, to the best of our knowledge, more than five percent of the outstanding common stock as of December 31, 2017. All information shown is based on information reported by the filer on a Schedule 13G filed with the SEC on the dates indicated in the footnotes below.     Name and Address of Beneficial Owner        Amount and Nature of       Beneficial Ownership of Common Stock             Percent             of Class                 BlackRock, Inc.   55 East 52nd Street, New York, NY 10055              13,545,765       (1)           7.8%       State Street Corporation   One Lincoln Street, Boston, MA 02111              19,261,080       (2)           11.1%       The Vanguard Group   100 Vanguard Blvd., Malvern, PA 19355              13,248,398       (3)           7.6%     (1) This information was provided by BlackRock, Inc. (BlackRock) in a Schedule 13G/A filed with the SEC on January 29, 2018. According to BlackRock, as of December 31, 2017, BlackRock had sole voting power over 12,190,349 shares and sole dispositive power over 13,545,765 shares. (2) This information was provided by State Street Corporation (State Street) in a Schedule 13G filed with the SEC on February 14, 2018. According to State Street, as of December 31, 2017, State Street had shared voting and dispositive power over 19,261,080 shares. This total includes 12,074,939 shares held in the Defined Contributions Master Trust for the Northrop Grumman Savings Plan and the Northrop Grumman Financial Security and Savings Program, for which State Street Bank and Trust Company acts as trustee and investment manager. (3) This information was provided by The Vanguard Group (Vanguard) in a Schedule 13G/A filed with the SEC on February 9, 2018. According to Vanguard, as of December 31, 2017, Vanguard had sole voting power over 239,674 shares, sole dispositive power over 12,968,516 shares and shared dispositive power over 279,882 shares. 28 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  VOTING SECURITIES AND PRINCIPAL HOLDERS  Stock Ownership of Officers and Directors The following table shows beneficial ownership of our common stock as of March 20, 2018 by each of our current directors, our named executive officers and all directors and executive officers as a group. As of March 20, 2018, there were 174,383,808 shares of our common stock outstanding. None of the persons named below beneficially owns in excess of 1% of our outstanding common stock. Unless otherwise indicated, each individual has sole investment power and sole voting power with respect to the shares owned by such person.        Shares of Common Stock Beneficially Owned          Share Equivalents (1)          Total     Non-Employee Directors                        Marianne C. Brown                —                          3,371                      3,371         Victor H. Fazio                18,368         (2)                  20,305                      38,673         Donald E. Felsinger                —                          34,340                      34,340         Ann M. Fudge                93                          1,786                      1,879         Bruce S. Gordon                —                          16,325                      16,325         William H. Hernandez                1,000                          3,851                      4,851         Madeleine A. Kleiner                971                          15,339                      16,310         Karl J. Krapek                8,194                          21,139                      29,333         Gary Roughead                —                          7,045                      7,045         Thomas M. Schoewe                3,160                          8,241                      11,401         James S. Turley                —                          2,319                      2,319         Mark A. Welsh III                —                          889                      889         Named Executive Officers                        Wesley G. Bush (3)                430,162         (4)                  5,560                      435,722         Kenneth L. Bedingfield                34,340                          —                      34,340         Gloria A. Flach (5)                87,668                          —                      87,668         Janis G. Pamiljans                6,677                          6,224                      12,901         Kathy J. Warden                88,011                          —                      88,011         Other Executive Officers                245,957                            9,176                        255,133           All Directors and Executive Officers as a Group (27 persons)                924,601                            155,910                        1,080,511         (6)    (1) Share equivalents for directors representnon-voting deferred stock units acquired under the 2011 Plan, some of which are paid out in shares of common stock at the conclusion of a director-specified deferral period, and others are paid out upon termination of the director’s service on the Board. Certain of the NEOs hold share equivalents with pass-through voting rights in the Northrop Grumman Savings Plan or the Northrop Grumman Financial Security and Savings Program. (2) Includes 1,141 shares held in our Dividend Reinvestment Plan. (3) Mr. Bush is also Chairman of the Board. (4) Includes 259,053 shares held in the W.G. and N.F. Bush Family Trust, 63,980 shares held in the Bush Trust Number 4 Trust, and 63,979 shares held in the Wesley G. Bush Revocable Trust, each of which Mr. Bush and his wife serve as trustees. (5) Ms. Flach retired from the Company on December 31, 2017. (6) Total represents 0.62% of the outstanding common stock as of March 20, 2018. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|29  EQUITY COMPENSATION PLAN INFORMATION We currently maintain two equity compensation plans: the 2011 Plan and the 1993 Stock Plan forNon-Employee Directors, as amended (1993 Directors Plan). Each of these plans has been approved by our shareholders. The following table sets forth the number of shares of our common stock to be issued upon payout of outstanding awards and the number of shares remaining available for future award grants under these equity compensation plans as of December 31, 2017.     Plan category        Number of shares of common stock to be issued upon exercise of outstanding options and payout of outstanding awards (1) (#)        Weighted-average exercise price of outstanding options (2) ($)        Number of shares of     common stock     remaining available for future     issuance under equity     compensation plans     (excluding     shares reflected in the     first column) (3)     (#)         Equity compensation plans approved by shareholders                1,989,372                      N/A                      6,295,076               Equity compensation plans not approved by shareholders                N/A                      N/A                      N/A               Total                1,989,372                      N/A                      6,295,076         (4) �� (1) This number includes 955,588 shares that were subject to outstanding stock awards granted under the 2011 Plan, 462,245 awards earned at year end but pending distribution subject to final performance adjustments, 136,019 shares subject to outstanding stock unit credited under the 2011 Plan and 1993 Directors Plan, and additional performance shares of 435,521, which reflect the number of shares deliverable under payment of outstanding restricted performance stock rights, assuming maximum performance criteria have been achieved. (2) There were no options outstanding as of December 31, 2017. (3) Of the aggregate number of shares that remained available for future issuance, 6,295,076 were available under the 2011 Plan as of December 31, 2017. No new awards may be granted under the 1993 Directors Plan. (4) After giving effect to our February 2018 awards, the number of shares of common stock remaining available for future issuance would be 5,900,763 (assuming maximum payout of such awards). 30 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  PROPOSAL TWO: ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS Consistent with Section 14A of the Exchange Act, we are providing our shareholders with the opportunity to cast anon-binding, advisory vote on the compensation of our NEOs. This advisory vote, commonly known as“say-on-pay,” gives our shareholders the opportunity to express their view on our 2017 executive compensation programs and policies for our NEOs. The vote does not address any specific item of compensation and is not binding on the Board; however, as an expression of our shareholders’ views, the Compensation Committee seriously considers the vote when making future executive compensation decisions. The Board has adopted a policy of providing for annual advisory votes on the compensation of our NEOs. We believe our compensation programs reflect responsible, measured practices that effectively incentivize our executives to dedicate themselves fully to value creation for our shareholders, customers and employees. Our pay practices are aligned with our shareholders’ interests and with leading industry practice and are governed by a set of strong policies. Examples include: · Double-trigger provisions for change in control situations, and no excise taxgross-ups for payments upon termination after a change in control; · A recoupment policy applicable to cash and equity incentive compensation payments; · Stock ownership guidelines of 7x base salary for the CEO and 3x base salary for other NEOs, and stock holding requirements of three years from the vesting date for equity awards; and · Prohibitions on hedging or pledging of Company stock. For a more extensive list of our best practices, refer to page 33 of this Proxy Statement. In addition, our Compensation Discussion and Analysis (CD&A) provides a detailed discussion of our performance-based approach to executive compensation. We encourage you to read the CD&A, the rest of this Proxy Statement and our 2017Form 10-K, which describes our business and 2017 results in more detail. Recommendation The compensation of our executives is aligned to performance, is sensitive to shareholder returns, appropriately motivates and retains our executives, and is a competitive advantage in attracting and retaining the high caliber talent necessary to drive our business forward and build sustainable value for our shareholders. Accordingly, the Board recommends that shareholders approve the following resolution: “RESOLVED, that, as an advisory matter, the shareholders of Northrop Grumman Corporation approve the compensation paid to the Company’s named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.” Vote Required Approval of this proposal requires that the votes cast “for” the proposal exceed the votes cast “against” the proposal. Abstentions and brokernon-votes will have no effect on this proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL TWO. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|31  EXECUTIVE COMPENSATION  Compensation Discussion and Analysis In this CD&A, we provide an overview of our executive compensation programs and the underlying philosophy used to develop the programs. We describe the material components of our executive compensation programs for our 2017 NEOs and explain how and why our Board’s Compensation Committee arrived at certain specific compensation policies and decisions. We refer to certainnon-GAAP (accounting principles generally accepted in the United States of America) financial measures, which are identified with asterisks. For more information, including definitions, reconciliations to the most directly comparable GAAP measure and why we believe these measures may be useful to investors, see “Appendix A - Use ofNon-GAAP Financial Measures.” The 2017 NEO compensation is provided in the Summary Compensation Table on page 49 and other compensation tables contained in this Proxy Statement. 2017 NEOs WESLEY G. BUSH KENNETH L. BEDINGFIELD GLORIA A. FLACH(1) JANIS G. PAMILJANS(2) KATHY J. WARDEN (1)Ms. Flach retired from the Company on December 31, 2017. (2) Mr. Pamiljans was elected Corporate Vice President and President, Aerospace Systems (President, Aerospace Systems) effective April 1, 2017. References to Mr. Pamiljans’ compensation prior to April 1, 2017 in this CD&A include compensation for service as an appointed officer in the role of Vice President and General Manager. 32 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS  |  EXECUTIVE SUMMARY  Summary of Our Executive Compensation Programs Our executive compensation philosophy is to provide a complementary set of compensation programs to our NEOs with attractive, flexible and market-based total compensation tied to annual and long-term performance and aligned with the interests of our shareholders. The key elements of our compensation programs for our NEOs are summarized below. Compensation Element Purpose Key Characteristics Fixed     Component     Base Salary Compensate fairly and competitively Determined by level of responsibility, competitive market pay assessment and individual performance Long-Term Incentive Plan (LTIP) Restricted Stock Rights (RSRs) Link the interests of our executive officers to shareholders and retain executive talent 30% of annual LTIP grant Three-year cliff vesting Performance-     Based     Component     Annual Incentive Plan (AIP) Motivate and reward achievement of annual business objectives Financial Metrics Pension-adjusted Operating Margin (OM) Rate*, Cash Flow from Operations Conversion* and Pension-adjusted Net Income* Growth Subject to downward adjustment for failure to achievenon-financial objectives LTIP Restricted Performance Stock Rights (RPSRs) Link the interests of our executive officers to shareholders, motivate and reward achievement of long-term strategic goals and retain executive talent 70% of annual LTIP grant Three-year performance period Actual shares earned are weighted 50% to relative TSR and 50% to Cumulative Free Cash Flow* (Cumulative FCF*) * This metric is anon-GAAP financial measure. For more information, see “Appendix A - Use ofNon-GAAP Financial Measures.”  Our Compensation Pay Practices (pages 36 - 47) Our compensation programs incorporate best practices, including the following: Best Practices ·  Pay for Performance ·  Above Target and Maximum Annual Incentive Payouts Only When We Outperform Our Peer Benchmarks ·  Long-Term Incentives Focused on Performance ·  Cap on Annual Bonuses and Performance-Based Long-Term Incentive Share Payouts ·  Total Direct Target Compensation Aimed at Market Median ·  Annual Peer Group Review ·  Independent Consultant Reports Directly to Compensation Committee ·  Double Trigger Provisions for Change in Control ·  No Individual Change in Control Agreements ·  No Excise TaxGross-ups for Payments Received Upon Termination After a Change in Control ·  No Hedging or Pledging of Company Stock ·  Dividends Paid Upon Vesting ·  Recoupment Policy on Incentive Compensation Payments ·  Stock Ownership Guidelines and Stock Holding Requirements ·  Regular Risk Assessments Performed ·  No Employment Contracts for CEO or other NEOs NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|33  COMPENSATION DISCUSSION AND ANALYSIS  |  EXECUTIVE SUMMARY  2017 Performance Highlights We continued to generate strong financial results in 2017, including higher segment operating income and, excluding 2017 tax reform and our related discretionary pension contribution impacts, higher earnings, cash from operations and free cash flow*. 2017 diluted earnings per share were $11.47 and excluding 2017 tax reform and our related discretionary pension contribution impacts were $13.28*. Our strong cash generation allowed us to invest $928 million in our business and return more than $1 billion to our shareholders through share repurchases and dividends. Operational performance and effective capital deployment supported a 33.9% TSR in 2017. Earnings Per Share Total Shareholder Return * This metric is anon-GAAP financial measure. For more information, see “Appendix A - Use ofNon-GAAP Financial Measures.” 34 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS  |  EXECUTIVE SUMMARY Management and the Compensation Committee believe our executive compensation programs are competitive and support achieving strong financial performance while investing for profitable growth and value creation over the long-term. A 96% shareholder majority approved last year’ssay-on-pay proposal, and our ongoing shareholder engagement indicates continued support for the structure and elements of our executive incentive compensation programs.  Performance Incentive Compensation Metrics 2017 results, which have been adjusted to exclude the impacts of the Tax Cuts and Jobs Act (the “2017 Tax Act”), for AIP metrics: · Pension-adjusted OM Rate*: 10.5% · Cash Flow from Operations Conversion*: 127% · Pension-adjusted Net Income* Growth: $1.93B For the LTIP, our three-year TSR score covering 2015-2017 was at the 89th percentile as measured against the 2015 Performance Peer Group identified on page 38 and the 96th percentile as measured against the S&P industrials. Over the last three years, the weighting of our LTIP RPSR metrics has transitioned from 100% TSR in 2015-2017 to 70% TSR and 30% Cumulative FCF* in 2016-2018 to the current 50% TSR and 50% Cumulative FCF* weighting. The weighting transition reflects a desire for a better balance between relative TSR performance and an operational metric more directly impacted by management decisions and behaviors.  Compensation Mix We have a balanced pay for performance compensation structure that places an appropriate level of compensation at risk, based on our financial andnon-financial performance measures and relative TSR. The AIP award is determined by our financial performance and is subject to a downward only adjustment for performance againstnon-financial goals. For NEOs, the value of LTIP RPSR compensation is weighted 50% to relative TSR and 50% to Cumulative FCF*. Achievement of both annual and long-term incentive goals will result in individual awards commensurate with results; however, if absolute TSR is negative, the maximum relative TSR payout is capped at 100%, even if the relative TSR would have resulted in a higher score. The following charts show performance-based compensation elements at target values. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|35  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY PRINCIPLES  Compensation Philosophy and Objectives We provide an attractive, flexible and market-based total compensation program tied to performance and aligned with the interests of our shareholders. Our objective is to recruit and retain the caliber of executives and other key employees capable of achieving top performance and generating value for our shareholders, customers and employees. Our goal is to lead our industry in sustainable performance, while maintaining strong, enduring values. The targets and thresholds of our AIP are based on the performance of our peers and the market. Our 2017 LTIP metrics are based on (1) TSR relative to our Performance Peer Group and the S&P Industrials and (2) Cumulative FCF*. For each plan, we selected metrics that drive shareholder value and benchmark our performance against our peers and the market. Our executive compensation and benefit programs are guided by the following principles: Pay for Performance ·   Our incentive plans are based on peer and market benchmarked performance metrics. Leadership Retention and Succession ·   Compensation is designed to be competitive within our industry and retain top talent. ·   Programs are designed to motivate and reward NEOs for delivering operational and strategic performance over time. Sustainable Performance ·   Our AIP includes both financial andnon-financial metrics to ensure we are building a strong foundation for long-term sustainable performance and shareholder value creation. Alignment with Shareholder Interests ·   Our compensation structure places an appropriate amount of compensation at risk based on annual and long-term results. ·   At-risk compensation is based on financial andnon-financial performance measures and relative TSR. ·   A significant portion of compensation is delivered in equity, the vesting and value of which provides alignment with shareholder returns. ·   Stock ownership guidelines, holding requirements for equity awards and our recoupment policy further align executive and shareholder interests. Benchmarking ·   Compensation program provisions and financial objectives are evaluated on an annual basis and modified in accordance with industry and business conditions. ·   We seek to outperform our peers (a group of top global defense companies identified as the Performance Peer Group on page 38). ·   We use a Target Industry Peer Group (identified on page 39) for broader market executive compensation analyses that includes companies based on apeer-of-peers analysis. Compensation Risk Management ·   The Compensation Committee, recommendstogether with its independent compensation consultant, conducts an annual assessment of the compensation for our CEOprograms to determine if there are potential material risks to the independent directors of the Board for approval and approves the compensation for the other NEOs. Among its duties, the Compensation Committee:Company.   — reviews market data and other input from its independent compensation consultant; — reviews and approves incentive goals and objectives (CEO goals and objectives are set by the independent directors); — evaluates and approves executive benefit and perquisite programs; and — evaluates the competitiveness of each elected officer’s total compensation package. For more information regarding the composition of·   Both the Compensation Committee and its dutiesindependent compensation consultant evaluate the mix ofat-risk compensation linked to stock appreciation. ·   The assessment is to confirm there is an appropriate balance in the executive compensation programs, practices and responsibilities, see “Corporate Governance – Committees of the Board of Directors – Compensation Committee.” The Compensation Committee’s charter can be found on the Investor Relations section of our website (www.northropgrumman.com).policies. 36 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY PRINCIPLES Role of the Independent Compensation Consultant  How We Make Compensation Decisions Role of the Compensation Committee The Compensation Committee is responsible for overseeing our compensation policies, incentive and equity compensation plans and approving payments or grants under these plans for elected officers (other than the CEO). The Compensation Committee recommends the compensation for our CEO to the independent directors of the Board for approval and approves the compensation for the other NEOs. In performing its duties, the Compensation Committee: · retains an independent compensation consultant Frederic W. Cook & Co. (the Compensation Consultant). The Compensation Consultantwhich reports directly to the Compensation Committee and is discussed further below; · reviews market data and other input from its independent compensation consultant; · reviews and approves incentive goals and objectives (CEO goals and objectives are reviewed and approved by the independent directors); · evaluates and approves executive benefit and perquisite programs; and · evaluates the competitiveness of each elected officer’s total compensation package. In addition, the Compensation Committee annually reviews and discusses with management the CD&A and provides a Compensation Committee Report for inclusion in the proxy statement. For more information regarding the composition of the Compensation Committee and its duties and responsibilities, see “Corporate Governance – Committees of the Board of Directors – Compensation Committee.” Role of the Independent Compensation Consultant The Compensation Committee retains an independent compensation consultant, Frederic W. Cook & Co. (the Compensation Consultant). The Compensation Consultant reports directly to the Compensation Committee, and the Compensation Committee may replace the Compensation Consultant or hire additional consultants at any time. A representative of the Compensation Consultant regularly attends meetings of the Compensation Committee and communicates with the Compensation Committee Chairperson between meetings as needed; however, the Compensation Committee and the independent directors of the Board make final decisions on the compensation actions for the NEOs. The Compensation Consultant regularly meets in executive session with the Compensation Committee. Other than the fees paid to the Compensation Consultant pursuant to its engagement by the Compensation Committee for its advice on executive and director compensation, the Compensation Consultant does not receive any fees or income from the Company. The Compensation Consultant’s role is to provide an independent review of market data and to advise the Compensation Committee on the levels and structure of our executive compensation policies and procedures, including compensation matters for NEOs. The Compensation Consultant utilizes aerospace and defense industry market data and conducts an independent review of publicly available data. The roles of the Compensation Consultant include: · reviewing and advising the Compensation Committee on our total compensation philosophy, peer groups and target competitive positioning; · identifying market trends and practices and advising the Compensation Committee on program design implications; · providing proactive advice to the Compensation Committee on best practices for Board governance of executive compensation, compensation-related risk management, and any areas for program design to most appropriately support the Company’s business strategy and organizational values; and · serving as a resource to the Compensation Committee Chairperson between meetings; however, theon setting agenda items for Compensation Committee meetings and the independent directors of the Board make final decisions on the compensation actions for the NEOs. The Compensation Consultant may meet in executive session withundertaking special projects. In February 2018, the Compensation Committee determined that there were no relationships between the Compensation Consultant and the Company or any of the Company’s directors or executive officers that raised a conflict of interest. Role of Management Our CEO makes compensation-related recommendations for elected officers to the Compensation Committee for its review and approval. The CEO’s evaluation is based on each officer’s compensation relative to market and the overall framework, philosophy and objectives for our executive compensation programs set by the Compensation Committee. Other than the fees paid to the Compensation Consultant pursuant to its engagement by the Compensation Committee for its advice on executive and director compensation, the Compensation Consultant does not receive any fees or income from the Company. The Compensation Consultant’s role is to provide an independent review of market data and to advise the Compensation Committee on the levels and structure of our executive compensation policies and procedures including compensation matters for NEOs. The Compensation Consultant utilizes aerospace and defense industry market data and conducts an independent review of publicly available data. The specific roles of the Compensation Consultant include:   — reviewing our total compensation philosophy, peer groups and target competitive positioning and advising the Compensation Committee; NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|37  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY PRINCIPLES   — identifying market trends and practices and advising the Compensation Committee on such trends and practices; The recommendations for elected officers are based on an assessment of each executive’s performance, skills and industry knowledge, market compensation benchmarks, and succession and retention considerations. The Chief Human Resources Officer provides a summary of historical compensation and benefits-related data when compensation decisions are considered by the Compensation Committee to ensure compensation decisions are made within our total compensation framework. Management also provides recommendations to the Compensation Committee regarding executive incentive and benefit plan designs and strategies. These recommendations include financial andnon-financial operational goals and criteria for our annual and long-term incentive plans.  Use of Competitive Data   — providing proactive advice to the Compensation Committee on best practices for Board governance of executive compensation, as well as any areas of concern or risk that may exist or be anticipated in the design of our executive compensation programs; and Performance Peer Group: Set Performance Targets and Evaluate Performance — serving as a resource to the Compensation Committee Chairperson on setting agenda items for Compensation Committee meetings and undertaking special projects. In February 2015, the Compensation Committee determined that there were no relationships between the Compensation Consultant and the Company or any of the Company’s directors or executive officers that raise a conflict of interest. Role of Management Our CEO makes compensation-related recommendations for elected officers to the Compensation Committee for its review and approval based on the CEO’s evaluation of each officer’s compensation relative to market and the overall framework, philosophy and objectives for our executive compensation programs set by the Compensation Committee. The CEO does not make any compensation recommendations for himself to the Compensation Committee. The recommendations for elected officers are based on an assessment of each executive’s performance, skills and industry knowledge, as well as succession and retention considerations. The Chief Human Resources Officer regularly provides tally sheets to the Compensation Committee that summarize the total compensation and benefits for each NEO. These tally sheets are provided to NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 33  COMPENSATION DISCUSSION AND ANALYSIS | KEY PRINCIPLES the Compensation Committee to ensure that compensation decisions are made within our total compensation framework. The values of nonqualified deferred compensation, outstanding equity awards, health and welfare benefits, pension benefits and perquisites are also included. Management also provides recommendations to the Compensation Committee regarding executive incentive and benefit plan designs and strategies. These recommendations include financial and non-financial operational goals and criteria for our annual and long-term incentive plans.  Use of Competitive Data The Compensation Committee uses a Performance Peer Group, consisting of competitor companies in the aerospace and defense market in the U.S. and Europe, to set annual performance targets and evaluate performance for the purpose of award payments under our incentive plans. In addition, the Compensation Committee uses a Target Industry Peer Group, comprised of 14 companies, to benchmark executive compensation levels and practices. Performance Peer Group to Set Performance Targets and Evaluate Performance For purposes of setting targets for our annual and long-term incentive plans, the Compensation Committee uses a Performance Peer Group. TSR performance for LTIP grants vesting in 2014 was benchmarked against the Performance Peer Group identified in the table below. AIP goals for 2014 were established based on an amended Performance Peer Group, updated to comprise the largest global defense companies by government revenues within our market space. The updated Performance Peer Group includes Booz Allen Hamilton (a U.S.-based defense provider of mission and engineering services) and Thales (an international defense provider of electronic systems and services) in place of Airbus Group and SAIC, Inc. TSR performance for LTIP grants vesting after 2015 will be benchmarked against the updated The Compensation Committee uses the Performance Peer Group for purposes of setting performance targets and evaluating performance for our AIP and LTIP. The Performance Peer Group is comprised of the largest global defense companies by government revenues within the aerospace and defense market space. AIP goals for 2017 and goals for the LTIP grants made during 2017 that will vest in 2019 were established based on the 2017 Performance Peer Group.   2017 PERFORMANCE PEER GROUP BAE Systems Harris Corporation Lockheed Martin Corporation The Boeing Company L3 Technologies, Inc. Raytheon Company Booz Allen Hamilton Holding Corporation Leidos Holdings, Inc. Thales Group General Dynamics Corporation Leonardo Performance targets for the LTIP grants for the three-year performance period vesting in 2017 were established in 2015, based on the 2015 Performance Peer Group. 2015 PERFORMANCE PEER GROUP BAE Systems Finmeccanica(1) Lockheed Martin Corporation The Boeing Company General Dynamics Corporation Raytheon Company Booz Allen Hamilton Holding Corporation L-3 Communications Holdings, Inc.(2) Thales Group   (1) Finmeccanica changed its name to Leonardo in 2016   (2)L-3 Communications Holdings, Inc. changed its name to L3 Technologies, Inc. in 2016 Target Industry Peer Group: Benchmark Executive Compensation Practices The Compensation Committee benchmarks our executive compensation levels and practices against a Target Industry Peer Group of 14 companies, as well as against a subset of the Target Industry Peer Group containing six direct peers. Prior to the beginning of the year, the Compensation Committee sets the Target Industry Peer Group and the subset of direct peers used to benchmark compensation for the following year. To identify peer companies for compensation benchmarking purposes, the Compensation Consultant employed an objective criteria-based methodology where: · the company was identified as a peer by at least two aerospace and defense peers or proxy advisory services; · the company participated in the annual Aon Hewitt executive compensation study; and · revenues, total employees and market capitalization of the company were broadly similar to those of the Company. 38 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY PRINCIPLES While the Target Industry Peer Group is reviewed annually by the Compensation Committee with the Compensation Consultant, our goal is to keep it as consistent as reasonably possible on a year-over-year basis. The companies that comprise the 2017 Target Industry Peer Group are listed in the following table: 2017 TARGET INDUSTRY PEER GROUP 3M Company Johnson Controls International The Boeing Company(1) L3 Technologies, Inc.(1) Caterpillar Inc. Lockheed Martin Corporation(1) Eaton Corporation Raytheon Company(1) Emerson Electric Company Rockwell Collins, Inc. General Dynamics Corporation(1) Textron Inc. Honeywell International Inc.(1) United Technologies Corporation (1) Included in the subset of six direct peers also used for compensation benchmarking It is the Company’s pay philosophy to provide the CEO a compensation package that comprises competitive elements of base salary and target variable pay relative to the Target Industry Peer Group. In 2017, the CEO’s target total direct compensation approximated the median of the Target Industry Peer Group. Another element of the Company’s pay philosophy is to tie a significant portion of the CEO’s pay to performance. As a result, the CEO’s actual compensation may differ from this market median based on the Company’s actual performance. In determining the base salary and target variable pay elements for the other NEOs, the Compensation Committee does not set any specific benchmark relative to the Target Industry Peer Group; rather, the Compensation Committee considers several factors in determining their compensation, including executive compensation levels and practices of the Target Industry Peer Group, NEO individual experience, growth in job as demonstrated through sustained performance, leadership impact, retention and pay relative to the CEO. Actual annual incentive awards and long-term incentive award opportunities reflect these factors, as well as Company performance. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|39  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY COMPONENTSOFOUR PROGRAMS  Annual Incentive Compensation Under our shareholder-approved 2002 Incentive Compensation Plan (the Plan), the Compensation Committee approves the annual incentive compensation target payout percentage for each NEO other than the CEO. For the CEO, such percentage is approved by the independent directors of the Board. The target incentive award (target bonus) represents a percentage of each NEO’s base salary. Following the completion of the fiscal year, the target bonus is used by the Compensation Committee, together with its assessment of Company performance againstpre-determined performance criteria, to determine the final bonus award amount. 2017 Annual Incentive Plan The 2017 target bonus for the CEO was 180% of base salary, which was unchanged from 2016. For each of the other NEOs, the 2017 target bonus was 100% of base salary, which was also unchanged from 2016. Upon Mr. Pamiljans’ promotion effective April 1, 2017, his target bonus was increased to 100% of base salary. Mr. Pamiljans’ 2017 target bonus and final bonus award were prorated to reflect the time he served in his role as an elected officer and as an appointed officer. The final bonus award for each NEO was determined by multiplying the Northrop Grumman Company Performance Factor (CPF) by the target bonus. The CPF can range from 0% to 200% in the annual incentive formula described below. Annual Incentive Formula for 2017: At the end of each year, the CEO conducts an annual performance evaluation for each NEO, other than himself, and then reviews the evaluation with the Compensation Committee. The Compensation Committee reviews Company performance information, as well as the comparison to market data. The Compensation Committee approves bonus amounts for all NEOs except the CEO, whose annual bonus is recommended by the Compensation Committee to the independent members of the Board for approval. The Compensation Committee has discretion to make adjustments to the annual bonus payouts for NEOs, except the CEO, if it determines such adjustment is warranted. For example, in instances where Company performance has been impacted by unforeseen or unusual events (e.g., the 2017 Tax Act), the Compensation Committee has exercised its authority to increase the final awards as necessary to preserve the intended incentives and benefits. The Compensation Committee has also adjusted payouts downward in the past despite performance targets having been met when it determined that particular circumstances had a negative impact on the Company but were not reflected in the performance calculation. 