UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A
Proxy Statement Pursuant to Section
14(a) of the Securities
Exchange Act of 1934 (Amendment No.
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Filed by the Registrant |
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Filed by a Party other than the Registrant |
Check the appropriate box: |
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Preliminary Proxy Statement |
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CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Under Rule 14a-12 |
TEXTRON INC.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
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Payment of Filing Fee (Check the appropriate box): |
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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(1) Title of each class of securities to which transaction applies: |
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(2) Aggregate number of securities to which transaction applies: |
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(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: |
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(4) Proposed maximum aggregate value of transaction: |
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(5) Total fee paid: |
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Fee paid previously with preliminary materials. |
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11 (a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing. |
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(1) Amount Previously Paid: |
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(2) Form, Schedule or Registration Statement No.: |
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(3) Filing Party: |
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(4) Date Filed: |
Textron’s
Global Network of Businesses
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TEXTRON
AVIATION
Textron Aviation is home to the Beechcraft®,
Cessna® and Hawker® aircraft brands and continues to be a leader in general aviation through
two principal lines of business: aircraft and aftermarket. Aircraft includes sales of business jet, turboprop and piston aircraft,
as well as special mission and military aircraft. Aftermarket includes commercial parts sales, maintenance, inspection and
repair services. |
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BELL
Bell is a leading supplier of helicopters and related
spare parts and services. Bell is the pioneer of the revolutionary tiltrotor aircraft. Globally recognized for world-class
customer service, innovation and superior quality, Bell’s global workforce serves customers flying Bell aircraft in
more than 130 countries. |
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INDUSTRIAL
Our Industrial segment offers two main product lines:
fuel systems and functional components produced by Kautex; and specialized vehicles such as golf cars, recreational and utility
vehicles, aviation ground support equipment and professional mowers, manufactured by Textron Specialized Vehicles businesses. |
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TEXTRON
SYSTEMS
Textron Systems’ businesses provide innovative
solutions to the defense, aerospace and general aviation markets. Product lines include unmanned systems, advanced marine
craft, armored vehicles, intelligent software solutions, piston engines, simulation, training and other defense and aviation
mission support products and services. |
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FINANCE
Our Finance segment, operated by Textron Financial Corporation
(TFC), is a commercial finance business that provides financing solutions for purchasers of Textron products, primarily Textron
Aviation aircraft and Bell helicopters. For more than five decades, TFC has played a key role for Textron customers around
the globe. |
NOTICE
OF ANNUAL MEETING
To the Shareholders of Textron
Inc.:
The 2020 annual meeting of
shareholders of Textron Inc. will be held on Wednesday, April 29, 2020 at 11:00 a.m. at the Company’s principal executive
office located at 40 Westminster Street, Providence, Rhode Island for the following purposes:
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To
elect the ten director nominees named in the proxy statement to hold office until the next annual shareholders’ meeting; |
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Wednesday,
April 29, 2020 |
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To
approve Textron’s executive compensation on an advisory basis; |
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11:00
a.m. Eastern Daylight Time |
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To
ratify the appointment by the Audit Committee of Ernst & Young LLP as Textron’s independent registered public accounting
firm for 2020; and |
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Textron
Inc.
40 Westminster Street
Providence, Rhode Island 02903 |
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To
transact any other business as may properly come before the meeting or any adjournment or postponement of the meeting. |
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You are entitled to vote all
shares of common stock registered in your name at the close of business on March 2, 2020. If your shares are held in the name
of your broker or bank and you wish to attend the meeting in person and vote your shares, your broker or bank must issue to you
a proxy covering your shares.
As permitted by the rules of
the Securities and Exchange Commission, we are making our proxy materials available to shareholders primarily via the Internet,
rather than mailing printed copies of these materials to shareholders. On March 6, 2020, we mailed to many of our shareholders
a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access and review
our proxy materials, including our Proxy Statement and the Annual Report to Shareholders, and vote online. This process is designed
to expedite shareholders’ receipt of proxy materials, lower the cost of the annual meeting, and help conserve natural resources.
If you received a Notice by mail, you will not receive a printed copy of the proxy materials unless you request one. If you would
prefer to receive printed proxy materials, please follow the instructions included in the Notice. Shareholders who requested paper
copies of the proxy materials or previously elected to receive our proxy materials electronically did not receive the Notice and
will receive the proxy materials in the format requested.
Whether or not you plan to
attend the meeting, we urge you to cast your vote as soon as possible so that your shares may be represented at the meeting. You
may vote your shares via the Internet or by telephone by following the instructions included on the Notice. Alternatively, if
you received paper copies of the proxy materials by mail, you can also vote by mail by following the instructions on the proxy
card.
A list of shareholders entitled
to vote at the 2020 annual meeting will be open to examination by any shareholder for any purpose germane to the meeting, for
ten days prior to the meeting, at Textron’s principal executive office, 40 Westminster Street, Providence, Rhode Island
02903.
By order of the Board of Directors,
E. Robert Lupone
Executive Vice President, General Counsel and Secretary
Providence, Rhode Island
March 6, 2020
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YOUR
VOTE IS IMPORTANT |
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Brokers are not
permitted to vote on the election of directors or on certain other proposals without instructions from the beneficial owner.
Therefore, if your shares are held in the name of your broker or bank, it is important that you vote. We encourage you to
vote promptly, even if you intend to attend the annual meeting. |
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 29, 2020: |
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The
Company’s Proxy Statement for the 2020 Annual Meeting of Shareholders, the Annual Report to Shareholders for the fiscal
year ended January 4, 2020 and the Company’s Annual Report on Form 10-K for the fiscal year ended January 4, 2020 are
available at http://investor.textron.com/investors/investor-resources. The Company will provide by mail, without charge,
a copy of its Annual Report on Form 10-K, at the request of shareholders. Please direct all inquiries to the Company at (401)
457-2353 or by submitting a written request to the Secretary at Textron Inc., 40 Westminster Street, Providence, Rhode Island
02903. |
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REVIEW
THE PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS: |
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BY
TELEPHONE
Call
the telephone number on your proxy card or voting instruction form. |
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BY
MAIL
If
you received your materials by mail, you can vote by mail by marking, dating and signing your proxy card or voting instruction
form and returning it in the postage-paid envelope. |
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BY
INTERNET
You
can vote your shares online at www.proxyvote.com. |
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IN
PERSON
Attend
the meeting to vote in person. |
TEXTRON 2020 PROXY STATEMENT
TABLE OF CONTENTS
TEXTRON 2020 PROXY STATEMENT
TEXTRON 2020 PROXY STATEMENT
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INFORMATION
ABOUT THE ANNUAL MEETING |
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GENERAL
This proxy statement, which
is first being made available to shareholders on or about March 6, 2020, is furnished in connection with the solicitation by the
Board of Directors of Textron Inc. of proxies to be voted at the annual meeting of shareholders to be held on April 29, 2020,
at 11:00 a.m. at the Company’s principal executive office, located at 40 Westminster Street, Providence, Rhode Island, and
at any adjournments or postponements thereof.
SHAREHOLDERS
WHO MAY VOTE
All shareholders of record at
the close of business on March 2, 2020 will be entitled to vote. As of March 2, 2020, Textron had outstanding 227,645,495 shares of common
stock, each of which is entitled to one vote with respect to each matter to be voted upon at the meeting. Proxies are solicited
to give all shareholders who are entitled to vote on the matters that come before the meeting the opportunity to do so whether
or not they attend the meeting in person.
INTERNET
AVAILABILITY OF PROXY MATERIALS
As permitted by the rules of
the Securities and Exchange Commission, we are making our proxy materials available to shareholders primarily via the Internet,
rather than mailing printed copies of these materials to shareholders. On March 6, 2020, we mailed to many of our shareholders
a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access and review
our proxy materials, including our Proxy Statement and the Annual Report to Shareholders, and vote online.
This process is designed to
expedite shareholders’ receipt of proxy materials, lower the cost of the annual meeting, and help conserve natural resources.
If you received a Notice by mail, you will not receive a printed copy of the proxy materials unless you request one. If you would
prefer to receive printed proxy materials, please follow the instructions included in the Notice. Shareholders who requested paper
copies of the proxy materials or previously elected to receive our proxy materials electronically did not receive the Notice and
will receive the proxy materials in the format requested.
VOTING
Shareholders of record may vote
via the Internet or by using the toll-free telephone number listed on the proxy card. Please follow the instructions for Internet
or telephone voting provided on the proxy card or Notice. Alternatively, if you received paper copies of the proxy materials by
mail, you can vote by mail by following the instructions on the proxy card. If you vote via the Internet or by telephone, please
do not return a signed proxy card. Shareholders who hold their shares through a bank or broker can vote via the Internet or by
telephone if these options are offered by the bank or broker. If you received the proxy materials in paper form from your bank
or broker, the materials include a voting instruction form so you can instruct the holder of record on how to vote your shares.
If voting by mail, please complete,
sign, date and return your proxy card enclosed with the proxy statement in the accompanying postage-paid envelope. You can specify
how you want your shares voted on each proposal by marking the appropriate boxes on the proxy card. If your proxy card is signed
and returned without specifying a vote or an abstention on any proposal, it will be voted according to the recommendation of the
Board of Directors on that proposal. That recommendation is shown for each proposal on the proxy card.
You also may vote in person
at the meeting. If your shares are held in the name of your broker or bank and you wish to vote in person at the meeting, you
must request your broker or bank to issue you a proxy covering your shares.
SAVINGS
PLAN PARTICIPANTS
If you are a participant in
a Textron savings plan with a Textron stock fund as an investment option, when you vote via the Internet or by telephone, or your
proxy card is returned properly signed, the plan trustee will vote your proportionate interest in the plan shares in the manner
you direct, or if you vote by mail and make no direction, in proportion to directions received from the other plan participants
(except for any shares allocated to your Tax Credit Account under the Textron Savings Plan which will be voted only as you direct).
All directions will be held in confidence.
TEXTRON 2020 PROXY STATEMENT 1
CHANGING
OR REVOKING A PROXY
Whether voting by mail, via
the Internet or by telephone, if you are a shareholder of record, you may change or revoke your proxy at any time before it is
voted by submitting a new proxy with a later date, voting via the Internet or by telephone at a later time, delivering a written
notice of revocation to Textron’s Secretary, or voting in person at the meeting. If your shares are held in the name of
your broker or bank, you may change or revoke your voting instructions by contacting the bank or brokerage firm or other nominee
holding the shares or by obtaining a legal proxy from such institution and voting in person at the annual meeting.
REQUIRED
VOTE
A quorum is required to conduct
business at the meeting. A quorum requires the presence, in person or by proxy, of the holders of a majority of the issued and
outstanding shares entitled to vote at the meeting. Abstentions and broker “non-votes” are counted as present and
entitled to vote for purposes of determining a quorum. A broker non-vote occurs when you fail to provide voting instructions to
your broker for shares owned by you but held in the name of your broker and your broker does not have authority to vote without
instructions from you. Under those circumstances, your broker may be authorized to vote for you without your instructions on routine
matters but is prohibited from voting without your instructions on non-routine matters. The ratification of independent registered
public accountants is a routine matter on which your broker may vote your shares without your instructions. Non-routine matters
include the election of directors and the advisory vote to approve Textron’s executive compensation. Those items for which
your broker cannot vote result in broker non-votes.
Election of each of the nominees
for director requires a vote of the majority of the votes cast at the meeting, which means that the number of shares voted “for”
a nominee for director must exceed the number of shares voted “against” that nominee. Abstentions and broker non-votes
are not counted for this purpose and will have no effect on the outcome of the election.
Approval of all other matters
to be voted on at the meeting requires the affirmative vote of a majority of the shares present in person or represented by proxy
and entitled to vote on the matter. Abstentions will have the same effect as votes “against” the proposal, and broker
non-votes (when applicable) will have no effect on the outcome of the vote.
COSTS OF
PROXY SOLICITATION
Textron pays the cost of this
solicitation of proxies. Textron will request that persons who hold shares for others, such as banks and brokers, solicit the
owners of those shares and will reimburse them for their reasonable out-of-pocket expenses for those solicitations. In addition
to solicitation by mail, Textron employees may solicit proxies by telephone, by electronic means and in person, without additional
compensation for these services. Textron has hired Alliance Advisors, LLC of Bloomfield, New Jersey, a proxy solicitation organization,
to assist in this solicitation process for a fee of $16,000, plus reasonable out-of-pocket expenses.
CONFIDENTIAL
VOTING POLICY
Under Textron’s policy
on confidential voting, individual votes of shareholders are kept confidential from Textron’s directors, officers and employees,
except for certain specific and limited exceptions. Comments of shareholders written on proxies or ballots are transcribed and
provided to Textron’s Secretary. Votes are counted by Broadridge Financial Solutions, Inc. and certified by an independent
Inspector of Election.
ATTENDING
THE MEETING
If your shares are held in the
name of your bank or broker and you plan to attend the meeting, please bring proof of ownership with you to the meeting. A bank
or brokerage account statement showing that you owned voting stock of Textron on March 2, 2020 is acceptable proof to obtain admittance
to the meeting. If you are a shareholder of record, no proof of ownership is required. All shareholders or their proxies should
be prepared to present government-issued photo identification upon request for admission to the meeting.
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TEXTRON 2020 PROXY STATEMENT
BOARD MEMBERSHIP
QUALIFICATIONS
The Board of Directors
believes that the Board, as a whole, should possess a combination of skills, professional experience and diversity of
backgrounds necessary to oversee the Company’s business. Accordingly, the Board and the Nominating and Corporate
Governance Committee consider the qualifications of directors and director candidates individually and in the broader context
of the Board’s overall composition and the Company’s current and future needs. In addition, the Board believes
that there are certain attributes that every director should possess, as reflected in the Board’s membership criteria
which are developed and recommended to the Board by the Nominating and Corporate Governance Committee. All of our current
Board members share certain qualifications and attributes consistent with these criteria, which are set forth in the
Company’s Corporate Governance Guidelines and Policies and are summarized below:
Board
Membership Criteria
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Exemplary
personal ethics and
integrity |
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Core
business competencies of
high achievement and a record
of success |
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Financial
literacy and a history of
making good business decisions
and exposure to best practices |
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Enthusiasm
for Textron and
sufficient time to be fully
engaged |
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Strong
communications skills
and confidence to ask tough
questions |
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Interpersonal
skills that
maximize group dynamics,
including respect for others |
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Specific
skills and experience aligned with Textron’s strategic direction and
operating challenges and that complement the overall composition of
the Board |
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NOMINEES
FOR DIRECTOR
At the 2020 annual meeting,
ten directors are to be elected to hold office until the 2021 annual meeting and until their successors have been elected and
qualified. All ten nominees are currently Textron directors. Lionel L. Nowell III, who was recommended by a third-party search
firm, was appointed as a director by the Board effective January 1, 2020. The search firm assisted the Company in identifying
and evaluating director candidates for a fee paid by the Company. It is the intention of the persons named as proxies for the
annual meeting, unless otherwise instructed, to vote “for” each of the directors who have been nominated for election.
If any director nominee is unable or unwilling to serve as a nominee at the time of the annual meeting, the persons named as proxies
will vote for the balance of the nominees and may vote for a substitute nominee designated by the present Board. Both Lawrence
K. Fish, a director since 1999, and Lloyd G. Trotter, a director since 2008, will be retiring from our Board effective as of the
annual meeting in accordance with our retirement policy. At that time, the Board intends to reduce the number of directors of
the Company to ten.
Our Nominating and Corporate
Governance Committee and our Board have determined that each of our directors has the experience, attributes and skills needed
to collectively comprise an effective and well-functioning Board. Textron’s directors have experience with businesses that
operate in industries in which Textron operates or that involve skills that are integral to Textron’s operations.
TEXTRON 2020 PROXY STATEMENT 3
Our director nominees offer
an effective mix of relevant experience and skills, as illustrated below (by percentage of board members):
Director
Experience and Skills
AEROSPACE AND DEFENSE |
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40% |
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FINANCE / ACCOUNTING |
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40% |
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INTERNATIONAL BUSINESS |
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50% |
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MARKETING AND SALES |
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40% |
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OPERATIONS AND MANUFACTURING |
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30% |
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PUBLIC COMPANY BOARD EXPERIENCE |
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90% |
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SENIOR LEADERSHIP |
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100% |
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STRATEGIC PLANNING |
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60% |
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TECHNOLOGY / R&D |
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30% |
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Although the Nominating and
Corporate Governance Committee does not have a formal policy for considering diversity in identifying nominees for director, it
seeks a variety of occupational and personal backgrounds on the Board in order to obtain a range of viewpoints and perspectives.
During its recent refreshment process, increasing the diversity of the Board was a significant focus in developing the pool from
which we identified qualified director candidates. Our Board provides diverse and independent oversight, with director tenure
that balances institutional knowledge with fresh perspectives, as illustrated below:
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Gender
Diversity |
Balanced
Tenure |
Number
of
Independent Directors |
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TEXTRON 2020 PROXY STATEMENT
Biographical
information about each nominee, as well as highlights of the specific experience,
qualifications, attributes and skills of our
individual Board members, are included below:
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Scott C. Donnelly
Director Since 2009
Chairman
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Experience,
Qualifications, Attributes and Skills
• Significant
experience in the aerospace and defense sector
• Deep
operational experience in innovation, manufacturing, sales and marketing, portfolio management, talent development and
business processes
• First-hand,
real-time experience in, and understanding of, Textron operations
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Mr.
