28 TEXTRON 2022 PROXY STATEMENT To achieve these objectives, the Committee uses the following five guidelines for designing and implementing executive compensation programs at Textron: Target total pay should be set in reference to the median target total pay of a talent peer group Incentive compensation payout should be higher than target compensation when Textron performs well and lower if Textron underperforms Performance goals 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 PAY How Does the Committee Establish Target Pay? Target total pay consists of three components: (i) base salary, (ii) target annual incentive compensation and (iii) target longterm 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 are established as a percentage of base salary, varying for each NEO. The objectives of the three components are as follows: 1 2 3 4 5 At-Risk Compensation Base Salary • Provide market-competitive fixed pay reflective of an executive’s responsibilities, position, experience and performance Target Annual Incentive • Focus executives on executing the Company’s short-term business goals Target Long-Term Incentive • Align executive compensation with increasing long-term shareholder value Component Objective 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 approved by the Committee, as part of its process in establishing target pay for each NEO. The compensation consultant advised the Committee that revenue/market capitalization and industry/business fit are the most important factors in establishing this group of companies to provide appropriate references for target pay levels, followed by global reach and peer similarity, as well as availability of compensation data. Primary selection criteria for the talent peer group used to set 2021 compensation included: • Companies that are headquartered in the U.S. and publicly-traded on a major exchange, with some exposure to international markets • Revenue within a range of approximately 0.40X to 2.50X of Textron’s revenues • Market capitalization range of approximately 0.25X to 4.00X of Textron’s market capitalization • Preference for aerospace and defense-focused companies, but companies in other relevant industries were also considered
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