40 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY COMPONENTSOFOUR PROGRAMS 2017 Annual Incentive Goals and Results  2016 Financial Metrics Weighting       2017 Financial Metrics Weighting      Pension-adjusted OM Rate* 30%           Pension-adjusted OM Rate* 1/3     Cash Flow from Operations Conversion* 30%     Cash Flow from Operations Conversion* 1/3     Pension-adjusted Net Income* Growth 30%     Pension-adjusted Net Income* Growth 1/3     Awards(Book-to-Bill) 10%     * This metric is anon-GAAP financial measure. For more information, see “Appendix A - Use ofNon-GAAP Financial Measures.” For the AIP, we use a mix of financial andnon-financial metrics to measure our performance. For 2017, the Compensation Committee refined our AIP financial metrics and weightings, reflecting our commitment to investing for and achieving long-term profitable growth; maintaining alignment with shareholders’ interests; and incentivizing top performance against our industry peers. The Compensation Committee approved the following metrics, equally weighted at 1/3: · Pension-adjusted OM Rate*: establishes high program performance expectations for the Company and is calculated as OM rate (operating margin divided by sales) before net FAS/CAS pension adjustment* (the difference between pension expense charged to contracts and included as cost in segment operating income in accordance with U.S. Government Cost Accounting Standards (CAS) and pension expense determined in accordance with GAAP (FAS)). · Cash Flow from Operations Conversion*: recognizes the importance of converting net income into cash. The metric is calculated as cash provided by operating activities before theafter-tax impact of discretionary pension contributions* divided by net income. Cash Flow from Operations Conversion* enables management to make capital investment decisions that support long-term profitable growth without impacting performance-based incentive compensation. · Pension-adjusted Net Income* Growth: incentivizes management to achieve relative long-term profitable growth greater than a projected industry growth rate. Pension-adjusted Net Income* Growth is calculated as net income before theafter-tax impact of the net FAS/CAS pension adjustment* and is based on a three-year growth trajectory. In addition to these financial goals, we establishednon-financial goals to align our objectives with all our stakeholders. Performance againstnon-financial metrics can result only in a downward adjustment to the financial metric score. For 2017, we selected the followingnon-financial metrics: · Customer Satisfaction: measured in terms of customer feedback, including customer-generated performance scores, award fees and verbal and written feedback. · Quality: measured using program-specific objectives, including defect rates, process quality, supplier quality, planning quality or other appropriate criteria for program type and phase. · Engagement & Inclusion: measured based on performance at or above the global high performing norm for engagement and inclusion indices and an accountability metric (as reported in a company-wide employee survey). · Diversity: measured in terms of improving representation of females and people of color in all management level positions with respect to internal and external benchmarks. · Safety: measured by total case rate, defined as the number of Occupational Safety & Health Administration recordable injuries as well as by lost work day rate associated with those injuries. · Environmental Sustainability: measured in terms of reductions in absolute greenhouse gas emissions and potable water use consumption, and improvement in solid waste diversion (i.e., waste diverted from landfill disposal). NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|41  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY COMPONENTSOFOUR PROGRAMS Our AIP provides for payout levels from 0% to 200% of target. The minimum, target and maximum performance levels are derived based on an analysis of the past performance of our Performance Peer Group (Pension-adjusted Net Income* Growth is based on projected market growth rates). Specific values are identified for each metric at selected points in the range between minimum and maximum and other values are determined by linear interpolation between these points. No payout is made if performance is below the minimum. Above target payout can be earned only if the Company’s performance exceeds the performance threshold noted in the table below. The maximum 200% payout is based upon top quartile past performance of the Performance Peer Group. This structure rewards superior performance by aligning above-target payouts to outperforming our peer benchmarks and provides reduced awards for below target performance. Based on Company performance for the three financial metrics shown in the table below, which have been adjusted to exclude the impact of the 2017 Tax Act, the 2017 CPF was 131%. No downward adjustment was made fornon-financial metric performance as the Compensation Committee determined that performance, in aggregate, against thenon-financial goals, met the Company’s stated objectives.   Metric/Goal      Weighting        Performance to Achieve Target Payout      2017 Performance      2017 Score           Pension-adjusted OM Rate*      1/3      10.0%      10.5%      44%     Cash Flow from Operations Conversion*      1/3      145%      127%      20%     Pension-adjusted Net Income* Growth      1/3      $1.67B      $1.93B      67%     Company Performance Factor                     131%     * This metric is anon-GAAP financial measure. For more information, see “Appendix A - Use ofNon-GAAP Financial   Measures.” Decisions for 2017 In February 2018, the Compensation Committee applied the CPF to Mr. Bush’s target bonus. Based on the CPF, in February 2018, the Committee recommended, and the independent members of our Board approved, a 2017 annual incentive award of $3,662,000 for Mr. Bush. Based on the CPF, the CEO recommended, and the Compensation Committee approved, the other NEOs’ annual incentive awards.   Name        Target Payout % of Salary          Payout Range % of Salary        Actual Payout % of Salary        Actual Payout (1)          Wesley G. Bush        180%        0% - 360%        236%        $3,662,000     Kenneth L. Bedingfield        100%        0% - 200%        131%        $1,041,000     Gloria A. Flach        100%        0% - 200%        131%        $1,061,000     Janis G. Pamiljans(2)        93%        0% - 186%        121%        $861,000     Kathy J. Warden      100%        0% - 200%        131%        $1,061,000   (1)The potential range of bonus payouts based on 2017 performance is disclosed in the Grants of Plan-Based Awards Table. Actual bonus payouts for 2017 performance are disclosed above and in the Summary Compensation Table. (2) Mr. Pamiljans was elected President, Aerospace Systems effective April 1, 2017. His target and actual payout under the AIP is prorated to reflect time served as an elected officer and as an appointed officer. 42 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY COMPONENTSOFOUR PROGRAMS  Long-Term Incentive Compensation 2017 Long-Term Incentive Program In determining the amount of individual long-term incentive award for an NEO (other than the CEO), the Compensation Committee considers an elected officer’s individual performance during the preceding year, growth in job as demonstrated through sustained performance, leadership impact, retention and pay relative to the CEO, as well as market data for the elected officer’s position based on the Target Industry Peer Group analysis. In 2017, after determining the award value for the NEOs as described above, the Compensation Committee granted awards in the form of RPSRs to ensure sustainability and achievement of business goals over time and RSRs to provide retention value. The awards were comprised of 70% RPSRs and 30% RSRs. The Committee determined this long-term incentive mix would appropriately motivate and reward the NEOs to achieve our long-term objectives and further reinforce the link between their interests and the interests of our shareholders. The RPSRs will vest and be distributed following the completion of the three-year performance period (2017-2019) if goals are met. The RSRs generally vest 100% after three years. Vesting for termination due to death, disability or retirement is discussed in the Terms of Equity Awards section. For the 2017 grant, dividend equivalents accrue on both RPSR and RSR awards earned and will be paid upon distribution of the RPSRs and RSRs. The Compensation Committee evaluates RPSR performance requirements each year to ensure they are aligned with our business objectives. For the 2017 RPSR grant, the Compensation Committee determined that for the NEOs, performance will continue to be measured in terms of relative TSR and Cumulative FCF*; however, in order to increase management’s focus on the operational metrics that drive long-term shareholder value creation, the weighting of Cumulative FCF* has been increased to 50% from 30%. Therefore, 2017 RPSR grant performance will be weighted 50% to relative TSR and 50% to Cumulative FCF*. Based on the performance against these metrics, shares earned for 2017 RPSR grants can vary from 0% to 150% of the rights awarded. TSR is measured by comparing cumulative stock price appreciation with reinvestment of dividends over a three-year period to the Performance Peer Group (50% of relative TSR portion of award) and to the S&P Industrials (50% of relative TSR portion of award), which comprises companies within the S&P 500 classified as Industrials, reflecting the range of similar investment alternatives available to our shareholders. To smooth volatility in the market, the TSR calculation is based on the average of the 30 calendar days immediately prior to the start of the performance period and the last 30 calendar days of the performance period. The maximum relative TSR payout is capped at 100% of target shares if the absolute TSR is negative, even if the relative TSR would have resulted in a higher score. Cumulative FCF* focuses on cash generation after capital investments and is calculated as the aggregate free cash flow before theafter-tax impact of total pension funding* over a three-year period. Free cash flow* includes funds available to create shareholder value after investing in the business through capital expenditures. On February 17, 2017, prior to his promotion, Mr. Pamiljans received an annual long-term incentive award as an appointed officer. The terms associated with this award are disclosed in the Grants of Plan-Based Awards Table on page 52. Recently Completed RPSR Performance Period (2015 – 2017) In February 2015, when granting RPSRs to NEOs who were elected officers at the time of the grant, the Compensation Committee selected relative TSR as the performance metric for the awards and established the performance criteria for the awards as set forth in the table below. In February 2018, the Compensation Committee reviewed performance for the January 1, 2015 to December 31, 2017 RPSR performance period.           Percentile Required to Score           Metric/Goal      Weighting      0%      100%      150%      2017 Actual        Performance               Relative TSR - 2015 Performance Peer Group      50%      25th      50th      80th      89th       Relative TSR - S&P Industrials      50%      25th      50th      80th      96th   NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|43  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY COMPONENTSOFOUR PROGRAMS Decisions for 2017 Based on 2015 - 2017 TSR performance, we ranked second against the 2015 Performance Peer Group and were in the 89th percentile. We were in the 96th percentile of the S&P Industrials. The combined weighted score generated an overall performance score of 150% for NEOs who were elected officers at the time of the grant. In February 2018, the NEOs received payouts in stock with respect to the RPSR awards that were granted in February 2015 for the three-year performance period ending December 31, 2017 (as described further in footnote 3 to the Outstanding Equity Awards Table on page 54).  Other Benefits This section describes other benefits the NEOs receive. These benefits are not performance related and are designed to provide a competitive package for purposes of attracting and retaining the executive talent needed to achieve our business objectives. These benefits include retirement benefits, certain perquisites and severance arrangements. Retirement Benefits We maintaintax-qualified retirement plans (both defined benefit pension plans and defined contribution savings plans) that cover most of our workforce, including the NEOs. We also maintain nonqualified retirement plans that are available to our NEOs, which are designed to restore benefits that were limited under thetax-qualified plans or to provide supplemental benefits. Compensation, age and years of service factor into the amount of benefits provided under the plans. Thus, the plans are structured to reward and retain employees of long service and recognize higher performance levels as evidenced by increases in annual pay. Additional information about these retirement plans and the NEO benefits under these plans can be found in the Pension Benefits Table and Nonqualified Deferred Compensation Table, on pages 56 and 60, respectively. The Compensation Committee assesses aggregate benefits available to the NEOs and has previously imposed an overall cap, generally limited to no more than 60% of final average pay, on pension benefits for the NEOs (except for small variations due to contractual restrictions under the plans). Mr. Bush voluntarily agreed to reduce his cap to 50% of final average pay. In addition, the nonqualified supplemental defined benefit plans in which our NEOs participate were frozen as to pay and service as of December 31, 2014. Retiree Medical Arrangement The Special Officer Retiree Medical Plan (SORMP) was closed to new participants in 2007. Participants in the SORMP are entitled to retiree medical benefits and life insurance pursuant to the terms of the Plan. Mr. Bush is eligible for SORMP benefits due to his date of hire and years of service as an executive. The other NEOs became elected officers after the SORMP was closed to new participants and are not eligible for SORMP benefits. The estimated cost of the SORMP benefit reflected in the Termination Payment Table is the present value of the estimated cost to provide future benefits using actuarial calculations and assumptions. Perquisites Our NEOs are eligible for certain limited executive perquisites that include financial planning, income tax preparation, physical exams and personal liability insurance. The Compensation Committee believes these perquisites are common within the competitive market for total compensation packages for executives and are useful in attracting, retaining and motivating talented executives. Perquisites provided to the NEOs in 2017 are detailed in the Summary Compensation Table on page 49. Security Arrangements Given the nature of our business, we maintain a comprehensive security program. As a component of that program, we provide residential and/or travel protection that we consider necessary to address our security requirements. In selecting the level and form of protection, we and the Board consider both security risks faced by those in our industry in general and security risks specific to our Company and its individuals. Based on security threat information obtained and an ongoing dialogue with law enforcement officials, the Board has required that Mr. Bush and other NEOs receive varying levels of residential and travel protection. Since we require this protection under a comprehensive security program and it is not designed to provide a personal benefit (other than the intended security), we do not view these security arrangements as compensation to the individuals. We report these security arrangements as perquisites as required under applicable SEC rules. In addition, we would report them as taxable compensation to the individuals if they were not excludable from income as working condition fringe benefits under Section 132 of the Internal Revenue Code. 44 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY COMPONENTSOFOUR PROGRAMS The Board has determined that the CEO should avoid traveling by commercial aircraft for purposes of security, rapid availability and communications connectivity during travel, and should use Company-provided aircraft for all air travel. If, as a result, the CEO uses Company-provided aircraft for personal travel, the costs of such travel are imputed as income and are subject to the appropriate tax reporting according to Internal Revenue Code regulations. We regularly review the nature of the security threat and associated vulnerabilities with law enforcement and security specialists and will continue to revise our security program as appropriate. Severance Benefits We maintain the Severance Plan for Elected and Appointed Officers of Northrop Grumman Corporation (Severance Plan), which is available to our NEOs (other than the CEO) who qualify and are approved to receive such benefits. Mr. Bush is not eligible to participate in a Northrop Grumman severance plan. The purpose of the Severance Plan is to help bridge the gap in an executive’s income and health coverage during a period of unemployment following termination. We do not maintain any change in control severance plans. In addition, we do not provide excise taxgross-ups for any payments received upon termination after a change in control. Upon a “qualifying termination” (defined below) the Company will provide severance benefits to eligible NEOs under the Severance Plan. Provided the NEO signs a release, he or she will receive: (i) a lump sum severance benefit equal to one andone-half times annual base salary and target bonus, (ii) a prorated performance bonus for the year of termination, (iii) continued medical and dental coverage for the severance period, (iv) income tax preparation/financial planning fees for the year of termination and the following year and (v) outplacement expenses up to 15% of salary, all subject to management approval. The cost of providing continued medical and dental coverage is based upon current premium costs. The cost of providing income tax preparation and financial planning is capped at $15,000 for the year of termination and $15,000 for the year following termination. A “qualifying termination” means one of the following: · involuntary termination, other than for cause or mandatory retirement; or · election to terminate in lieu of accepting a downgrade to anon-officer position (i.e., good reason). Change in Control Benefits We do not maintain separate change in control programs or agreements. The only change in control benefits available to the NEOs are those described in the terms and conditions of the grants under the 2011 Long-Term Incentive Stock Plan (2011 Plan).  Policies and Procedures Stock Ownership Guidelines We maintain stock ownership guidelines for our NEOs to further promote alignment of management and shareholder interests. These guidelines require that NEOs own Company stock with a value denominated as a multiple of their annual salaries, which can be accumulated over a five-year period from the date of hire or promotion into an elected officer position. The guidelines are as follows:   Position Stock Value as a Multiple of Base Salary     Chairman and Chief Executive Officer 7x base salary Other NEOs 3x base salary Shares that satisfy the stock ownership guidelines include: · Company stock owned outright; · unvested RSRs; and · the value of shares held in the Northrop Grumman Savings Plan or Northrop Grumman Financial Security and Savings Program. Unvested RPSRs are not included in calculating ownership until they are converted to actual shares owned. The Compensation Committee reviews compliance with our stock ownership guidelines on an annual basis. As of December 31, 2017, all NEOs were in compliance with the ownership guidelines. The Compensation Committee continues to monitor compliance and will conduct a full review again in 2018. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|45  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY COMPONENTSOFOUR PROGRAMS Stock Holding Requirements We have a holding period requirement for payouts from long-term incentive grants, further emphasizing the importance of sustainable performance and appropriate risk-management behaviors. Under this policy, NEOs are required to hold, for a period of three years, 50% of their netafter-tax shares received from RSR vestings and RPSR distributions. These restrictions generally continue following termination and retirement; however, shares acquired from RPSR distributions following termination or retirement occurring more than one year after separation from the Company are not subject to the holding requirement. Anti-Hedging and Pledging Policy Company policy prohibits our NEOs and other elected officers from hedging, entering into margin transactions involving Company stock, and pledging Company securities as collateral for loans or other transactions. Recoupment Policy The Company’s recoupment policy provides that: · the Board has discretion to recoup incentive compensation paid to an elected officer in the event of a restatement or if an elected officer engages in illegal conduct that causes significant financial or reputational harm to the Company; · the Board has discretion to recoup incentive compensation paid to the elected officer in the event the elected officer fails to report such misconduct of another, or is grossly negligent in fulfilling his or her supervisory responsibilities to prevent such misconduct; and · the CEO has discretion to recoup under similar circumstances incentive compensation provided tonon-elected officers or other employees. The Company’s recoupment policy applies to a three-year look back of performance-based short or long-term, cash or equity incentive payments. It provides for certain disclosure in the event of recoupment, consistent with SEC and other legal requirements. Risk Management The Compensation Committee annually reviews our compensation program and together with the independent compensation consultant assesses potential compensation-related risks to the Company. Based on this assessment for 2017, the Compensation Committee determined that the risk profile is appropriate and substantial risk management features are incorporated into our compensation program. This determination reflects the following conclusions from the detailed risk assessment: · there is appropriate balance to mitigate compensation-related risk in the executive compensation program’s design between fixed and variable pay, cash and stock components, short- and long-term measures, financial andnon-financial measures, and formulaic and discretionary decisions; · there are appropriate policies in place to mitigate compensation-related risk including the Compensation Committee’s and its advisor’s independence, transparent disclosure, officer stock ownership guidelines and holding period requirements, and hedging and recoupment policies; and · there are no incentive or commission arrangements below the executive level that potentially encourage excessive risk-taking behavior. Grant Date for Equity Awards Annual grant cycles for equity awards occur in February at the same time as salary increases and annual incentive grants. This timing allows the Compensation Committee to make decisions on each of these compensation components at the same time, utilizing a total compensation philosophy. The Compensation Committee reviews and approves annual long-term incentive grants during its scheduled meeting, which occurs following announcement of ouryear-end financial results. Equity grants may also be granted on an interim basis throughout the year for special situations, such as new executive hires, promotions or retention. Tax Deductibility of Pay Under prior law, Section 162(m) of the Internal Revenue Code generally limited the annual tax deduction to $1 million per person for compensation paid to the Company’s CEO and the next three highest-paid NEOs, other than the Chief Financial Officer (collectively, covered employees). Certain compensation, including qualified performance-based compensation, was not subject to the deduction limit if certain requirements were met. 46 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS  |  KEY COMPONENTSOFOUR PROGRAMS The 2017 Tax Act enacted on December 22, 2017, modifies Section 162(m). The 2017 Tax Act expands the definition of covered employees to include the Company’s Chief Financial Officer and any employee who was a covered employee for any taxable year beginning after December 31, 2016. The 2017 Tax Act also repeals the performance-based compensation exception to the deduction limit. These amendments, effective January 1, 2018, do not apply to compensation paid pursuant to a written binding contract in effect on November 2, 2017 that was not materially modified after such date. Say-on-Pay Our shareholders have been asked annually to approve, on an advisory basis, the compensation paid to our NEOs. We regularly engage with our shareholders to understand their concerns regarding executive compensation. The Compensation Committee annually reviews and discusses the results of thesay-on-pay vote. In 2017, our executive compensation programs continued to receive strong support from shareholders with 96% approval at our 2017 Annual Meeting of Shareholders. Based on its review and feedback from shareholder engagement, the Compensation Committee determined that our programs are effective and aligned with shareholder interests, and no substantive changes were required. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|47  COMPENSATION COMMITTEE REPORT The Compensation Committee reviewed and discussed the CD&A with management. Based on such review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this Proxy Statement. The Board has approved the recommendation. COMPENSATION COMMITTEE KARL J. KRAPEK, CHAIRPERSON DONALD E. FELSINGER BRUCE S. GORDON GARY ROUGHEAD THOMAS M. SCHOEWE 48 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION TABLES  |  SUMMARY COMPENSATION TABLE  2017 Summary Compensation Table   Name & Principal Position   Year     Salary (1) ($)   Bonus (2) ($)   Stock Awards (3) ($)   Non-Equity Incentive Plan Compensation (4) ($)     Change in Pension Value andNon- Qualified Deferred Compensation Earnings (5) ($)   All Other Compensation (6) ($)   Total ($)       Wesley G. Bush         2017         1,548,577     —     9,999,969     3,662,000     2,733,390     925,121         18,869,057           Chairman, Chief Executive Officer   and President         2016         1,530,000     —     10,000,072     4,406,400     3,036,744     868,625         19,841,841               2015         1,588,846     —     10,000,018     3,304,800     —     901,958         15,795,622           Kenneth L. Bedingfield         2017         790,192     —     3,250,106     1,041,000     —     351,426         5,432,724           Corporate Vice President and   Chief Financial Officer         2016         756,539     —     2,999,980     1,232,000     —     314,724         5,303,243               2015         685,077     —     3,000,092     840,000     —     196,798         4,721,967           Gloria A. Flach (7)         2017         807,116     —     3,499,993     1,061,000     —     184,922         5,553,031           Corporate Vice President and   Chief Operating Officer         2016         792,116     —     3,499,856     1,272,000     995,033     159,738         6,718,743               2015         806,538     —     3,500,083     936,000     —     357,219         5,599,840           Janis G. Pamiljans (8)         2017         702,623     100,000     3,499,941     861,000     369,399     1,032,397         6,565,360           Corporate Vice President and   President, Aerospace Systems         2016         —     —     —     —     —     —         —             2015         —     —     —     —     —     —         —         Kathy J. Warden         2017         807,116     —     3,499,993     1,061,000     388,015     206,548         5,962,672           Corporate Vice President and   President, Mission Systems         2016         772,500     —     3,499,856     1,272,000     200,220     165,596         5,910,172               2015         701,077     —     3,200,053     814,000     20,782     425,763         5,161,675       (1) Includes amounts deferred under the qualified savings and nonqualified deferred compensation plans. (2) Pursuant to a 2016 retention agreement, Mr. Pamiljans received a bonus of $200,000 in two installments ($100,000 each) in 2016 and 2017. (3) Represents the grant date aggregate fair value of RPSRs and RSRs granted during the periods presented. The fair value of awards was computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 disregarding potential forfeitures. Assumptions used in the calculation of these amounts are disclosed in Note 14 of the Company’s 2017 Form10-K. The maximum grant date fair values of the 2017 RPSRs are as follows, noting the grants assume a 150% maximum payout other than for Mr. Pamiljans:   Name Maximum Grant Date Fair Value    ($)   Mr. Bush 10,500,087   Mr. Bedingfield 3,412,596   Ms. Flach 3,674,895   Mr. Pamiljans(a) 3,884,932   Ms. Warden 3,674,895 PERFORMANCE PEER GROUP Airbus Group* (a)Comprised of a February RPSR grant which assumes a 200% maximum payout and an April RPSR grant which assumes a 150% maximum payout. These grants are disclosed in the Grants of Plan-Based Awards Table on page 52. Finmeccanica Lockheed Martin Corporation BAE Systems General Dynamics Corporation Raytheon Company The Boeing Company L-3 Communications Holdings, Inc. SAIC, Inc.** * Formerly known as EADS. ** On September 27, 2013, SAIC, Inc. (SAI) spun off its services business into Science Applications International Corporation and renamed the parent company Leidos Holdings, Inc., both publicly traded companies. The legacy SAI publicly traded company no longer exists in its prior form. We combined the two publicly traded components, Science Applications International Corporation and Leidos Holdings, Inc., as a proxy for the legacy company, to calculate an implied SAI TSR for outstanding LTIP grants vesting prior to 2016. Target Industry Peer Group to Benchmark Executive Compensation Practices The Compensation Committee compares the compensation of our NEOs against a Target Industry Peer Group of 14 companies, as well as against a subset of the Target Industry Peer Group containing six direct peers. Prior (4) These amounts were paid pursuant to the beginning ofCompany’s AIP. Includes amounts deferred under the year, the Compensation Committee sets the Target Industry Peer Groupqualified savings and the subset of direct peers used to benchmarknonqualified deferred compensation the following year. To identify companies for compensation benchmarking purposes, the Compensation Consultant employed a methodology that considered a company a peer if it met the following criteria: — the company was identified as a peer by at least three aerospace and defense peers or proxy advisory services; — the company participated in the annual Aon Hewitt executive compensation study; and — revenues, total employees and market capitalization of the company were broadly similar to those of the Company. plans.   34 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS | KEY PRINCIPLES While the Target Industry Peer Group is reviewed annually by the Committee’s Compensation Consultant, our goal is to keep it as consistent as possible on a year-over-year basis. The companies that comprise the 2014 Target Industry Peer Group are listed in the following table: TARGET INDUSTRY PEER GROUP 3M Company L-3 Communications Holdings, Inc. * The Boeing Company * Lockheed Martin Corporation * Caterpillar, Inc. Raytheon Company * Emerson Electric Company Rockwell Collins, Inc. General Dynamics Corporation * SAIC, Inc.** Honeywell International, Inc. * Textron, Inc. Johnson Controls, Inc. United Technologies Corporation * Included in the subset of six direct peers also used for compensation benchmarking. ** As a result of SAIC, Inc. spinning off its services business, it no longer meets the criteria and will be replaced by Eaton in 2015. It is the Company’s pay philosophy to provide the CEO a compensation package that comprises competitive elements of base salary and target variable pay relative (5) These amounts relate solely to the Target Industry Peer Group. In 2014, the CEO’s base salary, target annual incentive and long-term incentive grant each approximated the median. As a result, the CEO’s target total direct compensation also approximated the median of the Target Industry Peer Group. Another element of the Company’s pay philosophy is to tie a significant portion of the CEO’s pay to performance. As a result, the CEO’s actual compensation may differ from this market median based on the Company’s actual performance. In determining the base salary and target variable pay elements for the other NEOs, the Compensation Committee does not set any specific benchmark relative to the Target Industry Peer Group; rather, the Compensation Committee considers several factors in determining their compensation, including executive compensation levels and practices of the Target Industry Peer Group, NEO individual experience, growth in job as demonstrated through sustained performance, leadership impact, retention and pay relative to the CEO. Actual annual incentive awards and long-term incentive award opportunities reflect these factors, as well as Company performance. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 35  COMPENSATION DISCUSSION AND ANALYSIS | KEY COMPONENTSOFOUR PROGRAMS Selection of Performance Criteria Our objective in selecting performance goals for the annual incentive plan and long-term incentive plan is to establish metrics that enhance shareholder value, complement one another in support of strong Company performance, and balance annual and long-term results. As mentioned, we use the amended Performance Peer Group to establish key 2014 financial goals benchmarked against our industry for purposes of measuring performance.  Annual Incentive Compensation Under our shareholder-approved 2002 Incentive Compensation Plan (the Plan), the Compensation Committee approves the annual incentive compensation target payout percentage for each NEO. For the CEO, it is approved by the independent directors. The Compensation Committee applies the process detailed above to set incentive compensation levels for NEOs. The target incentive award (Target Bonus) represents a percentage of each NEO’s base salary. Following the completion of the fiscal year, the Target Bonus is used by the Compensation Committee, together with its assessment of Company performance against pre-determined performance criteria, to determine the final bonus award amount. 2014 Annual Incentive Plan For 2014, the Target Bonus for the CEO was 150% of base salary, which was unchanged from 2013. For each of the other NEOs , the 2014 Target Bonus was also unchanged from 2013 and was 100% of base salary. The final bonus award for each NEO was determined by multiplying the Northrop Grumman Company Performance Factor (CPF) by the Target Bonus. Within the annual incentive formula described below, the CPF can range from 0% to 200%. Annual incentive formula for 2014: Base Salary x Target Payout % = Target Bonus Target Bonus x CPF = Final Bonus Award The annual incentive payments are designed to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. As a result, the terms of the Plan provide that the maximum potential individual incentive compensation award for a performance year for an officer subject to Section 162(m) shall be limited. Actual payouts for the 2014 performance year were less than the limits set forth under the Plan. At the end of each year, the CEO conducts an annual performance evaluation for each NEO, other than himself, and then reviews the evaluation with the Compensation Committee. The Compensation Committee reviews Company performance information, as well as the comparison to market data. The Compensation Committee approves bonus amounts for all NEOs, subject to ratification by the independent members of the Board with respect to the CEO’s bonus. The Compensation Committee has discretion to make adjustments to the annual bonus payout if it determines such adjustment is warranted. For example, in instances where Company performance has been impacted by unforeseen or unusual events (natural disasters, significant acquisitions or divestitures, etc.), the Compensation Committee has exercised its authority to increase the final awards (subject to limitations under Section 162(m) of the Internal Revenue Code). The Compensation Committee has also adjusted payouts downward in the past despite performance targets having been met when it determined that particular circumstances had a negative impact on the Company but were not reflected in the performance calculation. For 2014, no adjustments were made. 2014 Annual Incentive Goals and Results For the annual incentive plan, we use a mix of financial and non-financial metrics to measure our performance. The following financial metrics were selected for 2014: — Pension-adjusted OM Rate: establishes high performance expectations for the Company and is calculated as OM rate (operating margin divided by sales) adjusted for net FAS/CAS pension income or expense. The net FAS/CAS pension adjustment is the difference between pension expense determined in accordance with GAAP under Financial Accounting Standards (FAS) and pension expense allocated to the business segments under U.S. Government Cost Accounting Standards (CAS). — Free Cash Flow Conversion Rate: focuses on the quality of net earnings and is calculated as free cash flow provided by operating activities before the after-tax impact of discretionary pension contributions divided by net income from continuing operations. 36 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS | KEY COMPONENTSOFOUR PROGRAMS — Awards (Book-to-bill): focuses the Company on maintaining market share and represents the value of total new contracts awarded to the Company during the year, net of backlog adjustments, divided by sales during the year. — Pension-adjusted Net Income: reflects an integrated metric for both top and bottom line performance and is calculated as net income adjusted for net FAS/CAS pension income or expense after tax. In addition to the financial goals, non-financial goals have been established to align our objectives with shareholders, customers and employees. Performance against non-financial metrics can result only in downward adjustment to the financial metric score. The following non-financial metrics were selected: — Customer Satisfaction: measured in terms of customer feedback, including customer-generated performance scores, award fees and verbal and written feedback. — Quality: measured using program-specific objectives within each of our sectors, including defect rates, process quality, supplier quality, planning quality and other appropriate criteria for program type and phase. — Engagement: measured in terms of improvement in overall engagement score (as reported by employees in a company-wide engagement survey). — Diversity: measured in terms of improving representation of females and People of Color in mid-level and senior-level management positions with respect to internal and external benchmarks. — Safety: measured by Total Case Rate, defined as the number of Occupational Safety & Health Administration recordable injuries as well as by Lost Work Day Rate associated with those injuries. — Environmental Sustainability: measured in terms of the reduction, in metric tons per sales, of greenhouse gas emissions, and of solid waste and water utilization. The Company’s achievement of the four financial metrics are used to determine the CPF value. Performance against the six non-financial goals cannot be used to adjust the CPF upward and can result only in a downward adjustment to the financial metric score if targets are not achieved. For 2014, the Compensation Committee determined that the aggregate performance against the non-financial metrics achieved targets, and, consequently, there was no reduction to the CPF. Our annual incentive plan provides for payout levels at 0% to 200% of target. The minimum, target and maximum performance levels are derived based on an analysis of the past performance of our Performance Peer Group. Specific values are identified for each metric at selected points in the non-linear range and other values determined by interpolation between these points. No payout is made if performance is below the minimum. No above-target payout is earned unless the Company’s performance exceeds the performance threshold noted in the table below. The maximum 200% payout is based upon the top past performance of the Performance Peer Group. This structure rewards superior performance by aligning above-target payouts to outperforming our peer benchmarks and provides reduced awards for below average performance. Based on Company performance for the four financial metrics shown in the table below, the CPF was 146%.   Metric/Goal    Weighting    Performance Threshold to be Exceeded In Order To Earn Above-Target Payout    2014  Performance Pension-adjusted OM Rate    35%    9.8%    12.2% Free Cash Flow Conversion Rate    35%    105%    98% Awards (Book-to-bill)    15%    100%    104% Pension-adjusted Net Income    15%    $1.59B    $1.89B NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 37  COMPENSATION DISCUSSION AND ANALYSIS | KEY COMPONENTSOFOUR PROGRAMS Decisions for 2014 In February 2015, the Compensation Committee applied the CPF to Mr. Bush’s Target Bonus. Based on the CPF, in February 2015, the Committee recommended, and the independent members of our Board approved, a 2014 annual incentive award of $3,350,700 for Mr. Bush. Based on the CPF, the CEO recommended, and the Compensation Committee approved, the NEOs’ annual incentive awards.  Name      Target Payout % of Salary      Payout Range % of Salary      Actual Payout % of Salary      Actual Payout*          Wesley G. Bush      150%      0% - 300%      219%      $3,350,700        James F. Palmer      100%      0% - 200%      146%      $1,270,000        Gloria A. Flach      100%      0% - 200%      146%      $1,117,000        Linda A. Mills      100%      0% - 200%      146%      $1,153,000        Thomas E. Vice      100%      0% - 200%      146%      $1,117,000       * Details on the range of bonuses that could have been payable based on 2014 performance are provided in the Grants of Plan-Based Awards table. Actual bonus payouts for 2014 performance are provided here and in the Summary Compensation Table.  