Donnelly, 58, is Chairman, President and Chief Executive Officer of Textron. Mr. Donnelly joined Textron in June 2008 as Executive
Vice President and Chief Operating Officer and was promoted to President and Chief Operating Officer in January 2009. He was
appointed to the Board of Directors in October 2009, became Chief Executive Officer of Textron in December 2009 and Chairman
of the Board in September 2010. Previously, Mr. Donnelly was the President and CEO of General Electric (GE) Company’s
Aviation business unit, a position he had held since July 2005. GE’s Aviation business unit is a leading maker of commercial
and military jet engines and components as well as integrated digital, electric power and mechanical systems for aircraft.
Prior to July 2005, Mr. Donnelly served as Senior Vice President of GE Global Research, one of the world’s largest and
most diversified industrial research organizations with facilities in the U.S., India, China and Germany and held various
other management positions since joining GE in 1989. In 2013, Mr. Donnelly joined the board of directors of Medtronic plc. |
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Kathleen M. Bader
Director Since 2004
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Experience,
Qualifications, Attributes and Skills
• Comprehensive
experience in strategic planning and change management
• Expertise
in managing strategic business process implementation within global industrial business environments
• Extensive
experience in advancing customer loyalty and employee satisfaction
• Expertise
in expansion of international business |
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Ms.
Bader, 69, was President and Chief Executive Officer of NatureWorks LLC, which makes proprietary plastic resins and was formerly
known as Cargill Dow LLC, until her retirement in January 2006. Formerly, she was a Business President of a $4.2 billion plastics
portfolio at the Dow Chemical Company, a diversified chemical company. She joined Dow in 1973 and held various management
positions in Dow’s global and North American operations, before becoming Chairman, President and Chief Executive Officer
of Cargill Dow LLC, at the time an equal joint venture between Dow and Cargill Incorporated, in February 2004. She assumed
the position of President and Chief Executive Officer of NatureWorks in February 2005 following Cargill’s acquisition
of Dow’s interest in Cargill Dow. Ms. Bader previously served as a director of Tyson Foods, Inc., from 2011 to 2015.
She also served for seven years on President Bush’s Homeland Security Advisory Council. |
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R. Kerry Clark
Director Since 2003
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Experience,
Qualifications, Attributes and Skills
• Extensive
expertise in establishing brand equity worldwide and extending strategic initiatives globally
• Leadership
skills in enhancing customer service and advancing customer relationships
• Significant
experience in corporate governance, talent development, change management, marketing and business development
• Audit
Committee Financial Expert |
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Mr.
Clark, 67, is the retired Chairman and Chief Executive Officer of Cardinal Health, Inc., a leading provider of services supporting
the health care industry. He joined Cardinal Health in April 2006 as President and Chief Executive Officer, became Chairman
in November 2007 and retired in September 2009. Prior to joining Cardinal Health he was Vice Chairman of the Board, P&G
Family Health, and a director of The Procter and Gamble Company, which markets consumer products in over 140 countries, from
2002–2006. He joined Procter and Gamble in 1974 and served in various key executive positions before becoming Vice Chairman
of the Board in 2002, and held that position until leaving the company in April 2006. Mr. Clark became a director of General
Mills, Inc. in 2009 and a director of Anthem, Inc. in 2014. He served as a director of Avnet, Inc. from 2012 through 2019. |
TEXTRON 2020 PROXY STATEMENT 5
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James T. Conway
Director Since 2011 |
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Experience, Qualifications, Attributes and
Skills
• Experience
managing complex operational and strategic issues
• Deep
understanding of the U.S. military
• Broad
knowledge of the defense industry and international security issues
• Demonstrated
leadership and management skills |
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Mr. Conway, 72, is a retired General in the United States Marine Corps who served as the 34th Commandant of the Marine Corps from 2006 through his retirement in 2010 and concurrently as a member of the Joint Chiefs of Staff. Prior to being named Commandant, Mr. Conway served as Director of Operations (J-3) on the Joint Chiefs of Staff. Among his previous postings were Commanding General of I Marine Expeditionary Force from 2002 through 2004 (which involved two combat tours in Iraq), Commanding General of the 1st Marine Division, and President of the Marine Corps University. Mr. Conway has been a director of Vislink Technologies, Inc. (formerly, xG Technology, Inc.) since 2015. |
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Paul E. Gagné
Director Since 1995
Lead Director |
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Experience, Qualifications, Attributes and
Skills
• Significant
executive management and financial management experience
• Expertise
in corporate strategic planning and risk management
• Considerable
experience with Canadian business opportunities and practices and other international business opportunities
• Audit
Committee Financial Expert |
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Mr. Gagné, 73, is the retired Chairman of Wajax Corporation, a leading Canadian distributor and support service provider of mobile equipment, industrial components and power systems, a position he had held from 2006 until his retirement in 2018. He previously was President and Chief Executive Officer of Avenor Inc., a publicly-traded Canadian forest products company, serving in that capacity from 1991 until November 1997, when he left the company. In 1998, Mr. Gagné joined Kruger Inc., a Canadian privately held producer of paper and tissue, as a consultant in corporate strategic planning, serving in that capacity until December 2002. He is also a director of Norbord Inc. (formerly, Ainsworth Lumber Co. Ltd.) since 2011, and he previously served as a director of CAE Inc. from 2006 through 2017. |
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Ralph D. Heath
Director Since 2017 |
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Experience, Qualifications, Attributes and
Skills
• Extensive
expertise in developing and growing business within the aerospace and defense industry
• Deep
understanding of working with the Department of Defense, including government defense program management
• Significant
experience in international business development in aerospace and defense markets
• Audit
Committee Financial Expert |
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Mr. Heath, 71, is the retired Executive Vice President—Aeronautics of Lockheed Martin Corporation, a global security and aerospace company. He joined Lockheed in 1975 and became Executive Vice President & Chief Operating Officer, Aeronautics in 1999 until his appointment in 2002 as Executive Vice President & General Manager, F-22 Raptor Program. In 2005, he became Executive Vice President— Aeronautics, a role he held until his retirement in 2012. During his tenure, Mr. Heath led the revitalization of the C-130 program, international expansion of the F-16 program, and the development and delivery of the F-22 and F-35 fighter aircraft. Mr. Heath served on the Board of Directors of Hawker Beechcraft from 2013-2014, prior to Textron’s acquisition of the Beechcraft business. |
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TEXTRON 2020 PROXY STATEMENT
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Deborah Lee James
Director Since 2017
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Experience,
Qualifications, Attributes and Skills
• Deep
expertise in national security
• Significant
experience in U.S. government procurement and logistics
• Demonstrated
leadership and management skills
• Extensive
experience in the cybersecurity field |
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Ms.
James, 61, is the retired 23rd Secretary of the United States Air Force, a position she held from December 2013 to January
2017. Prior to her role as Secretary of the Air Force, Ms. James held various executive positions during a 12-year tenure
at Science Applications International Corporation (SAIC), a provider of services and solutions in the areas of
defense, health, energy, infrastructure, intelligence, surveillance, reconnaissance and cybersecurity to agencies of the U.S.
Department of Defense (DoD), the intelligence community, the U.S. Department of Homeland Security, foreign governments and
other customers, most recently serving as Sector President, Technical and Engineering of the Government Solutions Group. Earlier
in her career, Ms. James served as Professional Staff Member for the House Armed Services Committee and as the DoD Assistant
Secretary of Defense for Reserve Affairs. Ms. James has served as a director of Unisys Corporation since 2017. |
|
Lionel L. Nowell III
Director Since 2020 |
|
Experience,
Qualifications, Attributes and Skills
• Deep
expertise in treasury functions, including debt, investments, capital markets strategies, foreign exchange and insurance
• Significant
experience in financial reporting and accounting of large international businesses
• Extensive
global perspective in risk management and strategic planning
• Audit
Committee Financial Expert |
|
|
|
Mr.
Nowell, 65, is the retired Senior Vice President and Treasurer of PepsiCo, Inc., a worldwide food and beverage company, where
he managed a global staff with responsibility for the company’s worldwide Treasury function. He joined PepsiCo in 1999
as Senior Vice President and Corporate Controller, and from 2000-2001 served as the Executive Vice President and Chief Financial
Officer of Pepsi Bottling Group, Inc. before being named Senior Vice President and Treasurer of PepsiCo in 2001, a role he
held until his retirement in 2009. Prior to PepsiCo, Mr. Nowell served as Senior Vice President, Strategy and Business Development
at RJR Nabisco from 1998 to 1999 and from 1991 to 1998, he held various senior financial roles at the Pillsbury division of
Diageo plc, including Chief Financial Officer of its Pillsbury North America, Pillsbury Foodservice and Häagen-Dazs businesses.
Earlier in his career, he held finance roles at Pizza Hut, which at the time was a division of PepsiCo, and Owens Corning.
Mr. Nowell has served as a director of American Electric Power Company since 2004 and does not plan to stand for re-election
at its April 2020 annual meeting. He also serves as a director of Bank of America Corporation (since 2013) and Ecolab Inc.
(since 2018). |
|
James L. Ziemer
Director Since 2007
|
|
Experience,
Qualifications, Attributes and Skills
• Extensive
expertise in establishing brand equity worldwide
• Leadership
experience in fostering outstanding customer satisfaction and loyalty
• Significant
experience with the captive finance business model |
|
|
|
Mr.
Ziemer, 70, was the President and Chief Executive Officer and a director of Harley-Davidson, Inc. until his retirement in
April 2009. Harley-Davidson, Inc. is the parent company for the group of companies doing business as Harley-Davidson Motor
Company which design, manufacture and sell motorcycles and related parts and accessories, and Harley-Davidson Financial Services,
which provides related financing and insurance. Mr. Ziemer had been a director of Harley-Davidson, Inc. since December 2004
and was named President and Chief Executive Officer in April 2005. He previously served as Vice President and Chief Financial
Officer of Harley-Davidson from December 1990 to April 2005 and President of the Harley-Davidson Foundation, Inc. from 1993
to 2006. Mr. Ziemer is also a director of Thor Industries, Inc. (since 2010). |
TEXTRON 2020 PROXY STATEMENT 7
|
Maria T. Zuber
Director Since 2016
|
|
Experience,
Qualifications, Attributes and Skills
• Extensive
expertise in scientific research
• Considerable
leadership experience, including in relationships with the federal government
• Deep
understanding of emerging technologies |
|
|
|
Ms.
Zuber, 61, is the Vice President for Research and the E.A. Griswold Professor of Geophysics at the Massachusetts Institute
of Technology where she has been a member of the faculty in the Department of Earth, Atmospheric and Planetary Sciences since
1995. In her role as Vice President for Research, to which she was appointed in 2013, she has overall responsibility for research
administration and policy at MIT, overseeing MIT Lincoln Laboratory and more than a dozen interdisciplinary research laboratories
and centers, and plays a central role in research relationships with the federal government. Since 1990, she has held leadership
roles associated with scientific experiments or instrumentation on ten NASA missions. In 2013, President Obama appointed Ms.
Zuber to the National Science Board, and, in 2018 she was reappointed by President Trump. She served as Board Chair from 2016-2018.
In December 2017, Ms. Zuber became a director of Bank of America Corporation. |
|
The
Board of Directors recommends a vote “FOR” each of the
director nominees (Items 1a through 1j on the proxy card). |
8
TEXTRON 2020 PROXY STATEMENT
GOVERNANCE
HIGHLIGHTS
Textron is committed to sound
corporate governance practices, including the following:
Director
Independence |
|
● 9 of
our 10 director nominees are independent, with our CEO being the only management director.
● Our
three principal Board committees, the Audit, Nominating and Corporate Governance, and Organization and Compensation Committees,
are each comprised of entirely independent directors.
● The independent
directors meet regularly in executive session without management present. |
|
|
|
Independent
Lead Director |
|
● Our
independent directors elect a director from among them to serve as Lead Director, generally for a three-year term, with
annual ratification.
● The
Lead Director is assigned clearly defined and expansive duties.
● The
Lead Director presides at executive sessions of the independent directors without management present at each regularly
scheduled Board meeting. |
|
|
|
Board
Accountability
and Practices |
|
● All
directors must stand for election annually and be elected by a majority of votes cast in uncontested elections.
● During
2019, each director attended at least 75% of the total number of Board and applicable committee meetings, and all director
nominees attended the Annual Meeting of Shareholders.
● The
Board and each of its three principal committees perform annual self-evaluations.
● Directors
may not stand for reelection after their 75th birthday. |
|
|
|
Shareholder
Rights |
|
● Shareholders
holding 25% of our outstanding shares may call a special meeting of shareholders.
● Our
By-Laws provide for proxy access to allow eligible shareholders to include their own director nominees in the Company’s
proxy materials. |
|
|
|
Textron
Stock |
|
● We
have robust stock ownership requirements for both our directors and our senior executives, all of whom currently meet
their respective requirements.
● Our
executives and our directors are prohibited from hedging or pledging Textron securities. |
TEXTRON 2020 PROXY STATEMENT 9
DIRECTOR
INDEPENDENCE
The Board of Directors has determined
that Mses. Bader, James and Zuber and Messrs. Clark, Conway, Fish, Gagné, Heath, Nowell, Trotter and Ziemer, are independent,
as defined under the listing standards of the New York Stock Exchange, based on the criteria set forth in the Textron Corporate
Governance Guidelines and Policies which are posted on Textron’s website as described below. In making its determination,
the Board examined relationships between directors or their affiliates with Textron and its affiliates and determined that each
such relationship did not impair the director’s independence. Specifically, the Board considered the fact that, in 2019,
the Textron Charitable Trust made a $20,000 donation to The Marine Corps University Foundation, an organization for which Mr.
Conway serves as Chairman, and a $20,000 donation to the Semper Fi Wounded Warrior Fund, an organization for which Mr. Conway’s
wife serves as Board Vice President. In addition, the Board considered that, in 2019, the Textron Charitable Trust made a $50,000
donation to The Atlantic Council, an organization for which Ms. James serves as a director. Textron has supported The Atlantic
Council since 2002, with the amount of its contribution being $50,000 annually since 2011. The Board determined that these donations
have not compromised either director’s independence as a Textron director.
LEADERSHIP
STRUCTURE
Historically, as reflected in
Textron’s Corporate Governance Guidelines and Policies, the Board has determined that the practice of combining the positions
of Chairman of the Board and Chief Executive Officer serves the best interests of Textron and its shareholders. This is because
the Board believes that the CEO, with his extensive knowledge of the Company’s businesses and full time focus on the business
affairs of the Company, makes a more effective Chairman than an independent director, especially given the size and multi-industry
nature of the Company’s business. The Board has committed to review, at least once every two years, whether combining these
positions serves the best interests of Textron and its shareholders.
Our independent directors elect
a Lead Director from among them for what is expected to be a three-year term with the appointment ratified annually. Currently,
Mr. Gagné serves as Lead Director. The Lead Director is assigned clearly defined and expansive duties under our Corporate
Governance Guidelines and Policies, including:
|
|
● |
Presiding at all
meetings of the Board at which the Chairman is not present, including all executive sessions of the Board; |
● |
Serving, when needed,
as liaison between the CEO and the independent directors; |
● |
Identifying, together
with the CEO, key strategic direction and operational issues upon which the Board’s annual
core agenda is based; |
● |
Discussing agenda
items and time allocated for agenda items with the CEO prior to each Board meeting, including the authority to make changes
and approve the agenda for the meeting; |
● |
Determining the
type of information to be provided to the directors for each scheduled Board meeting; |
● |
Convening additional
executive sessions of the Board; |
● |
Being available
for consultation and direct communication with Textron shareholders; and |
● |
Such other functions
as the Board may direct. |
|
|
Textron’s Corporate Governance
Guidelines and Policies also require that the Board meet in executive session for independent directors without management present
at each regularly scheduled Board meeting. Textron’s Lead Director presides at these sessions and at any additional executive
sessions convened at the request of a director. During 2019, the independent directors met in executive session without management
present during each of the Board’s six regularly scheduled meetings.
The functions of the Board are
carried out by the full Board, and, when delegated, by the Board committees, with each director being a full and equal participant.
The Board is committed to high standards of corporate governance and its Corporate Governance Guidelines and Policies were designed,
in part, to ensure the independence of the Board and include a formal process for the evaluation of CEO performance by all non-management
Board members. The evaluation
10
TEXTRON 2020 PROXY STATEMENT
is used by the Organization and Compensation Committee as a basis to recommend the compensation
of the CEO. In addition, the Audit Committee, the Nominating and Corporate Governance Committee and the Organization and Compensation
Committee are composed entirely of independent directors. Each of these committees’ charters provides that the committee
may seek the counsel of independent advisors and each routinely meets in executive session without management present. The Board
and each of its three principal committees perform an annual self-evaluation.
MEETING
ATTENDANCE
During 2019, the Board of Directors
held six regular meetings and one special meeting. Directors are expected to regularly attend Board meetings and meetings of committees
on which they serve, as well as the annual meeting of shareholders. Each director attended at least 75% of the total number of
Board and applicable committee meetings. All directors attended the 2019 annual meeting of shareholders.
