● After receiving its first order from an automotive OEM for a thermoplastic composite underbody battery protection system, Kautex ramped up in preparation for successful production of this innovative product. The underbody protection product is part of Kautex’s customizable Pentatonic battery system, which also includes battery enclosures and thermal management systems for use in electric vehicles, from hybrid to full battery electric vehicles. ● Pipistrel, within our Textron eAviation segment, has expanded its distributor and customer reach by adding three new distributors in the U.S. that collectively represent 29 states, as well as distributors in both Canada and Africa. Overview of 2023 Executive Compensation Decisions and Results Key compensation decisions and results for 2023 include the following: ● 2023 Base Salaries: The Organization and Compensation Committee (the “Committee”) increased base salaries for each of the named executive officers (“NEOs”). Mr. Donnelly received an increase of 5.0% while Mr. Connor, Mr. Lupone, and Ms. Duffy received increases of 4.5%, 4.6% and 6.1% respectively. ● 2023 Target Incentive Compensation: Target annual and long-term incentive compensation for each of the named executive officers increased only as a result of their base salary increases, except that the Committee increased Mr. Donnelly’s target annual incentive compensation by 10% of his base salary and his target long-term incentive compensation increased 8% from $12 million to $13 million. ● 2023 Long-Term Incentive Awards: Maintained the target value allocation first instituted in 2020 of 50% PSUs, 25% stock options, and 25% RSUs. ● 2023 Short-Term Incentive Results: The calculated payout for 2023 was 112.9% of target, which reflects above target performance on our profitability and cash flow metrics, and performance just below target on our hiring diversity metric. ● 2021-2023 Long-Term Incentive Results: The calculated payout for the 2021-2023 PSU award was 200% as performance on our return on invested capital, cumulative cash flow and relative total shareholder return metrics exceeded maximum performance. Executive Compensation Highlights The following summarizes key aspects of our executive compensation program for the NEOs: 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 for 2023 included hiring diversity performance metric; beginning in 2024, this metric will be broadened to encompass additional environmental, social, and governance objectives. ● Caps on annual incentive compensation and performance share unit payouts ● Double-trigger change in control provisions for equity awards and severance arrangements ● 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 24 TEXTRON 2024 PROXY STATEMENT
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