Long-Term Incentive Compensation 2014 Long-Term Incentive Program In determining the amount of individual long-term incentive awards, the Compensation Committee considers an executive officer’s individual performance during the preceding year, growth in job as demonstrated through sustained performance, leadership impact, retention and pay relative to the CEO, as well as market data for the executive officer’s position based on the Target Industry Peer Group analysis. In 2014, after determining the award value for the NEOs based on the market data and individual factors as described above, the Compensation Committee granted 70% of the value in the form of RPSRs and 30% in the form of RSRs to provide retention value to ensure sustainability and achievement of business goals over time. The Committee determined that this long-term incentive mix would appropriately motivate and reward the NEOs to achieve our long-term objectives and further reinforce the link between their interests and the interests of our shareholders. The RPSRs are paid following the completion of the 2014-2016 performance period if goals are met. The RSRs vest 100% after three years. Vesting for termination due to death, disability, or retirement is discussed in the Terms of Equity Awards section on page 53. For the 2014 grant, dividends accrue on both RPSR and RSR awards earned and will be paid upon payment of the RPSR or RSR. The Compensation Committee evaluates RPSR performance requirements each year to ensure they are aligned with our objectives. For the 2014 grant, the Compensation Committee determined that for the NEOs, performance would continue to be measured in terms of relative TSR as it provides the most direct line of sight to shareholder value creation. TSR is measured by comparing cumulative stock price appreciation with reinvestment of dividends over a three-year period to the Performance Peer Group (50% of award) and to the S&P Industrials (50% of award), which comprises companies within the S&P 500 classified as Industrials, reflecting the range of similar investment alternatives available to our shareholders. To smooth volatility in the market, the TSR calculation is based on the average of the 30 calendar days immediately prior to the start of the performance period and the last 30 calendar days of the performance period. Beginning with 2012 grants, we reduced the maximum payout from 200% to 150% of the original award granted. Shares that are paid out under an RPSR award granted to the executive in 2014 can vary from 0% to 150% of the original RPSR award granted. The maximum payout is capped at 100% if the absolute TSR is negative, even if the relative TSR would have resulted in a higher score. RPSR awards may be paid in shares, cash or a combination of shares and cash; however, we have chosen to pay our awards in shares. 38 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS | KEY COMPONENTSOFOUR PROGRAMS Recently Completed RPSR Performance Period (2012 – 2014) In February 2012, when granting RPSRs, the Compensation Committee selected relative TSR as the performance metric for the awards and established the performance criteria in the table below. In February 2015, the Compensation Committee reviewed performance for the January 1, 2012 to December 31, 2014 RPSR performance period.      Percentile Required to Score  Metric/Goal    Weighting    0%    100%   150%    2014 Actual Performance *  Relative TSR - Performance Peer Group    50%    25th    50th   80th    100th  Relative TSR - S&P Industrials    50%    25th    50th   80th    94th * On September 27, 2013, SAIC, Inc. (SAI) spun off its services business into Science Applications International Corporation and renamed the parent company Leidos Holdings, Inc., both publicly traded companies. The legacy SAI publicly traded company no longer exists in its prior form. We combined the two publicly traded companies, Science Applications International Corporation and Leidos Holdings, Inc., as a proxy for the legacy company, to calculate an implied SAI TSR for outstanding LTIP grants awarded in 2012. Decisions for 2014 Based on 2012 - 2014 TSR performance, we ranked first against the Performance Peer Group and were in the 100th percentile. We were in the 94th percentile of the S&P Industrials. The combined weighted score generated an overall performance score of 150%. In early 2015, the NEOs received payouts in stock with respect to the performance awards that were granted in February 2012 for the three-year performance period ending December 31, 2014. These awards were paid at 150% of the target number of shares initially awarded.  Other Benefits This section describes other benefits the NEOs receive. These benefits are not performance related and are designed to provide a competitive package for purposes of attracting and retaining the executive talent needed to achieve our business objectives. These benefits include retirement benefits, certain perquisites and severance arrangements. Retirement Benefits We maintain tax-qualified retirement plans (both defined benefit pension plans and defined contribution savings plans) that cover most of our workforce, including the NEOs. We also maintain nonqualified retirement plans that are available to our NEOs, which are designed to restore benefits that were limited under the tax-qualified plans or to provide supplemental benefits. Compensation, age and years of service factor into the amount of the benefits provided under the plans. Thus, the plans are structured to reward and retain employees of long service and recognize higher performance levels as evidenced by increases in annual pay. Additional information about these retirement plans and the NEO benefits under these plans can be found in the Pension Benefits Table and Nonqualified Deferred Compensation Table. The Compensation Committee assesses aggregate benefits available to the NEOs and has previously imposed an overall cap, generally limited to no more than 60% of final average pay, on pension benefits for the NEOs (except for small variations due to contractual restrictions under the plans). Mr. Bush voluntarily agreed to reduce his cap to 50% of final average pay. In addition, the defined benefit nonqualified supplemental retirement plans in which our NEOs participate were frozen as to pay and service as of December 31, 2014. Retiree Medical Arrangement The Special Officer Retiree Medical Plan (SORMP) was closed to new participants in 2007. NEOs who are vested participants in the SORMP are entitled to retiree medical benefits and life insurance pursuant to the terms of the Plan. A participant becomes vested if he or she has either five years of vesting service as an elected officer or 30 years of total service with the Company and its affiliates. A vested participant can commence SORMP benefits at retirement before age 65 if he or she has attained age 55 and 10 years of service. The estimated cost of the SORMP benefit reflected in the Termination Payment Table is theincreased present value of the estimated cost to provide futureNEO’s pension plan benefits using actuarial calculationsmandatory SEC assumptions (see the descriptions of these plans under the Pension Benefits table on page 56). The amount accrued in each year differs from the amount accrued in prior years due to an increase in age, service and assumptions. Ms. Mills, Mr. Vicepay (salary and Ms. Flach are not eligible for SORMP benefits.bonus). The aggregate change in actuarial present value of accumulated benefits is a negative amount for Ms. Flach (-$5,874,072) due to her attainment of an early retirement milestone, which eliminates double counting of benefits in the Northrop Grumman NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|49   NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 39  COMPENSATION DISCUSSION AND ANALYSIS | KEY COMPONENTSOFOUR PROGRAMS COMPENSATION TABLES  |  SUMMARY COMPENSATION TABLE   Perquisites Our NEOs are eligible for certain limited executive perquisites that include financial planning, income tax preparation, physical exams and personal liability insurance. While almost all other executive perquisites have been eliminated, the Compensation Committee believes the remaining perquisites are common within the competitive market for total compensation packages for executives and are useful in attracting, retaining and motivating talented executives. Perquisites provided to the NEOs in 2014 are detailed in the Summary Compensation Table. Security Arrangements Given the nature of our business, we maintain a comprehensive security program. As a component of that program, we provide residential and/or travel protection that we consider necessary to address our security requirements. In selecting the level and form of protection, we and the Board consider both security risks faced by those in our industry in general and security risks specific to our Company and its individuals. In 2010, we received specific information from Federal law enforcement officials that led us to conclude that there were threats to the Company and its principals. Based on that information and an ongoing dialogue with law enforcement officials, the Board has required that Mr. Bush and certain NEOs receive varying levels of residential and travel protection. Since we require this protection under a comprehensive security program and it is not designed to provide a personal benefit (other than the intended security), we do not view these security arrangements as compensation to the individuals. We report these security arrangements as perquisites as required under applicable SEC rules. In addition, we would report them as taxable compensation to the individuals if they were not excludable from income as working condition fringe benefits under Internal Revenue Code Section 132. The Board has determined that the CEO should avoid traveling by commercial aircraft for purposes of security, rapid availability and communications connectivity during travel, and should use Company-provided aircraft for all air travel. If, as a result, the CEO uses Company-provided aircraft for personal travel, the costs of such travel are imputed as income and are subject to the appropriate tax reporting according to Internal Revenue Code regulations. We regularly review the nature of the threat and associated vulnerabilities with law enforcement and security specialists and will continue to revise our security program as appropriate. Severance Benefits We maintain the Severance Plan for Elected and Appointed Officers of Northrop Grumman Corporation (Severance Plan), which is available to our NEOs (other than the CEO) who qualify and are approved to receive such benefits. Mr. Bush is not eligible for any severance plan, program or policy of Northrop Grumman. The purpose of the Severance Plan is to help bridge the gap in an executive’s income and health coverage during a period of unemployment following termination. We do not maintain any change in control severance plans. In addition, we do not provide excise tax gross-ups for any payments received upon termination after a change in control. Upon a “qualifying termination” (defined below) the Company will provide severance benefits to eligible NEOs under the Severance Plan. Provided the NEO signs a release, he or she will receive: (i) a lump sum severance benefit equal to one and one-half times annual base salary and target bonus, (ii) a prorated performance bonus, (iii) continued medical and dental coverage for the severance period, (iv) income tax preparation/financial planning fees for the year of termination and the following year and (v) outplacement expenses up to 15% of salary, all subject to management approval. The cost of providing continued medical and dental coverage is based upon current premium costs. The cost of providing income tax preparation and financial planning is capped at $15,000 for the year of termination and $15,000 for the year following termination. A “qualifying termination” means one of the following: — involuntary termination, other than for cause or mandatory retirement; or   — election to terminate in lieu of accepting a downgrade to a non-officer position (i.e., good reason) Electronic Systems Executive Pension Plan (ESEPP) and Officers Supplemental Executive Retirement Program (OSERP) that had been required by SEC guidance. In accordance with SEC rules, this negative amount is reported as $0 in the above table. Mr. Bedingfield was hired after the Company’s defined benefit pension plans were closed to new entrants and as a result he does not participate in any defined benefit pension plans. There were no above-market earnings in the nonqualified deferred compensation plans (see the descriptions of these plans under the Nonqualified Deferred Compensation table on page 60). Change in Control Benefits We do not maintain separate change in control programs or agreements. The only change in control (6) Amounts include, as applicable, (a) the value of perquisites and personal benefits, available(b) basic life insurance premiums, (c) matching contributions through the Northrop Grumman Foundation made to eligible educational institutions and to disaster relief organizations during qualifying disasters, and tonon-profit organizations under a Company program, (d) Company contributions to defined contribution and deferred compensation plans (the Northrop Grumman Savings Plan, the NEOs are those described in the terms and conditions of the 2001 Long-Term Incentive StockSavings Excess Plan (2001 Plan) and the 2011 Long-Term Incentive Stock Plan (2011Officers Retirement Account Contribution Plan). 40 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION DISCUSSION AND ANALYSIS | KEY COMPONENTSOFOUR PROGRAMS  Policies, and Procedures Stock Ownership Guidelines We maintain stock ownership guidelines for our NEOs to further promote alignment of management and shareholder interests. These guidelines require that the CEO and other NEOs own Company stock denominated as a multiple of their annual salaries that can be accumulated over a five-year period from the date of hire or promotion into an elected officer position. The guidelines are as follows:  Position Stock Value as a Multiple of Base Salary         Chairman, CEO and President 7x base salary  NEOs 3x base salary Shares that satisfy the stock ownership guidelines include: — Company stock owned outright; — RSRs, whether or not vested; and — the value of shares held in the Northrop Grumman Savings Plan or Northrop Grumman Financial Security and Savings Program. Stock options and unvested RPSRs are not included in calculating ownership until they are converted to actual shares owned. The Compensation Committee reviews compliance with our stock ownership guidelines on an annual basis. As of December 31, 2014, the CEO and other NEOs were in compliance with the ownership guidelines. The Compensation Committee continues to monitor compliance and will conduct a full review again in 2015. Stock Holding Requirements We have a holding period requirement for payouts from long-term incentive grants, further emphasizing the importance of sustainable performance and appropriate risk-management behaviors. Under this policy, NEOs are required to hold, for a period of three years, 50% of their net after-tax shares received from RSR vestings, RPSR payments and stock option exercises. These restrictions will generally continue following termination and retirement; however, shares acquired from option exercises or RPSR payments following termination or retirement occurring more than one year after separation from the Company will not be subject to the holding requirement. Anti-Hedging and Pledging Policy Company policy prohibits our NEOs and other elected officers from engaging in hedging transactions(e) with respect to Company stock or pledging Company stock. Mr. Bedingfield, aRecoupment Policygross-up During 2014, the Board revised the Company’s recoupment policy of $1,042 to expand the circumstances under which, and the employees from whom, the Company may recoup incentive compensation and also to provide for certain disclosure in the event of recoupment, consistent with SEC and other legal requirements. The policy applies to a three-year look back of performance-based short or long-term, cash or equity incentive payments. The policy provides that: — the Board has discretion to recoup incentive compensation paid to an elected officer in the event of a restatement or if an elected officer engages in illegal conduct that causes significant financial or reputational harm to the Company; — the Board has discretion to recoup incentive compensation paid to the elected officer in the event the elected officer fails to report such misconduct of another, or is grossly negligent in fulfilling his or her supervisory responsibilities to prevent such misconduct; and — the Chief Executive Officer has discretion to recoup under similar circumstances incentive compensation provided to non-elected officers or other employees. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 41  COMPENSATION DISCUSSION AND ANALYSIS | KEY COMPONENTSOFOUR PROGRAMS Risk Management The Compensation Committee annually reviews the design of our compensation program and together with the independent compensation consultant assesses its risk. Based on the independent compensation consultant and the Compensation Committee’s review of our compensation programs, practices, and policies, the Compensation Committee determined that the risk profile is appropriate and substantial risk management features are incorporated into our compensation program, including: — overlapping three-year cliff vested LTIP grants that are tied to multiple performance periods and encourage focus on sustainable and continual performance improvement; — capped annual and performance-based long-term incentive payouts; — three-year holding periods for long-term incentive grants and ownership guidelines that emphasize the importance of sustainable performance and encourage management behaviors aligned with the long-term interests of shareholders; and — policies that allow for recoupment of short and long-term incentive payments and prohibit NEOs and other elected officers from engaging in hedging transactions or pledging Company stock. Grant Date for Equity Awards Annual grant cycles for equity awards occur in February at the same time as salary increases and annual incentive grants. This timing allows the Compensation Committee to make decisions on three compensation components at the same time, utilizing a total compensation philosophy. The Compensation Committee reviews and approves annual long-term incentive grants during its scheduled meeting, which occurs following announcement of our year-end financial results. Equity grants may also be granted on an interim basis throughout the year for special situations, such as new executive hires, promotions, or retention. Tax Deductibility of Pay Section 162(m) of the Internal Revenue Code generally limits the annual tax deduction to $1 million per person for compensation paid to the Company’s CEO and the next three highest-paid NEOs (other than the CFO). Qualifying performance-based compensation is not subject to the deduction limit. The Company’s annual incentive payments and equity-based incentive compensation are generally designed to qualify as performance-based compensation under this definition and to be fully deductible. Our RSR grants are not considered performance-based under Section 162(m) and, as such, may not be deductible. Since the CEO’s salary in 2014 was above the $1,000,000 threshold, a portion of his salary and his perquisites are not deductible by the Company. Say-on-Pay Our shareholders are asked to approve on an annual, advisory basis, the compensation paid to our NEOs. We regularly engage with our shareholders to understand their concerns regarding executive compensation. Our shareholders expressed a preference for full-value shares as they are less dilutive and provide stronger alignment with shareholder interests. In 2012,cover costs incurred as a result of feedback from our shareholders, the Compensation Committee eliminated the use of stock options and approved a mix of LTIP awards to NEOs composed of 70% RPSRs and 30% RSRs. 42 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION TABLES | SUMMARY COMPENSATION TABLE 2014 Summary Compensation Table   Name & Principal   Position    Year      Salary (1) ($)      Bonus ($)     Stock Awards (2) ($)      Option Awards ($)     Non-Equity Incentive Plan Compensation (3) ($)     Change in Pension Value and Non- Qualified Deferred Compensation Earnings (4) ($)      All Other Compensation (5) ($)      Total ($)     Wesley G. Bush      2014         1,524,231            0      9,000,007            0      3,350,700        6,890,754         1,030,011         21,795,703      Chairman, Chief Executive Officer and President      2013         1,500,023            0      8,000,025            0      3,240,000        4,372,961         1,543,403         18,656,412           2012         1,500,120            0      8,000,011            0      4,117,500        8,939,532         1,902,181         24,459,344        James F. Palmer      2014         866,154            0      3,500,061            0      1,270,000        2,390,103         197,798         8,224,116      Corporate Vice President and Chief Financial Officer      2013         850,016            0      5,499,964            0      1,224,000        1,210,323         182,137         8,966,440           2012         850,081            0      3,500,023            0      1,560,000        1,707,827         183,098         7,801,029        Gloria A. Flach (6)      2014         762,115            0      3,500,061            0      1,117,000        6,457,588         33,951         11,870,715      Corporate Vice President and President, Electronic Systems      2013         738,462            0      3,499,980            0      1,080,000        2,819,117         88,309         8,225,868        Linda A. Mills      2014         787,116            0      3,500,061            0      1,153,000        3,667,442         123,101         9,230,720      Corporate Vice President, Operations      2013         775,010            0      3,499,980            0      1,116,000        1,963,264         145,064         7,499,318           2012         775,050            0      4,000,009            0      1,420,000        3,321,233         138,917         9,655,209        Thomas E. Vice (6)      2014         762,115            0      3,500,061            0      1,117,000        3,616,917         160,478         9,156,571      Corporate Vice President and President, Aerospace Systems      2013         742,308            0      3,499,980            0      1,080,000        1,501,337         397,053         7,220,678      (1) This column includes amounts that were deferred under the qualified savings and nonqualified deferred compensation plans. (2) The dollar value shown in this column is equal to the total grant date fair value of RPSRs and RSRs granted during the periods presented. The Company did not grant stock options in 2014. For assumptions used in calculating the grant date fair value, see the discussion in Note 13 of the Company’s 2014 Form 10-K, adjusted to exclude forfeitures. (3) These amounts were paid pursuant to the Company’s annual incentive plan. This column includes amounts that were deferred under the qualified savings and nonqualified deferred compensation plans. (4) The amounts in this column relate solely to the increased present value of the executive’s pension plan benefits using mandatory SEC assumptions (see the descriptions of these plans under the Pension Benefits table). There were no above-market earnings in the nonqualified deferred compensation plans (see the descriptions of these plans under the Nonqualified Deferred Compensation table). The amount accrued in each year differs from the amount accrued in prior years due to an increase in age, service and final average pay (salary and bonus). The change in pension value is also highly sensitive to changes in the interest rate used to determine the present value of the payments to be made over the life of the executive. As an example, of the $6,890,754 change in pension value in 2014 for Mr. Bush, approximately $4,000,000 was due to lower discount rates used in 2014. (5) All Other Compensation amounts include, as applicable, (a) the value of perquisites and personal benefits and (b) the amount of Company contributions to defined contribution plans (the Northrop Grumman Savings Plan and the Savings Excess Plan). Perquisites and Personal Benefits - Perquisites and other personal benefits provided to certain NEOs include security, travel-related perquisites, including use of Company aircraft or ground transportation services for personal travel and travel and incidental expenses for family members accompanying the NEO while on travel, financial planning/income tax preparation services, insurance premiums paidan administrative error by the Company onCompany. Where the NEO’s behalf and other nominal perquisites or personal benefits (including executive physicals and commemorative gifts). NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 43  COMPENSATION TABLES | SUMMARY COMPENSATION TABLE The cost of any categoryvalue of the listeditems reported in a particular category for a NEO exceeded $10,000 in 2017 (other than perquisites and personal benefits, did not exceed the greater of $25,000 or 10% of total perquisiteswhich are subject to different thresholds as described below), those items are identified and personal benefits for any NEO in 2014, except for the following: (i)quantified below. Perquisites and Personal Benefits - Perquisites and other personal benefits provided to certain NEOs are as follows: security, travel-related perquisites, including use of Company aircraft or ground transportation services for personal travel (including travel and incidental expenses for family members accompanying the NEO while on travel), financial planning/income tax preparation services, insurance premiums paid by the Company on the NEO’s behalf, executive physicals and other nominal perquisites or personal benefits. The cost of any category of the listed perquisites and personal benefits did not exceed the greater of $25,000 or 10% of total perquisites and personal benefits for any NEO in 2017, except for the following: i. Mr. Bush,Bush: costs attributable to security protection ($781,433)399,545), which includes personal travel on Company aircraft consistent with the Company’s security program ($190,590)172,353), (ii) for ii. Mr. Palmer,Bedingfield: costs attributable to personal travel on Company aircraft ($61,525), and (iii) for Mr. Vice, costs attributable to financial planning/income tax preparation in 2013 and 2014 ($29,999). The amount of security costs reported for Mr. Bush has been reduced by $41,105, which reflects the portion for the security perquisite that Mr. Bush reimbursed to the Company related to personal travel on the corporate aircraft by him and his family members. We determine the incremental cost for perquisites and personal benefits based on the actual costs or charges incurred by the Company for the benefits. The Company calculates the value of personal use of Company aircraft based on the incremental cost of each element. Fixed costs that would be incurred in any event to operate Company aircraft (e.g., aircraft purchase costs, maintenance not related to personal trips and flight crew salaries) are not included. As discussed above under “Security Arrangements,” the Company provides NEOs with certain residential and personal security protection due($61,657) and iii. Mr. Pamiljans: relocation expenses ($850,000), which were in lieu of all benefits he would have been entitled to receive under the nature of our business and security threat information. The amounts reflected in the “All Other Compensation” column include expenses for certain residential and personal security that are treatedCompany’s relocation policy. The amount of security costs reported for Mr. Bush has been reduced by $72,719, which reflects the portion of the security perquisite that Mr. Bush reimbursed to the Company for himself and his family related to personal travel on the corporate aircraft ($37,557) and other transportation ($35,162). Security Protection - As discussed in “Key Components - Security Arrangements,” the Company provides NEOs with certain residential and travel security protection due to the nature of our business and security threat information. The amounts reflected in the “All Other Compensation” column include expenses for certain residential and travel security that we treat as perquisites under relevant SEC guidance, even though the need for such expenses arises from the risks attendant with their positions with the Company. The Company calculates the cost of travel security coverage here based on the hourly rates and overhead fees charged directly to the Company by the firms providing security personnel. If Company security personnel are used, their hourly rates are used to calculate the cost of coverage. Use of Company Aircraft - We determine the incremental cost for perquisites and personal benefits based on the actual costs or charges incurred by the Company for the benefits. The Company calculates the value of personal use of Company aircraft based on the incremental cost of each element. Fixed costs that would be incurred in any event to operate Company aircraft (e.g., aircraft purchase costs, maintenance not related to personal trips and flight crew salaries) are not included. 50 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  COMPENSATION TABLES  |  SUMMARY COMPENSATION TABLE Contributions to Plans - In 2014,2017, we made the following contributions to Northrop Grumman defined contribution and deferred compensation plans (the Northrop Grumman Savings Plan, andthe Savings Excess Plan and the Officers Retirement Account Contribution Plan): Mr. Bush $190,569, Mr. Palmer $83,580, Ms. Flach $10,367, Ms. Mills $76,063, and Mr. Vice $75,275.   (6)  Name Company Contributions ($) Mr. Bush 476,398 Mr. Bedingfield 242,663 Ms. Flach 162,296 Mr. Pamiljans 55,762 Ms. Warden 166,329  (7) Ms. Flach retired from the Company on December 31, 2017.  (8) Mr. Pamiljans was not an NEO for 2016 and Mr. Vice were not named executive officers for 2012;2015; therefore, data for this yearthese years is not applicable.reflected.   44 INOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT|51  COMPENSATION TABLES  |  GRANTSOF PLAN-BASED AWARDS TABLE     2014 2017 Grants of Plan-Based Awards           Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1)     Estimated Future Payouts Under Equity Incentive Plan Awards (2)(3)     All Other Stock Awards: Number of Shares of Stock or Units (4) (#)       All Other Option Awards: Number of Securities Underlying Options (2) (#)   Exercise or Base Price of Option Awards ($/Sh)   Grant Date Fair Value of Stock and Option Awards (2)(5)           Estimated Future Payouts Under Non-Equity  Incentive Plan Awards (1)             Estimated Future Payouts Under Equity Incentive Plan Awards (2)     All Other Stock Awards: Number of Shares of Stock or Units (3) (#)   Grant  Date Fair  Value of  Stock  Awards (4)  ($)  Name     Grant Type     Grant Date     Threshold ($)     Target ($)     Maximum ($)     Threshold (#)     Target (#)     Maximum (#)     Grant Type     Grant Date     Threshold ($)     Target ($)     Maximum ($)     Threshold (#)     Target (#)     Maximum (#)       Wesley G. Bush   Incentive Plan       0        2,295,000        4,590,000                      Incentive Plan         —       2,795,400       5,590,800             RPSR     2/19/2014              0        54,387        81,581              6,299,953        RPSR       2/17/2017             —       30,504       45,756         7,000,058   RSR     2/19/2014        22,680        2,700,054        RSR       2/17/2017                               12,756       2,999,911   James F. Palmer   Incentive Plan       0        870,000        1,740,000                  RPSR     2/19/2014              0        21,151        31,727              2,450,040      RSR     2/19/2014        8,820        1,050,021      Kenneth L. Bedingfield     Incentive Plan         —       795,000       1,590,000               RPSR       2/17/2017             —       9,914       14,871         2,275,064     RSR       2/17/2017                               4,146       975,042   Gloria A. Flach   Incentive Plan       0        765,000        1,530,000                      Incentive Plan         —       810,000       1,620,000             RPSR     2/19/2014              0        21,151        31,727              2,450,040        RPSR       2/17/2017             —       10,676       16,014         2,449,930   RSR     2/19/2014        8,820        1,050,021        RSR       2/17/2017                               4,465       1,050,063   Linda A. Mills   Incentive Plan       0        790,000        1,580,000                  RPSR     2/19/2014              0        21,151        31,727              2,450,040      RSR     2/19/2014        8,820        1,050,021      Thomas E. Vice   Incentive Plan       0        765,000        1,530,000                  RPSR     2/19/2014              0        21,151        31,727              2,450,040      RSR     2/19/2014        8,820        1,050,021      Janis G. Pamiljans     Incentive Plan         —       659,263       1,318,526               RPSR       2/17/2017             —       1,786       3,572         420,025     RSR       2/17/2017                   765       179,910     RPSR       4/1/2017             —       9,395       14,093         2,029,921     RSR       4/1/2017                               3,789       870,085   Kathy J. Warden     Incentive Plan         —       810,000       1,620,000               RPSR       2/17/2017             —       10,676       16,014         2,449,930     RSR       2/17/2017                               4,465       1,050,063     (1) Amounts in these columns showRepresents the potential range of payouts that were possible under the Company’s annual incentive plan. The actual bonusesAIP. Actual payouts are shown in the Summary Compensation Table column entitled “Non-Equity“Non-Equity Incentive Plan Compensation.”Compensation” on page 49.   (2) The Company did not grant stock options in 2014. (3) These amounts relate to RPSRs granted in 20142017 under the 2011 Plan. Each RPSR represents the right to receive a share of the Company’s common stock upon vesting of the RPSR. The RPSRs are earned based on relative TSR over a three-year performance period commencing January 1, 2014 and ending December 31, 2016. The payout will occur in early 2017 and will range from 0% to 150% of the rights awarded.vesting. Earned RPSRs may be paid in shares, cash or a combination of shares and cash. An executive must remain employed throughcash at the performance period to earn an award, although pro-rata vesting results if employment terminates earlier due to early retirement, death or disability. The award will fully vest if the executive terminates due to normal retirement. DividendsCompensation Committee’s discretion. Dividend equivalents accrue on RPSR awards earned and will be paid upon paymentdistribution of the RPSR. See the Severance Program section for treatment of RPSRs in these situations and upon a change in control.RPSRs. For NEOs who were elected officers at the time of grant, RPSRs are earned based on relative TSR and the achievement of Cumulative FCF* targets over a three-year performance period commencing January 1, 2017 and ending December 31, 2019. The payout will occur in early 2020 and will range from 0% to 150% of the rights awarded. The RPSRs granted to Mr. Pamiljans in February 2017 while he was serving as an appointed officer are earned based on the achievement of metric targets weighted 50% to pension-adjusted return on net assets and 50% to Cumulative FCF* over a three-year performance period. The payout will occur in early 2020 and will range from 0% to 200% of the rights awarded. An executive must remain employed through the performance period to earn an award, although prorated vesting results if employment terminates earlier due to early retirement, death or disability. The award will fully vest if the executive terminates due to a change in control qualifying termination or normal retirement (mandatory at age 65). See the Termination Payments and Benefits section for treatment of RPSRs in these situations and upon a change in control.   (4)(3) These amounts relate to RSRs granted in 20142017 under the 2011 Plan. Each RSR represents the right to receive a share of the Company’s common stock upon vesting of the RSR. An executive must remain employed through the vesting period to earn an award, although full vesting results from death, disability, qualifying termination or mandatory retirement. The award is prorated if the executive terminates due to early retirement.vesting. Earned RSRs may be paid in shares, cash or a combination of shares and cash. Dividendscash at the Compensation Committee’s discretion. Dividend equivalents accrue on RSR awards earned and will be paid upon paymentdistribution of the RSR. See the Severance Program section for treatment of RSRs in these situations and upon a change in control.RSRs.   52 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT (5)  COMPENSATION TABLES  |  GRANTSOF PLAN-BASED AWARDS TABLE RSRs generally vest three years from the date of grant. An executive must remain employed through the vesting period to earn an award, although full vesting results if employment terminates earlier due to death, disability, a change in control qualifying termination or normal retirement (mandatory at age 65). The award is prorated if the executive terminates due to early retirement. See the Termination Payments and Benefits section for treatment of RSRs in these situations and upon a change in control. The RSRs granted to Mr. Pamiljans in April 2017 in connection with his promotion vest one year from the date of grant on April 1, 2018. Mr. Pamiljans must remain employed through the vesting period to earn the award, although full vesting will result if his employment terminates earlier due to death, disability or a change in control qualifying termination. (4) For assumptions used in calculating the grant dateThe fair value per share, see the discussionof awards was computed in Note 13 of the Company’s 2014 Form 10-K, adjusted to excludeaccordance with FASB ASC Topic 718 disregarding potential forfeitures.   NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT I| 4553  COMPENSATION TABLES  |  OUTSTANDING EQUITY AWARDS TABLE     Outstanding Equity Awards at 20142017 Fiscal Year End       Option Awards          Stock Awards     Name                   Number of Securities Underlying Unexercised Options (#) Exercisable (1)                                           Number of Securities Underlying Unexercised Options (#) Unexercisable (1)                                                 Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)                                          Grant Date                  Option Exercise Price ($)                      Options Expiration Date                                 Number of Shares or Units of Stock that Have Not Vested (#) (2)                                                Market Value of Shares or Units of Stock that Have Not Vested ($) (3)                                                      Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that Have Not Vested (#) (4)                                                                          Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights that Have Not Vested ($) (3)                                              Wesley G. Bush     0        0        0        2/19/2014                 22,680         3,342,805         54,387         8,016,100        0        0        0        2/20/2013                 36,342         5,356,447         100,411         14,799,577        0        0        0        2/15/2012                 40,235         5,930,237         102,546         15,114,255        0        0        0        2/15/2011                               67,415         9,936,297         0         0      James F. Palmer     0        0        0        2/19/2014                 8,820         1,299,980         21,151         3,117,446        0        0        0        9/17/2013                 20,253         2,985,090         0         0        0        0        0        2/20/2013                 15,899         2,343,354         43,930         6,474,843        0        0        0        2/15/2012                 17,603         2,594,506         44,864         6,612,505        0        0        0        2/15/2011                               16,853         2,483,964         0         0      Gloria A. Flach     0        0        0        2/19/2014                 8,820         1,299,980         21,151         3,117,446        0        0        0        2/20/2013                 15,899         2,343,354         43,930         6,474,843        0        0        0        7/19/2012                 15,356         2,263,321         0         0        0        0        0        2/15/2012                 7,544         1,111,910         19,227         2,833,868        34,424        0        0        2/15/2011         63.22         2/15/2018           8,089         1,192,238         0         0        29,832        0        0        2/16/2010         54.46         2/16/2017             0         0         0         0      Linda A. Mills     0        0        0        2/19/2014                 8,820         1,299,980         21,151         3,117,446        0        0        0        2/20/2013                 15,899         2,343,354         43,930         6,474,843        0        0        0        12/18/2012                 7,298         1,075,652         0         0        0        0        0        2/15/2012                 17,603         2,594,506         44,864         6,612,505        32,544        0        0        2/15/2011         63.22         2/15/2018             15,168         2,235,612         0         0      Thomas E. Vice     0        0        0        2/19/2014                 8,820         1,299,980         21,151         3,117,446        0        0        0        2/20/2013                 15,899         2,343,354         43,930         6,474,843        0        0        0        7/19/2012                 7,678         1,131,660         0         0        0        0        0        2/15/2012                 12,070         1,778,997         30,764         4,534,306        14,344        0        0        2/15/2011         63.22         2/15/2018             20,222         2,980,521         0         0      Name      Grant Date        Number of Shares or Units of Stock that Have Not Vested (1) (#)      Market Value of Shares or Units of Stock that Have  Not Vested (2) ($)        Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (3) (#)              Equity Incentive          Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (2) ($)   Wesley G. Bush            2/17/2017              12,756        3,914,944        30,504        9,361,983              2/17/2016              16,478        5,057,263        36,316        11,145,744              2/18/2015              16,745        5,139,208        41,147        12,628,426   Kenneth L. Bedingfield            2/17/2017              4,146        1,272,449        9,914        3,042,706              2/17/2016              4,943        1,517,056        10,895        3,343,784              2/18/2015              5,582        1,713,172        11,837        3,632,894   Gloria A. Flach (4)            2/17/2017              4,465        1,370,353        10,676        3,276,571              2/17/2016              5,767        1,769,950        12,710        3,900,826              2/18/2015              6,512        1,998,598        13,810        4,238,427   Janis G. Pamiljans            4/1/2017              3,789        1,162,882        9,395        2,883,419              2/17/2017              765        234,786        1,786        548,141              2/17/2016              2,362        724,921        2,307        708,041              2/18/2015              987        302,920        2,302        706,507   Kathy J. Warden            2/17/2017              4,465        1,370,353        10,676        3,276,571              2/17/2016              5,767        1,769,950        12,710        3,900,826              2/18/2015              5,954        1,827,342        12,626        3,875,046     (1) The Company has not granted stock options since 2011 and all outstanding stock option grants are vested. (2) Outstanding RSRs vest as follows: RSRs granted in 2011 will fully vest four years from date of grant. RSRs granted in 2012 through 2014 will fullygenerally vest three years from date of grant. Mr. Palmer’s outstandingPamiljans’ April 1, 2017 RSR promotion grant vests on April 1, 2018. Mr. Pamiljans’ February 17, 2016 RSR grant is comprised of an annual grant (989 shares) and a retention grant of 20,253 shares(1,373 shares) and vests on March 1, 2015.February 17, 2018.   (3)(2) The value listed is based on the closing price of the Company’s stock of $147.39$306.91 on December 31, 2014,29, 2017, the last trading day of the year.   (4)(3) The 2014 RPSR award for each NEO vestsOutstanding RPSRs granted in 2017, 2016 and 2015 generally vest based on performance for the three-year performance period ending on December 31, 2016. The 20132019, 2018 and 2017, respectively. Mr. Pamiljans’ 2016 RPSR awardgrant vests based on performance for the three-year2015-2017 performance period ending on December 31, 2015.2017. All RPSR grants are subject to the Compensation Committee’s approval of the performance-based earnout percentage applicable to the grant following the end of the performance period. The 2012 RPSR award vested based on performance2015 RPSRs and Mr. Pamiljans’ 2016 RPSRs were distributed in February 2018 upon the Compensation Committee’s approval. Mr. Pamiljans was an appointed officer at the time his 2015 and 2016 RPSRs were granted and his payout reflects the performance-based earnout percentage applicable to awards for appointed officers. The actual number of shares distributed to the three-year performance period endedNEOs in February 2018 as a result of the vesting RPSRs was as follows:   Name Actual Shares Distributed                 (#)                 Mr. Bush 61,721                 Mr. Bedingfield 17,756                 Ms. Flach 20,715                 Mr. Pamiljans 6,038                 Ms. Warden 18,939                 (4) Ms. Flach retired from the Company on December 31, 2014.2017. In each case, settlementaccordance with the retirement-related provisions established at the time of grant, a prorated portion of the award isoutstanding grants above will be paid out based on the number of days in the applicable vesting period that Ms. Flach was employed with the Company. Ms. Flach’s prorated RPSRs will be distributed following the applicable performance period and subject to certification by the Compensation Committee.performance factor. Because Ms. Flach qualifies as a “specified employee” for purposes of Section 409A of the Internal Revenue Code, her prorated RSRs will be distributed six months from the date of her retirement.   4654 I|NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION TABLES  | OPTION EXERCISESAND  STOCK VESTED TABLE   2017 Stock Vested   2014 Option Exercises and Stock Vested    Option Awards (1)      Stock Awards (1)        Stock Awards (1) (2) Name    Number of Shares Acquired on Exercise (#)      Value Realized on Exercise ($)      Number of Shares Acquired on Vesting (#)      Value Realized on Vesting ($)        Number of Shares Acquired on Vesting (#)        Value Realized on Vesting         ($)           Wesley G. Bush      95,621         5,480,996         107,189         12,760,952           103,173        25,130,821           James F. Palmer      165,438         10,861,570         72,734         8,715,519      Kenneth L. Bedingfield      7,601        1,851,435           Gloria A. Flach      36,980         3,123,570         12,861         1,531,163           40,123        9,773,277           Linda A. Mills      213,073         15,361,933         24,117         2,871,143      Thomas E. Vice      —         —         16,076         1,913,906      Janis G. Pamiljans      5,637        1,373,143           Kathy J. Warden      34,391        8,376,940             (1) Number of shares and amounts reflected in the table are reported on an aggregate basis and do not reflect shares that were sold or withheld to pay withholding taxes and/ortaxes. (2) Consists of RSRs and RPSRs granted in 2014. The 2014 RSRs vested three years from the option exercise price.date of grant and the 2014 RPSRs vested based on the three-year performance period ended on December 31, 2016 and were distributed in February 2017.   NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT I| 4755  COMPENSATION TABLES  |  PENSION BENEFITS      20142017 Pension Benefits   The following table provides information about the pension plans in which the NEOs participate (described in more detail on the following pages), including the present value of each NEO’s accumulated benefits as of December 31, 2014.2017, calculated pursuant to SEC specifications for this table. Our policy generally limits an executive’s total benefit under these plans to be no more than 60% of final average pay. Mr. Bush has voluntarily elected to limit his OSERP benefit to no more than 50% of final average pay.     Name   Plan Name    Number of Years         Credited (1)          Service (#)          Present Value of     Accumulated Benefit (2) ($)      Payments         During Last         Fiscal Year ($)     Wesley G. Bush   Pension Plan      12.00         621,294         S&MS Pension Plan      15.67         622,273         ERISA 2      12.00         11,550,452         SRIP      15.67         11,931,507         OSERP      27.67         8,870,123               James F. Palmer   Pension Plan      7.83         273,892         ERISA 2      7.83         1,831,281         CPC SERP      7.83         5,566,600         SRRP      N/A         1,747,236         103,584        Gloria A. Flach   Pension Plan      33.39         1,078,225         ERISA 2      11.50         1,211,381         OSERP      33.42         10,174,976         ESEPP      33.39         5,851,217               Linda A. Mills   S&MS Pension Plan      35.58         1,739,403         SRIP      35.58         11,736,204         CPC SERP      6.92         3,899,277               Thomas E. Vice   Pension Plan      28.17         1,643,479         ERISA 2      28.17         9,600,008         OSERP      28.00         456,794                 Name (1)       Plan Name          Number of Years Credited Service (2) (#)          Present Value of Accumulated Benefit (3) ($)          Payments     During Last     Fiscal Year ($)   Wesley G. Bush     Pension Plan          15.00          816,937          —       S&MS Pension Plan          15.67          733,725          —       ERISA 2          15.00          15,035,377          —       SRIP          15.67          13,986,129          —       OSERP          27.67          8,712,894          —   Gloria A. Flach     Pension Plan          36.39          1,377,858          —       ERISA 2          14.50          2,225,301          —       OSERP          33.42          2,279,385          —       ESEPP          33.39          6,843,298          —   Janis G. Pamiljans     Pension Plan          31.00          1,924,666          —       ERISA 2          31.00          3,430,836          —       OSERP          28.00          82,209          —     Kathy J. Warden       OSERP II          9.33          1,453,584          —     (1) Mr. Bedingfield was hired after the Company’s defined benefit pension plans were closed to new entrants and as a result he does not participate in any defined benefit pension plans. (2) Each NEO’s credited service under OSERP and ESEPP is less than his or her actual service because credited service under these plans stopped as of December 31, 2014. In addition, Mr. Bush’s credited service under four of thehis other plans is less thanbecause of his transfers among those plans due to Company acquisitions. Ms. Flach’s credited service under her other plans is less due to a period of employment before plan eligibility commenced. Each NEO’s actual service of 27.67 years. This is due to his transfer between the plans based on Company acquisitions.as follows: Mr. Bush: 30.67; Ms. Flach: 37.58; Mr. Pamiljans: 30.92; Ms. Warden: 9.33. Ms. Flach’s credited service under each plan is less than her actual service of 34.58 years due to a period of employment before plan eligibility commenced. Ms. Mills’s credited service under the CPC SERP is less than her actual service of 35.58 years. She only receives credited service for purposes of the CPC SERP while she is a CPC member.   (2)(3) Amounts are calculated using the following assumptions:     —·   The NEO retires on the earliest date he/she could receive an unreduced benefit under each plan;     —·   The form of payment is a single life annuity; and     —·   The discount rate is 4.10%3.67% for the Pension Plan, 4.19%3.72% for the S&MS Pension Plan and 4.12%3.68% for all others;other plans; the mortality table is the RP-2014RP-2006 annuitant mortality tabletables projected generationally with an adjusted version of Scale MP-2014MP-2017 (the same assumptions used for the Company’s financial statements). — The value of accumulated benefits for Ms. Flach, in accordance with SEC guidance, includes an overlap of benefits in the OSERP and the EPP which has the effect of overvaluing her benefits. Based on the OSERP rules, the assumed retirement age for Ms. Flach is her age at December 31, 2014. At this age, her EPP benefit is zero, thereby increasing the OSERP benefit. The assumed retirement age for the remaining plans is age 60. Under this assumption, the EPP and the OSERP are both payable. In reality, Ms. Flach will retire under only one retirement age. If we were to provide pension table results under a single retirement date assumption of December 31, 2014, her total number annuity would be $731,185, the present value of which is $12,487,780. This represents a more accurate value of her total benefit rather than the total amount of $18,315,799 shown above.   4856 I|NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION TABLES  |  PENSION BENEFITS      Pension Plans and Descriptions     Most of the pension plans were closed to new hires in 2008. Prior to that time, the Company consolidated the pension plan provisions from diverse Heritage Formulas to a Cash Balance Formula. Over time, the Company also transitioned officers, including NEOs, from SERPs to a deferred compensation plan, called the Officers Retirement Account Contribution Plan. In addition, effective as of December 31, 2014, all final average pay formulas were frozen. Service for final average pay formulas under the ERISA 2, Pension Plan, S&MS Pension Plan and SRIP was frozen as of 2009 or earlier. Service for the CPC SERP, OSERP and ESPP was frozen as of December 31, 2014. Instead, the NEOs began participating, effective January 1, 2015, in a deferred compensation Plan, called the Officers Retirement Account Contribution Plan, along with other Company officers. The pension plans in which NEOs participate are listed below in alphabetical order. Service and pay have been frozen with regards to ESEPP and OSERP plans.   —·   CPC SERP is the Corporate Policy Council (CPC) Supplemental Executive Retirement Program. This plan provides a supplemental pension benefit for certain CPC members. — ERISA 2 is the ERISA Supplemental Program 2. This plan makes participants whole for benefits they lose under the Pension Plan due to certain Internal Revenue Code limits.   —·   ESEPP is the Northrop Grumman Electronic Systems Executive Pension Plan. This plan provides a supplemental pension benefit for certain ES Sector executives. Company officers.   —·   OSERPis the Officers Supplemental Executive Retirement Program. This plan provides a supplemental pension benefit for certain Company officers.   —·   OSERP II is the Officers Supplemental Executive Retirement Program II. This plan provides a pension benefit for certain Company officers. · Pension Plan is the Northrop Grumman Pension Plan. This is a tax qualified pension plan covering a broad base of Company employees.   —·   S&MS Pension Plan is the Northrop Grumman Space & Mission Systems Salaried Pension Plan (former TRW plan). This is a tax qualified pension plan covering a broad base of Company employees.   —·   SRIP is the Northrop Grumman Supplementary Retirement Income Plan (former TRW plan). This plan makes participants whole for benefits they lose under the S&MS Pension Plan due to certain Internal Revenue Code limits. — SRRP is the Supplemental Retirement Replacement Plan. This frozen plan replaced benefits Mr. Palmer forfeited as a result of his commencing employment with the Company.  Pension Plan and S&MS Pension Plan (Tax Qualified Plans)     Due to acquisitions, the Company acquired various pension plans with different types of pension formulas.formulas (Heritage Formulas). These are described in detail in the Heritage Formulas table that follows. Prior to 2005, the Company transitioned the various Heritage Formulas in these plans to a single formula: a Cash Balance formula.Formula. The Cash Balance formulaFormula is a percentage of pay credited to a hypothetical account, which grows with interest. At retirement, the Cash Balance Account is converted to a monthly pension benefit (further information is included in the Cash Balance Formula section below). Except as provided below, the final benefit from each plan is the sum of the two formulas: the Heritage Formula benefit plus the Cash Balance Formula benefit. The following explains the formulas applicable to each NEO:   —·   Mr. Bush and Mr. VicePamiljans receive a benefit under a Heritage Formula and a Cash Balance Formula in the Northrop Grumman Retirement Plan, a subplan of the Pension Plan (NGR Subplan).   —·   Mr. Bush also receives a frozen benefit under a Heritage Formula in the S&MS Pension Plan due to hisTRW-related service. He ceased to be eligible for future service growth under this plan and the SRIP when he began participating in the NGR Subplan.   —·   Due to his date of hire, Mr. Palmer does not receive a benefit under a Heritage Formula; he only receives a benefit under a Cash Balance Formula in the Pension Plan. — Ms. Flach receives a benefit under a Heritage Formula and a Cash Balance Formula in the Northrop Grumman Electronic Systems Pension Plan, a subplan of the Pension Plan (ES Subplan). — Ms. Mills receives a benefit under a Heritage Formula and a Cash Balance Formula in the S&MS Pension Plan.   NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT I| 4957  COMPENSATION TABLES  |  PENSION BENEFITS      Heritage Formulas     The following table summarizes the key features of the Heritage Formulas applicable to the eligible NEOs.     Feature   NGR Subplan   ES Subplan   S&MS Pension Plan Plan Benefit Formula   Final Average Pay x 1.6667% timesPre-July 1, 2003 service   Eligible Pay since 1995 x 2% plus the prior Westinghouse Pension Plan benefit   (Final Average Pay x 1.5% minus Covered Compensation x 0.4%) 0.4%) timesPre- January 1, 2005 service Final Average Pay (1)   Average of highest 3 years of Eligible Pay   Not applicable   Average of the highest 5 consecutive years of Eligible Pay; Covered Compensation is specified by the IRS Eligible Pay (limited by Internal    Revenue Code section 401(a)(17))   Salary plus bonus   Salary plus bonus (50% of bonus through 2001) Salary plus bonus Normal Retirement   Age 65 Age 65 Age 65 Salary plus bonus Early    Normal Retirement   Age 65 Age 65 Age 65    Early Retirement Age 55 with 10 years of service   Age 58 with 30 years of service or age 60 with 10 years of service   Age 55 with 10 years of service Early Retirement Reduction (for    retirements occurring between Early Early   Retirement and Normal Retirement)   Benefits are reduced for commencement prior to the earlier of age 65 and 85 points (age + service)   Benefits are reduced for commencement prior to age 60   Benefits are reduced for commencement prior to age 60 (1) Final average pay was frozen for the NGR Subplan and the S&MS Pension Plan as of December 31, 2014. Cash Balance Formula     The Cash Balance Formula is a hypothetical account balance consisting of pay credits plus interest. It has the following features:   —·   Pay credits are a percentage of pay that vary based on an employee’s “points” (age plus service). The range of percentages applicable to the NEOs on December 31, 20142017 was 6.5%5.5% – 9.0%.   —·   Interest is credited at the30-year U.S. Treasury bond rate. The December 31, 20142017 interest credit rate was 3.20%2.80%.   —·   Eligible pay is salary plus bonus, as limited by Internal Revenue Code section 401(a)(17).   —·   Eligibility for early retirement occurs at age 55 with 10 years of service. Benefits may be reduced if commenced prior to Normal Retirement Age (65).  ERISA 2 SRIP and SRRPSRIP (Nonqualified Restoration Plans)     ERISA 2 and SRIP are nonqualified plans that restore benefits provided for under the Pension Plan and S&MS Pension Plan, respectively, but for the limits on eligible pay imposed by Internal Revenue Code section 401(a)(17) and the overall benefit limitation of Internal Revenue Code section 415. Benefits and features in these restoration plans otherwise are generally the same as described above for the underlying tax qualified plan. SRRP entitles Mr. Palmer to an annuity equal to the amount that would have been paid to him under his former employer’s supplemental retirement plan but for his employment with the Company.   5058 I|NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  COMPENSATION TABLES  |  PENSION BENEFITS      CPC SERP, OSERP, OSERP II and ESEPP (Nonqualified Supplemental Executive Retirement Plans)   These plans provide supplemental pension benefits that supplement the tax qualified pension plans.benefits. They were closed to new hires several years ago.in 2009. In addition, final average pay and associated service under these plans waswere frozen as of December 31, 2014. The following chart highlights the key features of these plans applicable to eligible NEOs.    Feature   CPC SERPOSERP and OSERP II (1)   OSERP ESEPP Benefit Formula Greater of CPC Formula and OSERP Formula CPC Formula is: Final Average Pay times 3.3334% for each year that the NEO has served on the CPC up to 10 years, 1.5% for each subsequent year up to 20 years and 1% for each additional year over 20   Final Average Pay times 2% for each year of service up to 10 years, 1.5% for each subsequent year up to 20 years, and 1% for each additional year over 20 and less than 45   Final Average Pay times 1.47% for each year that the NEO made maximum contributions to the ES Subplan Final Average Pay   Average of highest 3 years of Eligible Pay   Average of highest 3 years of Eligible Pay Average of highest 5 years of Eligible Pay Eligible Pay   Salary and bonus (including amounts above Internal Revenue Code limits and amounts deferred) Salary and bonus (including amounts above Internal Revenue Code limits and amounts deferred)   Salary and bonus averaged separately (including amounts above Internal Revenue Code limits and amounts deferred) Normal Retirement   Age 65 Age 65 Age 65 Early Retirement   Age 55 with 10 years of service65  Early Retirement   Age 55 with 10 years of service   Age 58 with 30 years of service or Age 60 with 10 years of service Early Retirement Reduction Reduction   Benefits are reduced for commencement prior to the earlier of age 65 or 85 points (age + service) Benefits are reduced for commencement prior to the earlier of age 65 or 85 points (age + service)   Benefits are reduced for commencement prior to age 60 Reductions From Other Plans   Reduced by any other Company pension benefits accrued during period of CPC service   Reduced by any other Company pension benefits Reduced by ES Subplan and ERISA 2 benefits (1) Ms. Warden participates in OSERP II, which mirrors the benefits provided under the Cash Balance Formula, ERISA 2 and OSERP provisions described above.  Information on Executives Eligible to Retire for Early Retirement   The following NEOs were eligible to retirefor early retirement as of December 31, 2014 under the plans specified below:2017:   —·   If Mr. PalmerBush had retired on December 31, 2014,2017, he would have been eligible to receive an estimated total annual Pension Plan, ERISA 2 and CPC SERP benefits totaling $574,475. pension benefit of $2,408,678 (commencing January 1, 2018) plus a supplemental benefit payable from retirement to age 62 of $5,437.   —·   If Ms. Flach retired on December 31, 2017. Her total annual pension benefit is $790,646 (based on a commencement date of January 1, 2018) plus a supplemental benefit payable from retirement to age 62 of $3,152. · If Mr. Pamiljans had retired on December 31, 2014, she2017, he would have been eligible to receive an estimated total annual Pension Plan, ERISA 2 and OSERP benefits totaling $731,185. — If Ms. Mills had retired on December 31, 2014, she would have been eligible to receive estimated annual S&MS Pension Plan, SRIP and CPC SERP benefits totaling $1,213,686. pension benefit of $335,297 (commencing January 1, 2018).   NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT I| 5159  COMPENSATION TABLES  |  NONQUALIFIED DEFERRED COMPENSATION TABLE     2014 2017 Nonqualified Deferred Compensation   Name   Plan Name                Executive Contributions in Last FY (1) ($)      Registrant Contributions in Last FY (2) ($)      Aggregate Earnings in Last FY (3) ($)      Aggregate Withdrawals/ Distributions ($)      Aggregate Balance at Last FYE (4) ($)     Plan Name   Executive Contributions in Last FY (1) ($)   Registrant Contributions in Last FY (2) ($)   Aggregate Earnings in Last FY (3) ($)   Aggregate Withdrawals/ Distributions ($)   Aggregate    Balance at    Last FYE (4)    ($)    Wesley G. Bush   Deferred Compensation      0         0         136,745         0         2,426,935        Deferred Compensation     —     —     456,102     —     3,116,783   Savings Excess      360,338         180,169         424,817         0         6,649,892      Savings Excess     454,798     227,399     1,347,609     —     10,556,370   James F. Palmer   Deferred Compensation      0         0         59,801         0         910,612    Savings Excess      183,015         73,580         176,207         0         3,909,125    Wesley G. Bush   ORAC     —     238,199     76,026     —     726,221       Savings Excess     140,175     140,176     112,895     —     989,068     ORAC     —     80,888     39,528     —     335,650   Gloria A. Flach   Deferred Compensation      0         0         37,993         0         917,093        Deferred Compensation     —     —     22,855     —     996,143   Savings Excess      0         783         17,646         0         586,220      Savings Excess     144,729     73,131     22,121     —     1,034,369   Linda A. Mills   Deferred Compensation      0         0         84,126         0         1,449,132    Savings Excess      328,623         68,132         145,513         0         4,148,422    Thomas E. Vice   Deferred Compensation      0         0         0         0         0    Savings Excess      553,740         65,691         163,536         0         2,598,519    Gloria A. Flach   ORAC     —     83,165     4,891     —     237,983       Deferred Compensation     —     —     119,983     —     954,370     Savings Excess     —     —     347,240     —     1,883,791   Janis G. Pamiljans   ORAC     —     44,962     12,933     —     119,517       Savings Excess     144,729     72,365     187,589     —     1,272,491     ORAC     —     83,165     38,372     —     261,646     (1) NEO contributions in this column are also included in the 20142017 Summary Compensation Table on page 49, under the columns entitled “Salary” and “Non-Equity“Non-Equity Incentive Plan Compensation.”   (2) Company contributions in this column are included in the 20142017 Summary Compensation Table, under the column entitled “All Other Compensation.”   (3) Aggregate earnings in the last fiscal year are not included in the 20142017 Summary Compensation Table because they are not above market or preferential.   (4) NEO and Company contributions in this column may include balances for merged plans. Employee contributions by Messrs.Mr. Bush, and PalmerMr. Bedingfield, Ms. Flach and Ms. MillsWarden for the years ended December 31, 2014, 20132017, 2016 and 2012, collectively, and employee contributions by Ms. Flach and Mr. Vice for the years ended December 31, 2014 and 2013,2015, collectively, previously reported as compensation in the Summary Compensation tables, were as follows:   —  Name      Mr. Bush’s Savings Excess Plan (SEP) account includes $1,211,550 in employee contributions for those years. —Employee Contributions ($)      Mr. Palmer’s SEP account includes $583,525 in employee contributions for those years.Bush   —      Ms. Flach’s SEP account includes $262,692 in employee contributions for those years. 1,194,346   —      Ms. Mills’ SEP account includes $1,302,893 in employee contributions for those years.   — Mr. Bedingfield      308,304 Mr. Vice’s SEP account includes $1,077,798 in employee contributions for those years. Ms. Flach 261,778 Ms. Warden 363,015 Employee contributions by Mr. Pamiljans for the year ended December 31, 2017 are presented in the table above. Because Mr. Pamiljans was not an NEO for the years ended December 31, 2016 and 2015, employee contribution data for these years is not presented. Because Ms. Flach and Mr. Vice were not NEOs for the year ended December 31, 2012, employee contribution data for this year is not presented. Deferred Compensation Plans and Descriptions   The deferred compensation plans in which the NEOs participate are listed below in alphabetical order:below:   —·   Deferred Compensation Planis the Northrop Grumman Deferred Compensation Plan. ThisIn 2010, this plan was closed to future contributions at the end of 2010.new hires and existing participants ceased to be able to make contributions. Before 2011, eligible executives were allowed to defer a portion of their salary and bonus. No Company contributions were made to the plan.   —·   Officers Retirement Account Contribution Plan (ORAC)is the Northrop Grumman Officers Retirement Account Contribution Plan. This plan allows eligible executives, including NEOs, to receive a Company contribution of 4% of base salary and bonus. · Savings Excess Plan orSEP (SEP) is the Northrop Grumman Savings Excess Plan. ThisPlan.This plan allows eligible employees, including the NEOs, to (i) defer up to 50% (75% before 2015) of their salary and bonus beyond the compensation limits of the tax qualified plans and receive a Company matching contribution of up to 4%. on a maximum of 8% of pay and (ii) receive RAC contributions beyond the compensation limits in the qualified plans.   5260 I|NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  CEO PAY RATIO  2017 CEO Pay Ratio Consistent with Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of RegulationS-K (the pay ratio rule), we are providing the following information about the relationship of the annual total compensation of employees and the annual total compensation of our Chief Executive Officer (CEO), Mr. Bush. We believe the pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K. We determined that as of October 31, 2017, the company’s global employee population, applying the definition of employee under the pay ratio rule, consisted of 73,822 individuals. We selected October 31, 2017 to allow sufficient time to identify the median employee given the global scope of our operations. While the population is primarily comprised of U.S. based employees (92%), we scoped in individuals employed in countries such as the United Kingdom, Germany and Australia, as they represent a significant portion of our international population. As permitted under the pay ratio rule, we excluded the other individuals employed outside of the U.S. from the employee population. The number of excluded individuals totaled approximately 2,983 (~4% of the population) and were located in the following countries:  Countries (1) Approximate Number of Excluded Individuals   Belgium 102 Canada 15 Denmark 15 France 425 Italy 243 Japan 54 South Korea 81 Netherlands 62 Norway 6 Saudi Arabia 1,889 Singapore 22 Spain 1 Switzerland 4 United Arab Emirates 64 Total 2,983 (1) The approximate number of excluded individuals in Saudi Arabia consists largely of individuals employed by a joint venture in which the Company holds a 51% ownership interest. After taking into account the exclusions above, our employee population consisted of 70,839 individuals. To identify the median employee, we used wages comprised of base and overtime pay for the10-month period ending October 31, 2017. We believe this measure provides a reasonably obtainable and well reflective component of compensation from which to identify the median employee. After identifying the median employee, we calculated the median employee’s annual total compensation in the same manner as the CEO’s annual total compensation was calculated in the Summary Compensation Table on page 49. The median employee’s annual total compensation was $101,872, which includes other forms of compensation including financial and wellness benefits. The CEO’s annual total compensation was $18,869,057, as reported in the “Total” column of the Summary Compensation Table. Based on this information, for 2017 the ratio of the annual total compensation of the CEO to the annual total compensation of the median employee was 185 : 1. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|61  TERMINATION PAYMENTS AND BENEFITS | TERMINATION PAYMENT TABLE     Terms of Equity Awards   The terms of equity awards granted to the NEOs under the 2001 Plan and the 2011 Plan provide for accelerated vesting if an NEO’s employment terminates for certain reasons. For stock options, all outstanding stock option grants are vested. For a termination due to death, disability, or retirement, options are exercisable until the original expiration date. ForGenerally for RPSRs, accelerated vesting of a prorated portion of each award resultsoccurs from a termination due to death, disability, or retirement (after age 55 with 10 years of service or mandatory retirement at age 65). Starting with the 2013 grant, full vesting occurs for a termination due to normal retirement at age 65 (with 10 years of service) or upon mandatory retirement at age 65. For RSRs, full vesting occurs for a termination due to death or disability or mandatory retirement at age 65, and prorated vesting for early retirement (age 55 with 10 years of service). For certain retention grants of RSRs, no vesting occurs upon termination due to early retirement, death or mandatory retirement. Such retention grants were awardeddisability, and full vesting occurs upon normal retirement (mandatory at age 65), all subject to Mr. Palmer in 2013, Ms. Flach in 2012,the Compensation Committee’s approval of the earnout percentage based on the RPSR performance metrics for the three-year performance period. Generally for RSRs, vesting of a prorated portion of each award occurs from termination due to early retirement, and Mr. Vice in 2011 and 2012.full vesting occurs upon normal retirement (mandatory at age 65), death or disability. Possible Accelerated Equity Vesting Due to Change in Control   The terms of equity awards to the NEOs under the 2001 Plan and the 2011 Plan provide for possible accelerated vesting of stock options, RSRs and RPSRs when the Company is involved in certain types of change in control events, which are more fully described in such plansthe 2011 Plan (e.g., certain business combinations after which the Company is not the surviving entity and the surviving entity does not assume the awards). Possible acceleration would occur with respect to options, RSRs and RPSRs in certain change in control events that result in a termination of the NEO (other than for cause) within the specified period (double trigger). The acceleration of awards requires this double trigger, unless an acquiring company fails to assume the awards. In February 2013, theThe award terms were amended to provide that acceleration will not occur to the extent that it would result in an excise tax that decreases theafter-tax value of the awards to an NEO. In cases where acceleration occurswould occur under these limited change in control provisions, vested stock options that are not exercised prior to one of these changes in control may be settled in cash and terminated. Paymentsdistributions for RPSRs and RSRs made upon onewould be in full. The table below provides the estimated value of theseaccelerated equity vesting if such a change in control events will be in full. had occurred on December 31, 2017. The estimated value is computed by multiplying unvested shares as of December 31, 2017 by the closing market price of the Company’s common stock on December 29, 2017, the last trading day of the year ($306.91). For purposes of estimating the payments due under RPSRs, below, Company performance is assumed to be at target levels through the close of each three-year performance period. The table below provides the estimated value of accelerated equity vesting and/or payments if such a change in control had occurred on December 31, 2014. The value of the accelerated vesting was computed using only the closing market price of the Company’s common stock on December 31, 2014 ($147.39), with no consideration of an earnout percentage as previously described. The value for unvested RSRs and RPSRs is computed by multiplying $147.39 by the number of unvested shares that would vest.        RSRs      RPSRs          Name        Acceleration of Vesting ($)      Acceleration of Vesting ($)      Total          ($)              Wesley G. Bush        14,111,415      20,507,726      34,619,141              Kenneth L. Bedingfield        4,502,677      6,386,490      10,889,167              Gloria A. Flach        5,138,901      7,177,397      12,316,298              Janis G. Pamiljans        2,425,510      3,431,560      5,857,070              Kathy J. Warden        4,967,645      7,177,398      12,145,043                   RSRs                RPSRs                      Name            Acceleration         of Vesting ($)                Acceleration         of Vesting ($)                Total         ($)     Wesley G. Bush      24,565,786           22,815,677           47,381,463      James F. Palmer (1)      11,706,893           9,592,289           21,299,182      Gloria A. Flach      8,210,802           9,592,289           17,803,091      Linda A. Mills      9,549,103           9,592,289           19,141,392      Thomas E. Vice      9,534,512           9,592,289           19,126,801    (1) Under the terms of his offer letter, Mr. Palmer would also receive a lump-sum payment of approximately $1,659,700 for the present value of his monthly benefit under the Supplemental Retirement Replacement Plan.        NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 53  TERMINATION PAYMENTS AND BENEFITS | SEVERANCE PROGRAM Termination Payments and Benefits   The following table provides estimated payments and benefits that the Company would providehave provided to each NEO if his or her employment had terminated on December 31, 20142017 for specifiedthe reasons assuming thatset forth in the table below. The Company stock price per share of the Company’s common stock is $147.39,assumed to be $306.91, the closing market price ason December 29, 2017, the last trading day of that date.the year. These payments and benefits are payable based on:   —·   the Severance Plan;   —·   the 2001 Plan, the 2011 Plan and the terms and conditions of equity awards made pursuant to such plans;the plan; and   —·   the SORMP. SORMP (Retiree Medical and Life Insurance). Due to the many factors that affect the nature and amount of any benefits provided upon the termination events, discussed above, any actual amounts paid or distributed to NEOs may be different from the values shown in the table. Factors that may affect these amounts include timing during the year of the occurrence of the event, our stock price and the NEO’s age. The amounts described below are in addition to an NEO’s benefits described in the Pension Benefits and Nonqualified Deferred Compensation Tables on pages 56 and 60, respectively, as well as benefits generally available to our employees such as distributions under our savings plan, disability or life insurance benefits and accrued vacation.   