OTHER DIRECTORSHIPS
Textron’s Corporate Governance
Guidelines and Policies provide that non-management directors may serve on four other public company boards, provided that, in
the case of a director who is a chief executive officer of a public company, the limit is two other such boards.
BOARD COMMITTEES
The Board of Directors has established
the following three standing committees to assist in executing its duties: Audit, Nominating and Corporate Governance, and Organization
and Compensation. The primary responsibilities of each of the committees are described below, together with the current membership
and number of meetings held in 2019. Each of these committees is composed entirely of independent, non-management directors. Each
of these committees has a written charter. Copies of these charters are posted on Textron’s website, www.textron.com,
under “Investors—Corporate Governance—Committee Charters,” and are also available in print upon request
to Textron’s Secretary.
Member
Name |
|
AUDIT
COMMITTEE |
|
NOMINATING
AND
CORPORATE
GOVERNANCE
COMMITTEE |
|
ORGANIZATION
AND
COMPENSATION
COMMITTEE |
|
|
|
|
|
|
|
Kathleen
M. Bader |
|
|
|
|
|
|
R. Kerry Clark |
|
|
|
|
|
|
James T.
Conway |
|
|
|
|
|
|
Lawrence K. Fish |
|
|
|
|
|
|
Paul E.
Gagné* |
|
|
|
|
|
|
Ralph D. Heath |
|
|
|
|
|
|
Deborah
Lee James |
|
|
|
|
|
|
Lionel
L. Nowell III |
|
|
|
|
|
|
Lloyd G. Trotter |
|
|
|
|
|
|
James L.
Ziemer |
|
|
|
|
|
|
Maria T. Zuber |
|
|
|
|
|
|
|
|
Member |
|
Chair |
|
Audit Committee Financial Expert |
* Lead Director
TEXTRON 2020 PROXY STATEMENT 11
AUDIT
COMMITTEE |
Meetings
in 2019: 10 |
|
|
R. Kerry Clark (Chair)
Kathleen M. Bader
Paul E. Gagné
Ralph D. Heath
Lionel L. Nowell III
Deborah Lee James
Lloyd G. Trotter |
Primary Responsibilities:
• Assists
the Board with its oversight of (i) the integrity of Textron’s financial statements, (ii) Textron’s compliance
with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, (iv) the
performance of Textron’s internal audit function and independent auditor, and (v) risk management
• Directly
responsible for the appointment, compensation, retention and oversight of Textron’s independent auditors |
The Board has determined that
each member of the Audit Committee is independent as defined for audit committee members in the listing standards of the New York
Stock Exchange. No member of the committee simultaneously serves on the audit committees of more than three public companies.
The Board of Directors has determined that Mr. Clark, Mr. Gagné, Mr. Heath and Mr. Nowell each are “audit committee
financial experts” under the criteria adopted by the Securities and Exchange Commission.
|
|
|
NOMINATING
AND CORPORATE GOVERNANCE COMMITTEE |
Meetings
in 2019: 4 |
|
|
James T. Conway (Chair)
Kathleen M. Bader
Lawrence K. Fish
Deborah Lee James
Lionel L. Nowell III
Maria T. Zuber
|
Primary Responsibilities:
• Identifies
individuals to become Board members and recommends that the Board select the director nominees for the next annual meeting
of shareholders, considering suggestions regarding possible candidates from a variety of sources, including shareholders
• Develops
and recommends to the Board a set of corporate governance principles applicable to Textron
• Oversees
the evaluation of the Board and its committees
• Annually
reviews the Board’s committee structure, charters and membership
• Makes
recommendations on compensation of the Board after conducting an annual review of director compensation and benefits program,
consulting with independent board compensation advisors, as appropriate
• Annually
reviews the Board’s composition, appropriate size of the Board, results of the review of the Board’s overall
performance and the strategy of the Company to determine future requirements for Board members |
The Board has determined that
each member of the Nominating and Corporate Governance Committee is independent as defined under the New York Stock Exchange listing
standards.
12
TEXTRON 2020 PROXY STATEMENT
|
|
|
ORGANIZATION
AND COMPENSATION COMMITTEE |
Meetings
in 2019: 7 |
|
|
James L. Ziemer (Chair)
Lawrence K. Fish
Paul E. Gagné
Ralph D. Heath
Lloyd G. Trotter
Maria T. Zuber
|
Primary Responsibilities:
• Approves
compensation arrangements, including merit salary increases and any annual and long-term incentive compensation, with
respect to the Chief Executive Officer and other executive officers of the Company
• Oversees
and, where appropriate, takes actions with respect to compensation arrangements applicable to other corporate officers
• Amends
any executive compensation plan or nonqualified deferred compensation plan of the Company and its subsidiaries to the
same extent that the plan may be amended by the Board
• Administers
the executive compensation plans and nonqualified deferred compensation plans of the Company and its subsidiaries
• Approves
the Chief Executive Officer’s and other executive officers’ responsibilities and performance against pre-established
performance goals
• Plans
for the succession of the Company’s management |
See the Compensation Discussion
and Analysis (CD&A) beginning on page 21 for more information on the Organization and Compensation Committee’s processes
and the role of management and consultants in determining the form and amount of executive compensation. The Board of Directors
has determined that each member of the committee is independent as defined under the New York Stock Exchange listing standards
applicable to compensation committee members.
EXECUTIVE
COMMITTEE
Textron’s Board also maintains
an Executive Committee which has the power, between meetings of the Board of Directors, to exercise all of the powers of the full
Board, except as specifically limited by Textron’s By-Laws and Delaware law. Currently, Mr. Donnelly, Mr. Clark, Mr. Conway,
Mr. Gagné and Mr. Ziemer comprise the Executive Committee, which did not meet during 2019.
RISK OVERSIGHT
The Board oversees the Company’s
enterprise risk management process. Management reviews the process, including identification of key risks and steps taken to address
them, with the full Board on a periodic basis. These reviews occur at an annual dedicated risk management session and as part
of the Board’s annual review of the Company’s strategy. Although the full Board is responsible for this oversight
function, the Organization and Compensation Committee, the Nominating and Corporate Governance Committee and the Audit Committee
assist the Board in discharging its oversight duties.
The Organization and Compensation
Committee reviews risks related to the subject matters enumerated in its charter, including risks associated with the Company’s
compensation programs, to provide incentive compensation arrangements for senior executives that do not encourage inappropriate
risk taking. The Nominating and Corporate Governance Committee considers risks related to the subject matters for which it is
responsible as identified in its charter, including risks associated with corporate governance. Similarly, the Audit Committee
discusses with management and the independent auditor, as appropriate, (i) risks related to its duties and responsibilities as
described in its charter, (ii) management’s policies and processes for risk assessment and risk management, including with
respect to cybersecurity risks, and (iii) in the period between the Board’s risk oversight reviews, management’s evaluation
of the Company’s major risks and the steps management has taken or proposes to take to monitor and mitigate such risks.
Accordingly, while each of the
three committees contributes to the risk management oversight function by assisting the Board in the manner outlined above, the
Board itself remains responsible for the oversight of the Company’s risk management program.
TEXTRON 2020 PROXY STATEMENT 13
CORPORATE
GOVERNANCE GUIDELINES AND POLICIES
Textron’s Corporate Governance
Guidelines and Policies, originally adopted in 1996 and most recently revised in February 2020, meet or exceed the listing standards
adopted by the New York Stock Exchange and are posted on Textron’s website, www.textron.com, under “Investors—Corporate
Governance/Corporate Governance Guidelines and Policies,” and are also available in print upon request to Textron’s
Secretary.
CODE OF
ETHICS
Textron’s Business Conduct
Guidelines, originally adopted in 1979 and most recently revised in September 2010, are applicable to all employees of Textron,
including the principal executive officer, the principal financial officer and the principal accounting officer. The Business
Conduct Guidelines are also applicable to directors with respect to their responsibilities as members of the Board of Directors.
The Business Conduct Guidelines are posted on Textron’s website, www.textron.com, under “About—Our Commitment—Ethics
and Compliance/Business Conduct Guidelines,” and are also available in print upon request to Textron’s Secretary.
We intend to post on our website, at the address specified above, any amendments to the Business Conduct Guidelines or the grant
of a waiver from a provision of the Business Conduct Guidelines requiring disclosure under applicable Securities and Exchange
Commission rules within four business days following the date of the amendment or waiver.
SHAREHOLDER
COMMUNICATIONS TO THE BOARD
Shareholders or other interested
parties wishing to communicate with the Board of Directors, the Lead Director, the non- management directors as a group or with
any individual director may do so by calling (866) 698-6655 (toll-free) or (401) 457-2269, writing to Board of Directors at Textron
Inc., 40 Westminster Street, Providence, Rhode Island 02903, or by e-mail to textrondirectors@textron.com. The telephone numbers
and addresses are also listed on the Textron website. All communications received via the above methods will be sent to the Board
of Directors, the Lead Director, the non- management directors or the specified director.
DIRECTOR
NOMINATIONS
Nominees suggested by shareholders
will be communicated to the Nominating and Corporate Governance Committee for consideration in the committee’s selection
process. Shareholder-recommended candidates are evaluated using the same criteria used for other candidates. The committee also
periodically retains a third-party search firm to assist in the identification and evaluation of candidates.
Textron’s By-Laws contain
a provision which imposes certain requirements upon nominations for directors made by shareholders, including proxy access nominees,
at the annual meeting of shareholders or a special meeting of shareholders at which directors are to be elected. Shareholders
wishing to nominate an individual for director at the annual meeting must submit timely notice of nomination within the time limits
described below, under the heading “Shareholder Proposals and Other Matters for 2021 Annual Meeting” on page 55, to
the committee, c/o Textron’s Secretary, along with the information described in our By-Laws.
All candidates are evaluated
against the Board’s needs and the criteria for membership to the Board set forth above. The committee must also take into
account our By-Laws which provide that no person shall be elected a director who has attained the age of 75. In addition, the
Corporate Governance Guidelines and Policies provide that a substantial majority of the Company’s directors must be independent
under the standards of the New York Stock Exchange. All recommendations of nominees to the Board by the committee are made solely
on the basis of merit.
COMPENSATION
OF DIRECTORS
During 2019, for their service
on the Board, non-employee directors were paid an annual retainer of $260,000 ($135,000 of which was required to be deferred and
paid in the form of stock units, as discussed below). The annual retainer is prorated for directors who serve on the Board for
a portion of the year. Each member of the Audit Committee (including the chair) received an additional retainer of $15,000, and
the chairs of the Audit Committee, the Nominating and Corporate Governance Committee and the Organization and Compensation Committee
received, respectively, an additional $15,000, $15,000 and $20,000, and the Lead Director received an additional $30,000. In addition,
Textron reimburses each director for his or her expenses in attending Board or committee meetings.
14
TEXTRON 2020 PROXY STATEMENT
Textron maintains a Deferred
Income Plan for Non-Employee Directors (the “Directors’ Deferred Income Plan”) under which they can defer all
or part of their cash compensation until retirement from the Board. Deferrals are made either into an interest-bearing account
which bears interest at a monthly rate that is one-twelfth of the greater of 8% and the average for the month of the Moody’s
Corporate Bond Yield Index, but in either case, not to exceed a monthly rate equal to 120% of the Applicable Federal Rate as provided
under Section 1274(d) of the Internal Revenue Code, or into an account consisting of Textron stock units, which are equivalent
in value to Textron common stock. Textron credits dividend equivalents to the stock unit account. Directors were required to defer
a minimum of $135,000 of their 2019 annual retainer into the stock unit account.
Textron sponsors a Directors
Charitable Award Program that was closed to new participants in 2004. Under the program, Textron contributes up to $1,000,000
to the Textron Charitable Trust on behalf of each participating director upon his or her death, and the Trust donates 50% of that
amount in accordance with the director’s recommendation among up to five charitable organizations. Textron currently maintains
life insurance policies on the lives of the participating directors, the proceeds of which may be used to fund these contributions.
The premiums on the policies insuring our current directors who participate in this program (Ms. Bader and Messrs. Clark, Fish
and Gagné) have been fully paid so there were no expenditures associated with these policies during 2019. The directors
do not receive any direct financial benefit from this program as the insurance proceeds and charitable deductions accrue solely
to Textron. Non-employee directors also are eligible to participate in the Textron Matching Gift Program under which Textron will
match contributions of directors and full-time employees to eligible charitable organizations at a 1:1 ratio up to a maximum of
$7,500 per year.
Non-employee directors are eligible
to receive awards granted under the Textron Inc. 2015 Long-Term Incentive Plan. Other than a one-time grant of 2,000 shares of
restricted stock (the “Restricted Shares”) received upon joining the Board, they currently do not receive any such
awards. The Restricted Shares do not vest until the director has completed at least five years of Board service and all successive
terms of Board service to which he or she is nominated and elected or in the event of death or disability or a change in control
of Textron.
None of our directors receive
compensation for serving on the Board from any shareholder or other third party. Employee directors do not receive fees or other
compensation for their service on the Board or its committees.
Changes
to Director Compensation Program for 2020
In December 2019, the Nominating
and Corporate Governance Committee conducted its annual review of the type and amount of compensation paid to our non-employee
directors for their service on our Board and its committees. The Committee considered the results of an analysis prepared by its
independent compensation consultant, Semler Brossy Consulting Group, which included non-employee director compensation trends
and data from Textron’s Talent Peer Group companies as well as companies included in the 2018-2019 NACD Annual Director
Compensation Survey. After its review, the Committee recommended, and the Board approved, increasing the annual retainer for our
non-employee directors for 2020 from $260,000 to $270,000, of which $145,000 will be in the form of equity, and increasing the
Lead Director’s annual retainer from $30,000 to $35,000.
In addition, the Committee recommended,
and the Board approved, issuing the equity portion of the annual Board retainer in the form of stock-settled restricted stock
units (“RSUs”) rather than as deferred stock units under the Directors’ Deferred Income Plan (as described above).
The RSUs will be issued annually on the date of the annual meeting, beginning with the 2020 annual meeting, and will vest in one
year unless the director elects to defer settlement of the RSUs until the director’s separation from service on the Board.
No changes were made related to the cash portion of the annual Board retainer or to the ability of directors to defer all or part
of their cash compensation until retirement from the Board.
These changes are intended to
align Textron’s program more closely with peer company practices. With regard to the increase in the annual retainer, the
Board believes that modest, biennial increases are preferable to less frequent, larger increases which otherwise would be needed
to keep pace with peer company levels.
TEXTRON 2020 PROXY STATEMENT 15
Director
Compensation Table
The following table provides
2019 compensation information for our directors other than Mr. Donnelly, whose compensation is reported in the Summary Compensation
Table on page 38.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Fees
Earned or
Paid in Cash ($) |
|
Stock
Awards ($)(1) |
|
All
Other
Compensation ($)(2) |
|
Total
($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathleen
M. Bader |
|
140,000 |
|
|
135,000 |
|
|
|
|
|
275,000 |
|
R. Kerry Clark |
|
155,000 |
|
|
135,000 |
|
|
7,500 |
|
|
297,500 |
|
James
T. Conway |
|
140,000 |
|
|
135,000 |
|
|
|
|
|
275,000 |
|
Lawrence K. Fish |
|
125,000 |
|
|
135,000 |
|
|
|
|
|
260,000 |
|
Paul
E. Gagné |
|
170,000 |
|
|
135,000 |
|
|
|
|
|
305,000 |
|
Ralph D. Heath |
|
140,000 |
|
|
135,000 |
|
|
5,000 |
|
|
280,000 |
|
Deborah
Lee James |
|
140,000 |
|
|
135,000 |
|
|
|
|
|
275,000 |
|
Lloyd G. Trotter |
|
140,000 |
|
|
135,000 |
|
|
7,500 |
|
|
282,500 |
|
James
L. Ziemer |
|
145,000 |
|
|
135,000 |
|
|
|
|
|
280,000 |
|
Maria T. Zuber |
|
125,000 |
|
|
135,000 |
|
|
|
|
|
260,000 |
|
(1) |
The
amounts in this column represent the grant date fair value of the portion of the director’s
annual retainer mandatorily deferred into the stock unit account under the Directors
Deferred Income Plan. These amounts are converted to stock units at a grant date fair
value equal to the average share price for the calendar quarter in which the fees were
payable. |
(2) |
The
amounts in this column represent the amounts of matching contributions made by the Company on behalf of participating directors
pursuant to the Textron Matching Gift Program. |
DIRECTOR
STOCK OWNERSHIP REQUIREMENTS
In order to align the financial
interests of our directors with the interests of our shareholders, we require that our directors maintain a specified level of
stock ownership equal to eight times the portion of their annual retainer payable in cash. Toward this end, in 2019 we required
all non-employee directors to defer a minimum of $135,000 of their annual retainer into the stock unit account of the Directors
Deferred Income Plan. All directors currently meet the stock ownership requirement, which allows them to achieve the required
level of ownership over time in the case of directors who have more recently joined the Board. We also have a stock retention
policy restricting non-employee directors from transferring the Restricted Shares or the stock units credited under the Directors’
Deferred Income Plan while they serve on the Board. As described above, RSUs will be issued to directors beginning in 2020 for
the equity portion of their annual retainer. To the extent that directors do not defer settlement of their RSUs, they may not
sell shares of common stock received upon vesting of RSUs unless the stock ownership requirement has been met.
