● 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 Practices we prohibit ● No single-trigger vesting of long-term incentive awards upon a change in control of the Company ● No tax gross-ups for officers hired after 2008 ● No employment contracts guaranteeing fixed-term employment or bonuses to executives and no individually negotiated termination protection since 2008 ● No excessive executive perquisites ● No hedging or pledging Textron securities ● No repricing or exchanging stock options without shareholder approval Compensation Philosophy Textron’s compensation philosophy is to establish target total direct compensation with reference to a talent peer group median and to tie a substantial portion of our executives’ compensation to performance against objective business metrics and stock price performance. This approach helps us to recruit and retain talented executives, incentivizes our executives to achieve desired business goals and aligns their interests with the interests of our shareholders. 2023 Compensation Program Components Total direct compensation for Textron’s executives, including the NEOs, consists of base salary, annual incentive compensation and long-term incentive compensation. Our annual incentive compensation program is designed to reward performance against annual business metrics established by the Committee at the beginning of each year and is payable in cash. Our long-term incentive compensation program is directly linked to stock price through three award types: performance share units (“PSUs”), restricted stock units (“RSUs”) and stock options. PSUs represent 50% of long-term incentives awarded to our NEOs and are earned based on performance against financial metrics set by the Committee measured over a three-year performance period. The three-year financial metrics currently used for our PSUs are Average Return on Invested Capital (weighted at 50%), Cumulative Manufacturing Cash Flow (weighted at 30%), and relative Total Shareholder Return (“TSR”) compared to the S&P 500 (weighted at 20%). PSUs are typically settled in cash based upon our stock price at the end of the three-year performance cycle, but, in the Committee’s discretion, can be settled in shares of common stock, cash, or a combination of both. TEXTRON 2024 PROXY STATEMENT 25
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