5462 I|NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  TERMINATION PAYMENTS AND BENEFITS  |  TERMINATION PAYMENT TABLE     Termination Payment Table Potential Termination Payments     Name     Executive Benefits          Voluntary Termination ($)                     Involuntary Termination Not For Cause (4) ($)                          Post-CIC Involuntary or Good Reason Termination (5) ($)                         Death or Disability (6) ($)            Wesley G. Bush     Cash Severance      0         0         0         0         Long-term Incentives (2)      0         32,126,893         47,381,463         37,101,600         Benefits and Perquisites               Retiree Medical and Life Insurance (6)      1,271,249         1,271,249         1,271,249         1,271,249       Medical/Dental Continuation      0         0         0         0       James F. Palmer     Cash Severance (1)      0         2,610,000         0         0         Long-term Incentives (2)(3)      18,314,092         18,314,092         21,299,182         17,061,424         Benefits and Perquisites               Retiree Medical and Life Insurance (6)      719,319         719,319         719,319         719,319       Medical/Dental Continuation      0         13,237         0         0       Financial Planning/Income Tax      0         15,000         0         0       Outplacement Services      0         130,500         0         0       Gloria A. Flach     Cash Severance (1)      0         2,295,000         0         0         Long-term Incentives (2)(3)      9,402,597         9,402,597         17,803,091         13,565,333         Benefits and Perquisites               Retiree Medical and Life Insurance      0         0         0         0       Medical/Dental Continuation      0         6,326         0         0       Financial Planning/Income Tax      0         15,000         0         0       Outplacement Services      0         114,750         0         0       Linda A. Mills     Cash Severance (1)      0         2,370,000         0         0         Long-term Incentives (2)(3)      19,141,392         19,141,392         19,141,392         14,903,634         Benefits and Perquisites               Retiree Medical and Life Insurance      0         0         0         0       Medical/Dental Continuation      0         9,405         0         0       Financial Planning/Income Tax      0         15,000         0         0       Outplacement Services      0         118,500         0         0       Thomas E. Vice     Cash Severance (1)      0         2,295,000         0         0         Long-term Incentives (2)      0         10,330,270         19,126,801         14,889,043         Benefits and Perquisites               Retiree Medical and Life Insurance      0         0         0         0       Medical/Dental Continuation      0         10,962         0         0       Financial Planning/Income Tax      0         15,000         0         0       Outplacement Services      0         114,750         0         0         Name        Executive Benefits        Voluntary Termination ($)        Involuntary Termination Not For Cause (1) ($)        Post-CIC Involuntary or Good Reason Termination (2) ($)        Death or Disability ($)       Wesley G. Bush      Long-term Incentives (3)        19,753,035        19,753,035        34,619,141        24,665,743          Retiree Medical and Life Insurance (4)        1,889,724        1,889,724        1,889,724        1,889,724       Kenneth L. Bedingfield      Long-term Incentives (3)        —          —          10,889,167        7,746,715          Severance Benefits (5)                      Cash Severance        —          2,385,000        —          —            Medical/Dental Continuation        —          8,104        —          —            Financial Planning/Income Tax        —          15,000        —          —            Outplacement Services        —          119,250        —          —         Gloria A. Flach (6)      Long-term Incentives (3)        7,103,739        7,103,739        12,316,298        8,832,563          Severance Benefits (5)                      Cash Severance        —          2,430,000        —          —            Medical/Dental Continuation        —          5,668        —          —            Financial Planning/Income Tax        —          15,000        —          —            Outplacement Services        —          121,500        —          —         Janis G. Pamiljans      Long-term Incentives (3)        1,500,483        1,500,483        5,857,070        3,569,056          Severance Benefits (5)                      Cash Severance        —          2,430,000        —          —            Medical/Dental Continuation        —          14,988        —          —            Financial Planning/Income Tax        —          15,000        —          —            Outplacement Services        —          121,500        —          —         Kathy J. Warden      Long-term Incentives (3)        —          —          12,145,043        8,661,307          Severance Benefits (5)                      Cash Severance        —          2,430,000        —          —            Medical/Dental Continuation        —          3,625        —          —            Financial Planning/Income Tax        —          15,000        —          —            Outplacement Services        —          121,500        —          —           (1) CashSimilar treatment provided for certain “good reason” terminations, as described in “Key Components of Our Programs - Severance equals one and a half timesBenefits” found on page 45; however, there would be no termination payment in the sumevent of the annual base salary and the target annual bonus, as of the effective date of termination. Mr. Bush is not eligible to receive a payment under our severance program.an involuntary termination for cause.   (2) The amounts assume full acceleration, which, as discussed above, may not occur to the extent that it would result in an excise tax that decreases theafter-tax value of the awards to an NEO. (3) Long-term Incentives include grants of RPSRs and RSRs. (3) Results in a benefit under Voluntary Termination only if eligible for retirement treatment under the terms and conditions of the grants.   (4) Similar treatment provided for certain “good reason” terminations, as describedRepresents SORMP benefits outlined in “Key Components of Our Programs - Severance Benefits”; however, there would be no termination payment inRetiree Medical Arrangement.” Mr. Bush is the eventonly NEO eligible for benefits under this plan due to his date of hire and years of service as an involuntary termination for cause. (5) The amounts assume full acceleration, which, as discussed above, may not occur to the extent that it would result in an excise tax that decreases the after-tax value of the awards to an NEO. (6) executive. Retiree medical values for Mr. Bush and Mr. Palmer reflect cost associated with disability. If termination results from death, the retiree medical insurance expense would be less than the disability amount indicated.   (5) Represents the following benefits under the Severance Plan, assuming a termination date of December 31, 2017: (i) cash severance equivalent to one and a half times the sum of the annual base salary and target annual bonus, (ii) continued medical/dental coverage for the severance period, (iii) financial planning/income tax preparation fees for the year following termination and (iv) outplacement services up to 15% of salary. Mr. Bush does not receive severance benefits as he is not eligible to participate in a Northrop Grumman severance plan. (6) Ms. Flach retired on December 31, 2017 and is eligible for prorated payout of her outstanding grants based on the number of days in the applicable vesting period that Ms. Flach was employed with the Company. For further detail, refer to the Outstanding Equity Awards Table on page 54. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT I| 5563 PROPOSAL THREE: APPROVAL OF AMENDMENT TO THE 2011 LONG-TERM INCENTIVE STOCK PLAN The Board of Directors recommends the shareholders approve amendments to the Northrop Grumman 2011 Long-Term Incentive Stock Plan (the “2011 Plan”) that reduce the total number of shares available for issuance under the 2011 Plan, eliminate complicated share-counting provisions, and reflect the Company’s current practice of awarding time- and performance-based stock rights, instead of stock options, under the 2011 Plan. The 2011 Plan helps to ensure a compensation program aligned with shareholder interests and aimed at enhancing shareholder value. It is an important tool for attracting, retaining and motivating plan participants. Originally approved by shareholders on May 18, 2011, the 2011 Plan authorizes Northrop Grumman to grant stock options, stock appreciation rights (“SARs”), and awards other than stock options or SARs that are denominated in or can be settled in shares of the Company’s common stock (defined as “Share Awards”) and performance-based awards that are denominated in or can be settled only in cash (defined as “Cash Awards”). On March 18, 2015, the Board approved several amendments to the 2011 Plan that are intended to simplify administration of the 2011 Plan and reflect the Company’s current compensation practices (the “Amended 2011 Plan”). If approved by shareholders, these 2011 Plan amendments will, among other things: — extend the plan’s expiration date to the tenth anniversary of the date that these amendments are approved by shareholders (the “Amendment Date”); — reduce the total number of shares authorized for issuance under new awards from 22,168,522 to 7,500,000, as of March 10, 2015, and eliminate the plan’s “fungible pool share-counting provisions” (which previously provided that certain Share Awards would count against the authorized share limit on a 4.5-to-1 basis); — specify a minimum vesting period of at least one year applicable to awards granted under the plan, subject to certain exceptions; and — amend the language in the plan’s change in control provisions to provide explicitly only for “double trigger” vesting acceleration upon a change in control, consistent with the terms of the awards granted under the plan. While the plan amendments allow the ability to continue to grant stock options, our current long term compensation incentive approach utilizes only Share Awards, and there is no current plan to change this approach. A description of key features of the Amended 2011 Plan is attached as Appendix A to this Proxy Statement and incorporated herein by reference. A copy of the full Amended 2011 Plan is attached as Appendix B to this Proxy Statement. Company Considerations When approving the proposed amendments to the 2011 Plan, the Board and Compensation Committee considered the number of shares available for issuance under the 2011 Plan, both prior to being amended and as amended, as well as the dilution, burn rate and overhang resulting from the Amended 2011 Plan. — As of March 10, 2015, a total of 22,168,522 shares of common stock remained available for new awards under the 2011 Plan, meaning that the Company could grant options or SARs for that many shares, or could grant Share Awards for 5,133,009 shares of common stock (in all cases, assuming performance awards are settled at target and no awards are forfeited). — If the amendments to the 2011 Plan are approved, 7,500,000 shares will be available for new awards under the 2011 Plan , representing the 5,133,009 shares available for Share Awards, as of March 10, 2015, plus an additional 2,366,991 shares. — If the amendments to the 2011 Plan are approved, the Company’s total potential dilution in respect of the 2011 Plan, would have been 3.80% as of March 10, 2015. Potential dilution, for this purpose, is calculated as the total number of shares available for issuance under the 2011 Plan, divided by total common shares outstanding at the time of the calculation. — The approved amendments do not alter the manner in which shares from forfeited, terminated, cancelled or otherwise expiring awards under the 2001 Long-Term Incentive Plan (“2001 Plan”) will be available for issuance under the 2011 Plan. As of March 10, 2015, there were 231,115 shares subject to stock options and 15,168 shares subject to stock awards outstanding under the 2001 Plan. — As of March 10, 2015, there were stock options covering 231,115 shares of common stock outstanding under the 2001 Plan, with a weighted average exercise price of $52.59 and a weighted average remaining term of 1.65 years, all of which were fully vested. No options or SARs are outstanding under the 2011 Plan. In addition, as of March 10, 2015, under all Company incentive plans, there were outstanding (i) unvested time-based Share Awards covering 1,089,176 shares of common stock and (ii) unvested performance-based Share Awards covering 1,863,603 shares of common stock (assuming, for this purpose, the target level of performance were achieved with respect to any performance-based vesting criteria). To the extent outstanding awards are forfeited or settle below target, such shares will be available for new awards under the 2011 Plan. 56 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  PROPOSAL THREE: APPROVAL OF AMENDMENT TO THE 2011 LONG-TERM INCENTIVE STOCK PLAN — The Company’s annual burn rate for 2014 was 0.39%. Burn rate shows how rapidly a company is depleting its shares reserved for equity compensation plans, and is defined for any year as the number of shares granted under the Company’s equity incentive plans during the year divided by total common shares outstanding at the end of the year. The Company’s average annual burn rate for the years 2012 to 2014 was 0.64%. — Our overhang as of March 10, 2015 was 12.83%. If the amendments to the 2011 Plan are approved, our overhang as of March 10, 2015 would have been 5.41% (reflecting both the reduced share pool and the addition of 2,366,991 shares to the reduced share pool). Overhang is calculated as the number of shares subject to equity awards outstanding but not exercised or settled, plus number of shares available to be granted, divided by total common shares outstanding. Code Section 162(m) The Board of Directors believes it is in the best interests of the Company to provide an equity incentive plan under which awards are eligible to be deducted by the Company for federal income tax purposes. Thus, the 2011 Plan is designed to permit the grant of awards to “covered employees” that are intended to qualify as “performance-based compensation” not subject to the $1,000,000 deductibility cap under Section 162(m) (“Section 162(m)”) of the Internal Revenue Code (the “Code”). For compensation to qualify as “performance-based,” the material terms of the performance goals under which compensation may be paid should be disclosed to and approved by the Company’s shareholders at least once every five years. For purposes of Section 162(m), the material terms include: — the employees eligible to receive compensation, — a description of the business criteria on which the performance goal is based, and — the maximum amount of compensation that can be paid to an employee under the performance goal. Each of these aspects is discussed in the summary of material terms of the Amended 2011 Plan attached as Appendix A to this Proxy Statement. Approval of the Amended 2011 Plan will be approval of each of these aspects of the plan for purposes of Section 162(m). Nonetheless, shareholder approval cannot guarantee that compensation will be treated as exempt “performance-based” compensation, and our Compensation Committee and Board will continue to have authority to provide compensation that is not exempt from the Section 162(m) limits on deductibility. U.S. Federal Income Tax Treatment of Awards Under the 2011 Plan The U.S. federal income tax consequences of the Amended 2011 Plan under current federal law are summarized below. This summary is not intended to be exhaustive and, among other considerations, does not describe the deferred compensation provisions of Section 409A of the Code to the extent an award is subject to and does not satisfy those rules; nor does it describe state, local, or international tax consequences. With respect to nonqualified stock options, the Company is generally entitled to deduct and the optionee recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. With respect to incentive stock options, we are generally not entitled to a deduction nor does the participant recognize income at the time of exercise, although the optionee may be subject to U.S. federal alternative minimum tax. The current federal income tax consequences of other awards authorized under the Amended 2011 Plan generally follow certain basic patterns: stock appreciation rights are taxed and deductible in substantially the same manner as nonqualified stock options; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses, cash and stock-based performance awards, dividend equivalents and other types of awards are generally subject to tax at the time of payment. Compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income. If an award is accelerated under the Amended 2011 Plan in connection with a “change in control” (as this term is used under the Code), we may not be permitted to deduct the portion of the compensation attributable to the acceleration (“parachute payments”) if it exceeds certain threshold limits under the Code and certain related excise taxes may be triggered. Furthermore, we may not be permitted to deduct aggregate compensation in excess of $1,000,000 attributable to awards that are not “performance-based” within the meaning of Section 162(m) in certain circumstances. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 57 PROPOSAL THREE: APPROVAL OF AMENDMENT TO THE 2011 LONG-TERM INCENTIVE STOCK PLAN Specific Benefits under the Amended 2011 Plan Future benefits under the Amended 2011 Plan are discretionary and not determinable at this time. Likewise, the benefits or amounts that would have been received by or allocated to participants for fiscal year 2014 had these amendments been in effect then cannot be determined. Information about awards granted in fiscal year 2014 to the Named Executive Officers can be found under the “Grants of Plan-Based Awards” table on page 45 of this Proxy Statement. The table below shows, as to each indicated individual or group, the total number of shares of common stock previously issued or subject to outstanding awards (at target) under the 2011 Plan from the plan’s inception through March 10, 2015.   Name    Number  of Options Granted (#)      Number  of Shares of Restricted Stock and Restricted Stock Units Granted (#)     Named Executive Officers:         Wesley G. Bush      0         465,766        James F. Palmer      0         194,952        Gloria A. Flach      0         161,863        Linda A. Mills      0         181,997        Thomas E. Vice      0         176,016        All current executive officers as a group (15 persons)      44,242*         1,924,666        All current non-executive directors as a group (12 persons)      0         98,263        All employees, excluding current executive officers      0         3,394,778      *These options, granted in November 2011, have fully vested and have all been exercised. There are no options currently outstanding under the 2011 Plan. Based on the foregoing, the Board of Directors unanimously recommends the shareholders approve the Amended 2011 Plan, reducing the total number of shares available for issuance, eliminating complicated share-counting provisions, and reflecting the Company’s practice of awarding time- and performance-based stock rights. Vote Required Approval of this proposal requires the affirmative vote of a majority of the votes cast on the proposal. Under NYSE rules, abstentions on this proposal will be treated as votes cast and will have the same effect as votes cast against the proposal. Broker non-votes will not be treated as votes cast on the proposal so they will not affect the actual vote on the proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL THREE. 58 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  PROPOSAL FOUR:THREE: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR     The Audit Committee believes that the appointment of Deloitte & Touche LLP (Deloitte) is in the best interests of the Company and its shareholders, and proposes and recommends that the shareholders ratify the Audit Committee’s appointment of Deloitte as our independent auditor for 2015.2018. Deloitte served as our independent auditor for 2014,2017, and Deloitte or its predecessors have served as the independent auditor for the Company (including certain of its predecessor companies) since 1975. The Audit Committee is responsible for the appointment, compensation, retention, oversight, evaluation and termination, if necessary, of our independent auditor. The Audit Committee is responsible for reviewing andpre-approving audit andnon-audit services and related fees for the independent auditor. In addition, the Audit Committee, at least annually, reviews and evaluates with management and our internal auditors Deloitte’s performance and periodically considers whether to change the independent auditor. The Audit Committee also reviews the performance of Deloitte’s lead audit partner, and the Audit Committee and its Chairperson oversee the rotation of Deloitte’s lead audit partner and are involved in the selection of the lead audit partner. Although ratification is not required by our Bylaws or otherwise, the Audit Committee is submitting the selection of Deloitte to shareholders as a matter of good corporate governance. If the shareholders fail to ratify the appointment of Deloitte, the Audit Committee will consider this in its selection of auditorsauditor for the following year. A representative from Deloitte will attend the Annual Meeting and will have the opportunity to make a statement and respond to appropriate questions. Audit Fees and All Other Fees   The following table summarizes aggregate fees billed for the years ended December 31, 20142017 and 20132016 by Deloitte, the member firms of Deloitte Touche Tohmatsu Limited and their respective affiliates:      2014      2013        2017          2016   Audit Fees (a)    $           13,899,000       $           13,362,000          $                          15,110,000              $                          15,253,000          Audit-Related Fees (b)      2,961,000         760,000                803,000                    803,000          Tax-Related Fees (c)      506,000         838,000                637,000                    377,000          All Other Fees      —         —                —                    —          Total Fees    $ 17,366,000       $ 14,960,000          $     16,550,000              $     16,433,000            (a) Audit fees for 20142017 and 2013 each2016 reflect fees of $12,400,000 and $11,900,000, respectively,$12,900,000 in each year for the consolidated financial statement audits and include the audit of internal controls pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. Audit fees for 20142017 and 20132016 also include $1,482,000$1,544,000 and $1,381,000,$1,576,000, respectively, for foreign statutory audits. Fees for foreign statutory audits are reported in the year in which the audits are performed. For example, foreign statutory audit fees reported in 20142017 relate to audits of the Company’s foreign entities for the fiscal year ended 2013.2016. The remaining 20132017 audit fees primarily relate to audit services associated with the Company’s evaluation of the adoption of Accounting Standards Update (ASU)2014-09,Revenue from Contracts with Customers, and procedures and consultations related to the Company’s Form8-K filing filings in connection with its debt issuance in May 2013.October 2017.   (b) Audit-related fees reflect fees for services that are reasonably related to the performance of the audit or review of the Company’s financial statements, including fees related to the support of business acquisition and divestiture activities and independent assessment of controls concerning outsourcing activities. Audit-related fees exclude fees that totaled $1,414,000$1,423,000 and $1,421,000$1,370,000 for 20142017 and 2013,2016, respectively, related to benefit plan audits which are paid for by the plans.   (c) Tax-related fees during 20142017 and 20132016 reflect fees of $506,000$637,000 and $838,000,$377,000, respectively, for services concerning foreign income tax compliance, foreign Value Added Tax compliance and other tax matters. Policy on Audit CommitteePre-Approval of Audit and PermissibleNon-Audit Services   It is the Audit Committee’s policy topre-approve all audit and permittednon-audit services provided by our independent auditor in order to provide reasonable assurance that the provision of these services does not impair the auditor’s independence. These services may include audit services, audit-related services, tax-related services and other services. Pre-approval may be given at any time. The Audit Committee has delegatedpre-approval authority for any individual project up to $100,000 to the Chairperson of the Audit Committee. The decisions of the Chairperson topre-approve a permitted service are reported to the Audit Committee at its next meeting. The independent auditor is required to periodically report to the full Audit Committee regarding the extent of services provided by the independent auditor in accordance with thispre-approval policy, as well as the fees for the services performed to date. 64 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR The Audit Committee approved all audit andnon-audit services provided by Deloitte, the member firms of Deloitte Touche Tohmatsu Limited and their respective affiliates during 20142017 and 2013,2016, in each case before being engaged to provide those services. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 59  PROPOSAL FOUR: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR Vote Required Approval of this proposal requires that the votes cast “for” the proposal must exceed the votes cast “against” the proposal. Abstentions and brokernon-votes will have no effect on this proposal.   THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL FOUR. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL THREE.   60 INOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT|65  AUDIT COMMITTEE REPORT     The Audit Committee of the Board of Directors is responsible for assisting the Board of Directors in fulfilling its oversight responsibilities over the Company’s accounting, auditing and financial reporting processes and financial risk assessment and management process, and for monitoring compliance with certain regulatory and compliance matters. The Audit Committee’s written charter describes the Audit Committee’s responsibilities and has been approved by the Board of Directors. Management is responsible for preparing the Company’s financial statements and for the financial reporting process, including evaluating the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting. Deloitte & Touche LLP (Deloitte), the Company’s independent auditor, is responsible for performing an independent audit of the Company’s consolidated financial statements and expressing an opinion on the conformity of the financial statements with accounting principles generally accepted in the United States of America, and on the effectiveness of the Company’s internal control over financial reporting. In connection with the preparation of the Company’s financial statements as of and for the year ended December 31, 2014,2017, the Audit Committee reviewed and discussed the audited financial statements with the Company’s Chief Executive Officer, Chief Financial Officer and Deloitte. The Audit Committee also discussed with Deloitte the communications required under applicable professional auditing standards and regulations, including the matters required to be discussed by Auditing Standard No. 16,1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (PCAOB) and, with and without management present, discussed and reviewed the results of Deloitte’s examination of the financial statements. Additionally, the Audit Committee discussed with the Company’s internal auditors the results of their audits completed during 2014.2017. The Audit Committee received the written disclosures and the letter from Deloitte required by the applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence. In addition, the Audit Committee discussed with Deloitte that firm’s independence from the Company. Based on the Audit Committee’s review and discussions described in this report, the Audit Committee recommended to the Board of Directors that the audited financial statements for 2014the year ended December 31, 2017 be included in the Company’s Annual Report onForm 10-K for the year ended December 31, 20142017 for filing with the SEC. The Audit Committee also reappointed Deloitte to serve as the Company’s independent auditorsauditor for 2015,2018, and requested that this appointment be submitted to shareholders for ratification at the Annual Meeting. AUDIT COMMITTEE WILLIAM H. HERNANDEZ, CHAIRPERSON MARIANNE C. BROWN VICTOR H. FAZIO WILLIAM H. HERNANDEZANN M. FUDGE MADELEINE A. KLEINER GARY ROUGHEAD THOMAS M. SCHOEWE JAMES S. TURLEY MARK A. WELSH III   66 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 61  PROPOSAL FIVE:FOUR: SHAREHOLDER PROPOSAL     Mr. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, a beneficial owner of 10050 shares of common stock of the Company, the proponent of a shareholder proposal, has stated that the proponenthe intends to present a proposal at the Annual Meeting. The proposal and supporting statement, for which the Board of Directors accepts no responsibility, is set forth below. The Board of Directors opposes the shareholder proposal for the reasons stated after this proposal.below. Proposal Five:Four: Special Shareholder Proposal Regarding Independent Board ChairmanMeeting Improvement   Proposal 5 - Independent Board Chairman RESOLVED: Shareholders request thatResolved, Shareowners ask our board to take the Boardsteps necessary (unilaterally if possible) to amend our bylaws and each appropriate governing document to give holders in the aggregate of Directors adopt a policy that the Chairman10% of our Boardoutstanding common stock the power to call a special shareowner meeting. This proposal does not impact our board’s current power to call a special meeting. Scores of Directors shall be an independent director whoFortune 500 companies allow a more reasonable 10% of shares to call a special meeting compared to Northrop Grumman (NOC). Northrop shareholders do not have the full right to call a special meeting that is not a current or former employee of the company, and whose only nontrivial professional, familial or financial connectionavailable under Delaware law. Special meetings allow shareowners to the company or its CEO is the directorship. Our board would have discretion to deal with existing agreements in implementing this proposal. Our board would have discretion to encourage any person who had contract rights that might delay full implementation of this proposal to voluntarily waive such contract rights for the benefit of shareholders. This policy should allow for policy departure under extraordinary circumstancesvote on important matters, such as the unexpected resignation of the chair. When our CEO is our board chairman, this arrangementelecting new directors that can hinder our board’s ability to monitor our CEO’s performance. An independent Chairman is the prevailing practice in the United Kingdom and many international markets.arise between annual meetings. This proposal topic won 50%-plus support at 5 major U.S. companies in 2013 including 73%more than 70%-support at Netflix.Edwards Lifesciences and SunEdison in 2013. This topic is particularly importantA full right for Northrop Grumman becauseshareholders to call a special meeting could give shareholders greater standing to improve the makeup of our board of directors after the excessive pay of $41 million for our Chairman/CEO Wesley Bush. Plus we had2018 annual meeting. For instance, Donald Felsinger, a former CEO asis now our Lead Director. The Lead Director - Donald Felsinger, previously theposition has additional oversight of our CEO and Chairman of Sempra Energy. A formercompared to other directors. For Wesley Bush, CEO, in the role ofthis is somewhat like answering to a Lead Director may get somewho is a member of the same criticisms as having a CEO onclub - not in the executive pay committee. It is interestingbest interest of shareholders. Plus one could argue that just before Mr. Felsinger left Sempra Energy as its Chairman and CEO that this topic received 55% support from Sempra shareholders.believed CEOs should be paid lavishly when he was a CEO. Our clearly improvable corporate governance (as reported in 2014)Victor Fazio, a lobbyist, with17-years long-tenure, was on our Audit Committee. Long-tenure can impair the independence of a director. Independence is an added incentive to voteall-important qualification for this proposal: Karl Krapek, a member of our executive payAudit Committee. We had a retired Admiral and nomination committees, received by farretired General on our board. Thus serious consideration should be given to avoiding a 3rd director from primarily a military background. If we had 3 such directors they could become a powerful faction on the highest negativeboard that could tend to vote in lockstep. This may not be good for a Northrop director in 2014. Mr. Krapek was negatively flagged by GMI Ratings, an independent investment research firm, for his involvementboard diversity – having 3 directors who could speak with the Visteon Corporation bankruptcy.one voice. William Hernandez and Richard Myers were potentially overextended with director duties at 4 public companies. Mr. Hernandez was also a member of our audit committee which is the most demanding committee assignment. Mr. Myers, even at age 72, had director duties at 4 public companies. GMI had additional issues with our executive pay besides the $41 million for Mr. Bush. Unvested equity pay partially or fully accelerate upon CEO termination. Accelerated equity vesting allowed executives to realize lucrative pay without necessarily having earned it through strong performance. Northrop had not disclosed specific, quantifiable performance objectives for our CEO. Our CEO’s annual incentives did not rise or fall in line with annual financial performance. Returning to the core topic of this proposal from the context of our clearly improvable corporate governance, pleasePlease vote to protect shareholder value:increase management accountability to shareholders: Independent Board ChairmanSpecial Shareholder Meeting Improvement - Proposal 54 Board of Directors’ Statement in Opposition to Proposal FiveFour   The Company’s shareholders have considered, and declined to provide majority support to, similar independent board chairman proposals at each of the three prior annual meetings, with only approximately 22% of shareholders who cast votes voting in favor of such proposal at the most recent 2014 Annual Meeting. The Board of Directors continues to opposeunanimously recommends that shareholders vote against this proposal because it deprivesProposal Four. Almost eight years ago, after thoughtful deliberation with the benefit of significant input from shareholders, the Board of important flexibilityDirectors recommended, and shareholders overwhelmingly approved, amendments to determine the most effective leadership structureCompany’s Certificate of Incorporation and Bylaws to serveadopt robust and well-balanced special meeting provisions. Those provisions give shareholders holding 25% or more of the Company’s outstanding shares of common stock the right to call special meetings, provided certain limited requirements are met. This Proposal Four - which recommends an alternative threshold of 10% of outstanding shares to call a special meeting - is unnecessary andill-advised. In framing the special meeting provisions, the Board sought and was guided by extensive input from our shareholders and other stakeholders. The Board was mindful that our shareholders both expressed support for special meeting provisions generally and cautioned that the framework should be balanced and ensure adequate protections for all shareholders. The Board believes the Company’s current provisions accomplish those goals. The Company’s current 25% threshold is also among the more common thresholds for large public companies who offer shareholders the right to call special meetings, and the overall approach remains consistent with the special meeting provisions adopted by other Fortune 500 companies. The Board continues to believe that our special meeting provisions - including specifically the 25% ownership threshold - remain well aligned with our shareholders’ perspectives, best practices and the Company’s best interests. The Board believes they balance and promote the interests of all our shareholders, particularly in the context of our broader governance construct. For example, because our shareholders have the right to propose business for consideration at our annual meeting of shareholders, the Board believes that special meetings should be called only to consider extraordinary events that are of interest to a broad base of our shareholders; specifically, such as when strategic, significant transactional or similar considerations dictate that a matter be addressed on an expeditious basis and cannot be delayed until the next annual meeting of shareholders. The proponent’s shareholder Proposal Four, if adopted, could result in a small minority of shareholders, potentially with narrow, short-term interests, calling a special meeting to NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|67  PROPOSAL FOUR: SHAREHOLDER PROPOSAL pursue matters that have little likelihood of success and that as much as 90% of shareholders may not view as requiring immediate attention, without regard to how the costs and other burdens might impact the Company’s future success or the interests of the Companyvast majority of shareholders.    Not surprisingly, since the special meeting provision was adopted in 2010, we have received very positive feedback from our shareholders in discussions regarding our approach. In that feedback, we have heard no input suggesting the threshold should be reduced to 10%, or that it presents a barrier for shareholders to bring matters of concern to the Company’s attention. For every special meeting, we must incur significant expenses, including legal, printing and its shareholders. The Board of Directors believesmailing expenses, as well as other costs normally associated with holding a shareholders meeting. Moreover, organizing and preparing for a special meeting involves significant time and attention from our directors, officers and other employees, thus diverting attention away from their focus on meeting our business objectives and enhancing shareholder value. Recognizing the substantial administrative and financial burdens that a special meeting imposes on the Company and its shareholders, are best served when it retains this flexibility. Under our Principles of Corporate Governance, the Board has the authority to determine whether the positions of Chair and Chief Executive Officer should be held by the same or different persons. The Board has the flexibility to consider what is best for the Company and its shareholders, in light of all facts and circumstances known to the Board. In today’s environment, having considered the experience of the management team, the challenges facing the Company, and the evolving environment in which we operate, the Board has concluded that having the CEO also serve as Chair best positions the Company to be innovative, compete successfully and advance shareholder interests. The Board believes it is important, especially in our changing and challenging environment, to retain the flexibility to determine which structure is most effective. 