ANTI-HEDGING
AND PLEDGING POLICY
Our directors are prohibited
from (i) pledging Textron securities as collateral for any loan or holding Textron securities in a margin account or (ii) engaging
in short sales of Textron securities or transactions in publicly-traded options or derivative securities based on Textron’s
securities.
16
TEXTRON 2020 PROXY STATEMENT
The following table sets forth
information regarding the beneficial ownership of our common stock as of January 1, 2020, unless otherwise noted, by:
|
|
● |
Each person or group
known by us to own beneficially more than 5% of our common stock; |
● |
Each of our directors; |
● |
Each of our named
executive officers, as defined under Securities and Exchange Commission rules (“NEOs”); and |
● |
All of our current
directors and executive officers as a group. |
Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission and generally includes any shares over which a person exercises
sole or shared voting or investment power. Shares of common stock subject to options that are exercisable, or restricted stock
units that will vest, within 60 days of January 1, 2020, and shares held for the executive officers by the trustee under the Textron
Savings Plan, are considered outstanding and beneficially owned by the person holding the option or unit or participating in the
Plan but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Each shareholder listed below
has sole voting and investment power with respect to the shares beneficially owned, except in those cases in which the voting
or investment power is shared with the trustee or as otherwise noted.
|
|
|
|
|
|
|
|
Directors
and Executive Officers |
|
Number
of Shares of
Common Stock |
|
Percent
of Class |
|
|
|
|
|
|
|
Kathleen
M. Bader |
|
12,775 |
(1) |
|
* |
|
|
R.
Kerry Clark |
|
7,000 |
(1) |
|
* |
|
|
Frank
T. Connor |
|
647,751 |
(2)(3) |
|
* |
|
|
James
T. Conway |
|
2,034 |
(1) |
|
* |
|
|
Scott
C. Donnelly |
|
2,277,378 |
(2)(3) |
|
* |
|
|
Julie
G. Duffy |
|
56,475 |
(2)(3) |
|
* |
|
|
Lawrence
K. Fish |
|
2,000 |
(1) |
|
* |
|
|
Paul
E. Gagné |
|
5,257 |
(1) |
|
* |
|
|
Ralph
D. Heath |
|
2,000 |
(1) |
|
* |
|
|
Deborah
Lee James |
|
2,007 |
(1) |
|
* |
|
|
E.
Robert Lupone |
|
239,598 |
(2)(3) |
|
* |
|
|
Lloyd
G. Trotter |
|
2,111 |
(1) |
|
* |
|
|
Lionel
L. Nowell III |
|
2,000 |
|
|
* |
|
|
James
L. Ziemer |
|
2,152 |
(1) |
|
* |
|
|
Maria
T. Zuber |
|
2,009 |
(1) |
|
* |
|
|
All
current directors and executive officers as a group (15 persons) |
|
3,262,547 |
|
|
1.4 |
% |
|
Beneficial
Holders of More than 5% |
|
|
|
|
|
|
|
BlackRock,
Inc.(4) |
|
18,311,457 |
|
|
8.0 |
% |
|
T.
Rowe Price Associates, Inc.(5) |
|
31,834,742 |
|
|
14.0 |
% |
|
The
Vanguard Group, Inc.(6) |
|
25,120,943 |
|
|
11.0 |
% |
|
*
|
Less than 1% of the outstanding shares of common stock. |
(1) |
Excludes
stock units held by our non-employee directors under the Directors Deferred Income Plan that are paid in cash following termination
of service as a director, based upon the value of Textron common stock, as follows: Ms. Bader, 63,527 shares; Mr. Clark, 82,281
shares; Mr. Conway, 26,899 shares; Mr. Fish, 100,315 shares; Mr. Gagné,111,875 shares; Mr. Heath, 11,962 shares; Ms.
James, 6,097 shares; Mr. Trotter, 101,242 shares; Mr. Ziemer, 76,412 shares; and Ms. Zuber, 9,617 shares. |
TEXTRON 2020 PROXY STATEMENT 17
(2) |
Includes
the following shares obtainable within 60 days of January 1, 2020, as follows: (i) upon the exercise of stock options: Mr.
Connor, 545,828 shares; Mr. Donnelly, 1,856,006 shares; Ms. Duffy, 35,416 shares; Mr. Lupone, 176,712 shares and (ii) upon
the vesting of RSUs: Mr. Connor, 18,696 shares; Mr. Donnelly, 64,875 shares; Ms. Duffy, 1,890 shares; Mr. Lupone,
8,484 shares; and all directors and executive officers as of 2019 year-end as a group, 2,707,907 shares. |
(3) |
Excludes
(i) stock units held under non-qualified deferred compensation plans that are paid in cash, based upon the value of Textron common
stock, as follows: Mr. Connor, 8,876 shares; Mr. Donnelly,14,666 shares; Ms. Duffy, 1,127 shares; and Mr. Lupone, 4,550 shares;
(ii) unvested RSUs payable in stock, not obtainable within 60 days of January 1, 2020, as follows: Mr. Connor, 54,539 shares;
Mr. Donnelly, 187,770 shares; Ms. Duffy, 11,854 shares; and Mr. Lupone, 24,035 shares; (iii) unvested PSUs payable in cash when
earned based upon the value of Textron common stock, as follows: Mr. Connor, 60,316 shares; Mr. Donnelly, 206,062 shares; Ms.
Duffy, 16,678 shares; and Mr. Lupone, 26,305 shares. |
(4) |
Based
on information disclosed in Amendment No. 5 to Schedule 13G filed by BlackRock, Inc. on February 6, 2020. According to this filing,
as of December 31, 2019, BlackRock, Inc., through its various entities, beneficially owns these shares and has sole power to dispose
of or direct the disposition of all of these shares and sole power to vote or direct the voting of 16,744,279 of these shares.
The address for BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. |
(5) |
Based
on information disclosed in Amendment No. 10 to Schedule 13G filed by T. Rowe Price Associates, Inc. on February 14, 2020. According
to this filing, as of December 31, 2019, T. Rowe Price Associates, Inc., in its capacity as investment adviser for various individual
and institutional investors, is deemed to beneficially own these shares as to which it has sole dispositive power and, with respect
to 12,033,006 of these shares, sole voting power; however, T. Rowe Price Associates, Inc. expressly disclaims such beneficial
ownership. The address for T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, MD 21202. |
(6) |
Based
on information disclosed in Amendment No. 9 to Schedule 13G filed by The Vanguard Group, Inc. on February 12, 2020. According
to this filing, as of December 31, 2019, The Vanguard Group, Inc. beneficially owns these shares and has sole power to dispose
of or direct the disposition of 24,744,134 of these shares, shared power to dispose of or direct the disposition of 376,809 of
these shares, sole power to vote or direct the voting of 331,747 of these shares and shared power to vote or direct the voting
of 54,468 of these shares. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial
owner of 259,679 shares, as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia,
Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 184,551 shares as a result of its serving
as investment manager of Australian investment offerings. The address for The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern,
PA 19355. |
18
TEXTRON 2020 PROXY STATEMENT
The Audit Committee of the Board
of Directors has furnished the following report on its activities:
The committee reviewed and discussed
the audited consolidated financial statements and the related schedule in the Annual Report referred to below with management.
The committee also reviewed with management and the independent registered public accounting firm (the “independent auditors”)
the reasonableness of significant judgments, including critical audit matters, and the clarity of disclosures in the financial
statements, the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are
required to be discussed with the committee by applicable requirements of the Public Company Accounting Oversight Board and the
Securities and Exchange Commission. In addition, the committee discussed with the independent auditors the auditors’ independence
from management and the Company. This discussion included the matters in the written disclosures and the letter from the independent
auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s
communication with the audit committee concerning independence and considered the possible effect of non- audit services on the
auditors’ independence.
The committee discussed with
the Company’s internal and independent auditors the overall scope and plans for their respective audits and met with the
internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations
of the Company’s internal controls, including internal controls over financial reporting, and the overall quality of the
Company’s financial reporting. The committee also reviewed the Company’s compliance program. Ten committee meetings
were held during the year.
In reliance on the reviews and
discussions referred to above, the committee recommended to the Board of Directors that the audited consolidated financial statements
and the related schedule be included in the Annual Report on Form 10-K for the fiscal year ended January 4, 2020, to be filed
with the Securities and Exchange Commission. The committee also reported to the Board that it had selected Ernst & Young LLP
as the Company’s independent auditors for 2020 and recommended that this selection be submitted to the shareholders for
ratification. In determining whether to reappoint Ernst & Young LLP as the Company’s independent auditor, the committee
took into consideration a number of factors, including the quality of the committee’s ongoing discussions with Ernst &
Young LLP and an assessment of the professional qualifications and past performance of the lead audit partner and Ernst &
Young LLP.
|
|
|
R. KERRY CLARK,
CHAIR |
|
KATHLEEN M. BADER |
|
PAUL E. GAGNÉ |
|
RALPH D. HEATH |
|
DEBORAH LEE JAMES |
|
LIONEL L. NOWELL
III |
|
LLOYD G. TROTTER |
TEXTRON 2020 PROXY STATEMENT 19
|
|
|
COMPENSATION
COMMITTEE REPORT |
|
The Organization and Compensation
Committee of the Board of Directors has furnished the following report:
The Committee reviewed the Compensation
Discussion and Analysis to be included in Textron’s 2020 Proxy Statement and discussed that Analysis with management.
Based on its review and discussions
with management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included
in Textron’s 2020 Proxy Statement and Textron’s Annual Report on Form 10-K for the fiscal year ended January 4, 2020.
This report is submitted by
the Organization and Compensation Committee.
|
|
|
JAMES L. ZIEMER,
CHAIR |
|
LAWRENCE K. FISH |
|
PAUL E. GAGNÉ |
|
RALPH D. HEATH |
|
LLOYD G. TROTTER |
|
MARIA T. ZUBER |
20
TEXTRON 2020 PROXY STATEMENT
|
|
|
COMPENSATION
DISCUSSION AND ANALYSIS |
|
EXECUTIVE
SUMMARY
Key 2019
Performance Highlights
During 2019, we achieved $1.27
billion in segment profit on revenues of $13.63 billion, and our manufacturing businesses generated $960 million of net cash from
operating activities of continuing operations. We continued our strategy of investing in new products with $647 million invested
in research and development activities for the year, along with $339 million in capital expenditures. We returned $521 million
to our shareholders through share repurchases and dividend payments. Backlog increased 8% to $9.8 billion, which includes new
contracts with the U.S. Government for spares and logistic support for the V-22 tiltrotor aircraft and the H-1 helicopter programs
at the Bell segment.
Business highlights of the year
include:
|
|
● |
At
Textron Aviation, we certified and began deliveries of our newest Citation, the Longitude super mid-size jet, delivering 13 Longitudes
in 2019, including the first Longitude to NetJets. We also advanced the development of our new Cessna SkyCourier twin-engine large-utility
turboprop that we expect will have its first flight in early 2020. For the fourth consecutive year, our Citation Latitude jet
that entered service in August 2015 was the most-delivered midsize business jet in the industry. |
● |
Bell
completed a second year of flight testing of its V-280 Valor next generation tiltrotor aircraft, Bell’s competitor for the
U.S. Army’s Future Long-Range Attack Aircraft program. Bell also introduced the Bell 360 Invictus, our offering for the
Army’s Future Attack Reconnaissance Aircraft competition. In a significant foreign military sale, the Government of the
Czech Republic agreed to purchase four Bell AH-1Z and eight UH-1Y helicopters. |
● |
At
Textron Systems, the first Ship-to-Shore Connector craft successfully completed Acceptance Trials after a series of in-port and
underway demonstrations for our U.S. Navy customer. The U.S. Army announced its intention to award us a contract to build four
RIPSAW M5 unmanned vehicles designed and built by Textron System’s Howe & Howe Technologies company. In addition, Textron
Systems’ Airborne Tactical Advantage Company won a contract to provide live military air-to- air training and support services
to the U.S. Air Force. |
● |
Textron
Specialized Vehicles entered into an agreement with Bass Pro Shops to design and manufacture a line of side-by- sides and ATVs
to be branded as Tracker Off Road and distributed by Bass Pro Shops, Cabela’s and independent Tracker Marine dealers. Also,
TSV’s golf business now has over 80,000 of its E-Z-GO ELiTE series of lithium-battery-powered vehicles, which excel in energy
efficiency and performance, at more than 1,350 private golf facilities worldwide. |
TEXTRON 2020 PROXY STATEMENT 21
2019 Shareholder
Outreach and New 2020 Long-Term Incentive Compensation Program Design
Executive compensation decisions
at Textron are made by our Board’s Organization and Compensation Committee (the “Committee”). One of the guiding
objectives of Textron’s compensation program, as established by the Committee, is to align executive compensation with creating
value for our shareholders. Therefore, the Board and the Committee take shareholder feedback and vote outcomes at our Annual Meeting
seriously. In 2019, to obtain more direct input from our shareholders on our compensation program, we meaningfully increased our
proactive shareholder outreach both before and after our 2019 Annual Meeting.
Prior to our 2019 Annual Meeting,
we contacted most of our top 30 shareholders to discuss our executive compensation program. A Textron management team led by our
Executive Vice President, Human Resources, and including our Vice President of Investor Relations, our Director of Executive Compensation
and our Executive Counsel conducted engagement calls with shareholders representing approximately 21% of our outstanding shares.
Our Lead Director was also involved in our outreach and participated on an engagement call with one of our larger shareholders.
In addition, our Vice President of Investor Relations spoke to additional shareholders representing approximately 23% of our outstanding
shares. In total prior to the Annual Meeting, we had direct discussions with shareholders representing approximately 45% of our
outstanding shares.
During these calls, we communicated
the Committee’s perspective with respect to our compensation program and invited feedback from our shareholders. Several
shareholders expressed a preference for a greater emphasis on performance-based awards in our long-term incentive compensation
program and indicated that a three-year performance period for the metrics in our performance share units (“PSUs”)
would be preferable to the three one-year performance periods we have been using for these awards. In addition, some inquired
about the use of the same performance metrics in both the annual and long-term incentive compensation programs.
In addition, in early 2019 and
before our 2019 Annual Meeting, the Committee had initiated a rigorous Request-for-Proposals evaluation process with multiple
firms to select its next independent compensation consultant in order to get a fresh, independent look at strategies that best
align executive compensation with company performance and shareholder value. Following in-depth interviews and evaluations of
several firms, the Committee chose a new consultant who was retained in July 2019.
In the five years prior to 2019,
shareholder approval of our say-on-pay advisory votes was above 92% in each year, ranging from 92% to 95%. At our 2019 Annual
Meeting, 55% of our shareholders approved our advisory say-on-pay vote on our 2018 executive compensation.
Following our 2019 Annual Meeting,
we conducted an in-depth review of the company’s executive compensation program with the assistance of the Committee’s
new independent compensation consultant. This review focused on our long-term incentive compensation program and included benchmarking
competitive pay practices against peer companies, reviewing the efficacy of our program’s performance metrics in driving
strategic business objectives and analyzing other potential long-term performance metrics.
The in-depth review of our executive
compensation program identified several alternatives for program design. Before deciding upon design changes, the Committee sought
to obtain additional shareholder input through a second round of discussions. In the latter half of 2019, we contacted shareholders
representing approximately 52% of our outstanding shares to seek an opportunity to engage with them and hear their views on our
executive compensation program. While some shareholders provided us with feedback that they did not believe a call was necessary,
shareholders representing approximately 39% of our outstanding shares participated in engagement calls with our management team
described above. The Committee Chair was also involved in this round of shareholder outreach and participated on an engagement
call with one of our larger shareholders. On these calls, we heard the views of our shareholders on various aspects of our executive
compensation program and specific input on potential changes to our long-term incentive compensation program. We also held calls
with the two leading proxy advisory firms. Throughout this process, shareholder feedback was presented and discussed with the
Committee and shared with our Board.
General compensation program
themes that emerged from these shareholder discussions included:
|
|
● |
Our
shareholders would like more differentiation between the annual incentive and long-term incentive compensation programs, both
with regard to performance period and metrics; |
● |
Our
shareholders are not prescriptive on inclusion of particular metrics but desire performance metrics that drive company business
strategy and creation of long-term shareholder value; and |
● |
Our
shareholders generally prefer a long-term incentive compensation award mix in which at least 50% of the award is subject to
performance-based metrics. |
22
TEXTRON 2020 PROXY STATEMENT
Because the Committee had made
its determinations for the 2019 executive compensation program in January 2019, well before the Committee’s program review
and our shareholder outreach, and the Committee did not wish to implement design changes retroactively, this review and the feedback
from shareholders has informed the Committee’s strategy on program design for 2020.
After careful consideration
of all shareholder feedback, industry practices and input from our executive team, the Committee has implemented a number of significant
changes for the 2020 long-term incentive compensation program designed to address the shareholder preferences described above.
