Textron 2021 Proxy Statement

TEXTRON 2021 PROXY STATEMENT 31 Approximately 91% of our CEO’s pay mix and on average approximately 76% of our other NEOs’ pay mix is tied to Company performance, including stock price performance (“at-risk”). CEO Target Pay Mix NEO Target Pay Mix (Excluding CEO) A t - R i s k C o m p e n s a t i o n Base Salary 9% Target Annual Incentive 13% Target Long-Term Incentive 78% A t - R i s k C o m p e n s a t i o n Base Salary 24% Target Annual Incentive 20% Target Long-Term Incentive 56% 2020 INCENTIVE COMPENSATION PROGRAMS How Does Our 2020 Incentive Compensation Work? Based on feedback received during our engagement with shareholders, the Committee did not revise the structure of our annual incentive compensation program for 2020, maintaining it consistent with prior years as summarized in the table below. As described above, we made extensive changes to our long-term incentive compensation (“LTIC”) program for grants made in 2020. Our long-term incentive compensation program includes three award types: PSUs, RSUs and stock options. This mix of award types encourages executives to focus on meeting performance goals established by the Committee, remaining with Textron as awards vest and increasing long-term shareholder value. For 2020, PSUs represent 50% of target LTIC, an increase from 40% in recent years, with the percentage awarded as stock options and RSUs correspondingly reduced. This change was made as a result of shareholder input as their view is that, because PSUs are subject to performance-based metrics, increasing the percentage of PSUs more closely aligns LTIC with long-term company performance. In response to shareholder feedback, for PSUs granted in 2020, the Committee has extended the performance period for all PSU metrics to a single three-year period instead of three one-year periods in order to more closely align LTIC with long-term company goals. The financial performance metrics for 2020 PSUs are Average Return on Invested Capital, weighted at 50% and Cumulative Manufacturing Cash Flow, weighted at 30%, with relative TSR accounting for 20%. The Average Return on Invested Capital and Cumulative Manufacturing Cash Flow metrics were chosen by the Committee to align with key value drivers of our business and, together, are designed to incentivize our executives to make disciplined capital allocation decisions and to manage working capital, inventory and investments to generate returns and create value for our shareholders over the long-term. As many shareholders expressed a desire for relative TSR to remain part of the LTIC program, the Committee also determined to move its use of relative TSR from a discretionary modifier applied to PSUs to a stand-alone metric weighted at 20% to maintain focus on stock performance as an important relative measure of company performance. In addition, evolving dynamics in our industries have resulted in frequent merger and acquisition and spin-off activity among our performance peer group companies, leaving fewer companies which the Committee believes are appropriate for comparison with Textron’s TSR performance. As a result, the Committee changed the benchmark used for comparison of TSR performance from the company- selected performance peer group to the S&P 500 index companies. This approach allows Textron to benchmark against the companies in a recognized market index which incorporates an independent selection process and ensures a robust number of companies for comparison. In addition, the Committee adjusted the PSU threshold payout opportunity from 50% to 25% and maximum payout opportunity from 150% to 200%, consistent with prevalent peer company practice, to enhance the effectiveness of PSUs over their three- year performance period through a range of economic and business scenarios. Finally, the Committee changed the vesting schedule for RSUs from vesting over five years in equal annual installments beginning on the third anniversary of the grant date to vesting in full on the third anniversary of the grant date, in order to align with the PSU performance period. This is the prevalent practice among our peer companies and therefore improves the competitiveness of our LTIC program for the attraction and retention of executive talent.