2018 Proxy Statement

TEXTRON 2018 PROXY STATEMENT 22 COMPENSATION PROGRAM COMPONENTS 7RWDO SD\ IRU 7H[WURQ¶V H[HFXWLYHV FRQVLVWV RI EDVH VDODU\ DQQXDO LQFHQWLYH FRPSHQVDWLRQ DQG ORQJ WHUP LQFHQWLYH compensation. Our annual incentive compensation program is designed to reward performance against annual business goals HVWDEOLVKHG E\ WKH &RPPLWWHH DW WKH EHJLQQLQJ RI HDFK \HDU DQG LV SD\DEOH LQ FDVK 7KH ORQJ WHUP LQFHQWLYH FRPSHQVDWLRQ program is directly linked to stock price through three award types: stock options, restricted stock units (“RSUs”) and performance share units (“PSUs”). PSUs reward performance against annual business goals set by the Committee for each \HDU RI D WKUHH \HDU SHUIRUPDQFH SHULRG 7KH &RPPLWWHH WKHQ PD\ XVH LWV QHJDWLYH GLVFUHWLRQ WR GHFUHDVH WKH SD\RXW EDVHG RQ KRZ 7H[WURQ¶V WKUHH \HDU WRWDO VKDUHKROGHU UHWXUQ ³765´ FRPSDUHV WR D SHUIRUPDQFH SHHU JURXS 368V DUH SD\DEOH LQ cash based upon our stock price. 2017 INCENTIVE COMPENSATION PAYOUTS The two main performance goals set by the Committee for 2017—applicable to our annual incentive compensation program as ZHOO DV WR WKH 368V XQGHU RXU ORQJ WHUP LQFHQWLYH FRPSHQVDWLRQ SURJUDP²IRFXVHG RQ SUR¿WDELOLW\ DQG FDVK ÀRZ ZKLFK DUH NH\ business priorities for Textron. )RU WKH DQQXDO LQFHQWLYH FRPSHQVDWLRQ SURJUDP SDLG RXW DW RI WDUJHW IRU RXU H[HFXWLYHV UHÀHFWLQJ SHUIRUPDQFH WKDW H[FHHGHG WDUJHWV VHW DW WKH EHJLQQLQJ RI WKH \HDU 368V DZDUGHG IRU WKH SHUIRUPDQFH F\FOH ZHUH VXEMHFW WR EXVLQHVV JRDOV VHW DQQXDOO\ E\ WKH &RPPLWWHH GXULQJ WKH WKUHH \HDU SHUIRUPDQFH SHULRG 7KHVH DZDUGV ZHUH DOVR VXEMHFW WR D QHJDWLYH discretionary adjustment by the Committee. Performance against these goals resulted in a multiplier of 106.8% of the number of 368V JUDQWHG KRZHYHU WKH &RPPLWWHH DSSOLHG D GLVFUHWLRQDU\ UHGXFWLRQ 7KLV DGMXVWPHQW UHVXOWHG LQ D ¿QDO QXPEHU RI XQLWV SDLG RI RI WKH LQLWLDO QXPEHU RI 368V JUDQWHG OVERVIEW AND OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAM 7KH REMHFWLYHV RI 7H[WURQ¶V FRPSHQVDWLRQ SURJUDP IRU H[HFXWLYH RI¿FHUV DUH • Encouraging world class performance • $WWUDFWLQJ DQG UHWDLQLQJ KLJK SHUIRUPLQJ WDOHQW • Focusing executives on delivering balanced performance by providing (i) both cash and equity incentives and LL ERWK DQQXDO DQG ORQJ WHUP LQFHQWLYHV • Aligning executive compensation with shareholder value 7R DFKLHYH WKHVH REMHFWLYHV WKH &RPPLWWHH XVHV WKH IROORZLQJ ¿YH JXLGHOLQHV IRU GHVLJQLQJ DQG LPSOHPHQWLQJ H[HFXWLYH compensation programs at Textron: • First, target total pay should be set in reference to the median target total pay of a talent peer group • Second, incentive compensation should pay higher when Textron performs well and lower if Textron performs poorly • 7KLUG SHUIRUPDQFH JRDOV VKRXOG DOLJQ LQWHUHVWV RI H[HFXWLYHV ZLWK ORQJ WHUP LQWHUHVWV RI VKDUHKROGHUV • Fourth, compensation programs should not incentivize executives to conduct business in ways which could put the Company at undue risk • )LIWK LQGLUHFW FRPSHQVDWLRQ VKRXOG SURYLGH WKH VDPH OHYHO RI EHQH¿WV JLYHQ WR RWKHU VDODULHG HPSOR\HHV