In addition, the Committee has made several changes to align our program with peer company practice or to achieve objectives identified
by the Committee. These changes are summarized in the following chart:
2020
Long-Term Incentive Compensation (“LTIC”) Program Changes |
|
|
|
Shareholder
Preference/
Committee Objective |
|
LTIC
Program Changes and Rationale |
|
|
|
● Performance
period for LTIC should be differentiated from annual incentive program |
|
Extend
the performance period for PSU metrics to one three-year period instead of three one-year periods in order to more closely
align LTIC with long-term company performance. |
● Performance
metrics for LTIC should be sufficiently differentiated from annual incentive program
|
|
For
PSUs granted in 2020, performance metrics are Average Return on Invested Capital, weighted at 50%, Cumulative Manufacturing
Cash Flow, weighted at 30%, and Relative Total Shareholder Return (“TSR”), weighted at 20%; whereas the performance
metrics used for our 2020 annual incentive program are the same as in 2019 (described on page 31). These metrics were determined
to align with key value drivers of our business and, together, are designed to incentivize our executives to make disciplined
capital allocation decisions and to manage working capital, inventory and investments to generate returns and create value
for our shareholders over the long-term. |
● At
least 50% of LTIC awards should be subject to performance-based metrics
|
|
Increase
the percentage of PSUs in LTIC award mix. For 2020, PSUs represent 50% of target LTIC (up from 40% in recent years), with
the percentage awarded as stock options and RSUs reduced proportionately. Because PSUs are subject to performance-based metrics,
increasing the percentage of PSUs more closely aligns LTIC with long-term company performance. In addition, the Committee
adjusted the PSU threshold payout opportunity from 50% to 25% and maximum payout opportunity from 150% to 200%, consistent
with prevalent peer company practice, to enhance the effectiveness of PSUs over their three-year performance period through
a range of economic and business scenarios. |
● LTIC
should align over a three-year period
|
|
Change
vesting schedule for RSUs from vesting over five years in equal annual installments beginning on the third anniversary of
the grant date to vesting in full on the third anniversary of the grant date, in order to align with the PSU performance period.
This is the prevalent practice among our peer companies and therefore improves the competitiveness of our LTIC program for
the attraction and retention of executive talent. |
● Relative
TSR should remain part of LTIC program
|
|
Move
use of relative TSR from a discretionary modifier applied to PSUs to a stand-alone metric to maintain focus on stock performance
as an important relative measure of company performance while improving clarity of program. In addition, change benchmark
from company-selected performance peer group to S&P 500 index companies. Evolving dynamics in our industries have resulted
in frequent merger and acquisition and spin-off activity among our chosen performance peer group companies. This has created
a constantly changing and shrinking group of companies which we believe are appropriate to serve as direct performance peers.
In order to improve the consistency of our relative TSR metric, the Committee has chosen to benchmark our TSR performance
against the S&P 500. The S&P 500 is a recognized market index which incorporates an independent selection process
and is used by a number of our peer companies. |
TEXTRON 2020 PROXY STATEMENT 23
Executive Compensation
Highlights
The Committee receives regular
briefings from its consultant on evolving best practices in executive compensation. The following summarizes key aspects of our
executive compensation program:
|
|
|
Practices
we employ |
|
● Pay
for performance—substantial portion of executives’ compensation tied to Company performance against pre-established
goals set by the Committee |
|
|
● Pay
aligned with shareholder interests—over 75% of CEO’s target compensation is in the form of equity-based long-term
incentives |
|
|
● Caps
on annual incentive compensation and performance share unit payouts |
|
|
● Double-trigger
change in control provisions for equity awards and severance arrangements |
|
|
● Clawback
policy applies to all annual and long-term incentive compensation |
|
|
● Committee
annually conducts a pay-for-performance analysis against a performance peer group utilizing operating metrics used in our
annual incentive awards |
|
|
● Committee
annually reviews the composition of the talent peer group and makes changes as appropriate |
|
|
● Committee
annually reviews compensation data for the talent peer group in order to understand the competitiveness of our compensation
program and pay levels |
|
|
● Committee
annually reviews a compensation-related risk assessment with assistance from its independent compensation consultant |
|
|
● Robust
stock ownership requirements |
Practices
we prohibit |
|
●
No single-trigger vesting of long-term incentive awards upon a change in control of the Company |
|
|
● No
tax gross-ups for officers hired after 2008 |
|
|
● No
employment contracts guaranteeing fixed-term employment or bonuses to executives and no individually negotiated termination
protection since 2008 |
|
|
● No
excessive executive perquisites |
|
|
● No
hedging or pledging Textron securities |
|
|
● No
repricing or exchanging stock options without shareholder approval |
24
TEXTRON 2020 PROXY STATEMENT
Compensation
Philosophy
Textron’s compensation
philosophy is to establish target total pay with reference to a talent peer group and to tie a substantial portion of our executives’
compensation to performance against objective business goals and stock price performance. This approach helps us to recruit and
retain talented executives, incentivizes our executives to achieve desired business goals and aligns their interests with the
interests of our shareholders.
2019 Compensation
Program Components
Total pay for
Textron’s executives consists of base salary, annual incentive compensation and long-term incentive compensation. Our
annual incentive compensation program is designed to reward performance against annual business goals established by the
Committee at the beginning of each year and is payable in cash. The long-term incentive compensation program is directly
linked to stock price through three award types: performance share units (“PSUs”), restricted stock units
(“RSUs”) and stock options. PSUs reward performance against annual business goals set by the Committee for each
year of a three-year performance period. The Committee then may use its negative discretion to decrease the payout based on
how Textron’s three-year total shareholder return (“TSR”) compares to a performance peer group. PSUs are
payable in cash based upon our stock price.
2019 Incentive
Compensation Payouts
The two main performance goals
set by the Committee for 2019—applicable to our annual incentive compensation program as well as to the PSUs under our long-term
incentive compensation program—focused on profitability and cash flow, which are key business priorities for Textron.
For 2019, the annual incentive
compensation program paid out at 93.7% of target for our executives, reflecting net operating profit performance that fell below
the target established at the beginning of the year, partly offset by above target performance on cash flow and workforce diversity.
PSUs awarded for the 2017–2019 performance cycle were subject to business goals set annually by the Committee during the
three-year performance period and then subject to a negative discretionary adjustment by the Committee. Performance against these
goals resulted in a multiplier of 105.8% of the number of PSUs granted, however, the Committee applied a -40% discretionary reduction
in light of a disappointing relative total shareholder return. This adjustment resulted in a final number of units paid of 63.5%
of the initial number of 2017–2019 PSUs granted.
OVERVIEW
AND OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAM
The objectives of Textron’s
compensation program for executive officers are:
|
|
● |
Encouraging
world class performance |
● |
Attracting
and retaining high-performing talent |
● |
Focusing
executives on delivering balanced performance by providing (i) both cash and equity incentives and (ii) both annual
and long-term incentives |
● |
Aligning
executive compensation with shareholder value |
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 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 |
TEXTRON 2020 PROXY STATEMENT 25
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 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 are established as a percentage of
base salary, varying for each NEO. The objectives of the three components are as follows:
Component
Objective Base Salary ● Provide market-competitive fixed pay reflective of an executive’s responsibilities,
position, experience and performance At-Risk Compensation 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
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. Selection criteria
for the talent peer group used to set 2019 compensation included:
|
|
● |
Publicly-traded
companies that are headquartered in the U.S. |
● |
Revenue of approximately
$4 billion to $40 billion, with at least 10% from outside the U.S. |
● |
Median revenue for
peer group approximates Textron’s revenue |
● |
Revenue in the aerospace/defense,
technology/engineering, general manufacturing and/or automotive industries |
26
TEXTRON 2020 PROXY STATEMENT
The table below lists the 2018
talent peer group companies and Textron showing fiscal 2017 revenues. The 2018 talent peer group was referenced in setting target
pay for 2019.
2018 Talent
Peer Group
|
|
|
|
Company
Name |
|
Industry |
2017
Revenue
($ in billions) |
|
|
|
|
Honeywell
International Inc. |
|
Aerospace/Defense |
$40.5 |
General
Dynamics Corporation |
|
Aerospace/Defense |
31.0 |
Northrop
Grumman Corporation |
|
Aerospace/Defense |
25.8 |
Lear
Corporation |
|
Automotive |
20.5 |
Eaton
Corporation Plc |
|
General
Manufacturing |
20.4 |
The
Goodyear Tire & Rubber Company |
|
Automotive |
15.4 |
Emerson
Electric Co. |
|
Technology/Engineering |
15.3 |
Illinois
Tool Works Inc. |
|
General
Manufacturing |
14.3 |
Ingersoll-Rand
Plc |
|
General
Manufacturing |
14.2 |
Parker-Hannifin
Corporation |
|
General
Manufacturing |
12.0 |
BorgWarner
Inc. |
|
Automotive |
9.8 |
L3
Technologies, Inc. |
|
Aerospace/Defense |
9.6 |
Spirit
AeroSystems Holdings, Inc. |
|
Aerospace/Defense |
7.0 |
Oshkosh
Corporation |
|
General
Manufacturing |
6.8 |
Rockwell
Collins, Inc. |
|
Aerospace/Defense |
6.8 |
Rockwell
Automation Inc. |
|
Technology/Engineering |
6.3 |
Harris
Corporation |
|
Technology/Defense |
5.9 |
Terex
Corporation |
|
General
Manufacturing |
4.4 |
KBR,
Inc. |
|
Technology/Engineering |
4.2 |
|
|
|
|
|
$17.9 |
|
$12.0 |
|
$6.8 |
75th Percentile |
|
Median |
|
25th Percentile |
|
|
|
|
|
|
|
|
|
|
|
$14.2 |
|
55% |
|
|
Textron Inc. |
|
Textron Percentile Rank |
|
The 2019 talent peer group referenced
in setting target pay for 2020 was changed to remove Rockwell Collins, Inc., due to its acquisition and to replace L3 Technologies,
Inc. and Harris Corporation with L3Harris Technologies, Inc., the survivor of the merger of the two companies.
TEXTRON 2020 PROXY STATEMENT 27
How did the Committee
Make 2019 Target Pay Decisions?
Prior to making decisions on
compensation, the Committee reviewed the following items:
|
|
● |
Compensation data
for each NEO |
● |
A detailed compensation
benchmarking study comparing each NEO’s current target compensation by component and in total to the market median of
the talent peer group |
● |
A retention analysis
that examines the value of compensation an executive would forfeit upon termination |
● |
Potential share-derived
wealth and stock ownership information for each NEO |
Additionally, the CEO provided
input to the Committee regarding compensation decisions for NEOs other than himself, including his assessment of each individual’s
responsibilities and performance, the complexity of their position against market benchmarks, their experience and future potential.
In approving 2019 target pay, the Committee considered the CEO’s input and made its own assessment of competitive pay and
performance.
In January 2019, the Committee
considered Mr. Donnelly’s leadership performance as well as his extensive experience as CEO in its decision to increase
his target total compensation by approximately 5%, all delivered through his target long-term incentive compensation. This approach
is consistent with the Committee’s philosophy of providing compensation opportunities that are generally competitive with
market median through increases in incentive compensation.
The Committee considered Mr.
Connor’s wide scope of responsibilities, including Information Technology, Investor Relations, Treasury, Internal Audit,
Mergers and Acquisitions and Strategy in addition to the traditional finance function, and strong performance as well as his experience
at Textron in increasing his target annual and target long-term incentive compensation by 15 percentage points and 25 percentage
points, respectively (to 100% and 325% of his base salary) in order to increase his target total compensation through incentive
compensation rather than through increases in base salary.
With respect to Mr.
Lupone and Ms. Duffy, the Committee increased the base salary, with the corresponding increases in target annual and target
long-term incentive compensation, for Mr. Lupone, by approximately 5% and for Ms. Duffy, by approximately 10%. Additionally,
in order to move closer to market median, the Committee increased Ms. Duffy’s target annual and target long-term
incentive compensation by 15 percentage points and 25 percentage points, respectively (to 75% and 175% of her base salary).
The increases in compensation for Mr. Lupone and Ms. Duffy were determined based on scope of responsibility and years of
experience and with consideration toward how their compensation compares against compensation for similar positions at the
talent peer group companies.
What is
the Target Pay and Pay Mix for Our Executives?
The following table shows 2019
target total pay, along with the target for each component of target total pay, for Textron’s NEOs as of the Committee’s
January 2019 meeting:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At-Risk
Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Position |
|
Base
Salary |
|
Target
Annual
Incentive |
|
Target
Long-Term
Incentive |
|
Target
Total Pay |
|
|
|
|
|
|
|
|
|
|
|
Scott
C. Donnelly |
|
CEO |
|
$1,236,000 |
|
$1,854,000
(150% of salary) |
|
$11,022,000
(892% of salary) |
|
$14,112,000 |
|
|
|
|
|
|
|
|
|
|
|
Frank
T. Connor |
|
CFO |
|
1,000,000 |
|
1,000,000
(100% of salary) |
|
3,250,000
(325% of salary) |
|
5,250,000 |
|
|
|
|
|
|
|
|
|
|
|
E.
Robert Lupone |
|
General
Counsel |
|
800,000 |
|
600,000
(75% of salary) |
|
1,400,000
(175% of salary) |
|
2,800,000 |
|
|
|
|
|
|
|
|
|
|
|
Julie
G. Duffy |
|
EVP,
HR |
|
550,000 |
|
412,500
(75% of salary) |
|
962,500
(175% of salary) |
|
1,925,000 |
|
|
|
|
|
|
|
|
|
|
|
28
TEXTRON 2020 PROXY STATEMENT
|
|
|
|
|
|
|
|
|
|
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”). |
|
|
|
|
|
|
|
|
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.
Component/Award
Type Description At-Risk Compensation Target Annual Incentive ● 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 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
TEXTRON 2020 PROXY STATEMENT 29
PERFORMANCE
ANALYSIS
Which Companies
Does the Committee Use to Compare Our Performance?
The table below shows the list
of performance peer group companies; checkmarks in the columns under Textron’s manufacturing segments mean that the peer
company competes in some way, or operates in similar industries, with that segment.
2019 Performance
Peer Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
Name |
|
2018
Revenue
($ in billions) |
|
|
Aviation |
|
|
Bell |
|
|
Industrial |
|
|
Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Boeing Company |
|
$101.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
Technologies Corporation |
|
66.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lockheed
Martin Corporation |
|
53.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Honeywell
International Inc. |
|
41.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deere
& Company |
|
37.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
Dynamics Corporation |
|
36.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northrop
Grumman Corporation |
|
30.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raytheon
Company |
|
27.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eaton
Corporation Plc |
|
21.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lear
Corporation |
|
21.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ingersoll-Rand
Plc |
|
15.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parker-Hannifin
Corporation |
|
14.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BorgWarner
Inc. |
|
10.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L3Harris
Technologies, Inc. |
|
6.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Textron
Inc. |
|
14.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The foregoing performance peer group
reflects one change from the 2018 Performance Peer Group reported in the 2019 proxy statement which is the replacement of L3 Technologies,
Inc. and Harris Corporation with L3Harris Technologies, Inc., the survivor of the merger of the two companies.
The 2019 performance peer group
will be used to measure relative TSR performance for the 2019-2021 PSU awards granted to NEOs in 2019.
30
TEXTRON 2020 PROXY STATEMENT
What Were Our Performance
Goals?
Performance goals for the 2019
annual incentive compensation program and the 2019 performance period for PSU awards under the long-term incentive compensation
program focused on profitability and cash flow, with an additional goal related to workforce diversity applicable only to annual
incentive compensation. The profitability target focused executives on delivery of segment profit in each of our segments. The
cash flow target focused executives on improving operational efficiency and sustaining the strength of the balance sheet. The
diversity metric focused management on having a diverse employee profile. In addition, PSUs are subject to a TSR modifier that
can decrease, but not increase, the final payout up to 40%, based on the mathematical ranking of Textron’s three-year TSR
performance compared to that of our 2017 performance peers and the Committee’s discretion.
Annual Incentive
Compensation Payouts and Performance Analysis
The Committee established the
weighting for the 2019 annual incentive compensation performance goals described above as 60% profitability, 35% cash flow and
5% workforce diversity. The net operating profit goal set by the Committee for 2019 was established at approximately 8% higher
than in the previous year, reflecting the disposition of our Tools and Test business in 2018, management’s continuing focus
on improving execution in order to increase profit margin and our expectations of our end markets. The cash flow goal for 2019
was approximately flat with the previous year’s goal, reflecting the disposition of our Tools and Test business in 2018
and anticipated capital requirements associated with our 2019 plan.