62 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  PROPOSAL FIVE: SHAREHOLDER PROPOSAL The Board also does not believe the proposed change is necessary to ensure that the Board effectively monitors the performance of the CEO, contrary to what the proponent suggests. Today, twelve of the Company’s thirteen directors are independent, and the Board regularly holds scheduled sessions of the independent directors at each Board meeting. The Chairs and all members of the Committees - Audit, Compensation, Governance and Policy - are independent directors. The independent directors have ample opportunity to, and regularly do, assess the performance of the CEO and provide meaningful direction. When the Chair is not independent, the Company’s bylaws specifically provide that the independent directors of the Board may designate a Lead Independent Director from among them. The Board has repeatedly exercised that authority and Donald E. Felsinger currently serves as our Lead Independent Director. Our Principles of Corporate Governance prescribe a strong role for our Lead Independent Director. Among other duties, the Principles of Corporate Governance specify that the Lead Independent Director shall: —     preside at all meetings of the Board at which the Chair is not present, including executive sessions of the independent directors, and serve as a liaison between the Chair and the independent directors; —     approve meeting agendas and information sent to the Board; —     approve the schedule of Board meetings; —     call meetings of the independent directors; —     interview, along with the Chair of the Board and the Chair of the Governance Committee, Board candidates and make recommendations to the Committee and the Board; and —     if requested by major shareholders, ensure that he or she is available for consultation and direct communication. Any shareholder can communicate directly with the Lead Independent Director (or any of the directors) as described on page 18 of this Proxy Statement and on the Company’s website. The designation of a Lead Independent Director by the independent directors of the Board demonstrates the Board’s continuing commitment to strong corporate governance, Board independence and the important role of Lead Independent Director. Our Company has performed exceptionally well under a combined Chairman/CEO. The Company’s total shareholder return, for example, has been outstanding, both in the short and the longer term, with 1 year TSR of 31.37% and 3-year TSR of 173.95%. The Company has adopted numerous other governance practices that further demonstrate our commitment to good corporate governance for our shareholders. We have adopted significant stock ownership guidelines for both our employees and the directors, eliminated change of control agreements, prohibited the hedging and pledging of Company stock, and implemented a strong recoupment policy, to name a few such examples. Our shareholders have approved by large margins separate management proposals granting the right to call a Special Meeting and to act by written consent. Management routinely communicates with shareholders to understand and seek to address any concerns they may have or suggestions as to how we can continue to enhance our governance practices. In addition to adopting good governance practices, our Board has successfully recruited a diverse group of accomplished, independent directors who bring a wide range of experiences to benefit the Company. The average tenure of our independent directors is seven years, reflecting a healthy mix of tenure and new perspective. Similarly, our CEO, Mr. Bush, has served as CEO for approximately five years and as Chairman for less than four years. The Company does not have lengthy directorships nor issues of lengthy CEO/director tenure. In the supporting statement for the Proposal, the proponent offers a series of assertions that are largely incorrect and/or inapplicable. For example, the proponent claims that our CEO’s pay is $41 million. As disclosed in this proxy statement for the Company’s 2015 Annual Meeting of Shareholders, Mr. Bush’s total compensation for 2014, calculated in accordance with the Security and Exchange Commission’s regulations and reflected in the Company’s Summary Compensation Table, was $21,795,703. For 2013, it was $18,656,412. We strongly dispute various other of the proponent’s assertions. Correct facts regarding compensation for and the record of our leadership, as well as the Company’s successful commitment to robust governance and the environment, are set forth in detail earlier in this proxy and in the Company’s annual Corporate Responsibility Report. Finally, we note that the Proponent seeks to define an independent director as someone whose directorship constitutes his or her only “nontrivial professional, familial or financial connection to the company or its CEO.” To the contrary, each of our independent directors is required to have, and should have, a significant financial interest in our Company. Indeed, as explained on page 19 of this proxy statement, all of the Company’s independent directors are subject to stock ownership requirements to help assure their interests are aligned with those of our shareholders. Pursuant to these requirements, all directors must, subject to certain transition NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 63  PROPOSAL FIVE: SHAREHOLDER PROPOSAL periods, own Company stock equal to five times his or her annual cash retainer of $120,000. As set forth on page 25 of this Proxy Statement, our directors hold significant financial interests in the Company through their ownership of common stock and/or deferred stock units. It appears the Proponent might restrict those complying with the Company’s stock ownership requirements from serving as the independent Chair, or alternatively, might require any Chair to dispose of his or her Company shares. The Board does not believe either alternative would benefit the Company and its shareholders. The Board believes that the Company’s balancedexisting 25% threshold strikes the appropriate balance between allowing shareholders to vote on important matters that arise between annual meetings and flexible corporate governance structure,protecting against the risk that a small group of shareholders call a meeting that serves only a narrow agenda not favored by the majority of shareholders. The proponent’s shareholder Proposal Four to lower the threshold to call a special meeting to 10% would serve only to undermine the balance our Board sought to preserve. As we continue to engage with our shareholders, we remain confident that our special meeting provisions, including the 25% ownership threshold, are consistent with industry practices, provide our shareholders with a Lead Independent Director with comprehensivemeaningful and meaningful duties,appropriate right to call special meetings, and strong corporate governance practices, makes it unnecessary and ill advisedbalance the need to have an absolute requirement thatprotect the Chair be an independent director.interests of all of our shareholders. The Board believes that adopting suchadoption of shareholder Proposal Four – and a rule would only limit the Board’s ability to select the director it believes best suited to serve as Chairthreshold of the Board, and10% – is not inonly unnecessary, but contrary to the best interests of the Company and itsour shareholders. Vote requiredRequired Approval of this proposal requires that the votes cast “for” the proposal must exceed the votes cast “against” the proposal. Abstentions and brokernon-votes will have no effect on this proposal.   THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “AGAINST” THIS PROPOSAL. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “AGAINST” PROPOSAL FOUR.   6468 I|NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING  Why did I receive a “Notice of Internet Availability of Proxy Materials” but not a full set of proxy materials? We distribute our proxy materials to shareholders via the internet under the “Notice and Access” approach permitted by the rules of the SEC. This approach reduces the environmental impact of the Annual Meeting and our distribution costs, while providing a timely and convenient method of accessing the proxy materials and voting. On March 30, 2018, we mailed a “Notice of Internet Availability of Proxy Materials” to participating shareholders, containing instructions on how to access the proxy materials on the internet.  Who is entitled to vote at the Annual Meeting? You may vote your shares of our common stock if you owned your shares as of the close of business on March 20, 2018 (Record Date). As of the Record Date, there were 174,383,808 shares of our common stock outstanding. You may cast one vote for each share of common stock you hold as of the Record Date on all matters presented.  How many votes must be present to hold the Annual Meeting? The presence in person or by proxy of the holders of a majority of the shares entitled to vote at the Annual Meeting will constitute a quorum at the Annual Meeting. Persons returning executed proxy cards will be counted as present for purposes of establishing a quorum even if they abstain from voting on any or all proposals. Shares held by brokers who vote such shares on any proposal and brokernon-votes will be counted as present for purposes of establishing a quorum.  How can I receive a paper copy of the proxy materials? Instead of mailing a printed copy of this Proxy Statement and accompanying materials to each shareholder of record, we have elected to provide a Notice of Internet Availability of Proxy Materials (Notice) as permitted by the rules of the SEC. The Notice instructs you as to how you may access and review all of the proxy materials and how you may provide your proxy. If you would like to receive a printed or electronic copy of this Proxy Statement and accompanying materials, you must follow the instructions for requesting such materials included in the Notice.  What am I being asked to vote on and what are the Board of Directors’ recommendations? The following table lists the proposals scheduled to be voted on, the vote required for approval of each proposal and the effect of abstentions and brokernon-votes: Proposal Board   Recommendation   Vote Required   Abstentions   Broker   Non-Votes   Unmarked   Proxy Cards   Election of Directors (Proposal One) FOR Majority of votes cast No effect No effect Voted “FOR”   Advisory Vote on Compensation of Named Executive Officers (Proposal Two) FOR Majority of votes cast No effect No effect Voted “FOR”   Ratification of Appointment of Independent Auditor (Proposal Three) FOR Majority of votes cast No effect No effect Voted “FOR”   Shareholder Proposal to Modify Ownership Threshold for Shareholders to Call a Special Meeting (Proposal Four) AGAINST Majority of votes cast No effect No effect Voted “AGAINST”    What is a brokernon-vote? Brokers who hold shares of common stock for the accounts of their clients may vote these shares either as directed by their clients or in their own discretion if permitted by the stock exchanges or other organizations of which they are members. Members of the New York Stock Exchange (NYSE) are permitted to vote their clients’ proxies in their own discretion on certain matters if the clients NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|69  QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING have not furnished voting instructions within ten days of the meeting. However, NYSE Rule 452 defines various matters as“non-routine,” and brokers who have not received instructions from their clients do not have discretion to vote their client’s shares on such“non-routine” matters, resulting in a “brokernon-vote.” If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority under NYSE rules to vote your shares, without instructions from you, on the ratification of the appointment of Deloitte & Touche LLP as independent auditor. However, your broker does not have discretionary authority to vote your shares, without instructions from you, on the election of directors, the advisory vote to approve the compensation of our NEOs or the shareholder proposal, in which case a brokernon-vote will occur and your shares will not be voted on these matters.  How do I vote my shares? If you hold shares as a record holder, you may vote by proxy prior to the Annual Meeting, as discussed below, or you may vote in person at the Annual Meeting. Shares represented by a properly executed proxy will be voted at the Annual Meeting in accordance with the shareholder’s instructions. If no instructions are given, the shares will be voted according to the recommendations of the Board. Registered shareholders and plan participants may go towww.envisionreports.com/noc to view this Proxy Statement and the Annual Report. By Internet Registered shareholders and plan participants may vote on the internet, as well as view the documents, by logging on towww.envisionreports.com/noc and following the instructions given. By Telephone Registered shareholders and plan participants may grant a proxy by calling800-652-VOTE(800-652-8683) (toll-free) with a touch-tone telephone and following the recorded instructions. By QR Code Registered shareholders and plan participants may vote by scanning the QR code on their proxy card or notice with their mobile device. By Mail Registered shareholders and plan participants must request a paper copy of the proxy materials to receive a proxy card and may vote by marking the voting instructions on the proxy card and following the instructions given for mailing. A paper copy of the proxy materials may be obtained by logging on towww.envisionreports.com/noc and following the instructions given. If any other matters are properly brought before the Annual Meeting, the proxy card gives discretionary authority to the proxyholders named on the card to vote the shares in their best judgment. A shareholder who executes a proxy may revoke it at any time before its exercise by delivering a written notice of revocation to the Corporate Secretary or by delivering a valid, later-dated proxy, or a later-dated vote by telephone or on the internet, in a timely manner. In addition, a shareholder attending the Annual Meeting in person may revoke the proxy by giving notice of revocation to the inspector of election at the meeting or by voting by ballot at the meeting.  How do I vote my shares if they are held by a bank, broker or other agent? Persons who own stock beneficially through a bank, broker or other agent may not vote directly and will need to instruct the record owner to vote their shares using the procedure identified by the bank, broker or other agent. Beneficial owners who hold our common stock in “street name” through a broker receive voting instruction forms from their broker. Most beneficial owners will be able to provide voting instructions by telephone or on the internet by following the instructions on the form they receive from their broker. Beneficial owners may view this Proxy Statement and the Annual Report on the internet by logging on towww.edocumentview.com/noc. A person who beneficially owns shares of our common stock through a bank, broker or other agent can vote his or her shares in person at the Annual Meeting only if he or she obtains from the bank, broker or other nominee a proxy, often referred to as a “legal proxy,” to vote those shares, and presents the proxy to the inspector of election at the meeting together with his or her ballot. 70 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING Beneficial owners who hold shares in “street name” may revoke a proxy or change a vote by submitting a new, later-dated voting instruction form, contacting the bank, broker or other agent or by voting in person at the Annual Meeting by obtaining a legal proxy as described above.  How do I vote my shares held under a Northrop Grumman savings plan? If shares are held on an individual’s behalf under any of our savings plans, the proxy will serve to provide confidential instructions to the plan Trustee or Voting Manager who then votes the participant’s shares in accordance with the individual’s instructions. For those participants who do not vote their plan shares, the applicable Trustee or Voting Manager will vote their plan shares in the same proportion as shares held under the plan for which voting directions have been received, unless the Employee Retirement Income Security Act requires a different procedure. Voting instructions from savings plan participants must be received by the applicable plan Trustee or Voting Manager by 11:59 p.m. Eastern Daylight Time on May 13, 2018 in order to be used by the plan Trustee or Voting Manager to determine the votes cast with respect to plan shares. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|71  MISCELLANEOUS     Voting on Other Matters   We are not aware of any other business to be transacted at the Annual Meeting. Our Bylaws outline procedures, including minimum notice provisions, for shareholder nominations of directors and submission of other shareholder business to be transacted at the Annual Meeting. A copy of the pertinent Bylaw provisions is available on request to the Corporate Secretary,Northrop Grumman Corporation, 2980 Fairview Park Drive, Falls Church, Virginia 22042. Our Bylaws are also available in the Investor Relations section of our website atwww.northropgrumman.com. If any other business properly comes before the Annual Meeting, the shares represented by proxies will be voted in accordance with the judgment of the persons authorized to vote them. Shareholder Proposals for 2016the 2019 Annual Meeting   Any shareholder who intends to present a proposal at the 20162019 Annual Meeting must deliver the proposal to the Corporate Secretary atNorthrop Grumman Corporation, 2980 Fairview Park Drive, Falls Church, Virginia 22042:   —·   not later than December 8, 2015,November 30, 2018, if the proposal is submitted for inclusion in the Company’s proxy materials for that meeting pursuant to Rule14a-8 under the Securities Exchange Act of 1934. Act; and   —·   not earlier than December 8, 2015November 30, 2018 and not later than January 7, 2016,December 30, 2018, if the proposal is submitted pursuant to the Bylaws, but not pursuant to Rule14a-8, in which case we are not required to include the proposal in our proxy materials. If the 2019 Annual Meeting is convened more than 30 days prior to or delayed by more than 30 days after theone-year anniversary of the Annual Meeting, our Bylaws provide different notice requirements. Any shareholder who wishes to introduce a proposal should review our Bylaws and applicable proxy rules of the SEC. Shareholder Nominations for Director Election at 2016the 2019 Annual Meeting   Any shareholder who intends to nominate a person for election as a director at the 20162019 Annual Meeting must deliver a notice of such nomination (along with certain other information required by our Bylaws) to the Corporate Secretary atNorthrop Grumman Corporation, 2980 Fairview Park Drive, Falls Church, Virginia 22042, not earlier than December 8, 2015 and not later than January 7, 2016.: · not earlier than October 31, 2018 and not later than November 30, 2018, if the nomination is submitted for inclusion in the Company’s proxy materials for that meeting pursuant to the Company’s proxy access provision, as set forth in our Bylaws, which nomination and supporting materials must comply with the requirements in our Bylaws; and · not earlier than November 30, 2018 and not later than December 30, 2018, if the nomination is submitted pursuant to the Bylaws, but not pursuant to our proxy access provision, in which case we are not required to include the nomination in our proxy materials. If the 2019 Annual Meeting is convened more than 30 days prior to or delayed by more than 30 days after theone-year anniversary of the Annual Meeting, our Bylaws provide different notice requirements. Any shareholder who wishes to nominate a person for election as a director should review our Bylaws. Householding Information   Some banks, brokers and other nominee record holders may be participating in the practice of “householding.” This means that only one copy of the Notice of Internet Availability of Proxy Materials may have been sent to multiple shareholders in a household. We will promptly deliver a separate copy to a shareholder upon written or oral request to the Corporate Secretary at the following address:address and phone number:Northrop Grumman Corporation, 2980 Fairview Park Drive, Falls Church, Virginia 22042, (703) 280-2900. To receive separate copies of the notice in the future, or if a shareholder is receiving multiple copies and would like to receive only one copy for the household, the shareholder should contact his or her bank, broker or other nominee record holder, or may contact the Corporate Secretary at the above address.address or phone number. 72 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT  MISCELLANEOUS Cost of Soliciting Proxies   We will pay all costs of soliciting proxies. We have made arrangements with brokerage houses and other custodians, nominees and fiduciaries to make proxy materials available to beneficial owners. We will, upon request, reimburse them for reasonable expenses incurred. We have retained D.F. King & Co,Co., Inc. of New York at an estimated fee of $18,500,$20,000, plus reasonable disbursements to solicit proxies on our behalf. Our officers, directors and regular employees may solicit proxies personally, by means of materials prepared for shareholders and employee-shareholders or by telephone or other methods to the extent deemed appropriate by the Board of Directors.Board. No additional compensation will be paid to such individuals for this activity. The extent to which this solicitation will be necessary will depend upon how promptly proxies are received. We therefore urge shareholders to give voting instructions without delay. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 65  MISCELLANEOUS  Available Information   Available Information You may obtain a copy of the following corporate governance materials on the Investor Relations section of our website (www.northropgrumman.com) under Corporate Governance:   —·   Principles of Corporate Governance; Bylaws;   —·   StandardsPrinciples of Business Conduct; Corporate Governance;   —·   Standards of Business Conduct; · Policy and Procedure Regarding Company Transactions with Related Persons; and   —·   Board Committee Charters. Copies of these documents are also available without charge to any shareholder upon written request to the Corporate Secretary,Northrop Grumman Corporation, 2980 Fairview Park Drive, Falls Church, Virginia 22042. We disclose amendments to provisions of our Standards of Business Conduct by posting amendments on our website. Waivers of the provisions of our Standards of Business Conduct that apply to our directors or our Corporate Vice Presidents who are members of the Corporate Policy Council and our Chief Accounting Officer (theseexecutive officers are designated as Section 16 officers under the Securities Exchange Act of 1934 (executive officers)) are disclosed in a Current Report onForm 8-K.  Incorporation by Reference In accordance with SEC rules, notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act, that might incorporate this Proxy Statement or future filings made by the Company under those statutes, the information included under the section entitled “Compensation Committee Report” and those portions of the information included under the section entitled “Audit Committee Report” required by the SEC’s rules to be included therein, shall not be deemed to be “soliciting material” or “filed” with the SEC and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by the Company under those statutes, except to the extent we specifically incorporate these items by reference.  Annual Report March 30, 2018 NOTICE: THE COMPANY FILED AN ANNUAL REPORT ON FORM10-K FOR THE YEAR ENDED DECEMBER 31, 2017 ON JANUARY 29, 2018. SHAREHOLDERS OF RECORD ON MARCH 20, 2018 MAY OBTAIN A COPY OF THIS REPORT WITHOUT CHARGE UPON WRITTEN REQUEST TO THE CORPORATE SECRETARY, NORTHROP GRUMMAN CORPORATION, 2980 FAIRVIEW PARK DRIVE, FALLS CHURCH, VIRGINIA 22042. Jennifer C. McGarey Corporate Vice President and Secretary Use of Non-GAAP Financial MeasuresNOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|73  APPENDIX A - USE OF NON-GAAP FINANCIAL MEASURES     This Proxy Statement containsnon-GAAP (accounting principles generally accepted in the United States of America) financial measures, as defined by SEC Regulation G.G and indicated by an asterisk in this Proxy Statement. While we believe thatinvestors and other users of our financial statements may find thesenon-GAAP financial measures may be useful in evaluating our financial information,performance and operational trends, they should be considered as supplemental in nature, and therefore, should not be considered in isolation or as a substitute for financial information prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).GAAP. Definitions and reconciliations for thenon-GAAP financial measures contained in this Proxy Statement and reconciliations are provided below. Other companies may define these measures differently or may utilize differentnon-GAAP financial measures. Cash provided by operating activities before discretionary pension contributionsflow metrics: Cash provided by operating activities before the after-tax impactWe use cash flow metrics as internal measures of discretionary pension contributions. Cash provided by operating activities before discretionary pension contributions has been provided for consistency and comparability of 2014 and 2013 financial performance reconciled below. Free cash flow: Cash provided by operating activities less capital expenditures.and for performance-based compensation decisions. We also use free cash flowthese measures as a key factor in our planning for, and consideration of, strategic acquisitions, stock repurchases and the payment of dividends. ThisThe following cash flow metrics may be useful to investors and other users of our financial statements as a supplemental measure of our cash performance, but should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating results presented in accordance with GAAP. Cash provided by operating activities beforeafter-tax discretionary pension contribution: Cash provided by operating activities before theafter-tax impact of discretionary pension contribution. Cash provided by operating activities beforeafter-tax discretionary pension contribution is reconciled below. Cash Flow from Operations Conversion:Cash provided by operating activities beforeafter-tax pension contribution as defined above, divided by net income excluding the impact of 2017 tax reform. Free cash flow: Net cash provided by operating activities less capital expenditures. Free cash flow is reconciled below. Free cash flow provided by operating activities beforeafter-tax discretionary pension contributionscontribution: Free cash flow provided by operating activities before theafter-tax impact of discretionary pension contributions. We usecontribution. Free cash flow beforeafter-tax discretionary pension contribution is reconciled below. Cumulative free cash flow provided by operating activities before discretionary pension contributions as a key factor in our planning for, and consideration of, strategic acquisitions, stock repurchases and the payment of dividends. This measure should not be considered in isolation, as a measure of residual: The aggregate free cash flow availablebefore theafter-tax impact of total pension funding over a three-year period. Pension-adjusted metrics: For financial statement purposes, we account for discretionary purposes, or as an alternative to operating results presentedour employee pension plans in accordance with GAAP. Free cash flow provided by operating activities before discretionary pension contributionsGAAP (FAS). However, the cost of these plans is reconciled below. Net FAS/CAS pension adjustment: Pension expensecharged to our contracts in accordance with the Federal Acquisition Regulation (FAR) and the related U.S. Government Cost Accounting Standards (CAS) that govern such plans. We use pension-adjusted metrics as internal measures of financial performance and for performance-based compensation decisions. The following pension-adjusted measures may be useful to investors and other users of our financial statements in evaluating our performance based upon the pension costs charged to our contracts. Net FAS/CAS pension adjustment: The difference between pension expense charged to contracts and included as cost in segment operating income lessin accordance with CAS and pension expense determined in accordance with Financial Accounting Standards (FAS) under GAAP.FAS. Net FAS/CAS pension adjustment is presented below. Pension-adjusted operating income: Operating income before the net FAS/CAS pension adjustment as defined above. Pension-adjusted operating income is reconciled below. Pension-adjusted operating margin rate: Pension-adjusted operating income as defined above, divided by sales. Pension-adjusted operating margin rate is reconciled below. After-tax net pension adjustment per share:The per sharenet income impact, after tax at the statutory rate of 35 percent, of the net FAS/CAS pension adjustment as defined above.After-tax net pension adjustment is presented below. Pension-adjusted net income:Net income before theafter-tax net pension adjustment as defined above and excluding the impact of 2017 tax reform. Pension-adjusted net income is reconciled below. Pre-tax net pension adjustment per share: The per share impact, before tax, of the net FAS/CAS pension adjustment as defined above.Pre-tax net pension adjustment per share is presented below. After-tax net pension adjustment per share: The per share impact, after tax at the statutory rate of 35 percent, provided for consistency and comparability of 2014 and 2013 financial performance as presented below. Pension-adjusted diluted EPS: Diluted EPS excluding the after-tax net pension adjustment per share, as defined above. These per share amounts are provided for consistency and comparability of operating results. Management uses pension-adjusted diluted EPS, as reconciled below, as an internal measure of financial performance. Pension-adjusted net income: Net income before the after-tax impact of the net FAS/CAS pension adjustment as defined above. Management uses pension-adjustedAfter-tax net incomepension adjustment per share is presented below. Pension-adjusted diluted EPS: Diluted EPS excluding theafter-tax net pension adjustment per share as a metric for both top and bottom line performance.defined above. Pension-adjusted net incomediluted EPS is reconciled below. Diluted EPS excluding 2017 tax reform and related discretionary pension contribution impacts: Net earnings excluding the impacts of 2017 tax reform and our related discretionary pension contribution divided by weighted average diluted shares outstanding. This measure may be useful to investors and other users of our financial statements in understanding the impact of these items to our   66 INOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT|A-1  MISCELLANEOUSAPPENDIX A - USE OF NON-GAAP FINANCIAL MEASURES     Pension-adjusted operating income: Operating income before net FAS/CAS pension adjustment as reconciled below. Management uses pension-adjusted operating incomefinancial results, but should not be considered in isolation or as an internal measure of financial performance.alternative to earnings per share presented in accordance with GAAP. Diluted earnings per share excluding 2017 tax reform and related discretionary pension contribution impacts is reconciled below. Pension-adjusted operating margin rate: Pension-adjusted operating income as defined above, divided by sales. Management uses pension-adjusted operating margin rate, as reconciled below, as an internal measure of financial performance. Segment operating income: Total earnings from our fourthree segments including allocated pension expense recognized under CAS. ReconcilingCAS, and excluding unallocated corporate items and FAS pension expense. This measure may be useful to investors and other users of our financial statements as a supplemental measure in evaluating the financial performance and operational trends of our sectors. Segment operating income include the net FAS/CAS pension adjustment, as defined above, as well as certain corporate-level expenses, which are not considered allowable or allocable under applicable CAS or the Federal Acquisition Regulation. Management uses segment operating income, asis reconciled below, as an internal measure of financial performance.below. Segment operating margin rate: Segment operating income as defined above, and reconciled below, divided by sales. Management uses segment operating margin rate,This measure may be useful to investors and other users of our financial statements as reconciled below, as an internala supplemental measure in evaluating the financial performance and operational trends of financial performance.our sectors. Reconciliation ofNon-GAAP Financial Measures     ($M)    Total Year              2014                 2013            Cash provided by operating activities before discretionary pension contributions    $             2,593         $             2,806    After-tax discretionary pension pre-funding impact      —           (323 )  Net Cash provided by operating activities      2,593           2,483    Less:         Capital expenditures      (561 )         (364 )  Free cash flow      2,032           2,119    After-tax discretionary pension pre-funding impact      —           323    Free cash flow provided by operating activities before discretionary pension contributions    $ 2,032         $ 2,442      ($M)      Total Year        2014                 2013            Segment Operating Income      $             3,099         $             3,080    Segment operating margin rate        12.9 %         12.5 %  Reconciliation to operating income           Net FAS/CAS pension adjustment        269           168    Unallocated corporate expenses        (169 )         (119 )  Other        (3 )         (6 )  Operating income      $ 3,196         $ 3,123    Operating margin rate        13.3 %         12.7 %    ($M)      Total Year        2014                 2013            Pension-adjusted Operating Highlights           Operating income      $             3,196         $             3,123    Net FAS/CAS pension adjustment        (269 )         (168 )  Pension-adjusted operating income      $ 2,927         $ 2,955    Pension-adjusted operating margin rate        12.2 %         12.0 %         Total Year        2014                 2013            Pension-adjusted Per Share Data           Diluted EPS      $             9.75         $             8.35    After-tax net pension adjustment per share        (0.82 )         (0.47 )  Pension-adjusted diluted EPS      $ 8.93         $ 7.88           Total Year      ($M)      2017      2016   Cash provided by operating activities beforeafter-tax discretionary pension contribution      $           2,938      $           2,813   After-tax discretionary pension contribution impact        (325 )       —                         Net cash provided by operating activities      $ 2,613      $ 2,813   Less: capital expenditures        (928 )       (920 )                        Free cash flow      $ 1,685      $ 1,893   After-tax discretionary pension contribution impact        325        —                         Free cash flow beforeafter-tax discretionary pension contribution      $ 2,010      $ 1,893                           Operating income        $   3,299          $   3,193     Operating margin rate        12.8 %       13.0 %  Reconciliation to segment operating income         Net FAS/CAS pension adjustment        (594 )       (316 )  Unallocated corporate expenses        250        53   Other        4        5                         Segment operating income      $ 2,959      $ 2,935   Segment operating margin rate        11.5 %       12.0 %                          Pension-adjusted operating highlights         Operating income      $ 3,299      $ 3,193   Net FAS/CAS pension adjustment        (594 )       (316 )                        Pension-adjusted operating income      $ 2,705      $ 2,877   Pension-adjusted operating margin rate        10.5 %       11.7 %                          Net income        $   2,015          $   2,200     Net FAS/CAS pension adjustment        (594 )       (316 )  Tax effect on net pension adjustment        208        111                         After-tax net pension adjustment        (386 )       (205 )  Tax expense related to the 2017 Tax Act        300        —                         Pension-adjusted net income      $ 1,929      $ 1,995                           Net income        $   2,015          $   2,200     Tax expense related to the 2017 Tax Act        300      $ —                         Net income excluding 2017 tax reform impact      $ 2,315      $ 2,200                           A-2 |NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI 67  APPENDIX A - USE OF NON-GAAP FINANCIAL MEASURES        Total Year            2017          2016          2015       Pension-adjusted per share data              Diluted EPS        $             11.47              $             12.19              $             10.39            Pre-tax net pension adjustment per share              (3.38     )               (1.75     )               (1.82)           Tax effect on net pension adjustment per share              1.18                    0.61                    0.64                                         After-tax net pension adjustment per share              (2.20     )               (1.14     )               (1.18)                                        Pension-adjusted diluted EPS        $     9.27              $     11.05              $     9.21                                        MISCELLANEOUSTotal Year     2017 Diluted EPS $         11.47  Tax expense related to the 2017 Tax Act 1.71  Tax expense related to discretionary pension contribution1 0.05  Operating income reduction related to discretionary pension contribution, net of tax2 0.05  Impact on diluted EPS of 2017 tax reform and related discretionary pension contribution $ 1.81  Diluted EPS excluding 2017 tax reform and related discretionary pension contribution impacts $ 13.28  1Reflects $8 million of additional income tax recorded due to lower manufacturing deductions available as a result of the $500 million voluntarypre-tax pension contribution. 2 Reflects $9 million of lower operating income (net of tax) as follows; $18 million reduction in corporate operating income due to lower state deferred tax assets, partially offset by approximately $4.5 million of higher sector operating income as a result of lower state tax cost, each tax effected at 35 percent. NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT|A-3              Total Year         ($M)                     2014                   Net income    $         2,069    Net FAS/CAS pension adjustment      (175 )  Pension-adjusted net income    $ 1,894    April 6, 2015 NOTICE: THE COMPANY FILED AN ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2014 ON FEBRUARY 2, 2015. SHAREHOLDERS OF RECORD ON MARCH 24, 2015 MAY OBTAIN A COPY OF THIS REPORT WITHOUT CHARGE FROM THE CORPORATE SECRETARY, NORTHROP GRUMMAN CORPORATION, 2980 FAIRVIEW PARK DRIVE, FALLS CHURCH, VIRGINIA 22042.        Jennifer C. McGarey IMPORTANT ANNUAL MEETING INFORMATION    Corporate Vice President and Secretary   68 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT Using a APPENDIX A - SUMMARY DESCRIPTION OF THE AMENDED 2011 PLANblack ink Appendix A Summary Description of the Amended 2011 Plan Key features of the 2011 Plan, as proposed to be amended, are described below. This description is qualified in its entirety by the full text of the 2011 Plan, as proposed to be amended, which is attached as Appendix B to this Proxy Statement. Purpose. The purpose of the 2011 Plan is to promote the long-term success of our Company and to increase shareholder value by providing directors, officers and selected employees with incentives to create excellent performance and to continue to serve our Company and its subsidiaries. Administration. The Compensation Committee will administer the 2011 Plan and may delegate its authority to make grants under the 2011 Plan to one or more committees of directors. Any power of the Compensation Committee may also be exercised by the Board, except with respect to awards intended to satisfy the requirements for performance-based compensation under Section 162(m), awards intended to be exempt under Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), or as otherwise required by applicable law. The appropriate acting body, be it the Board of Directors, the Compensation Committee or another authorized committee, is referred to in this summary as the “Committee.” The Committee has the full power to interpret and construe the 2011 Plan, to select participants, determine the form of awards and award agreements, grant awards, and to adopt guidelines and make determinations it may deem necessary or advisable for administration of the 2011 Plan. No Repricing. Without the approval of our shareholders, the Committee may not (1) amend an outstanding stock option or stock appreciation right (“SAR”) to reduce the exercise price or base price of the award (2) cancel, exchange, or surrender an outstanding stock option or SAR in exchange for cash or other awards at any time when the exercise price or base price of the stock option or SAR is above the fair market value of a share of common stock, or (3) cancel, exchange, or surrender an outstanding stock option or SAR in exchange for an option or SAR with an exercise or base price that is less than the exercise or base price of the original award. (Adjustments to reflect stock splits and similar events will not be considered amendments for this purpose.) Eligibility. Employees of our Company and its wholly-owned subsidiaries, and members of the Board of Directors are eligible to receive awards under the 2011 Plan. Approximately 210 officers and employees (including all of our named executive officers), and each of our non-employee directors, are considered eligible to participate in the 2011 Plan. Types of Awards. The 2011 Plan authorizes the grant of stock options, SARs, other awards providing for the issuance of or denominated in common stock or units of common stock (defined as “Share Awards”), and performance-based awards that are denominated in or may be settled only in cash (defined as “Cash Awards”). A stock option is the right to purchase shares of common stock at a future date at a specified exercise price. The per share exercise price of an option may not be less than the fair market value of a share of common stock on the date of grant. The maximum term of an option is ten years from the date of grant. An option may either be an incentive stock option or a nonqualified stock option. Incentive stock option benefits are taxed differently from nonqualified stock options, as described under “U.S. Federal Income Tax Treatment of Awards Under the 2011 Plan” in Proposal 3. Incentive stock options are also subject to more restrictive terms and are limited in amount by the Code and the 2011 Plan. Incentive stock options may only be granted to employees of our Company or our subsidiaries. A SAR is the right to receive payment of an amount equal to the excess of the fair market value of share of common stock on the date of exercise over the base price of the SAR. The base price will be established by the Committee at the time of grant and cannot be less than the fair market value of a share of common stock on the date of grant. SARs may be granted in connection with other awards or independently. The maximum term of a SAR is ten years from the date of grant. Share Awards may include restricted stock, performance stock, phantom stock, dividend equivalent rights or other rights. Subject to the express terms of the 2011 Plan, the Committee may grant or sell awards under the plan with or subject to terms, conditions or restrictions that it determines appropriate, including requirements of continuous service with the Company (or a subsidiary), achievement of specific business objectives, and other measurements of individual, business unit or Company performance. The grant, issuance, vesting, retention or settlement of Cash Awards must be dependent on satisfying performance conditions established by the Committee. Any award may be paid or settled in cash. Except with respect to up to five percent (5%) of the shares authorized under the 2011 Plan, no stock option, SAR or Share Award that vests based on continued employment or the passage of time may vest in less than one year from the date the award is made, other than upon the death or disability of the participant or in the case of termination following a change in control, in each case as specified in the agreement evidencing such award. In addition, the performance period for any stock option, SAR or Share Award that vests based in whole or in part on performance must be at least one year. