Textron 2020 Proxy Statement

TEXTRON 2020 PROXY STATEMENT 29 INCENTIVE COMPENSATION How Does Our Incentive Compensation Work? Our annual and long-term incentive compensation programs for 2019 are summarized in the following table. Long-term incentive 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 long-term shareholder value. CEO Target Pay Mix NEO Target Pay Mix (Excluding CEO) Approximately 91% 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”). A t - R i s k C o m p e n s a t i o n Base Salary 9% Target Annual Incentive 13% Target Long-Term Incentive 78% A t - R i s k C o m p e n s a t i o n Base Salary 24% Target Annual Incentive 20% Target Long-Term Incentive 56% Target Long-Term Incentive Performance Share Units 40% • Represent cash value of one share of common stock • Span a three-year performance period with vesting at the end of the third fiscal year • 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 • Payout is subject to a discretionary TSR modifier that can decrease the payout by as much as 40% based on how Textron’s three-year TSR compares to the performance peer group • 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 • Vest over five years in three equal annual installments beginning on the third anniversary of the grant date • Final value depends on the change in stock price over the vesting period • The Committee believes that RSUs help to retain executives because RSUs, unlike stock options, have value upon vesting even in a declining market Stock Options 30% • Provide value only if the stock price goes up during the 10-year original term of the option, resulting in a direct incentive to increase Textron’s stock price • Vest ratably over three years on each anniversary of the grant date • Target value and performance goals are set in the first quarter of each year • The performance goals are enterprise-wide goals that aggregate the separate goals for each of our business units which are set to focus the businesses primarily on generating profitability and cash flow, consistent with expected market conditions • Percentage earned (0% to 200%) is determined after the end of the fiscal year based upon the achievement of performance goals • Payout is subject to discretion based on the Committee’s and Board’s judgment of management’s performance Target Annual Incentive At-Risk Compensation Component/Award Type Description