Both targets were challenging
in light of uncertain global economic and market conditions. Payouts for each individual could range from 0% to 200% of target
based on performance. The formula for determining 2019 annual incentive compensation for executive officers, and the resulting
percentage earned, are detailed below:
2019
Annual Incentive Compensation Calculation
($ in millions)
(1) |
“Enterprise
NOP” means our total “Segment profit” as reported in our Annual Report on Form 10-K. Segment profit for
the manufacturing segments excludes interest expense, certain corporate expenses, gains/losses on major business dispositions
and special charges. The measurement for the Finance segment includes interest income and expense along with intercompany
interest income and expense. |
(2) |
“Manufacturing
Cash Flow” generally represents “Manufacturing cash flow before pension contributions” (a non-GAAP measure)
as reported in our quarterly earnings releases. This measure adjusts net cash from operating activities of continuing operations
for dividends received from Textron Financial Corporation (“TFC”), capital contributions provided under the Support
Agreement with TFC and debt agreements, capital expenditures, proceeds from the sale of property, plant and equipment, contributions
to our pension plans and taxes paid related to the gain realized in 2018 on the Tools and Test business disposition. |
(3) |
“Improvement
in Workforce Diversity” represents the percentage increase in diverse U.S. full-time salaried employees compared to
total U.S. full-time salaried employees, measured based on the current year actual percentage compared to the targeted percentage
from the prior year. |
TEXTRON 2020 PROXY STATEMENT 31
At its January 2020 meeting,
the Committee discussed the annual incentive compensation awards to be paid to the NEOs for the 2019 performance period and considered
input from the full Board. The Committee concluded that the calculated payouts appropriately reflected the Company’s performance
for 2019 and approved the payouts as calculated above.
Annual incentive compensation
targets and payouts for 2017, 2018 and 2019 for each NEO are shown below:
Annual
Incentive Compensation Targets and Payouts
|
|
|
|
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
|
Position |
|
|
|
Target |
|
Payout |
|
|
|
Target |
|
Payout |
|
|
|
Target |
|
Payout |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
C. Donnelly |
|
|
CEO |
|
|
|
$1,800,000 |
|
$2,160,000 |
|
|
|
$1,854,000 |
|
$2,223,000 |
|
|
|
$
1,854,000 |
|
$1,737,000 |
|
Frank
T. Connor |
|
|
CFO |
|
|
|
$ 850,000 |
|
$1,020,000 |
|
|
|
$ 850,000 |
|
$1,019,000 |
|
|
|
$ 1,000,000 |
|
$ 937,000 |
|
E.
Robert Lupone |
|
|
General
Counsel |
|
|
|
$ 547,500 |
|
$ 657,000 |
|
|
|
$ 570,000 |
|
$ 683,000 |
|
|
|
$ 600,000 |
|
$ 562,000 |
|
Julie
G. Duffy |
|
|
EVP,
HR |
|
|
|
$ 285,000 |
|
$ 342,000 |
|
|
|
$ 300,000 |
|
$ 360,000 |
|
|
|
$ 412,500 |
|
$ 387,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior Year Performance Analysis
The Committee believes that
a pay-for-performance analysis should compare Company performance vs. peer performance over the time period an incentive is earned
and that operating metrics are the appropriate performance comparator for annual incentive awards. Therefore, to validate that
Textron’s annual incentive compensation is appropriately linked to the executives’ performance, the Committee reviewed
the annual incentive compensation paid to Textron’s CEO in 2019, with respect to 2018, compared to Textron’s year-over-year
operating performance for that year, relative to the annual incentive compensation paid to the peer companies’ CEOs compared
to the year-over-year operating performance of the performance peer group companies for the corresponding year. While exactly
comparable data was not available for all peer companies, indicative comparisons were made using publicly-reported GAAP operating
cash flows and pre-tax earnings from continuing operations. As was the case for previous years, the Committee’s comparative
analysis conducted in 2019 for payouts related to the 2018 performance period confirmed the strong correlation between Textron’s
annual incentive compensation payouts and its performance relative to its peers.
32
TEXTRON 2020 PROXY STATEMENT
Long-Term Incentive
Compensation Payouts and Performance Analysis
Performance Share Units
Payouts for the 2017-2019 PSU
cycle were based upon performance for each of the annual periods within the 2017-2019 cycle against performance goals set for
three one-year performance periods, weighted equally, subject to a TSR modifier that can decrease, but not increase, the final
payout up to 40%, based on the mathematical ranking of Textron’s three-year TSR performance compared to that of our 2017
performance peers and the Committee’s discretion. The performance achieved against the threshold, target and maximum payouts
for the 2017-2019 PSU cycle, and the resulting percentage earned by the executive officers, are detailed below:
2017–2019
Performance Share Unit Calculation
($ in millions)
|
|
|
105.8% |
- 40% |
63.5% |
|
|
|
Units
Earned as %
of Original Award |
TSR
Modifier applied
by O&C Committee |
Final
Payout as %
of Original Award |
|
|
|
The performance metrics for
2019 are described in more detail in the 2019 Annual Incentive Compensation Calculation chart on page 31 and for previous years
are described in the proxy statement for the applicable year. Payouts are made in cash and could range from 0% to 150% of target
based on performance.
Two measures impact the value
of PSU cash payouts: (i) the number of units earned is based on Textron’s performance against operating metrics and may
be adjusted downward (but not upward), based upon the mathematical ranking of the Company’s three-year TSR performance compared
to the TSR performance of its performance peer companies and the Committee’s discretion and (ii) the value of each unit
earned is based on Textron’s stock price. The tables below show the PSU awards granted in 2017 and associated cash payouts
received by executive in terms of both units and value. To validate that the Company’s PSU awards link pay to performance,
the Committee evaluated the PSU payouts on the basis of both relative performance (TSR performance vs. 2017 performance peer group
companies) and absolute performance (change in stock price) and concluded that the payouts were appropriately linked to Textron’s
overall performance.
TEXTRON 2020 PROXY STATEMENT 33
2017–2019
Performance Share Unit Payouts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017–2019
Units |
|
2017–2019
Value |
|
|
|
|
|
|
|
|
|
Name(1) |
|
Position |
|
Units
Granted |
|
Units
Paid |
|
Grant
Date Value |
|
Payout
Value |
|
|
|
|
|
|
|
|
|
Scott
C. Donnelly |
|
CEO |
|
100,583 |
|
63,850 |
|
|
$4,986,905 |
|
$2,879,635 |
|
Frank
T. Connor |
|
CFO |
|
28,666 |
|
18,197 |
|
|
$1,421,260 |
|
$ 820,685 |
|
E.
Robert Lupone |
|
General
Counsel |
|
12,849 |
|
8,157 |
|
|
$ 637,053 |
|
$ 367,881 |
|
(1) |
Ms. Duffy’s
2017-2019 PSU award is not reflected in the preceding chart because it was granted while she served in her previous role and,
consistent with the terms of grants made to other non-executive officers, was not subject to the TSR modifier. The amount
paid is reflected in the Option Exercises and Stock Vested in Fiscal 2019 table on page 42. |
As shown in the chart above,
the payout value of the 2017–2019 awards was significantly lower than the grant date value of the award despite the Company’s
three-year average performance against operating metrics of 105.8%. Because the Company’s TSR performance was at the bottom
of the 2018 performance peer group, after adjusting for operating performance, the Committee exercised its negative discretion
and applied the TSR modifier to reduce the units earned by 40%. The final cash payout was then further reduced as a result of
the decrease in Textron’s stock price from 2017 to 2019, resulting in the payout values set forth above.
The chart below shows our CEO’s
2017–2019 cycle PSU award from grant date value, as adjusted by the Company’s performance against the goals set by
the Committee and as adjusted for the TSR modifier, to realized value (final payout value), reflecting the change in Textron’s
stock price during the performance period.
CEO’s
2017–2019 PSU Award Value
Restricted Stock Units and
Stock Options
In addition to PSUs, the Company’s
long-term incentive compensation program consists of RSUs and stock options.
The ultimate value of these
awards to the executives, upon the vesting of RSUs or the exercise of stock options, is directly based upon Textron’s stock
price. For the value realized by the executives upon the vesting or exercise of these awards, see Option Exercises and Stock Vested
in Fiscal 2019 on page 42.
34
TEXTRON 2020 PROXY STATEMENT
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
2019, 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.
OTHER COMPENSATION
PROGRAMS
As mentioned above, Textron
provides certain other compensation programs (such as retirement/death benefits) that are designed to provide to NEOs the same
level of benefits provided to non-executive officers and, in most cases, all salaried employees. Certain of these programs provide
benefits over any caps mandated by government regulations, including:
|
|
● |
Textron Spillover
Pension Plan: Non-qualified benefit plan to make up for IRS limits to qualified pension plans and, in the case of Mr.
Donnelly, to provide a “wrap-around” pension benefit which takes into account his final average compensation with
Textron and his combined service with Textron and his former employer, GE, and reduces this benefit by the amount of any other
pension benefits which he is eligible to receive under Textron and GE pension plans. |
● |
Textron Spillover
Savings Plan: Non-qualified benefit plan to make up for IRS limits to qualified savings plans. |
Textron provides a program to
executives which benefits them by allowing for tax planning and also benefits the Company, in that cash payments by the Company
are delayed:
|
|
● |
Deferred Income
Plan for Textron Executives: Non-qualified plan that allows participants to defer compensation. |
ROLE OF
INDEPENDENT COMPENSATION CONSULTANT
Under its charter, the Committee
has the authority to retain outside consultants or advisors as it deems necessary to provide desired expertise and counsel. At
the beginning of 2019, the Committee continued to use the services of Pay Governance LLC as its independent compensation consultant,
however, early in the year, the Committee initiated a rigorous Request-for-Proposals process with multiple firms to select its
next independent compensation consultant. The Committee, along with representatives from management, conducted in-depth interviews
with several firms before ultimately retaining Pearl Meyer as its independent compensation consultant, effective July 2019.
Pay Governance reported, and
Pearl Meyer reports, directly and exclusively to the Committee, and each was retained to provide advice regarding current and
emerging best practices with regard to executive compensation. In addition, as described above, Pearl Meyer will annually conduct
a risk review of our executive compensation program. A representative from Pay Governance, and then Pearl Meyer, attended each
of the Committee’s seven meetings in 2019. Neither Pay Governance nor Pearl Meyer provides any other services to the Committee
or the Company. The Committee has determined that both Pay Governance and Pearl Meyer are independent and that the work of Pay
Governance and Pearl Meyer with the Committee for 2019 has not raised any conflict of interest.
STOCK OWNERSHIP
REQUIREMENTS
One objective of our executive
compensation program is to align the financial interests of our NEOs with the interests of our shareholders. As a result, we require
that senior executives accumulate and maintain a minimum level of stock ownership in the Company which may be achieved through
direct ownership of shares, Textron Savings Plan shares, unvested RSUs and vested/ unvested share equivalents in Textron compensation
and benefit plans. Minimum ownership levels are expressed as a multiple of base salary as follows: five times for the CEO and
three times for other NEOs. New executive officers are given five years to reach their required ownership level. All NEOs currently
meet their respective stock ownership requirements or are within their initial five-year period.
TEXTRON 2020 PROXY STATEMENT 35
ANTI-HEDGING
AND PLEDGING POLICY
Our executives, including our
NEOs, and their designees are prohibited from engaging in short sales of Textron securities and from engaging in transactions
in publicly-traded options, such as puts, calls and other derivative securities based on Textron’s securities including
any hedging, monetization or similar transactions designed to decrease the risks associated with holding Textron securities, and
financial instruments such as equity swaps, collars, exchange funds and forward sales contracts. In addition, our NEOs are prohibited
from pledging Textron securities as collateral for any loan or holding Textron securities in a margin account. The anti-hedging
and pledging policy does not apply to employees generally.
CLAWBACK
POLICY
Our 2015 Long-Term Incentive
Plan, as well as our Short-Term Incentive Plan which governs our annual incentive compensation program, include a clawback provision
which provides that the Committee shall require reimbursement of any annual incentive payment or long-term incentive payment under
any award to an executive officer where (i) the payment was predicated upon achieving certain financial results that were subsequently
the subject of a substantial restatement of Company financial statements, (ii) the Committee determines the executive engaged
in intentional misconduct that caused or substantially caused the need for the restatement and (iii) a lower payment would have
been made to the executive based upon the restated financial results.
In addition, the Company’s
long-term incentive award agreements provide that an executive who violates the noncompetition provisions of the award during
employment or within two years after termination of employment with the Company forfeits future rights under the award and must
repay to the Company value received during the period beginning 180 days prior to the earlier of termination or the date the violation
occurred.
The Company also is subject
to the “clawback” provision of Section 304 of the Sarbanes-Oxley Act of 2002 which generally requires public company
chief executive officers and chief financial officers to disgorge bonuses, other incentive- or equity-based compensation, and
profits on sales of company stock that they receive within the 12-month period following the public release of financial information
if there is a restatement because of material noncompliance, due to misconduct, with financial reporting requirements under the
federal securities laws.
COMPENSATION
ARRANGEMENTS RELATING TO TERMINATION OF EMPLOYMENT
Mr. Donnelly’s letter
agreement with Textron provides for payment of varying benefits to him upon events such as death, disability, retirement and termination
under voluntary, involuntary (for cause), involuntary (not for cause or for good reason) or change in control circumstances. Mr.
Donnelly’s termination benefits are consistent with the terms of our previous CEO’s agreement and were approved by
the Committee upon Mr. Donnelly’s initial hiring in 2008 in order to attract him to Textron. Since hiring Mr. Donnelly,
the Committee no longer agrees to formal employment contracts which provide for individual termination protection. Mr. Connor,
Mr. Lupone and Ms. Duffy are each eligible for termination benefits that are available to all corporate officers as provided by
the Severance Plan for Textron Key Executives. With regard to retirement benefits, in order for Textron to attract Mr. Donnelly
to join the Company after his 19-year career at GE, his pension benefits were designed to take into account his years of service
at GE so that he would not be disadvantaged by joining Textron. This benefit has been effected through the adoption of an amendment
to the Textron Spillover Pension Plan adding an appendix which provides a “wrap-around pension benefit” to Mr. Donnelly
in order to compensate for pension benefits at GE that would otherwise not keep pace with his increasing compensation over the
course of his career upon joining Textron. The benefit takes into account his service with both GE and Textron and uses the definition
of pensionable compensation and final average compensation in the Textron Spillover Pension Plan. This nonqualified pension benefit
became 100% vested upon his completion of ten years of service with Textron and will be reduced by the combined value of any other
benefit which he is eligible to receive under (i) a tax-qualified defined benefit plan maintained by GE, (ii) a tax-qualified
defined benefit plan maintained by Textron and (iii) the Textron Spillover Pension Plan.
Mr. Connor’s letter agreement
provides for an enhanced pension benefit which will give him an additional three years of credited service under the Textron Spillover
Pension Plan, subject to the vesting terms of that Plan. Neither Mr. Lupone nor Ms. Duffy has been provided any supplemental or
enhanced pension benefits.
36
TEXTRON 2020 PROXY STATEMENT
TAX CONSIDERATIONS
Section 162(m) of the Internal
Revenue Code provides that no U.S. income tax deduction is allowable to a publicly held corporation for compensation in excess
of $1 million paid to a “covered employee” (generally the NEOs). Under the tax law applicable in 2017 and prior years,
“performance-based compensation” was exempt from the $1 million limitation if it was payable upon meeting pre-established
and objective performance goals established by the Committee under a plan that had been approved by shareholders and other tax
code requirements were met. In addition, under prior law the principal financial officer was not treated as a covered employee.
In December 2017, the Tax Cuts
and Jobs Act (the “Tax Act”) eliminated the exemption from Section 162(m)’s deduction limit for performance-based
compensation, effective for taxable years beginning after December 31, 2017, unless it qualifies for transition relief applicable
to certain arrangements in place as of November 2, 2017. In addition, the Tax Act broadened the list of covered employees to include
the principal financial officer. As a result of the Tax Act, beginning with our 2018 tax year, compensation paid to our named
executive officers, including performance-based compensation, in excess of $1 million generally will not be tax- deductible, with
the exception of certain compensation payable under arrangements in place as of November 2, 2017. Because there are uncertainties
as to the application of regulations under Section 162(m), as with most tax matters, it is possible that deductions we may claim
for compensation payable under arrangements in place as of November 2, 2017, as well as deductions for performance-based compensation
we have claimed prior to our 2018 tax year, may be challenged or disallowed.
TEXTRON 2020 PROXY STATEMENT 37
The following Summary Compensation
Table sets forth information concerning compensation of our principal executive officer, principal financial officer and each
other individual who was serving as an executive officer at the end of Textron’s 2019 fiscal year (each, an “NEO”
and collectively, the “NEOs”).
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
and Principal Position |
|
Year |
|
Salary
($)(1) |
Stock
Awards
($)(2) |
Option
Awards
($)(3) |
Non-Equity
Incentive Plan
Compensation
($)(4) |
Change
in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(5) |
All
Other
Compensation
($)(6) |
Total
($) |
|
|
|
|
|
|
|
|
|
|
Scott
C. Donnelly |
|
2019 |
|
1,236,000 |
|
8,247,424 |
|
3,544,166 |
|
1,737,000 |
|
4,056,094 |
|
100,914 |
|
18,921,598 |
|
Chairman,
President and |
|
2018 |
|
1,229,077 |
|
6,900,386 |
|
3,068,171 |
|
2,223,000 |
|
412,297 |
|
115,986 |
|
13,948,917 |
|
Chief
Executive Officer |
|
2017
|
|
1,191,154 |
|
6,653,694 |
|
3,030,742 |
|
2,160,000 |
|
1,676,783 |
|
112,957 |
|
14,825,330 |
|
Frank
T. Connor |
|
2019 |
|
1,000,000 |
|
2,411,829 |
|
1,045,038 |
|
937,000 |
|
1,208,027 |
|
81,711 |
|
6,683,605 |
|
Executive
Vice President and |
|
2018 |
|
1,000,000 |
|
1,991,619 |
|
889,314 |
|
1,019,000 |
|
230,970 |
|
82,531 |
|
5,213,434 |
|
Chief
Financial Officer |
|
2017 |
|
990,385 |
|
1,907,576 |
|
863,756 |
|
1,020,000 |
|
596,815 |
|
88,292 |
|
5,466,824 |
|
E.