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI A- 1  APPENDIX A - SUMMARY DESCRIPTION OF THE AMENDED 2011 PLAN Authorized Shares; Limits on Awards. The aggregate number of shares of common stock that may be issued pursuant to awards granted after March 10, 2015 under the 2011 Plan, as proposed to be amended, is: — pen, mark your votes with anX as shown in this example. Please do not write outside the designated areas.   7,500,000 shares,plus ☒ — the number of shares of common stock which are subject to stock, options or restricted stock awards granted under the 2011 Plan and the 2001 Long-Term Incentive Plan (the “2001 Plan”) and are outstanding on March 10, 2015 and that subsequently expire or are forfeited, terminated or canceled without being exercised or having become vested or paid (the “Outstanding Awards”). The foregoing share authorization does not include 2,588,207 shares that had been authorized for issuance pursuant to awards that were exercised or vested and paid on or before March 10, 2015. On and after the Amendment Date, the following share counting rules will apply under the 2011 Plan: — Shares of common stock issued in respect of any stock option, SAR, or Share Award granted under the 2011 Plan, whether such award was granted prior to or after the Amendment Date, will be counted against this limit on a 1-for-1 basis. — Except as described in following bullet, shares that are subject to or underlie awards granted under the 2011 Plan or the 2001 Plan which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, are settled in cash or for any other reason are not paid or delivered through the issuance of shares will become available for new awards under the 2011 Plan on a 1-for-1 basis. — Shares that are exchanged by a participant or withheld by us to pay the exercise price of an award granted under the 2011 Plan or the 2001 Plan, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any award, are not available for subsequent awards under the 2011 Plan. The payment of cash dividends in conjunction with outstanding awards will not be counted against the shares available for issuance under the 2011 Plan. However, in the event that shares are delivered in respect of a dividend equivalent right granted under the 2011 Plan, the actual number of shares delivered with respect to the award will be counted against the shares available for issuance under the 2011 Plan. The following limits are also contained in the 2011 Plan: — The maximum number of shares that may be delivered pursuant to incentive stock options granted after March 10, 2015 is 7,500,000 shares. — The maximum number of shares subject stock options and SARs awarded under the 2011 Plan to any participant during any three consecutive calendar years may not exceed 3,000,000 shares. — The maximum number of shares subject to Share Awards that are intended to qualify as “Section 162(m) Awards” under Section 8(a)(ii) of the 2011 Plan that are granted to any participant during any three consecutive calendar years may not relate to or provide for payment of more than 1,000,000 shares. — Cash Awards intended to satisfy Section 162(m) that are granted to any participant in any calendar year may not provide for payment of more than $20,000,000. As is customary in incentive plans of this nature, the number and kind of shares available under the 2011 Plan and the then outstanding awards, as well as exercise and purchase prices, performance targets under certain performance-based awards, and share limits, are subject to adjustment in the event of certain reclassifications, recapitalizations, stock splits, stock dividends, reverse stock splits; merger, combination, consolidation, or other reorganization; spin-offs, split-ups, or similar extraordinary dividends; or any exchange of shares of common stock or other securities of the Company, or any similar, unusual or extraordinary corporate transaction in respect of our common stock. The closing price of our common stock on the New York Stock Exchange (“NYSE”) on March 10, 2015 was $158.34 per share. Performance-Based Awards. The Committee may grant awards that are intended to qualify as performance-based compensation under, and be exempt from the deductibility limitations of, Section 162(m) (“Section 162(m) Awards”). In addition to options and SARs which may also qualify as performance-based compensation for Section 162(m) purposes, Section 162(m) Awards may be in the form of Share Awards (including restricted stock, performance stock, phantom stock or other rights) or Cash Awards. The grant, issuance, vesting, retention or settlement of Section 162(m) Awards will depend on the performance of our Company relative to pre-established goals on a consolidated, segment, sector, subsidiary, division, or plant basis with reference to: — new business awards or backlog (absolute dollars or ratio of awards to sales); — revenues; A- 2 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  APPENDIX A - SUMMARY DESCRIPTION OF THE AMENDED 2011 PLAN — operating margin (dollars or rate); — net earnings (on a total or continuing basis and either before or after (i) taxes, (ii) interest and taxes, or (iii) interest, taxes, depreciation, and amortization); — earnings per share (on a total or continuing basis and either before or after (i) taxes, (ii) interest and taxes, or (iii) interest, taxes, depreciation, and amortization); — cash flow or free cash flow (either as dollars or as a percentage of earnings before or after taxes); — returns on equity, investment, assets or net assets; — cash flow return on equity, investment, assets or net assets; — stock price or stock price appreciation; — total shareholder returns; — EVA-defined as operating profit after tax (which means net earnings after tax but before tax adjusted interest income and expense and goodwill amortization), less a charge for the use of capital (which is based on average total capital and the weighted average cost of capital); — overhead or expense containment or reduction; — working capital level or working capital turnover; and/or — asset levels or asset turnover. The financial metrics identified above can be measured on an as reported or pension adjusted basis, on an annual or cumulatively over a defined period of time basis, and can be measured on an absolute, relative or growth basis. The Committee will establish the criterion or criteria and target(s) on which performance will be measured, which must be established in advance of applicable deadlines under the Code and while the attainment of the performance targets remains substantially uncertain. Section 162(m) Awards may be granted only to employees of our Company or our subsidiaries. Performance goals will be adjusted to address the impact of material, unusual or nonrecurring gains and losses, changes in law, regulations or in generally accepted accounting principles, accounting charges or other extraordinary events not foreseen at the time the goals were set. Section 162(m) Awards may be paid in stock or in cash (in either case, subject to the limits described under the heading “Authorized Shares; Limits on Awards” above). Before any Section 162(m) Award is paid, the Committee must certify that the performance target or targets have been satisfied. The Committee has discretion to determine the performance target or targets and any other restrictions or other limitations of Section 162(m) Awards and reserves discretion to reduce the amount payable with respect to any Section 162(m) Award in accordance with any standards the Committee may impose or on any other basis (including the Committee’s discretion) as the Committee may determine appropriate. Dividend Equivalents; Deferrals. The Committee may provide for the deferred payment of awards, and may determine the other terms applicable to deferrals. The Committee may provide that any awards (other than stock options or SARs) under the 2011 Plan earn dividends or dividend equivalents, except that any dividend equivalent rights granted with respect to a performance-vesting Share Award shall not be paid or settled unless and to the extent that the related performance-based vesting conditions of such award are satisfied. Acceleration of Awards; Possible Early Termination of Awards. No acceleration of vesting and/or payment of an outstanding award under the 2011 Plan will occur solely as a result of a change in control (as defined in Section 6(e) of the 2011 Plan) unless: — the Company is liquidated, all or substantially all of the Company’s assets are sold, or the Company is merged, consolidated or reorganized and shareholders prior to the event do not continue to own more than 60% of the combined voting power of the Company or a successor after the event, — the Company is not the ultimate parent company whose common stock is publicly traded after such transaction, and — the successor to the Company (or its parent entity) does not agree in writing to assume the awards. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI A- 3  APPENDIX A - SUMMARY DESCRIPTION OF THE AMENDED 2011 PLAN However, if the above three conditions are met, generally all awards will vest or be paid. The Committee may also provide that acceleration of vesting and/or payment of an outstanding 2011 Plan award will occur if the participant’s employment or service is terminated by the Company without cause or the participant terminates employment or service for good reason in connection with a change in control. Transfer Restrictions. Subject to certain exceptions in the 2011 Plan, awards under the 2011 Plan are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable, during the recipient’s lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award will be paid only to the recipient or the recipient’s beneficiary or representative. Termination of or Changes to the 2011 Plan. The Board or Committee may amend or terminate the 2011 Plan at any time and in any manner as it deems necessary or appropriate to better achieve the purpose of the 2011 Plan. Shareholder approval for an amendment is required only if the amendment increases the number of shares available for issuance under the 2011 Plan, or if shareholder approval is otherwise required as a matter of law or applicable NYSE listing requirements. (Adjustments as a result of stock splits or similar events will not be considered an amendment requiring shareholder approval.) Unless terminated earlier by the Board, the authority to grant new awards under the 2011 Plan will terminate on the tenth anniversary of the Amendment Date. A- 4 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  APPENDIX B - AMENDED AND RESTATED 2011 LONG-TERM INCENTIVE STOCK PLAN NORTHROP GRUMMAN 2011 LONG-TERM INCENTIVE STOCK PLAN (as amended and restated effective as of May [·], 2015) 1. Purpose The purpose of the Northrop Grumman 2011 Long-Term Incentive Stock Plan (the “Plan”) is to promote thelong-term success of Northrop Grumman Corporation (the “Company”) and to increase shareholder value by providing its directors, officers and selected employees with incentives to create excellent performance and to continue service with the Company, its subsidiaries and affiliates. As set forth in Section 8 of the Plan, awards under the Plan may consist of stock options, stock appreciation rights (“SARs”), awards other than stock options or SARs (“Share Awards”) providing for the issuance of or denominated in shares of common stock of the Company (“Common Stock”) and awards that are denominated in or may be settled only in cash (“Cash Awards”). Both by encouraging such directors, officers and employees to become owners of the Common Stock of the Company and by providing actual ownership through Plan awards, it is intended that Plan participants will view the Company from an ownership perspective. 2. Term The Plan was approved by the Company’s Board of Directors (the “Board”) on March 15, 2011, became effective upon approval by the shareholders of the Company on May 18, 2011 (the “Effective Time”), and was amended and restated effective as of the date of the Company’s 2015 Annual Meeting of Shareholders (the “Amendment Date”). Unless previously terminated by the Board, the Plan shall terminate at the close of business on the tenth anniversary of the Amendment Date. After termination of the Plan, no future awards may be granted but previously granted awards (and the Committee’s (as such term is defined in Section 3) authority with respect thereto) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the Plan. 3. Plan Administration (a)           The Plan shall be administered by the Compensation Committee (or its successor) of the Board. The Board also may exercise any power of the Compensation Committee under the terms of the Plan, except as set forth below with respect to Section 162(m) of the Code and Rule 16b-3 of the 1934 Act, or as otherwise required by applicable law. Subject to the following provisions of this Section 3(a), the Compensation Committee (or its successor) may delegate different levels of authority to make grants under the Plan to different committees, provided that each such committee consists of one or more members of the Board. With respect to awards intended to satisfy the requirements for performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), the Plan shall be administered by a committee consisting of two or more outside directors (as this requirement is applied under Section 162(m) of the Code). Transactions in or involving awards intended to be exempt under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “1934 Act”), must be duly and timely authorized by the Board or a committee of non-employee directors (as this term is used in or under Rule 16b-3). (The appropriate acting body, be it the Board, the Compensation Committee or another duly authorized committee of directors, is referred to as the “Committee”.) (b)           The Committee shall have full power to interpret the Plan and to adopt such rules, regulations and guidelines for carrying out the Plan as it may deem necessary or proper. This power includes, but is not limited to the power: (i)          to prescribe, amend, and rescind rules and regulations relating to the Plan, including subplans and the like as may be necessary to comply with provisions of the laws and applicable regulatory rulings of countries in which the Company (or its subsidiaries or affiliates, as applicable) operates in order to assure the viability of awards granted under the Plan and to enable participants employed in such countries to receive advantages and benefits under the Plan and such laws and rulings; (ii)          to determine which persons are eligible to be participants, to which of such persons, if any, awards shall be granted hereunder and the timing of any such awards, and to grant awards; (iii)          to establish all award terms and conditions of awards, including the number of shares subject to awards and the exercise or purchase price of such shares and the circumstances under which awards become exercisable or vested or are forfeited or expire, which terms may but need not be conditioned upon the passage of time, continued employment, the satisfaction of performance criteria, the occurrence of certain events, or other factors; (iv)          to establish the forms of award agreement and manner of acceptance of an award, and to take or approve such further actions as the Committee determines necessary or appropriate to the administration of the Plan and awards, including without limitation adopting modifications and amendments, correcting a defect or supplying any omission, NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI B- 1  APPENDIX B - AMENDED AND RESTATED 2011 LONG-TERM INCENTIVE STOCK PLAN or reconciling any inconsistency so that the Plan or any award agreement complies with applicable law, regulations and stock exchange listing requirements and so as to avoid unanticipated consequences or address unanticipated events (including any temporary closure of the primary stock exchange on which the Common Stock is traded, disruption of communications or natural catastrophe) deemed by the Committee to be inconsistent with the purposes of the Plan or any award agreement, provided that no such action shall be taken absent stockholder approval to the extent required under Section 13; (v)          to establish or verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any award; (vi)          to prescribe and amend the terms of the agreements or other documents evidencing awards made under this Plan (which need not be identical); (vii)          to determine whether, and the extent to which, adjustments are required pursuant to Section 6; (viii)          to interpret and construe this Plan, any rules and regulations under this Plan and the terms and conditions of any award granted hereunder, and to make exceptions to any such provisions in good faith; and (ix)          to make all other determinations deemed necessary or advisable for the administration of this Plan. (c)           Notwithstanding the foregoing and except for an adjustment pursuant to Section 6, in no case may the Committee, without the approval of shareholders: (1) amend an outstanding stock option or SAR to reduce the exercise price or base price of the award; (2) cancel, exchange or surrender an outstanding stock option or SAR at any time when the exercise price or base price of the stock option or SAR is above the Fair Market Value of a share of Common Stock in exchange for cash or other awards; or (3) cancel, exchange or surrender an outstanding stock option or SAR with an exercise or base price that is less than the exercise or base price of the original award. (d)           The Committee may delegate to one or more officers or employees of the Company, and/or one or more agents, the authority to assist the Committee in any or all aspects of the day-to-day administration of the Plan and/or awards granted under the Plan. Any action by such officer or persons acting under his or her authority within the scope of such delegation shall be deemed for all purposes to have been taken by the Committee and references in this Plan to the Committee shall include any such administrator, provided that the actions and interpretations of any such administrator shall be subject to review and approval, disapproval or modification by the Committee. (e)           In making any determination or in taking or not taking any action under the Plan, the Committee may obtain and may rely on the advice of experts, including employees of and professional advisors to the Company. Any action taken by, or inaction of, the Committee relating to or pursuant to the Plan shall be within the absolute discretion of that entity or body and shall be conclusive and binding on all persons. 4. Eligibility The Committee may grant one or more awards under the Plan to any individual or individuals who, at the time of grant of the particular award, are employed by the Company or serve as a member of the Board. With respect to assumed or replacement awards as contemplated in Sections 5 and 6, eligible individuals shall also include any former employees of the Company and former members of the Board holding an award that is subject to assumption or replacement. For purposes of this Section 4, “Company” includes any entity that is directly or indirectly wholly owned by the Company. 5. Shares of Common Stock Subject to the Plan and Grant Limits (a)          Subject to Section 6 of the Plan, the aggregate number of shares of Common Stock which may be issued or transferred pursuant to awards granted after March 10, 2015 under the Plan shall not exceed the sum of: (i)          7,500,000; plus (ii)          the number of any shares of Common Stock which were subject to stock options granted under the Company’s 2001 Long-Term Incentive Stock Plan (the “2001 Plan”) and outstanding on March 10, 2015 which expire, or for any reason are cancelled or terminated, after March 10, 2015 without being exercised; plus (iii)          the number of shares of Common Stock which were subject to restricted stock, restricted stock right, restricted performance stock right or other awards (other than stock options) granted under this Plan or the 2001 Plan and outstanding and unvested on March 10, 2015 that are subsequently forfeited, terminated or cancelled by the Company B- 2 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  APPENDIX B - AMENDED AND RESTATED 2011 LONG-TERM INCENTIVE STOCK PLAN without having become vested or paid (including, for purposes of clarity, any shares initially reserved that are, at the conclusion of any applicable performance period ending after March 10, 2015, not otherwise deliverable with respect to restricted performance stock right awards because actual performance for the performance period resulted in below-target payout of the awards) (such awards, the “Outstanding Awards”). (b)           On and after the Amendment Date, shares of Common Stock issued in respect of any option, SAR, or Share Award, whether such award was granted prior to or after the Amendment Date, shall be counted against the foregoing limit on a 1:1 basis. In addition, any shares of Common Stock subject to options or Outstanding Awards that become available on and after the Amendment Date for new award grants under the Plan by operation of Section 5(a)(ii) or 5(a)(iii) shall also be counted against the foregoing limit on a 1:1 basis. The maximum number of shares of Common Stock that may be delivered pursuant to stock options qualified as incentive stock options under Section 422 of the Code (“ISOs”) after March 10, 2015 is 7,500,000 shares. (c)           Except as provided in the next sentence, shares of Common Stock which are subject to awards granted under the Plan which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the Plan (including, for purposes of clarity, any shares initially reserved but, at the conclusion of the applicable performance period, not otherwise deliverable with respect to any performance-based Share Awards because actual performance for the performance period did not result in the maximum potential payout of the awards) shall again be available for subsequent awards granted under the Plan. Shares of Common Stock that are exchanged by a participant or withheld by the Company as full or partial payment to satisfy the tax withholding obligations relating to such an award, shall not be available for subsequent awards under the Plan. Except as provided in the preceding sentence, in instances where a SAR or other award is settled in cash or a form other than shares under the Plan, the shares that would have been issued had there been no cash or other settlement shall not be counted against the shares available for issuance under the Plan and such shares shall be available for subsequent awards granted under the Plan. The payment in cash of dividends or dividend equivalents in conjunction with outstanding awards shall not be counted against the shares available for issuance under the Plan. In the event that shares are delivered in respect of a dividend equivalent right granted under the Plan, the number of shares delivered with respect to the award shall be counted against the shares available for issuance under the Plan. (For purposes of clarity, if 100 shares are delivered in payment of dividend equivalent rights, 100 shares shall be counted against the shares available for issuance under the Plan.) To the extent that shares are delivered pursuant to the exercise of a SAR or stock option granted under the Plan, the number of underlying shares as to which the exercise related shall be counted against the shares available for issuance under the Plan as opposed to only counting the shares issued. (For purposes of clarity, if a SAR relates to 1,000 shares and is exercised at a time when the payment due to the participant is 500 shares, 1,000 shares shall be counted against the shares available for issuance under the Plan.) Any shares that are issued by the Company, and any awards that are granted by, or become obligations of, the Company, through the assumption by the Company or an affiliate of, or in substitution for, outstanding awards previously granted by an acquired company (or previously granted by a predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by the Company (or a subsidiary or affiliate) in connection with a business or asset acquisition or similar transaction) shall not be counted against the shares available for issuance under the Plan. (d)           Any shares issued under the Plan may consist in whole or in part of authorized and unissued shares or of treasury shares, which may include fractional shares. Cash may be paid in lieu of any fractional shares in settlements of awards under the Plan. (e)           In no event shall the total number of shares of Common Stock subject to stock options and SARs awarded under the Plan to any eligible participant during any three consecutive calendar years period exceed 3,000,000 shares. In no event shall the total number of shares of Common Stock subject to Share Awards intended to qualify as “Section 162(m) Awards” under Section 8(c)(ii) that are granted to any eligible participant during any three consecutive calendar years relate to or provide for payment of more than 1,000,000 shares of Common Stock. (f)           Adjustments to the Plan’s aggregate share limit pursuant to Section 5(a), as well as the provisions of Section 5(c), are subject to any applicable limitations under Section 162(m) of the Code with respect to awards intended as performance-based compensation thereunder. The limits set forth in Sections 5(b) and 5(e) shall apply with respect to all Plan awards regardless of whether the underlying shares are attributable to the fixed number of shares made available for Plan award purposes or shares that become available under the Plan pursuant to Section 5(a) with respect to shares originally covered by awards granted under the 2001 Plan. 6. Adjustments and Reorganizations (a)           Upon (or, as may be necessary to effect the adjustment, immediately prior to): any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split; any merger, combination, consolidation, or other reorganization; any spin-off, split-up, or similar extraordinary dividend distribution in respect of the Common Stock; or any exchange of shares of Common Stock or other securities of the Company, or any similar, unusual or extraordinary corporate NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI B- 3  APPENDIX B - AMENDED AND RESTATED 2011 LONG-TERM INCENTIVE STOCK PLAN transaction in respect of the Common Stock; then the Committee shall equitably and proportionately adjust (1) the number and type of shares of Common Stock (or other securities) that thereafter may be issued under the Plan or made the subject of awards (including the specific share limits, maximums and numbers of shares set forth in Sections 5(a), 5(b) and 5(e) and elsewhere in this Plan), (2) the number, amount and type of shares of Common Stock (or other securities or property) subject to any outstanding awards, (3) the grant, purchase or exercise price (which term includes the base price of any SAR or similar right) of any outstanding awards, and/or (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding awards, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by this Plan and the then-outstanding awards. Unless otherwise expressly provided in the applicable award agreement, upon (or, as may be necessary to effect the adjustment, immediately prior to) any event or transaction described in the preceding paragraph or a sale of all or substantially all of the business or assets of the Company as an entirety, the Committee shall equitably and proportionately adjust the performance standards applicable to any then-outstanding performance-based awards to the extent necessary to preserve (but not increase) the level of incentives intended by the Plan and the then-outstanding performance-based awards. It is intended that, if possible, any adjustments contemplated by the preceding two paragraphs be made in a manner that satisfies applicable legal, tax (including, without limitation and as applicable in the circumstances, Section 424 of the Code, Section 409A of the Code and Section 162(m) of the Code) and accounting (so as to not trigger any charge to earnings with respect to such adjustment) requirements. (b)          Notwithstanding anything to the contrary in Section 6(a), the provisions of this Section 6(b) shall apply to an outstanding Plan award if a Change in Control (as defined in Section 6(e)) occurs. No acceleration of vesting, exercisability and/or payment of an outstanding Plan award shall occur solely as a result of a Change in Control unless the Change in Control is triggered by clause (iii) or (iv) of the definition thereof, the Company is not the ultimate parent company whose Common Stock is publicly traded after such transaction and the successor to the Company (if any) (or a parent thereof) does not agree in writing prior to the occurrence of the Change in Control to continue and assume the award following the Change in Control, in which case upon the Change in Control, (i) if the award is a stock option, it shall vest fully and completely, any and all restrictions on exercisability or otherwise shall lapse, and it shall be fully exercisable; (ii) if the award is a SAR, it shall vest fully and completely, any and all restrictions on such SAR shall lapse, and it shall be fully exercisable; and (iii) if the award is a Share Award, it shall immediately vest fully and completely, and all restrictions shall lapse, provided, however, that if the award is performance-based, the earnout or payout of the award, as applicable, shall be computed by the Committee as it determines appropriate based on the performance terms of the award and based on actual performance achieved to the date of the Change in Control. If a stock option, SAR or other award is fully vested or becomes fully vested as provided in the preceding sentence, then the Committee may provide for the settlement in cash of the award (such settlement to be calculated as though the award was paid or exercised simultaneously with the Change in Control and based upon the then Fair Market Value of a share of Common Stock and subject, in the case of a performance-based award, to the Change in Control payment provisions set forth above). A stock option, SAR or other award so settled by the Committee shall automatically terminate. If, in such circumstances, the Committee does not provide for the cash settlement of a stock option, SAR or other award, then upon the Change in Control such option or award shall terminate, subject to any provision that has been made by the Committee through a plan of reorganization or otherwise for the survival, substitution or exchange of such option or right and further subject to any Change in Control settlement or payment provisions included in the applicable award agreement; provided that the stock option, SAR or award holder shall be given reasonable notice of such intended termination and an opportunity to exercise the stock option, SAR or award (to the extent a Share Award must be exercised in order for the participant to realize the intended benefits) prior to or upon the Change in Control. (c)          The Committee may provide that acceleration of vesting, exercisability and/or payment of an outstanding Plan award will occur if the participant’s employment or service is terminated by the Company without cause or the participant terminates employment or service for good reason in connection with a Change in Control. Furthermore, and notwithstanding the provisions of Section 6(b), a Change in Control shall not accelerate the payment of any award that is subject to Section 409A of the Code to the extent such acceleration would result in any tax, penalty or interest under Section 409A of the Code; provided that the Committee retains the authority contemplated by this Section 6 to the extent any modification of an award may be made in a manner which complies with (and does not result in any tax under) Section 409A of the Code or is otherwise exempt from Section 409A of the Code. The occurrence of a particular Change in Control under the Plan shall have no effect on any award granted under the Plan after the date of that Change in Control. B- 4 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  APPENDIX B - AMENDED AND RESTATED 2011 LONG-TERM INCENTIVE STOCK PLAN (d)          The Committee may make adjustments pursuant to Section 6(a) and/or deem an acceleration of vesting of awards pursuant to Section 6(b) to occur sufficiently prior to an event if necessary or deemed appropriate to permit the participant to realize the benefits intended to be conveyed with respect to the shares underlying the award; provided, however, that, the Committee will, in such circumstances, reinstate the original terms of an award if the related event does not actually occur. (e)          A “Change in Control” of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied: (i)          Any Person (other than those Persons in control of the Company as of the Amendment Date, or other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any affiliate of the Company or a successor) becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of either (1) the then-outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this clause (i): (A) “Person” or “group” shall not include underwriters acquiring newly-issued voting securities (or securities convertible into voting securities) directly from the Company with a view towards distribution, (B) creditors of the Company who become shareholders of the Company in connection with any bankruptcy of the Company under the laws of the United States shall not, by virtue of such bankruptcy, be deemed a “group” or a single Person for the purposes of this clause (i) (provided that any one of such creditors may trigger a Change in Control pursuant to this clause (i) if such creditor’s ownership of Company securities equals or exceeds the foregoing threshold), and (C) an acquisition shall not constitute a Change in Control if made by an entity pursuant to a transaction that is covered by and does not otherwise constitute a Change in Control under clause (iii) below; (ii)          On any day after the Amendment Date (the “Measurement Date”) Continuing Directors cease for any reason to constitute either: (1) if the Company does not have a Parent, a majority of the Board; or (2) if the Company has a Parent, a majority of the Board of Directors of the Controlling Parent. A director is a “Continuing Director” if he or she either: (1) was a member of the Board on the applicable Initial Date (an “Initial Director”); or (2) was elected to the Board (or the Board of Directors of the Controlling Parent, as applicable), or was nominated for election by the Company’s or the Controlling Parent’s shareholders, by a vote of at least two-thirds (2/3) of the Initial Directors then in office. A member of the Board (or Board of Directors of the Controlling Parent, as applicable) who was not a director on the applicable Initial Date shall be deemed to be an Initial Director for purposes of clause (2) above if his or her election, or nomination for election by the Company’s or the Controlling Parent’s shareholders, was approved by a vote of at least two-thirds (2/3) of the Initial Directors (including directors elected after the applicable Initial Date who are deemed to be Initial Directors by application of this provision) then in office. “Initial Date” means the later of (1) the Amendment Date or (2) the date that is two (2) years before the Measurement Date. (iii)          Consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the Beneficial Owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination Beneficially Own, directly or indirectly, more than sixty percent (60%) of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, is a Parent of the Company or the successor of the Company) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from such Business Combination or a Parent of the Company or any successor of the Company or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or a Parent of the Company or the successor entity) Beneficially Owns, directly or indirectly, twenty-five percent (25%) or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of twenty-five percent (25%) existed prior to the Business Combination, and (3) a Change in Control is not triggered pursuant to clause (ii) above with respect to the Company (including any successor entity) or any Parent of the Company (or the successor entity). NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI B- 5  APPENDIX B - AMENDED AND RESTATED 2011 LONG-TERM INCENTIVE STOCK PLAN (iv)          A complete liquidation or dissolution of the Company other than in the context of a transaction that does not constitute a Change in Control of the Company under clause (iii) above. Notwithstanding the foregoing, in no event shall a transaction or other event that occurred prior to the Effective Time constitute a Change in Control. Notwithstanding anything in clause (iii) above to the contrary, a change in ownership of the Company resulting from creditors of the Company becoming shareholders of the Company in connection with any bankruptcy of the Company under the laws of the United States shall not trigger a Change in Control pursuant to clause (iii) above. “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the 1934 Act. “Controlling Parent” means the Company’s Parent so long as a majority of the voting stock or voting power of that Parent is not Beneficially Owned, directly or indirectly through one or more subsidiaries, by any other Person. In the event that the Company has more than one “Parent,” then “Controlling Parent” means the Parent of the Company the majority of the voting stock or voting power of which is not Beneficially Owned, directly or indirectly through one or more subsidiaries, by any other Person. “Parent” means an entity that Beneficially Owns a majority of the voting stock or voting power of the Company, or all or substantially all of the Company’s assets, directly or indirectly through one or more subsidiaries. “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the 1934 Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof. 7. Fair Market Value “Fair Market Value” for all purposes under the Plan shall mean the closing price of a share of Common Stock as reported by the New York Stock Exchange (the “Exchange”) for the date in question. If no sales of Common Stock were made on the Exchange on that date, the closing price of a share of Common Stock as reported by the Exchange for the next preceding day on which sales of Common Stock were made on the Exchange shall be substituted. 