Textron 2021 Proxy Statement

24 TEXTRON 2021 PROXY STATEMENT Overview of 2020 Executive Compensation Decisions As described further below, executive compensation decisions affecting our named executive officers’ 2020 compensation included the following: • Target direct compensation was maintained at 2019 levels for our CEO and all but one of the other NEOs whose compensation was below the competitive range of the talent peer group companies. • Based on our engagement with shareholders relating to our recent Say on Pay votes, we restructured our performance share units so that payout is based on performance against pre-established, three-year financial goals to better incentivize long- term performance, and we increased the percentage of long-term incentives awarded in the form of performance share units. • Reflecting our engagement with shareholders, we maintained the structure of our annual incentive compensation program. At our CEO’s request, we did not alter performance criteria or adjust performance results as a result of the COVID-19 pandemic in determining the payout to our CEO under this program. However, we excluded COVID-19-related idle facility costs when determining the other NEOs’ payout, which still resulted in a payout well below target. • We did not alter our performance criteria or adjust performance results as a result of the COVID-19 pandemic when determining results under 2018-2020 performance share units. The Organization and Compensation Committee (the “Committee”) exercised its discretion to reduce the final payout by 15% based on our relative TSR performance over the performance period and other factors. • Reflecting the impact of COVID-19 on our industries and our stock price performance, the CEO’s 2020 annual incentive payout was 57% lower than in 2019, and the value of performance share units that vested was approximately 42% lower than their grant date fair value. Executive Compensation Highlights The Committee receives regular briefings from its consultant on evolving best practices in executive compensation. The following summarizes key aspects of our executive compensation program: Practices we employ • Pay for performance—substantial portion of executives’ compensation tied to Company performance against pre-established goals set by the Committee • High percentage of long-term incentive awards subject to performance-based metrics to closely align with long-term company performance • Pay aligned with shareholder interests—substantial portion of executives’ target compensation, including more than 75% of CEO’s target compensation is in the form of equity-based long-term incentives • Caps on annual incentive compensation and performance share unit payouts • Diversity goals taken into account in establishing annual incentive compensation payouts • Double-trigger change in control provisions for equity awards and severance arrangements • Clawback policy applies to all annual and long-term incentive compensation • Committee annually conducts a pay-for-performance analysis based on operating and stock performance metrics used in our annual and long-term incentive awards • Committee annually reviews the composition of a talent peer group which is referenced for benchmarking our executives’ compensation and makes changes as appropriate • Committee annually reviews compensation data against the talent peer group in order to understand the competitiveness of our compensation program and pay levels • Committee reviews and evaluates plans for management development, succession and diversity • Committee annually reviews a compensation-related risk assessment with assistance from its independent compensation consultant • Robust share ownership requirements