Robert Lupone |
|
2019 |
|
792,308 |
|
1,050,566 |
|
450,164 |
|
562,000 |
|
0 |
|
98,628 |
|
2,953,666 |
|
Executive
Vice President, |
|
2018 |
|
754,231 |
|
887,659 |
|
394,262 |
|
683,000 |
|
0 |
|
94,161 |
|
2,813,313 |
|
General
Counsel and Secretary |
|
2017 |
|
724,231 |
|
860,777 |
|
387,173 |
|
657,000 |
|
0 |
|
86,221 |
|
2,715,402 |
|
Julie
G. Duffy |
|
2019 |
|
540,385 |
|
621,510 |
|
309,491 |
|
387,000 |
|
929,448 |
|
32,619 |
|
2,820,453 |
|
Executive
Vice President, |
|
2018 |
|
495,192 |
|
394,161 |
|
222,317 |
|
360,000 |
|
149,519 |
|
30,260 |
|
1,651,449 |
|
Human
Resources |
|
2017 |
|
403,216 |
|
191,741 |
|
86,388 |
|
342,000 |
|
347,325 |
|
25,561 |
|
1,396,231 |
|
(1) |
Base
salary increases, if any, are implemented in the first pay period in March of each year; therefore, amounts shown in this
column may not exactly match the base salaries disclosed in the CD&A. |
(2) |
The numbers shown
in this column represent the grant date fair values of equity awards granted during the fiscal year, whether settled in stock
or cash. The amounts for 2019 include PSUs (granted in 2017, 2018 and 2019 for all NEOs) and RSUs (granted in 2019), which
are described in the CD&A. The grant date fair values have been determined based on the closing share price on the date
of grant. For PSUs, because performance criteria are established on an annual basis, the amounts shown are for the first year
of the three-year performance cycle beginning in 2019, plus the second year of the three-year performance cycle beginning
in 2018, plus the third year of the three-year performance cycle beginning in 2017. The grant date fair value of each equity-based
award for 2019 is detailed below. |
Award |
Mr.
Donnelly |
Mr.
Connor |
Mr.
Lupone |
Ms.
Duffy |
|
|
|
|
|
Performance Share Units |
$4,410,762 |
$1,280,556 |
$ 563,254 |
$286,493 |
Restricted Stock Units |
3,836,662 |
1,131,273 |
487,312 |
335,017 |
Total |
$8,247,424 |
$2,411,829 |
$1,050,566 |
$621,510 |
|
The PSU
values above represent target performance. Assuming maximum performance is achieved, then the grant date fair value of the
PSUs would be: Mr. Donnelly $6,616,143, Mr. Connor $1,920,834, Mr. Lupone $844,882 and Ms. Duffy $429,739. |
(3) |
The amounts that
appear in this column represent the grant date fair value of stock options granted during the fiscal year. The grant date
fair values have been determined based on the assumptions and methodologies set forth in Note 15 Share-Based Compensation
in Textron’s Annual Report on Form 10-K for the fiscal year ended January 4, 2020. The number of shares underlying the
stock options granted to each NEO during 2019 is detailed in the Grants of Plan- Based Awards in Fiscal 2019 table on page
40. |
(4) |
The amounts in this
column reflect annual incentive compensation earned under Textron’s annual incentive compensation program. |
(5) |
The amounts in this
column are attributable to the change in actuarial present value from December 29, 2018 to January 4, 2020 of accumulated
pension benefits under all defined benefit plans in which the NEOs participate. For Ms. Duffy, this column also includes $222
in above-market non-qualified deferred compensation earnings that were posted to her interest-bearing account under the Deferred
Income Plan for Textron Executives. Earnings are considered “above-market” if they were higher than 120% of the
long-term applicable federal rate with compounding. |
38
TEXTRON 2020 PROXY STATEMENT
(6) |
The amounts in this
column include the value of other benefits and the incremental cost to Textron in 2019 of providing various perquisites in
2019, as detailed below: |
Benefit Type |
Mr.
Donnelly |
Mr.
Connor |
Mr.
Lupone |
Ms.
Duffy |
|
|
|
|
|
Spillover Savings Plan Contribution(a) |
$ 47,800 |
$36,000 |
$73,428 |
$13,019 |
Contributions to Textron Savings Plan |
14,000 |
14,000 |
25,200 |
14,000 |
Contributions to Retirement Plans |
5,600 |
5,600 |
0 |
5,600 |
Perquisites(b) |
33,514 |
26,111 |
0 |
0 |
Total |
$100,914 |
$81,711 |
$98,628 |
$32,619 |
(a) |
These
amounts represent the value of cash-settled Textron stock units credited to the NEO’s Spillover Savings Plan(“SSP”)
account during the year. For Mr. Lupone, who is not eligible for a defined benefit pension plan, the Company credits an interest-bearing
Moody’s account within the SSP with an amount equal to 4% of eligible compensation, reduced by the contribution that
was made by the Company under the Textron Savings Plan. |
(b) |
This amount includes
the following: (i) $3,000 for parking for each of Mr. Donnelly and Mr. Connor, (ii) $5,067 for an annual physical exam for
Mr. Donnelly, (iii) $20,303 for Mr. Donnelly’s usage of corporate aircraft to attend meetings of an outside board of
directors on which he serves at the request of the Company’s board and $5,144 for Mr. Donnelly to fly on a corporate
aircraft from a personal location to attend a business meeting, both of which are deemed to be personal travel under SEC rules,
(iv) $12,311 for the incremental cost to the Company of corporate aircraft dropping off or picking up Mr. Connor at an alternative
airport for his personal convenience and (v) $10,800 for Mr. Connor, representing the Company paid portion of the costs for
hangar space utilized by his personal aircraft. In addition, family members and invited guests of Mr. Donnelly occasionally
fly as additional passengers on business flights. In those cases, the aggregate incremental cost to the Company is a de minimis
amount and, as a result, no amount is reflected in the Summary Compensation Table. Textron values the personal use of corporate
aircraft by using an incremental cost method that multiplies the hours flown on a personal flight by an hourly direct operating
cost rate for the aircraft flown. The rate per flight hour is derived from the aircraft’s variable operating costs which
include landing fees, fuel, hangar fees, maintenance, catering, security fees, crew expenses, de-icing costs and other direct
operating expenses. The incremental cost of locating aircraft to the origin of a trip or returning aircraft from the completion
of a trip are also included in the amount reported. |
TEXTRON 2020 PROXY STATEMENT 39
GRANTS OF
PLAN-BASED AWARDS IN FISCAL 2019
The following table sets forth
information on plan-based compensation awards granted to the NEOs during Textron’s 2019 fiscal year. Annual equity awards
were approved on January 25, 2019 for grant on March 1, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other
Stock
Awards:
Number of
Shares
of Stock
or Stock
Units (#)(3) |
All
Other
Option
Awards:
Number of
Securities
Underlying
Options (#)(4) |
Exercise
or Base
Price
of Option
Awards
($/sh)(5) |
Grant
Date Fair
Value
of Stock
and
Option
Awards(6) |
|
|
|
|
Estimated
Possible
Payouts Under
Non-Equity Incentive
Plan Awards (1) |
|
|
Estimated
Future
Payouts Under
Equity Incentive
Plan Awards (2) |
Name |
|
Grant
Date |
Grant
Type |
Target
($) |
Maximum
($) |
Target
($) |
Maximum
($) |
|
|
|
|
|
|
|
|
|
|
|
|
Scott
C. Donnelly |
|
|
Annual
IC |
1,854,000 |
|
3,708,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/1/2019 |
PSUs |
|
|
|
|
4,204,844 |
|
6,307,266 |
|
|
|
|
|
|
|
1,705,183 |
|
|
|
3/1/2019 |
RSUs |
|
|
|
|
|
|
|
|
70,488 |
|
|
|
|
|
3,836,662 |
|
|
|
3/1/2019 |
Stock
Options |
|
|
|
|
|
|
|
|
|
|
242,419 |
|
54.43 |
|
3,544,166 |
|
|
|
3/1/2019 |
PSUs(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,705,579 |
|
Frank
T. Connor |
|
|
Annual
IC |
1,000,000 |
|
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/1/2019 |
PSUs |
|
|
|
|
1,239,835 |
|
1,859,752 |
|
|
|
|
|
|
|
502,788 |
|
|
|
3/1/2019 |
RSUs |
|
|
|
|
|
|
|
|
20,784 |
|
|
|
|
|
1,131,273 |
|
|
|
3/1/2019 |
Stock
Options |
|
|
|
|
|
|
|
|
|
|
71,480 |
|
54.43 |
|
1,045,038 |
|
|
|
3/1/2019 |
PSUs(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
777,768 |
|
E.
Robert Lupone |
|
|
Annual
IC |
600,000 |
|
1,200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/1/2019 |
PSUs |
|
|
|
|
534,088 |
|
801,132 |
|
|
|
|
|
|
|
216,588 |
|
|
|
3/1/2019 |
RSUs |
|
|
|
|
|
|
|
|
8,953 |
|
|
|
|
|
487,312 |
|
|
|
3/1/2019 |
Stock
Options |
|
|
|
|
|
|
|
|
|
|
30,791 |
|
54.43 |
|
450,164 |
|
|
|
3/1/2019 |
PSUs(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
346,666 |
|
Julie
G. Duffy |
|
|
Annual
IC |
412,500 |
|
825,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/1/2019 |
PSUs |
|
|
|
|
367,190 |
|
550,785 |
|
|
|
|
|
|
|
148,906 |
|
|
|
3/1/2019 |
RSUs |
|
|
|
|
|
|
|
|
6,155 |
|
|
|
|
|
335,017 |
|
|
|
3/1/2019 |
Stock
Options |
|
|
|
|
|
|
|
|
|
|
21,169 |
|
54.43 |
|
309,491 |
|
|
|
3/1/2019 |
PSUs(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,587 |
|
(1) |
These
amounts refer to awards of annual incentive compensation made under our Short-Term Incentive Plan. The performance metrics
and methodology for calculating payments are described in the CD&A. |
(2) |
These amounts refer
to PSU grants made under the Textron Inc. 2015 Long-Term Incentive Plan, which are performance-based long-term grants of share
units paid in cash, designed to reward the achievement of specified goals over three distinct fiscal-year performance periods.
The performance metrics and methodology for calculating payments are described in the CD&A. Grants of PSUs in 2019 vest
at the end of fiscal 2021. The “target” amount to be paid in 2022 assumes 100% earned and is based on the 2019
fiscal year-end share price of $44.74. The “maximum” that can be paid per the plan design is 150% of the PSUs
granted, as described in the CD&A. Both target and maximum amounts assume median TSR performance for the three-year performance
period. |
(3) |
These amounts represent the number
of RSUs granted in 2019 pursuant to the Textron Inc. 2015 Long-Term Incentive Plan. RSUs earn dividend equivalents until vested and vest
over five years, in three equal annual installments, beginning on the third anniversary of the grant date. |
(4) |
These amounts represent the
number of stock options granted in 2019 pursuant to the Textron Inc. 2015 Long-Term Incentive Plan. All annual grants of stock options
vest ratably over three years, beginning on March 1, 2020, and annually thereafter. |
(5) |
Reflects the exercise
price for the stock options granted on March 1, 2019 which is equal to the closing price on the grant date. |
(6) |
Represents the grant
date fair value of each equity award listed in the table as determined in accordance with generally accepted accounting principles.
With respect to PSUs granted in 2019, the amounts in this column represent the value of only the 2019 portion of the 2019-2021
grant because the grant is subject to three single-year performance periods (2019, 2020 and 2021). |
(7) |
Represents grant
date fair value of the 2019 portion of the 2017–2019 and 2018–2020 PSU awards. |
40
TEXTRON 2020 PROXY STATEMENT
OUTSTANDING
EQUITY AWARDS AT 2019 FISCAL YEAR-END
The following table sets forth
information with respect to the NEOs concerning unexercised options, stock awards that have not yet vested, and equity incentive
plan awards as of the end of our 2019 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Equity Awards at 2019 Fiscal Year-End |
|
|
Option
Awards |
|
Stock
Awards |
Name |
|
Grant
Date(1) |
Number
of Securities
Underlying Unexercised
Options(#) Exercisable |
|
Number
of Securities
Underlying Unexercised
Options(#) Unexercisable |
|
Option
Exercise Price
($)(2) |
|
Option
Expiration Date |
|
Type
of Stock
Award(3) |
Grant
Year |
Number
of Shares
or
Units of Stock
That Have Not
Vested (#) |
|
Market
Value of
Shares or Units
of Stock That
Have Not Vested
($)(4) |
|
Equity
Incentive Plan
Awards: Number
of Unearned Shares,
Units, or Other
Rights That Have
Not Vested (#) |
|
Equity
Incentive Plan
Awards: Market
or Payout Value
of Unearned Shares,
Units, or Other Rights
That Have Not Vested
($)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
C. Donnelly |
|
3/1/2019 |
0 |
|
|
242,419 |
|
|
54.43 |
|
|
3/1/2029 |
|
PSU |
2019 |
|
|
|
|
|
|
117,480 |
|
|
4,204,844 |
|
|
|
3/1/2018 |
64,607 |
|
|
129,213 |
|
|
58.24 |
|
|
3/1/2028 |
|
RSU |
2019 |
70,488 |
|
|
3,153,633 |
|
|
|
|
|
|
|
|
|
3/1/2017 |
146,413 |
|
|
73,206 |
|
|
49.58 |
|
|
3/1/2027 |
|
PSU |
2018 |
|
|
|
|
|
|
88,582 |
|
|
3,170,527 |
|
|
|
3/1/2016 |
238,578 |
|
|
0 |
|
|
34.50 |
|
|
3/1/2026 |
|
RSU |
2018 |
53,149 |
|
|
2,377,886 |
|
|
|
|
|
|
|
|
|
3/1/2015 |
194,546 |
|
|
0 |
|
|
44.31 |
|
|
3/1/2025 |
|
RSU |
2017 |
60,350 |
|
|
2,700,059 |
|
|
|
|
|
|
|
|
|
3/1/2014 |
222,319 |
|
|
0 |
|
|
39.70 |
|
|
3/1/2024 |
|
RSU |
2016 |
47,800 |
|
|
2,138,572 |
|
|
|
|
|
|
|
|
|
3/1/2013 |
243,157 |
|
|
0 |
|
|
28.47 |
|
|
3/1/2023 |
|
RSU |
2015 |
20,858 |
|
|
933,187 |
|
|
|
|
|
|
|
|
|
3/1/2012 |
300,000 |
|
|
0 |
|
|
27.76 |
|
|
3/1/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/1/2011 |
227,766 |
|
|
0 |
|
|
26.25 |
|
|
3/1/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank T. Connor |
|
3/1/2019 |
0 |
|
|
71,480 |
|
|
54.43 |
|
|
3/1/2029 |
|
PSU |
2019 |
|
|
|
|
|
|
34,640 |
|
|
1,239,835 |
|
|
|
3/1/2018 |
18,727 |
|
|
37,452 |
|
|
58.24 |
|
|
3/1/2028 |
|
RSU |
2019 |
20,784 |
|
|
929,876 |
|
|
|
|
|
|
|
|
|
3/1/2017 |
41,728 |
|
|
20,863 |
|
|
49.58 |
|
|
3/1/2027 |
|
PSU |
2018 |
|
|
|
|
|
|
25,676 |
|
|
918,995 |
|
|
|
3/1/2016 |
68,718 |
|
|
0 |
|
|
34.50 |
|
|
3/1/2026 |
|
RSU |
2018 |
15,405 |
|
|
689,220 |
|
|
|
|
|
|
|
|
|
3/1/2015 |
56,705 |
|
|
0 |
|
|
44.31 |
|
|
3/1/2025 |
|
RSU |
2017 |
17,199 |
|
|
769,483 |
|
|
|
|
|
|
|
|
|
3/1/2014 |
63,361 |
|
|
0 |
|
|
39.70 |
|
|
3/1/2024 |
|
RSU |
2016 |
13,768 |
|
|
615,980 |
|
|
|
|
|
|
|
|
|
3/1/2013 |
72,000 |
|
|
0 |
|
|
28.47 |
|
|
3/1/2023 |
|
RSU |
2015 |
6,079 |
|
|
271,974 |
|
|
|
|
|
|
|
|
|
3/1/2012 |
91,607 |
|
|
0 |
|
|
27.76 |
|
|
3/1/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/1/2011 |
69,566 |
|
|
0 |
|
|
26.25 |
|
|
3/1/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E.