8. Awards The Committee shall determine the type or types of award(s) to be made to each participant. Awards may be granted singly, in combination or in tandem. Awards also may be made in combination or in tandem with, in replacement of, as alternatives to, or as the payment form for grants or rights under any other employee or compensation plan of the Company, including the plan of any acquired entity. Share Awards, stock options and SARs may be granted under the Plan that provide for the issuance of or are denominated in Common Stock or units of Common Stock. Cash Awards that are denominated in or may be settled in cash also may be granted consistent with clause (c)(ii) below. (a)          Stock Options-A grant of a right to purchase a specified number of shares of Common Stock during a specified period as determined by the Committee. The purchase price per share for each stock option shall be not less than 100% of Fair Market Value on the date of grant. A stock option may be in the form of an ISO which, in addition to being subject to applicable terms, conditions and limitations established by the Committee, complies with Section 422 of the Code. If an ISO is granted, the aggregate Fair Market Value (determined on the date the stock option is granted) of Common Stock subject to an ISO granted to a participant by the Committee which first becomes exercisable in any calendar year shall not exceed $100,000.00 (otherwise, the intended ISO, to the extent of such excess, shall be rendered a nonqualified stock option). ISOs may only be granted to employees of the Company or a Subsidiary. (“Subsidiary” means a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code.) The maximum term of each stock option (ISO or nonqualified) shall be ten (10) years. The price at which shares of Common Stock may be purchased under a stock option shall be paid in full at the time of the exercise in cash or such other method permitted by the Committee, including (i) tendering (either actually or by attestation) Common Stock; (ii) surrendering a stock award valued at Fair Market Value on the date of surrender; (iii) authorizing a third party to sell the shares (or a sufficient portion thereof) acquired upon exercise of a stock option and assigning the delivery to the Company of a sufficient amount of the sale proceeds to pay for all the shares acquired through such exercise; (iv) the Company withholding a number of shares of Common Stock otherwise deliverable pursuant to the award with a value sufficient to cover such exercise price; or (v) any combination of the above. (b)          SARs-A right to receive a payment, in cash and/or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock on the date the SAR is exercised over the “base price” of the award, which base price shall be set forth in the applicable award agreement and shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of the SAR. The maximum term of a SAR shall be ten (10) years. B- 6 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  APPENDIX B - AMENDED AND RESTATED 2011 LONG-TERM INCENTIVE STOCK PLAN (c)          Other Awards-Share Awards providing for the issuance of or denominated in Common Stock or units of Common Stock may be granted under the Plan. Cash Awards that are denominated in or may be settled only in cash also may be granted consistent with clause (ii) below. (i)          All or part of any Share Award may be subject to conditions and restrictions established by the Committee, and set forth in the award agreement or other document evidencing the terms and conditions of the award, which may include, but are not limited to, continuous service with the Company (or a subsidiary or affiliate), achievement of specific business objectives, and other measurements of individual, business unit or Company performance. (ii)          Without limiting the generality of the foregoing, and in addition to stock options and SAR grants, other performance-based awards within the meaning of Section 162(m) of the Code (“Section 162(m) Awards”) may be granted under the Plan, whether in the form of Share Awards (including restricted stock, performance stock, phantom stock or other rights) or Cash Awards, the grant, issuance, vesting, retention or settlement of which depends on the performance of the Company relative to pre-established goals on a consolidated, segment, sector, subsidiary, division, or plant basis with reference to any one or more of the following: · New business awards or backlog (absolute dollars or ratio of awards to sales) · Revenues · Operating margin (dollars or rate) · Net earnings (on a total or continuing basis and either before or after (i) taxes, (ii) interest and taxes, or (iii) interest, taxes, depreciation, and amortization) · Earnings per share (on a total or continuing basis and either before or after (i) taxes, (ii) interest and taxes, or (iii) interest, taxes, depreciation, and amortization) · Cash flow or free cash flow (either as dollars or as a percentage of earnings before or after taxes) · Returns on equity, investment, assets or net assets · Cash flow return on equity, investment, assets or net assets · Stock price or stock price appreciation · Total shareholder returns · EVA - defined as operating profit after tax (which means net earnings after tax but before tax adjusted interest income and expense and goodwill amortization), less a charge for the use of capital (which is based on average total capital and the weighted average cost of capital) · Overhead or expense containment or reduction · Working capital level or working capital turnover · Asset levels or asset turnover The financial metrics identified above can be measured on an as reported or pension adjusted basis; on an annual or cumulatively over a defined period of time basis; and on an absolute, relative or growth basis. The applicable business criteria and the specific performance goals for Section 162(m) Awards must be approved by the Committee in advance of applicable deadlines under the Code and while the performance relating to such goals remains substantially uncertain. In the case of material, unusual or nonrecurring gains and losses, changes in law, regulations or in generally accepted accounting principles, accounting charges or other extraordinary events not foreseen at the time the targets were set, the Committee will adjust the performance targets in a manner that it determines to be equitable and appropriate to address the impact of such unforeseen events, unless otherwise expressly provided in the applicable award agreement, provided that any such adjustments do not affect the Committee’s ability to then exercise negative discretion as set forth in this paragraph. In no event shall Share Awards intended to qualify as Section 162(m) Awards granted to any eligible person under this Plan exceed the limit set forth in Section 5(e). In no event shall grants in any calendar year to any eligible person under this Plan of Cash Awards intended to qualify as Section 162(m) Awards provide for payment of more than $20,000,000. Except as otherwise permitted under Section 162(m) of the Code, before any Section 162(m) Award is paid, the Committee must approve (by NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI B- 7  APPENDIX B - AMENDED AND RESTATED 2011 LONG-TERM INCENTIVE STOCK PLAN resolution or other valid action of the Committee) that, and the extent to which, the performance goal and any other material terms of the Section 162(m) Award were in fact satisfied. The Committee shall have discretion to determine the conditions, restrictions or other limitations, and to make adjustments, all of which shall be in accordance with the terms of the Plan and in compliance with Section 162(m) of the Code, on the payment of individual Section 162(m) Awards. The Committee reserves the right to reduce the amount payable with respect to any Section 162(m) Award/Cash Award in accordance with any standards the Committee may impose or on any other basis (including the Committee’s discretion) as the Committee may determine appropriate, provided that no such reduction shall increase the amount of the maximum award payable to any other Section 162(m) Officer. Section 162(m) Awards may be granted only to employees of the Company or a Subsidiary. The Plan, and this Section 8(c)(ii) in particular, does not limit the Company’s authority to grant awards intended as performance-based compensation within the meaning of Section 162(m) of the Code under any other compensation plan that may be maintained by the Company or any of its Subsidiaries from time to time. (d)           No stock option, SAR or Share Award that vests based on continued employment or the passage of time shall vest in less than one year from the date the award is made, other than upon the death or disability of the participant or in the case of termination following a Change in Control, in each case as specified in the agreement evidencing such award. The performance period for any stock option, SAR or Share Award that vests based in whole or in part on performance shall be at least one year. Notwithstanding the foregoing, up to five percent (5%) of the shares authorized under the Plan may be issued pursuant to the vesting of awards over less than a one-year period. 9. Dividends and Dividend Equivalents The Committee may provide that any awards under the Plan earn dividends or dividend equivalents; provided, however, that dividend equivalent rights may not be granted in connection with any stock option or SAR granted hereunder. Such dividends or dividend equivalents may be paid currently or may be credited to a participant’s account either at the time of dividend payment or at the time of settlement of an award, provided that as to any dividend equivalent rights granted in connection with an award granted under the Plan that is subject to performance-based vesting requirements, no payment shall be made with respect to such dividend equivalent right (or, in the case of a restricted stock or similar award where the dividend must be paid as a matter of law, the dividend payment shall be subject to forfeiture or repayment, as the case may be) unless and to the extent that the related performance-based vesting conditions of such award are satisfied. Any crediting of dividends or dividend equivalents may be subject to such restrictions and conditions as the Committee may establish, including reinvestment in additional shares or share equivalents, and may be settled in cash or in shares of Common Stock as determined by the Committee. 10. Deferrals and Settlements Payment of awards may be in the form of cash, Common Stock, other awards or combinations thereof as the Committee shall determine, and with such restrictions as it may impose. The Committee may also require or permit participants to elect to defer the issuance of shares or the settlement of awards in cash under such rules and procedures as it may establish under the Plan. It may also provide that deferred settlements include the payment or crediting of interest or other earnings on the deferral amounts, or the payment or crediting of dividend equivalents where the deferral amounts are denominated in shares. Notwithstanding anything herein to the contrary, in no event will any election to defer the delivery of Common Stock or any other payment with respect to any award be allowed if the Committee determines, in its sole discretion, that the deferral would result in the imposition of the additional tax under Section 409A(a)(1)(B) of the Code. 11. Transferability and Exercisability Unless otherwise expressly provided in (or pursuant to) this Section 11, by applicable law or by the award agreement, (i) all awards are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (ii) awards shall be exercised (if exercisable) only by the holder; and (iii) amounts payable or shares issuable pursuant to an award shall be delivered only to (or for the account of) the holder. The foregoing exercise and transfer restrictions shall not apply to: (a) transfers to the Company; (b) the designation of a beneficiary to receive benefits in the event of the participant’s death or, if the participant has died, transfers to or exercise by the participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers to or exercise pursuant to will or the laws of descent and distribution; (c) transfers pursuant to a qualified domestic relations order (as defined in the Code) (in the case of ISOs, to the extent such transfers are permitted by the Code); (d) if the participant has suffered a disability, permitted transfers to or exercises on behalf of the holder by his or her legal representative; or (e) the implementation of “cashless exercise” procedures authorized by the Committee. The Committee by express provision in the award or an amendment thereto may permit an award (other than an ISO) to be transferred to, exercised by and paid to certain persons or entities related to the participant, including but not limited to members of the participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the participant’s family and/or B- 8 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT  APPENDIX B - AMENDED AND RESTATED 2011 LONG-TERM INCENTIVE STOCK PLAN charitable institutions, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection with the participant’s termination of employment or service with the Company (or a subsidiary or affiliate) to assume a position with a governmental, charitable, educational or similarnon-profit institution) and on a basis consistent with the Company’s lawful issuance or sale of securities. 12. Award Agreements Awards under the Plan shall be evidenced by documents or agreements that specifically state that they constitute the or a part of the award agreement and that set forth the terms, conditions and limitations for each award which may include the term of an award, the provisions applicable in the event the participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind any award; provided, however, that such authority shall be subject to the no repricing provisions of Section 3(c) hereof. The Committee need not require the execution of any such agreement, in which case acceptance of the award by the respective participant shall constitute agreement to the terms of the award. 13. Plan Amendment The Plan may only be amended by a majority of the Board of Directors or Committee as it deems necessary or appropriate to better achieve the purpose of the Plan, except that no such amendment shall be made without the approval of the Company’s shareholders if the amendment would increase the number of shares available for issuance under the Plan (except for increases or adjustments expressly contemplated by Sections 5 and 6) or shareholder approval is otherwise required under applicable law or applicable New York Stock Exchange listing requirements. 14. Tax Withholding The Company shall have the right to deduct from an award made under the Plan, including upon the delivery or vesting of shares, or deduct from any other compensation otherwise payable to the award holder a sufficient amount to cover withholding of any Federal, state or local taxes required by law with respect to such award settlement or to take such other action as may be necessary to satisfy any such withholding obligations. The Committee may permit shares to be used to satisfy required tax withholding and such shares shall be valued at the Fair Market Value as of the exercise or settlement date of the applicable award. 15. Other Company Benefit and Compensation Programs Unless otherwise specifically determined by the Committee, settlements of awards received by participants under the Plan shall not be deemed a part of a participant’s regular, recurring compensation for purposes of calculating payments or benefits from any benefit plan or severance program of the Company (or a subsidiary or affiliate), or any severance pay law of any country. Further, the Company may adopt other compensation programs, plans or arrangements as it deems appropriate or necessary. 16. Unfunded Plan Unless otherwise determined by the Committee, the Plan shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. The Plan shall not establish any fiduciary relationship between the Company and any participant or other person. To the extent any person holds any rights by virtue of a grant awarded under the Plan, such rights (unless otherwise determined by the Committee) shall be no greater than the rights of an unsecured general creditor of the Company. 17. Future Rights No person shall have any claim or rights to be granted an award under the Plan, and no participant shall have any rights under the Plan to be retained in the employ or service of the Company (or any subsidiary or affiliate). 18. Governing Law; Severability; Legal Compliance The validity, construction and effect of the Plan, any award agreements or other documents setting forth the terms of an award, and any actions taken or relating to the Plan shall be determined in accordance with the laws of the State of Delaware and applicable federal law. If any provision of the Plan, any award agreement, or any other document setting forth the terms of an award shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions of the Plan or such other document shall continue in effect. The Plan, the granting and vesting of awards under the Plan and the issuance and delivery of Common Stock and/or the payment of money under the Plan or under awards granted hereunder are subject to compliance with all applicable federal and state NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENTI B- 9  APPENDIX B - AMENDED AND RESTATED 2011 LONG-TERM INCENTIVE STOCK PLAN laws, rules and regulations (including but not limited to state and federal securities and banking laws) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. The Plan and the awards granted under the Plan are intended to comply with (or be exempt from, as the case may be) Section 409A of the Code so as to avoid any tax, penalty or interest under Section 409A of the Code. The Plan shall be construed, operated and administered consistent with this intent. As such, to the extent any payment under the Plan is considered deferred compensation subject to the restrictions contained in Section 409A of the Code, such payment may not be made to a specified employee (as determined in accordance with a uniform policy adopted by the Company with respect to all arrangements subject to Section 409A of the Code) upon separation from service (as defined under Section 409A of the Code) before the date that is six months after the specified employee’s separation from service (or, if earlier, the specified employee’s death). Any payment that would otherwise be made during this period of delay shall be accumulated and paid on the sixth month plus one day following the specified employee’s separation from service (or, if earlier, as soon as administratively practicable after the specified employee’s death). 19. Successors and Assigns The Plan shall be binding on all successors and assigns of a participant, including, without limitation, the estate of such participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the participant’s creditors. 20. Rights as a Shareholder Except as otherwise provided in the award agreement, a participant shall have no rights as a shareholder until he or she becomes the holder of record of shares of Common Stock. 21. Recoupment of Awards Awards under the Plan are subject to recoupment pursuant to the Company’s Policy Regarding the Recoupment of Certain Performance-Based Compensation Payments as in effect from time to time, and participants shall promptly make any reimbursement requested by the Board or Committee pursuant to such policy with respect to any award. B- 10 I NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND 2015 PROXY STATEMENT NNNNNNNNNNNN MMMMMMMMMMMMMMM C123456789 IMPORTANT ANNUAL MEETING INFORMATION 000004 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE            SACKPACK             000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext MR A SAMPLE Electronic Voting Instructions DESIGNATION (IF ANY) Available 24 hours a day, 7 days a week! ADD 1 ADD 2 Instead of mailing your proxy, you may choose one of the voting ADD 3 methods outlined below to vote your proxy. ADD 4 VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. ADD 5 Proxies submitted by the Internet or telephone must be received by ADD 6 1:00 AM, Eastern Time, on May 20, 2015.16, 2018. Vote by Internet Go towww.envisionreports.com/noc Or scan the QR code with your smartphone Follow the steps outlined on the secure website Vote by telephone Call toll free1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone Using a black ink pen, mark your votes with an X as shown in Follow the instructions provided by the recorded message X this example. Please do not write outside the designated areas. Annual Meeting Proxy Card 1234 5678 9012 345 qIFq IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR  A  Proposals — The Board of Directors recommends a voteFOR all the nominees listed,FOR Proposal 2,FOR Proposal 3                        andAGAINST Proposal 4. 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain   + 01 - Wesley G. Bush ☐ ☐ ☐ 06 - William H. Hernandez ☐ ☐ ☐ 10 - Thomas M. Schoewe ☐ ☐ ☐ 02 - Marianne C. Brown ☐ ☐ ☐ 07 - Madeleine A. Kleiner ☐ ☐ ☐ 11 - James S. Turley ☐ ☐ ☐ 03 - Donald E. Felsinger ☐ ☐ ☐ 08 - Karl J. Krapek ☐ ☐ ☐ 12 - Mark A. Welsh III ☐ ☐ ☐ 04 - Ann M. Fudge ☐ ☐ ☐ 09 - Gary Roughead ☐ ☐ ☐ 05 - Bruce S. Gordon ☐ ☐ ☐ For Against Abstain 2. Proposal to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers. ☐ ☐ ☐ For Against Abstain 3. Proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s Independent Auditor for fiscal year ending December 31, 2018. ☐ ☐ ☐ For Against Abstain 4. Proposal to modify the ownership threshold for shareholders to call a special meeting. ☐ ☐ ☐  B  Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.      /     / 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain 1 P C F                     02SCNA + 01—Wesley G. Bush 05—Bruce S. Gordon 09—Richard B. Myers 02—Marianne C. Brown 06—William H. Hernandez 10—Gary Roughead 03—Victor H. Fazio 07—Madeleine A. Kleiner 11—Thomas M. Schoewe 04—Donald E. Felsinger 08—Karl J. Krapek 12—James S. Turley For Against Abstain 2. Proposal to approve, on an advisory basis, the compensation of Named Executive Officers. 3. Proposal to amend the Company’s 2011 Long-Term Incentive Stock Plan. 4. Proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s Independent Auditor for fiscal year ending December 31, 2015. The Board of Directors recommends a vote AGAINST Proposal 5. For Against Abstain 5. Shareholder proposal regarding independent Board chairman. B Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND NNNNNNN1UP X 2 3 4 2 5 8 1 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 0213OC qIF q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q Proxy — NORTHROP GRUMMAN CORPORATION + + Proxy — NORTHROP GRUMMAN CORPORATION ANNUAL MEETING OF SHAREHOLDERS MAY 20, 2015,16, 2018, 8:00 A.M. Northrop Grumman Corporation Corporate Headquarters 2980 Fairview Park Drive, Falls Church, Virginia 22042 This Proxy/Voting Instruction Card is Solicited on Behalf of The Board of Directors for the 20152018 Annual Meeting of Shareholders The undersigned hereby constitutes and appoints Sheila C. Cheston and Jennifer C. McGarey, and each of them, attorneys and proxies with full power of substitution, to represent the undersigned and to vote all shares of Common Stock, $1.00 par value, of Northrop Grumman Corporation (the “Company”), that the undersigned would be entitled to vote if personally present at the 20152018 Annual Meeting of Shareholders of the Company to be held on Wednesday, May 20, 2015,16, 2018, at 8:00 a.m. (Eastern Daylight Time) at the Northrop Grumman Corporation Corporate Headquarters, 2980 Fairview Park Drive, Falls Church, Virginia 22042, and at any and all adjournments or postponements thereof (the “Meeting”), as herein specified and in such proxyholder’s discretion upon any other matter that may properly come before the Meeting including without limitation to vote on the election of such substitute nominees as such proxies may select in the event nominee(s) named on their card become(s) unable to serve as director. By granting this proxy, the undersigned hereby revokes any proxy previously granted by the undersigned. THIS PROXY WILL BE VOTED AS DIRECTED. IF NOT OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED “FOR” THE NOMINEES LISTED UNDER PROPOSAL 1, “FOR” PROPOSALS PROPOSAL 2, “FOR” PROPOSAL 3 AND 4 AND “AGAINST” PROPOSAL 5.4. PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY, EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING. If shares are held on your behalf under any of the Company Savings Plans, the proxy serves to provide confidential instructions to the plan Trustee or Voting Manager who then votes the shares. Instructions must be received by 11:59 p.m. Eastern Time on May 17, 201513, 2018 to be included in the tabulation to the plan Trustee or Voting Manager. For shares represented by proxies not received by this date, the applicable plan Trustee or Voting Manager will treat the received proxies as instructions to vote the respective plan shares in the same proportion as shares held under the plan for which voting instructions have been received, unless contrary to ERISA.the Employment Retirement Income Security Act. (Continued and to be signed on the other side) C Non-Voting Items  C  Non-Voting Items Change of Address— Please print new address below. +    IMPORTANT ANNUAL MEETING INFORMATION Using a black ink pen, mark your votes with an X as shown in X this example. Please do not write outside the designated areas. Annual Meeting Proxy Card Using ablack ink pen, mark your votes with anX as shown in this example. Please do not write outside the designated areas. ☒ q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR  A  Proposals — The Board of Directors recommends a voteFOR all the nominees listed,FOR Proposal 2,FOR Proposal 3                        andAGAINST Proposal 4. 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain   + 01 - Wesley G. Bush ☐ ☐ ☐ 06 - William H. Hernandez ☐ ☐ ☐ 10 - Thomas M. Schoewe ☐ ☐ ☐ 02 - Marianne C. Brown ☐ ☐ ☐ 07 - Madeleine A. Kleiner ☐ ☐ ☐ 11 - James S. Turley ☐ ☐ ☐ 03 - Donald E. Felsinger ☐ ☐ ☐ 08 - Karl J. Krapek ☐ ☐ ☐ 12 - Mark A. Welsh III ☐ ☐ ☐ 04 - Ann M. Fudge ☐ ☐ ☐ 09 - Gary Roughead ☐ ☐ ☐ 05 - Bruce S. Gordon ☐ ☐ ☐ For Against Abstain 2. Proposal to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers. ☐ ☐ ☐ For Against Abstain 3. Proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s Independent Auditor for fiscal year ending December 31, 2018. ☐ ☐ ☐ For Against Abstain 4. Proposal to modify the ownership threshold for shareholders to call a special meeting. ☐ ☐ ☐  B  Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.      /     / 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain 1 UPX                     02SCOA + 01—Wesley G. Bush 05—Bruce S. Gordon 09—Richard B. Myers 02—Marianne C. Brown 06—William H. Hernandez 10—Gary Roughead 03—Victor H. Fazio 07—Madeleine A. Kleiner 11—Thomas M. Schoewe 04—Donald E. Felsinger 08—Karl J. Krapek 12—James S. Turley For Against Abstain 2. Proposal to approve, on an advisory basis, the compensation of Named Executive Officers. 3. Proposal to amend the Company’s 2011 Long-Term Incentive Stock Plan. 4. Proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s Independent Auditor for fiscal year ending December 31, 2015. The Board of Directors recommends a vote AGAINST Proposal 5. For Against Abstain 5. Shareholder proposal regarding independent Board chairman. B Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. 1UP X 2342582 + 0213PC qPLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q Proxy — NORTHROP GRUMMAN CORPORATION ANNUAL MEETING OF SHAREHOLDERS MAY 20, 2015,16, 2018, 8:00 A.M. Northrop Grumman Corporation Corporate Headquarters 2980 Fairview Park Drive, Falls Church, Virginia 22042 This Proxy/Voting Instruction Card is Solicited on Behalf of The Board of Directors for the 20152018 Annual Meeting of Shareholders The undersigned hereby constitutes and appoints Sheila C. Cheston and Jennifer C. McGarey, and each of them, attorneys and proxies with full power of substitution, to represent the undersigned and to vote all shares of Common Stock, $1.00 par value, of Northrop Grumman Corporation (the “Company”), that the undersigned would be entitled to vote if personally present at the 20152018 Annual Meeting of Shareholders of the Company to be held on Wednesday, May 20, 2015,16, 2018, at 8:00 a.m. (Eastern Daylight Time) at the Northrop Grumman Corporation Corporate Headquarters, 2980 Fairview Park Drive, Falls Church, Virginia 22042, and at any and all adjournments or postponements thereof (the “Meeting”), as herein specified and in such proxyholder’s discretion upon any other matter that may properly come before the Meeting including without limitation to vote on the election of such substitute nominees as such proxies may select in the event nominee(s) named on their card become(s) unable to serve as director. By granting this proxy, the undersigned hereby revokes any proxy previously granted by the undersigned. THIS PROXY WILL BE VOTED AS DIRECTED. IF NOT OTHERWISE DIRECTED, THIS PROXY WILL BE VOTED “FOR” THE NOMINEES LISTED UNDER PROPOSAL 1, “FOR” PROPOSALS PROPOSAL 2, “FOR” PROPOSAL 3 AND 4 AND “AGAINST” PROPOSAL 5.4. PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY, EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING. If shares are held on your behalf under any of the Company Savings Plans, the proxy serves to provide confidential instructions to the plan Trustee or Voting Manager who then votes the shares. Instructions must be received by 11:59 p.m. Eastern Time on May 17, 201513, 2018 to be included in the tabulation to the plan Trustee or Voting Manager. For shares represented by proxies not received by this date, the applicable plan Trustee or Voting Manager will treat the received proxies as instructions to vote the respective plan shares in the same proportion as shares held under the plan for which voting instructions have been received, unless contrary to ERISA.the Employment Retirement Income Security Act. (Continued and to be signed on the other side) + IMPORTANT ANNUAL MEETING INFORMATION  . Vote by Internet • Go towww.envisionreports.com/NOC • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website NNNNNNNNNNNN + C 1234567890 IMPORTANT ANNUAL MEETING INFORMATION 000004 NNNNNN ENDORSEMENT_LINE            SACKPACK              MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 NNNNNNNNN ADD 5 ADD 6 Vote by Internet Go to www.envisionreports.com/NOC Or scan the QR code with your smartphone Follow the steps outlined on the secure website Shareholder Meeting Notice 1234 5678 9012 345 Important Notice Regarding the Availability of Proxy Materials for the Northrop Grumman Corporation Annual Meeting of Shareholders to be Held on May 20, 201516, 2018 Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual meeting of shareholders are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important! This communication is not a form for voting and presents only an overview of the more complete proxy materials that are available to you on the Internet or by mail. We encourage you to access and review all of the important information contained in the proxy materials before voting. The proxy statement and annual report to shareholders are available at: www.envisionreports.com/NOC Easy Online Access — A Convenient Way to View Proxy Materials and Vote ?When you go online to view materials, you can also vote your shares. Step 1: Go to www.envisionreports.com/NOC to view the materials. Step 2: Click on Cast Your Vote or Request Materials. Step 3: Follow the instructions on the screen to log in. Step 4: Easy Online Access — A Convenient Way to View Proxy Materials and Vote When you go online to view materials, you can also vote your shares. Step 1:Go towww.envisionreports.com/NOCto view the materials. Step 2:Click onCast Your Vote or Request Materials. Step 3:Follow the instructions on the screen to log in. Step 4:Make your selection as instructed on each screen to select delivery preferences and vote. When you go online, you can also help the environment by consenting to receive electronic delivery of future materials. Obtaining a Copy of the Proxy Materials – If you want to receive a paper or e-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed on the reverse side on or before May 10, 2015 to facilitate timely delivery. COY Obtaining a Copy of the Proxy Materials – If you want to receive a paper ore-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed on the reverse side on or before May 6, 2018 to facilitate timely delivery. 2 N O T         02SCPA + Shareholder Meeting Notice Northrop Grumman Corporation’s Annual Meeting of Shareholders will be held on May 20, 201516, 2018 at Northrop Grumman Corporation Corporate Headquarters, 2980 Fairview Park Drive, Falls Church, Virginia 22042, at 8:00 a.m. Eastern Daylight Time. Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations. The Board of Directors recommends that you voteFOR proposals 1–3 andAGAINST Proposal 4. 1. Election of the following 12 nominees as Directors: 1. Election of the following 12 nominees as Directors: Wesley G. Bush, Marianne C. Brown, Victor H. Fazio, Donald E. Felsinger, Ann M. Fudge, Bruce S. Gordon, William H. Hernandez, Madeleine A. Kleiner, Karl J. Krapek, Richard B. Myers, Gary Roughead, Thomas M. Schoewe, and James S. Turley.Turley and Mark A. Welsh III. 2. Proposal to approve, on an advisory basis, the compensation of Named Executive Officers. 2. Proposal to approve, on an advisory basis, the compensation of the Company’s Named Executive Officers. 3. Proposal to amend the Company’s 2011 Long-Term Incentive Stock Plan. 3. Proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s Independent Auditor for fiscal year ending December 31, 2018. 4. Proposal to ratify the appointment of Deloitte & Touche LLP as the Company’s Independent Auditor for fiscal year ending December 31, 2015. The Board of Directors recommends that you vote AGAINST proposal 5. 5. Shareholder proposal regarding independent Board chairman. 4. Proposal to modify the ownership threshold for shareholders to call a special meeting. PLEASE NOTE – YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must vote online or by telephone or request a paper copy of the proxy materials to receive a proxy card. If you wish to attend and vote at the meeting, please bring this notice with you. Directions to the 20152018 annual meeting are available in the proxy statement, which can be viewed at www.envisionreports.com/NOC. Here’s how to order a copy of the proxy materials and select a future delivery preference: Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or email options below. Email copies: Current and future email delivery requests must be submitted via the Internet following the instructions below. If you request an email copy of current materials you will receive an email with a link to the materials.      Here’s how to order a copy of the proxy materials and select a future delivery preference: Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or email options below. Email copies: Current and future email delivery requests must be submitted via the Internet following the instructions below. If you request an email copy of current materials you will receive an email with a link to the materials. PLEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials. g  Internet – Go towww.envisionreports.com/NOC. Click Cast Your Vote or Request Materials. Follow the instructions to log in and order a paper or email copy of the current meeting materials and submit your preference for email or paper delivery of future meeting materials. g  Telephone – Call us free of charge at1-866-641-4276 using a touch-tone phone and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings. g Email – Send email to investorvote@computershare.com with “Proxy Materials Northrop Grumman Corporation” in the subject line. Include in the message your full name and address, plus the number located in the shaded bar on the reverse, and state in the email that you want a paper copy of current meeting materials. You can also state your preference to receive a paper copy for future meetings. To facilitate timely delivery, all requests for a paper copy of the proxy materials must be received by May 6, 2018. PLEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials. g Internet – Go to www.envisionreports.com/NOC. Click Cast Your Vote or Request Materials. Follow the instructions to log in and order a paper or email copy of the current meeting materials and submit your preference for email or paper delivery of future meeting materials. g Telephone – Call us free of charge at 1-866-641-4276 using a touch-tone phone and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings. g Email – Send email to investorvote@computershare.com with “Proxy Materials Northrop Grumman Corporation” in the subject line. Include in the message your full name and address, plus the number located in the shaded bar on the reverse, and state in the email that you want a paper copy of current meeting materials. You can also state your preference to receive a paper copy for future meetings. To facilitate timely delivery, all requests for a paper copy of the proxy materials must be received by May 10, 2015. 0213QC        02SCPA April 6, 2015March 30, 2018 CA 15-0518-XX Important Information Regarding Your Northrop Grumman Shares—Your Vote Is Important To Northrop Grumman Employees: Today, Northrop Grumman filed its proxy statement today for the 20152018 Annual Meeting of Shareholders. The 2018 proxy statement and 20142017 annual report are now available online. Many of you hold Northrop Grumman shares through a company defined contribution plan or otherwise.one of the company’s savings plans. As shareholders, you have the right to vote on matters that impact the company. Your vote on these matters is important, and we encourageNorthrop Grumman encourages you to vote your shares. Northrop Grumman employees who hold Northrop Grumman shares as participants in the Northrop Grumman Savings Plan or the Northrop Grumman Financial Security and Savings Program will receive an emailthis eveningtonight from the company’s transfer agent, Computershare. This email will contain important instructions for viewing the proxy statement and annual report, and for voting your shares. This email is an important communication approved by Northrop Grumman. The subject line of the email will read, “Northrop Grumman Corporation Proxy Meeting Materials.” Note that the “EXT” warning tag, which appears in the subject line of emails originating outside of Northrop Grumman, has beenwill be removed for this message coming directly from Computershare. If you do not receive this email, correspondence, or if you have any questions, please contact Computershare at (877) 498-8861877-498-8861 or the company’s shareholder services at (310) 332-2544.703-280-3507. We valueNorthrop Grumman values your input as shareholders. Please ensure that your shares are represented at the 20152018 Annual Meeting. Thank you for your attention to this matter.       CORPORATE COMMUNICATIONS     Your Northrop Grumman Corporation proxy statement and annual report are now available online and you may also vote your shares for the 2018 Annual Meeting of Shareholders. To view the proxy statement and annual report, please visit:www.envisionreports.com/NOC To cast your vote, please visitwww.envisionreports.com/NOC and follow theon-screen instructions. You will be prompted to enter your Control Number (provided above) to access this voting site. Please note that votes submitted through this site must be received by 1:00 a.m., Eastern Time, May 16, 2018. If shares are held on your behalf under any of the Company Savings Plans, voting instructions submitted through this site must be received by 11:59 p.m., Eastern Time, Sunday, May 13, 2018. Thank you for viewing the 2018 Northrop Grumman Corporation Annual Meeting Materials and for submitting your very important vote. REMEMBER, YOUR VOTE IS VERY IMPORTANT, PLEASE VOTE. Please note: Registered shareholders may unsubscribe to email notifications at any time by changing their elections at Investor Center. Questions? For additional assistance regarding your account please visitwww.computershare.com/ContactUs. Our virtual agent, Penny, provides answer to many frequently asked questions. Please do not reply to this email. This mailbox is not monitored and you will not receive a response. This email and any files transmitted with it are solely intended for the use of the addressee(s) and may contain information that is confidential and privileged. If you receive this email in error, please advise us immediately. Please also disregard the contents of the email, delete it and destroy any copies immediately. Computershare Limited and its subsidiaries do not accept liability for the views expressed in the email or for the consequences of any computer viruses that may be transmitted with this email. This email is also subject to copyright. No part of it should be reproduced, adapted or transmitted without the written consent of the copyright owner.   Your Northrop Grumman Corporation proxy statement and annual report are now available online and you may also vote your shares for the 2015 Annual Meeting of Shareholders. To view the proxy statement and annual report, please visit:www.envisionreports.com/NOC To cast your vote, please visit www.envisionreports.com/NOC and follow the on-screen instructions. You will be prompted to enter your Control Number (provided above) to access this voting site. Please note that votes submitted through this site must be received by 1:00 a.m., Eastern Time, on May 20, 2015. If shares are held on your behalf under any of the Company Savings Plans, voting instructions submitted through this site must be received by 11:59 p.m., Eastern Time, on Sunday, May 17, 2015. Thank you for viewing the 2015 Northrop Grumman Corporation Annual Meeting Materials and for submitting your very important vote. REMEMBER, YOUR VOTE IS VERY IMPORTANT, PLEASE VOTE. Please note: Registered shareholders may unsubscribe to email notifications at any time by changing their elections at Investor Centre. Questions? For additional assistance regarding your account please visitwww.computershare.com/ContactUs. Our virtual agent, Penny, provides answer to many frequently asked questions. Please do not reply to this email. This mailbox is not monitored and you will not receive a response. This email and any files transmitted with it are solely intended for the use of the addressee(s) and may contain information that is confidential and privileged. If you receive this email in error, please advise us immediately. Please also disregard the contents of the email, delete it and destroy any copies immediately. Computershare Limited and its subsidiaries do not accept liability for the views expressed in the email or for the consequences of any computer viruses that may be transmitted with this email. This email is also subject to copyright. No part of it should be reproduced, adapted or transmitted without the written consent of the copyright owner.