2022 Target Pay Mix CEO Target Pay Mix NEO Target Pay Mix (Excluding CEO) Approximately 92% 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”). 2022 INCENTIVE COMPENSATION TARGETS, PAYOUTS AND PERFORMANCE ANALYSIS Setting Targets for 2022 Performance Metrics The Committee relies on Textron’s Annual Operating Plan (“AOP”) in setting financial performance targets for short and long-term incentive compensation. The AOP, which is prepared toward the end of each fiscal year for the following fiscal year, includes financial plans and targets and key assumptions for each segment. At its December meeting, the Board of Directors reviews and approves the AOP, subject to adjustment for certain year-end items. The Committee approves targets for the performance metrics included in Textron’s incentive compensation programs in January based upon the finalized AOP. 2022 Annual Incentive Compensation Performance Metrics Performance metrics for the 2022 annual incentive compensation program, consistent with the prior year, focused on profitability, measured by enterprise net operating profit (weighted at 60%), manufacturing cash flow (weighted at 35%), and hiring diversity (weighted at 5%). The net operating profit metric focuses executives on improving execution in order to increase profit margin consistent with our expectations of our end markets. The net operating profit target established by the Committee for 2022 was approximately 43% higher than the previous year’s target and approximately 13% higher than the previous year’s actual performance. The manufacturing cash flow metric focused executives on improving operational efficiency and sustaining the strength of the balance sheet. The cash flow target established by the Committee for 2022 was approximately 78% higher than the previous year’s target. However, because we expected a significant increase in cash taxes due to a change in tax law that became effective in 2022, the target was set approximately 37% below last year’s actual performance. The hiring diversity performance metric focused executives on increasing hiring of diverse employees (defined as employees who identify as female or diverse based on race or ethnicity). Annually, our executives review hiring plans for the coming year along with publicly available data on talent availability as a guide for setting diverse hiring targets. 2022-2024 PSU Cycle Performance Metrics Performance metrics for the 2022-2024 PSU cycle, unchanged from the prior year, consisted of average return on invested capital (ROIC) (weighted at 50%), cumulative manufacturing cash flow (weighted at 30%), and relative total shareholder return compared to the S&P 500 (weighted at 20%), all measured over the three-year performance period. The ROIC and cumulative manufacturing cash flow performance 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. The relative total shareholder return metric maintains focus on stock performance as an important relative measure of company performance. TEXTRON 2023 PROXY STATEMENT 31
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