To achieve these objectives, the Committee uses the following five guidelines for designing and implementing executive compensation programs at Textron: Target total direct compensation should be set in reference to the median target total direct compensation of a talent peer group Incentive compensation payout should be higher than target compensation when Textron performs well and lower if Textron underperforms Performance metrics should align interests of executives with long-term interests of shareholders Compensation programs should not incentivize executives to conduct business in ways which could put the Company at undue risk Indirect compensation should provide the same level of benefits given to other salaried employees TARGET DIRECT COMPENSATION How Does the Committee Establish Target Direct Compensation? Target total direct compensation consists of three components: (i) base salary, (ii) target annual incentive compensation and (iii) target long-term incentive compensation. In establishing target pay, the Committee addresses each component with reference to a talent peer group median and makes its determinations based on individual responsibilities, complexity of position versus that of the market benchmarks, performance, experience, and future potential. The target incentive compensation components generally are established as a percentage of base salary, varying for each NEO. The objectives of the three components are as follows: How Does the Committee Select the Talent Peer Group? The Committee references a “talent” peer group of companies, recommended by its independent compensation consultant, and reviewed and approved by the Committee annually, as part of its process in establishing target direct compensation for each NEO. For its 2022 review of the talent peer group, the compensation consultant evaluated current and potential peer companies using the following factors: size appropriateness, based upon both revenue and market capitalization, industry and business fit, global reach, and whether the company uses Textron as a peer company for compensation purposes. The Committee also considers changes that may occur at peer companies due to mergers and acquisitions and/or spin-off activities. After this review, the compensation consultant recommended, and the Committee concluded, that no changes to the 2022 talent peer group were warranted. TEXTRON 2024 PROXY STATEMENT 27
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