Lockheed’s Incoming Chief Forced Out Over Ethics Violation

The official, Christopher E. Kubasik, 51, was vice chairman, president and chief operating officer of Lockheed, the world’s largest military contractor. He was to become chief executive on Jan. 1.

Robert J. Stevens, Lockheed’s current chief executive, told reporters that an employee had tipped off the company two weeks ago to Mr. Kubasik’s relationship with another employee. Mr. Stevens said an investigation by outside lawyers had confirmed the assertion, which violated company ethics codes, and led the board to demand his resignation on Friday.

Citing privacy concerns, Mr. Stevens would not disclose details of Mr. Kubasik’s relationship. But Loren Thompson, a military analyst and consultant to Lockheed, said that Mr. Kubasik, who is married, had been involved in a long-standing relationship with a female employee who has since left the company.

Lockheed’s board selected a longtime company executive, Marillyn A. Hewson, to replace Mr. Kubasik as president and chief operating officer now and to become chief executive on Jan. 1.

Mr. Kubasik’s dismissal comes at a crucial time for Lockheed and the military contracting industry in general, as President Obama and Republican leaders in Congress begin to look at ways to cut the federal budget. Military spending, which surged after the 2001 terrorist attacks, has already begun to slow, and Lockheed and other military companies have laid off thousands of workers and are consolidating operations to deal with what Mr. Stevens calls “the new reality.”

Mr. Kubasik’s departure also represents a significant change in what had been a long-anticipated succession at the top of Lockheed. He was considered the heir apparent to Mr. Stevens after forging a strong relationship with Wall Street as Lockheed’s chief financial officer from 2001 to 2007. He was known for his intelligence as well as his sharp and acerbic wit, but within the company, Mr. Thompson said, those characteristics had begun to grate on co-workers. “His sarcasm was less welcome as he rose to one of the top positions in the company,” Mr. Thompson said.

Mr. Kubasik said in a statement, “I regret that my conduct in this matter did not meet the standards to which I have always held myself.”

He earned more than $9.4 million in total compensation in 2011 and could have received substantially more as chief executive. Mr. Stevens earned about $25 million last year. In a filing with the Securities and Exchange Commission late Friday, Lockheed said Mr. Kubasik would receive a $3.5 million separation payment, but would not be entitled to his bonus for 2012. His bonus last year was $2.275 million.

Mr. Stevens, 61, has been Lockheed’s chief executive since 2004 and is retiring from that role.

The board said that Mr. Stevens’s title would shift to “executive chairman” on Jan. 1, signifying that he would play a more active, day-to-day advisory role in 2013 to help Ms. Hewson in her transition. Mr. Stevens said the company had a deep enough bench of executives that he felt comfortable planning to retire from that new role at the end of next year.

Mr. Thompson said that Mr. Stevens, who had brought the company back from financial difficulties, had had enough of dealing with the Pentagon and Congress over problematic acquisition programs and did not want to stay longer.

Ms. Hewson “is unfailingly polite and gracious,” Mr. Thompson said, “and her personality may be better suited than Mr. Kubasik’s to interacting with the government.” In a statement Friday, Mr. Stevens said, “While I am deeply disappointed and saddened by Chris’s actions, which have been inconsistent with our values and standards, our swift response to his improper conduct demonstrates our unyielding commitment to holding every employee accountable for their actions.”

Lockheed, based in Bethesda, Md., has about 120,000 employees and had sales of $46.5 billion last year. It makes the F-35 and other fighter planes, satellites and missile defense systems and provides information technology and security services to government agencies.

Mr. Kubasik had been promoted to president and chief operating officer in April. It was also announced then that he would succeed Mr. Stevens on Jan. 1.

Ms. Hewson, 58, has been an executive vice president in charge of the company’s electronic systems business since January 2010. The board had also decided in April that she would move up to president and chief operating officer when Mr. Kubasik replaced Mr. Stevens.

Ms. Hewson will join Linda Hudson of BAE Systems and Phebe Novakovic, who will become chief executive of General Dynamics in January, in the rarefied world of women who run major military companies.

Ms. Hewson was born in Junction City, Kan., and her father died when she was 9. Her mother, with three of her five children, moved to Alabama, to be near relatives who could help her. Ms. Hewson earned a bachelor’s degree in business administration and a master’s in economics from the University of Alabama and has been with Lockheed Martin since 1983. She has since had 18 management jobs at the company. She has a husband and two sons and said she moved her family eight times along the way.

She once told Fortune that when she interviewed for her first job at Lockheed, in Marietta, Ga., she loved seeing all the planes in the factory. After that, “I never really wanted to work anywhere else,” she said.