36 TEXTRON 2022 PROXY STATEMENT What We Heard Our Perspective Most shareholders supported the Committee’s decision to grant 50% of LTIC in the form of PSUs, which was implemented in 2020, but a few would prefer an even greater percentage of PSUs since they don’t consider stock options to be performance based. The majority of shareholders that we spoke to indicated that they are satisfied with PSUs at 50% of LTIC and, like the Committee, they do consider stock options to be performance based. Some shareholders questioned the use of a cash flow metric in both annual and long-term incentive compensation. The Committee views the three-year Cumulative Manufacturing Cash Flow metric, used beginning with 2020 PSUs, as strategically very different from a one-year cash flow goal used in the annual incentive program, due to the nature of Textron’s business which is largely long-cycle, requiring an investment build up at certain points of the cycle. This investment cycle can have an outsized impact on oneyear cash flow goals, making a three-year cumulative cash flow metric strategically more meaningful. Some shareholders would like to see long-term compensation tied to performance on ESG goals, including environmental/ climate change-related goals. Compensation for personnel directly responsible for environmental and health and safety matters at our businesses is tied to achievement of related goals. The Committee is monitoring developments in the use of ESG goals for long-term compensation. Many shareholders supported our inclusion of the hiring diversity metric in the annual incentive program and our disclosure of EEO-1 data on Textron.com. Textron has had an employee diversity metric in its annual incentive compensation for a decade. Some shareholders expressed general satisfaction with our executive compensation program and the changes the Committee had implemented in response to shareholder feedback on our 2019 say-on-pay vote, but voted against say-on-pay in 2021 in reliance on a proxy advisory firm’s recommendation. The Committee believes that its extensive engagement with shareholders over the past two years have reaffirmed the design of the executive compensation program that it implemented in 2020 and maintained for 2021, and that, as shareholders see it in operation, they will increasingly concur that it appropriately aligns pay with performance. Based upon these discussions and with the strong majority of shareholders being supportive of the Committee’s actions and our recently redesigned long-term incentive compensation program, the Committee did not make any changes for the 2022 executive compensation program. We intend to continue to regularly engage with our investors to hear their views on our executive compensation program as well as on other matters. RISKS RELATED TO COMPENSATION The Committee strives to set compensation policies for senior executives which do not encourage excessive risk-taking that could endanger the Company. For 2021, the Committee completed a full review of managing risk within our executive compensation program. This review was informed by a risk analysis of our executive compensation program conducted by the Committee’s independent compensation consultant. The consultant’s risk analysis concluded that our executive compensation program has no elements that are likely to cause a material adverse outcome for the Company. This annual review helps the Committee to structure executive compensation programs that are designed to avoid exposing the Company to unwarranted risk.
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