2018 Proxy Statement

TEXTRON 2018 PROXY STATEMENT 26 $SSUR[LPDWHO\ RI RXU CEO’s pay mix and an average of approximately RI RXU RWKHU 1(2V· pay mix is tied to Company performance (“at-risk”). Component Award Type Description Target Long-Term Incentive INCENTIVE COMPENSATION HOW DOES OUR INCENTIVE COMPENSATION WORK? 2XU DQQXDO DQG ORQJ WHUP LQFHQWLYH FRPSHQVDWLRQ SURJUDPV DUH VXPPDUL]HG LQ WKH IROORZLQJ WDEOH /RQJ WHUP LQFHQWLYH compensation consists of three award types: PSUs, RSUs and stock options. This mix of award types encourages executives to focus on meeting performance goals established by the Committee, remaining with Textron as awards vest, and increasing ORQJ WHUP VKDUHKROGHU YDOXH Base Salary 9% Target Long-Term Incentive 77% Target Annual Incentive 14% A t - R i s k C o m p e n s a t i o n Base Salary 26% Target Long-Term Incentive 55% Target Annual Incentive 19% A t - R i s k C o m p e n s a t i o n Performance Share Units 40% • Represent cash value of one share of common stock • 6SDQ D WKUHH \HDU SHUIRUPDQFH SHULRG ZLWK YHVWLQJ DW WKH HQG RI WKH WKLUG ¿VFDO \HDU • Percentage earned (0% to 150%) is based upon the achievement of performance goals set annually by the Committee for each year of the performance period • 3D\RXW LV VXEMHFW WR D GLVFUHWLRQDU\ 765 PRGL¿HU WKDW FDQ GHFUHDVH WKH SD\RXW E\ DV PXFK DV EDVHG RQ KRZ 7H[WURQ¶V WKUHH \HDU 765 FRPSDUHV WR WKH SHUIRUPDQFH SHHU JURXS • Incentivize achievement of Company performance goals over a sustained period in order to build shareholder value Restricted Stock Units 30% • Represent the right to receive one share of common stock upon vesting • Final value depends on the change in stock price over the vesting period • The Committee believes that RSUs help to retain executives because they have value upon vesting regardless of stock price Stock Options 30% • Provide value only if the stock price goes up during the term of the option, resulting in a direct incentive to increase Textron’s stock price • 7DUJHW YDOXH DQG SHUIRUPDQFH JRDOV DUH VHW LQ WKH ¿UVW TXDUWHU RI HDFK \HDU • 7KH SHUIRUPDQFH JRDOV DUH HQWHUSULVH ZLGH JRDOV WKDW DJJUHJDWH WKH VHSDUDWH JRDOV IRU each of our business units which are set to focus the businesses primarily on generating SUR¿WDELOLW\ DQG FDVK ÀRZ FRQVLVWHQW ZLWK H[SHFWHG PDUNHW FRQGLWLRQV • 3HUFHQWDJH HDUQHG WR LV GHWHUPLQHG DIWHU WKH HQG RI WKH ¿VFDO \HDU EDVHG upon the achievement of performance goals • Payout is subject to adjustments based on the Committee’s and Board’s judgment of management’s performance Target Annual Incentive CEO Target Pay Mix NEO Target Pay Mix (Excluding CEO) At-Risk Compensation