Overview of 2022 Executive Compensation Decisions and Results Key compensation decisions and results for 2022 include the following: ● 2022 Base Salaries: The Organization and Compensation Committee (the “Committee”) increased 2022 base salaries for each of the named executive officers for 2022, noting that Messrs. Donnelly and Connor received no base salary increase in 2021, and Mr. Donnelly’s base salary had not been increased since 2018. ● 2022 Target Incentive Compensation: Annual and long-term incentive compensation as a percentage of base salary were not increased for any of the named executive officers other than Mr. Donnelly. ● 2022 Long-Term Incentive Awards: Maintained the allocation first instituted in 2020 of 50% PSUs, 25% stock options, and 25% RSUs, in light of continued shareholder support for this structure. ● 2022 Short-Term Incentive Results: The calculated payout for 2022 was 130% of target. This reflects above target performance on our cash flow and hiring diversity metrics and performance just below target on our profitability metric. ● 2020-2022 Long-Term Incentive Results: The calculated payout for the 2020-2022 PSU award was 142.5%, which reflects top quartile performance for relative total shareholder return, above target performance for our cumulative cash flow metric and below target performance on our return on invested capital metric. Executive Compensation Highlights 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 preestablished metrics set by the Committee ● Fifty percent (50%) 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 ● Annual incentive compensation includes hiring diversity performance metric ● Caps on annual incentive compensation and performance share unit 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 annually reviews a compensation-related risk assessment with assistance from its independent compensation consultant ● Committee and the Board review and evaluate plans for executive development, succession and diversity ● Annual shareholder engagement program includes discussion of executive compensation with Board involvement as requested by shareholders ● Robust share ownership requirements TEXTRON 2023 PROXY STATEMENT 25
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