Robert Lupone |
|
3/1/2019 |
0 |
|
|
30,791 |
|
|
54.43 |
|
|
3/1/2029 |
|
PSU |
2019 |
|
|
|
|
|
|
14,922 |
|
|
534,088 |
|
|
|
3/1/2018 |
8,302 |
|
|
16,604 |
|
|
58.24 |
|
|
3/1/2028 |
|
RSU |
2019 |
8,953 |
|
|
400,557 |
|
|
|
|
|
|
|
|
|
3/1/2017 |
18,704 |
|
|
9,352 |
|
|
49.58 |
|
|
3/1/2027 |
|
PSU |
2018 |
|
|
|
|
|
|
11,383 |
|
|
407,420 |
|
|
|
3/1/2016 |
31,091 |
|
|
0 |
|
|
34.50 |
|
|
3/1/2026 |
|
RSU |
2018 |
6,829 |
|
|
305,529 |
|
|
|
|
|
|
|
|
|
3/1/2015 |
26,114 |
|
|
0 |
|
|
44.31 |
|
|
3/1/2025 |
|
RSU |
2017 |
7,709 |
|
|
344,901 |
|
|
|
|
|
|
|
|
|
3/1/2014 |
29,752 |
|
|
0 |
|
|
39.70 |
|
|
3/1/2024 |
|
RSU |
2016 |
6,229 |
|
|
278,685 |
|
|
|
|
|
|
|
|
|
3/1/2013 |
34,831 |
|
|
0 |
|
|
28.47 |
|
|
3/1/2023 |
|
RSU |
2015 |
2,799 |
|
|
125,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julie
G. Duffy |
|
3/1/2019 |
0 |
|
|
21,169 |
|
|
54.43 |
|
|
3/1/2029 |
|
PSU |
2019 |
|
|
|
|
|
|
10,259 |
|
|
367,190 |
|
|
|
3/1/2018 |
4,682 |
|
|
9,362 |
|
|
58.24 |
|
|
3/1/2028 |
|
RSU |
2019 |
6,155 |
|
|
275,375 |
|
|
|
|
|
|
|
|
|
3/1/2017 |
4,174 |
|
|
2,086 |
|
|
49.58 |
|
|
3/1/2027 |
|
PSU |
2018 |
|
|
|
|
|
|
6,419 |
|
|
229,749 |
|
|
|
3/1/2016 |
7,009 |
|
|
0 |
|
|
34.50 |
|
|
3/1/2026 |
|
RSU |
2018 |
3,851 |
|
|
172,294 |
|
|
|
|
|
|
|
|
|
3/1/2015 |
5,727 |
|
|
0 |
|
|
44.31 |
|
|
3/1/2025 |
|
RSU |
2017 |
1,720 |
|
|
76,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU |
2016 |
1,404 |
|
|
62,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSU |
2015 |
614 |
|
|
27,470 |
|
|
|
|
|
|
|
(1) |
Stock
option awards associated with each annual grant vest ratably over three years on each anniversary of the grant date. |
(2) |
The exercise
price of stock options is equal to the closing price of our common stock on the date of grant. |
(3) |
The following
types of stock awards are shown in this table: |
|
(a) |
“PSU” refers
to performance share units. These units reward achievement of long-term goals over a three-year performance period, vesting
at the end of the third fiscal year. They are settled in cash and valued based on the average closing price of Textron common
stock for the first ten trading days of the fiscal year following vesting. Further information about these awards can be found
in the CD&A. |
|
(b) |
“RSU” refers to restricted
stock units. RSUs vest over five years, in three equal annual installments, beginning on the third anniversary of the grant
date. Upon vesting, common stock will be issued to the executive. RSUs are granted with the right to receive dividend equivalents. |
(4) |
The market
value of RSUs that have not vested as of January 4, 2020 was calculated using the fiscal year-end closing share price of $44.74
multiplied by the number of unvested units as of that date. |
(5) |
PSUs
granted in 2018 and 2019 vest, to the extent earned, on January 2, 2021 and January 1, 2022, respectively. The market value
of PSUs that have not vested as of year-end 2019 was calculated using the fiscal year-end closing share price of $44.74 multiplied
by the number of unvested units assuming that 100% of the units are earned and assuming a median TSR performance modifier
for the three-year performance period (representing the target performance level). |
TEXTRON 2020 PROXY STATEMENT 41
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2019
The following table provides
information concerning option exercises and the vesting of stock, including PSUs and RSUs, during Textron’s 2019 fiscal
year for each NEO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
Exercises and Stock Vested in Fiscal 2019 |
|
|
|
Option
Awards |
|
Stock
Awards |
Name |
|
|
Number
of Shares
Acquired on Exercise
(#) |
|
Value
Realized on Exercise
($) |
|
|
|
Type
of Equity
Award(1) |
Number
of Shares
or Units Acquired
on Vesting (#) |
|
|
Value
Realized on Vesting
($)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
C. Donnelly |
|
|
235,602 |
|
|
8,207,633 |
|
|
|
|
PSU |
63,850 |
|
|
|
|
2,879,635 |
|
|
|
|
|
|
|
|
|
|
|
|
RSU |
68,388 |
|
|
|
|
3,722,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,601,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank T. Connor |
|
|
83,933 |
|
|
2,932,562 |
|
|
|
|
PSU |
18,197 |
|
|
|
|
820,685 |
|
|
|
|
|
|
|
|
|
|
|
|
RSU |
19,697 |
|
|
|
|
1,072,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,892,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E.
Robert Lupone |
|
|
0 |
|
|
0 |
|
|
|
|
PSU |
8,157 |
|
|
|
|
367,881 |
|
|
|
|
|
|
|
|
|
|
|
|
RSU |
9,077 |
|
|
|
|
494,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
861,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julie G. Duffy |
|
|
0 |
|
|
0 |
|
|
|
|
PSU |
2,426 |
|
|
|
|
109,413 |
|
|
|
|
|
|
|
|
|
|
|
|
RSU |
2,013 |
|
|
|
|
109,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
218,981 |
|
(1) |
“PSU”
and “RSU” are described in more detail in footnote 3 to the previous table. |
(2) |
Valuation methodology
for the PSUs is described in footnote 5 to the previous table, using actual performance results. |
42
TEXTRON 2020 PROXY STATEMENT
PENSION
BENEFITS IN FISCAL 2019
The table below sets forth information on the pension benefits for the NEOs under each of the Company’s pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Plan
Name |
Number
of
Years of
Credited
Service |
|
|
Present
Value
of Accumulated
Benefit
($)(1) |
|
Payments
During Last
Fiscal Year
($) |
|
|
|
|
|
|
|
|
|
|
|
|
Scott
C. Donnelly |
|
TRP |
11.50 |
|
|
|
|
465,486 |
|
|
0 |
|
|
|
Spillover |
11.50 |
|
|
|
|
4,846,515 |
|
|
0 |
|
|
|
Wrap
Around |
30.50 |
(2) |
|
|
|
7,880,157 |
|
|
0 |
|
|
|
|
|
|
|
Total |
|
13,192,158 |
|
|
|
|
Frank
T. Connor |
|
TRP |
10.42 |
|
|
|
|
452,594 |
|
|
0 |
|
|
|
Spillover |
10.42 |
|
|
|
|
2,708,470 |
|
|
0 |
|
|
|
Add’l
Credited Service |
3.00 |
(2) |
|
|
|
910,386 |
|
|
0 |
|
|
|
|
|
|
|
Total |
|
4,071,450 |
|
|
|
|
E.
Robert Lupone(3) |
|
N/A |
N/A |
|
|
|
|
N/A |
|
|
N/A |
|
Julie
G. Duffy |
|
TRP |
22.50 |
|
|
|
|
839,541 |
|
|
0 |
|
|
|
Spillover |
22.50 |
|
|
|
|
1,384,311 |
|
|
0 |
|
|
|
TSPPSO |
22.50 |
|
|
|
|
345,396 |
|
|
0 |
|
|
|
|
|
|
|
Total |
|
2,569,248 |
|
|
|
|
(1) |
The present
value of the accumulated benefit has been calculated consistent with the assumptions set forth in Note 16 Retirement Plans
in Textron’s Annual Report on Form 10-K for the fiscal year ended January 4, 2020. |
(2) |
Years of extra service
granted to the executive by employment letter. |
(3) |
Mr. Lupone is not
eligible to participate in any of our pension plans. |
A brief description of each
of the Company’s pension plans referenced above follows.
TRP: Textron
Retirement Program
Textron’s retirement benefits
for U.S. salaried and eligible bargained employees, the Textron Retirement Program (“TRP”), is designed to be a “floor-offset”
arrangement which has two parts. The first is a traditional defined pension benefit which provides a set monthly income (pension)
at retirement through a formula based on age, years of service and annual compensation. The second is a defined contribution benefit
called the Textron Retirement Account Plan. The TRP is funded and tax qualified.
Benefits under the TRP are based
on one and one-third percent of eligible compensation, provided that, for service years prior to 2007 (which only applies to Ms.
Duffy), benefits are based on a one percent annual benefit for eligible compensation up to the “covered compensation”
level ($68,676 in 2019), plus an additional amount equal to one and one-half percent of eligible compensation in excess of covered
compensation. “Eligible Compensation” includes base salary plus annual incentive payments in a given year, up to the
Internal Revenue Code limit ($280,000 in 2019). The benefit formula is calculated based on eligible employees’ highest consecutive
five-year average eligible compensation throughout their career at Textron. Provided an employee meets the five years of qualifying
service to become vested in the TRP, the accumulated benefit earned during an employee’s career is payable in monthly installments
after retirement. While the normal retirement age under the TRP is 65, eligible employees who meet defined age and service criteria
can retire and begin collecting a reduced benefit as early as age 55. Mr. Donnelly, Mr. Connor and Ms. Duffy qualify for the early
retirement benefit under the TRP.
TEXTRON 2020 PROXY STATEMENT 43
Under the Textron Retirement
Account Plan, Textron makes annual contributions to a participant’s account equal to 2% of eligible compensation up to the
Internal Revenue Code limit, and the account balance is adjusted for investment gains and losses. The participant may receive
the account in a lump sum or as an actuarially equivalent annuity upon termination of employment at any age. The value of any
distribution from the Textron Retirement Account Plan offsets benefits accrued after 2006 under the pension formula.
Effective January 1, 2010, the
TRP was closed to new entrants, and new employees, including Mr. Lupone, instead receive an annual company contribution to the
Textron Savings Plan equal to 4% of eligible compensation up to the Internal Revenue Code Limit.
SPP: Spillover
Pension Plan
Textron maintains the Spillover
Pension Plan (“SPP”) to compensate certain Textron executives for pension benefits that would have been earned but
for limitations imposed on tax-qualified plans under federal law. The formula for the SPP is the same as the formula for the defined
benefit portion of the qualified plan (the TRP). Eligible compensation components include base salary and annual incentive compensation
paid in a given year. The amount included in the formula equals the total of these components (whether or not deferred), less
the Internal Revenue Code limit noted above ($280,000 in 2019). Benefits under the SPP also vest after five years of qualifying
service, and are generally paid under the same age and service requirements as the defined benefit portion of the TRP. This plan
is unfunded and not qualified for tax purposes.
In 2008, an appendix was added
to the SPP for certain designated participants hired on or after January 1, 2008, including Mr. Donnelly, to provide a “wrap-around
pension benefit.” This appendix will recognize an additional benefit service accrual identified in the offer letter of the
designated participant and the resulting calculation will be offset by the prior employer age 65 benefit as described in the offer
letter, and any qualified and non-qualified age 65 benefit provided by Textron. Specific to Mr. Donnelly, refer to the CD&A
for details on his “wrap-around” benefit.
Effective January 1, 2010, the
SPP was closed to new entrants except for those who were participants in the Textron Retirement Program on December 31, 2009.
Mr. Lupone, therefore, is not eligible to participate in the SPP.
TSPPSO:
Textron Supplemental Pension Plan in Lieu of Stock Options
The Textron Supplemental Pension
Plan in Lieu of Stock Options (“TSPPSO”) is a pension enhancement benefit that was provided to a select group of employees
whose stock option grants were reduced beginning in 2003. The plan increases pensionable earnings for these employees by approximately
10-15%. Benefits under the TSPPSO also vest after five years of qualifying service, and are generally paid under the same age
and service requirements as the defined benefit portion of the TRP. This plan is unfunded and not qualified for tax purposes.
The TSPPSO is no longer open
to new entrants. Based on Ms. Duffy’s position in 2003, she is the only NEO who is eligible to participate in the plan.
44
TEXTRON 2020 PROXY STATEMENT
NONQUALIFIED
DEFERRED COMPENSATION
The table below shows the deferred
compensation activity for each NEO during 2019 under nonqualified deferred compensation plans maintained by Textron.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Plan
Name |
|
Registrant
Contributions
in Last FY
($)(1) |
|
Aggregate
Earnings
in Last FY
($)(2) |
|
Aggregate
Withdrawals/
Distributions
($) |
|
Aggregate
Balance at
Last FYE
($)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
C. Donnelly |
|
Spillover
Savings Plan |
|
47,800 |
|
|
(12,368 |
) |
|
0 |
|
|
656,177 |
|
Frank
T. Connor |
|
Spillover
Savings Plan |
|
36,000 |
|
|
(7,547 |
) |
|
0 |
|
|
397,139 |
|
E.
Robert Lupone |
|
Spillover
Savings Plan |
|
73,428 |
|
|
6,236 |
|
|
0 |
|
|
504,451 |
|
Julie
G. Duffy |
|
Deferred
Income Plan |
|
0 |
|
|
673 |
|
|
0 |
|
|
19,903 |
|
|
|
Spillover
Savings Plan |
|
13,019 |
|
|
(958 |
) |
|
0 |
|
|
47,696 |
|
|
|
(1) |
The amounts
shown in this column include contributions made by Textron into each executive’s notional deferred income account in
the Textron Spillover Savings Plan (the “SSP”) in 2019. There are two types of Company contributions made under
the SSP. First, if a participant contributes at least 10% of eligible compensation to the tax-qualified Textron Savings Plan
(“TSP”), then the participant’s stock unit account within the SSP is credited with a match equal to 5% of
eligible compensation reduced by the matching contribution under the TSP. Second, for Mr. Lupone and other employees hired
after 2009 who are not eligible for a defined benefit pension plan, the Company credits the interest-bearing Moody’s
account within the SSP with an amount equal to 4% of eligible compensation reduced by the contribution that was made by the
Company under the TSP. These amounts are also reported in the “All Other Compensation” column in the Summary Compensation
table on page 38. |
(2) |
The amounts
in this column reflect aggregate earnings during the fiscal year on amounts accrued in the participants’ accounts under
the SSP and the DIP, if applicable, based upon the terms of each plan, as described below. To the extent the credited rate
exceeds 120% of the long-term applicable federal rate, such earnings are considered “above-market earnings”. The
amount of above-market earnings in the DIP was $222 for Ms. Duffy. These earnings are also reported in the “Change in
Pension Value and Nonqualified Deferred Compensation Earnings” column in the Summary Compensation Table. |
(3) |
Of these
balances, the following amounts were reported in Summary Compensation Tables in prior-year proxy statements: Mr. Donnelly
$417,174, Mr. Connor $275,383, Mr. Lupone $379,151 and Ms. Duffy $17,671. This information is provided to clarify the extent
to which amounts payable as deferred compensation represent compensation reported in our prior proxy statements, rather than
additional currently earned compensation. |
|
|
|
A brief description of the Company’s
deferred compensation plans referenced above follows.
DIP: Deferred
Income Plan for Textron Executives
NEOs deferring compensation
into the Deferred Income Plan for Textron Executives (“DIP”) have forgone current compensation in exchange for an
unsecured promise from the Company to pay the deferred amount after their employment ends. NEOs can defer up to 80% of their base
salary and certain other cash compensation including annual incentive compensation and long- term incentive distributions settled
in cash. The “principal” amount that is deferred can be credited with either a Moody’s-based interest rate or
a rate of return that approximates the return on investment for a share of Textron common stock, including dividend equivalents,
based upon the elections made annually by each NEO. The interest rate applicable to the Moody’s account is the average Moody’s
Corporate Bond Yield Index as published by Moody’s Investors Service, Inc. The compounded Moody’s yield for 2019 was
3.99%, which was applied to all deferrals made subsequent to December 31, 2001.
SSP: Textron
Spillover Savings Plan
The Textron Spillover Savings
Plan (the “SSP”) makes up for forgone Company matches into the tax-qualified Textron Savings Plan because of federal
compensation limits, as a result of deferring income under the DIP, and for employees hired or rehired after 2009 who are not
eligible for a defined benefit pension plan. NEO contributions to the qualified savings plan are capped at 10% of eligible compensation
up to the Internal Revenue Code limit ($280,000 in 2019). The contribution amount for employees hired or rehired after 2009 is
based on 4% of eligible compensation. Contributions under the SSP are tracked in the form of unfunded book-entry accounts credited
as stock units, which earn dividend equivalents and which are reinvested into stock units. NEOs are not permitted to make contributions
to the SSP.
TEXTRON 2020 PROXY STATEMENT 45
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The discussion and tables below
reflect the amount of compensation that would become payable to each of the NEOs under existing plans and arrangements if the
named executive’s employment had terminated and/or a change in control had occurred on January 3, 2020, the last business
day of Textron’s 2019 fiscal year. Information is provided with respect to the following termination scenarios— voluntary,
“for cause”, death or disability, “not for cause” or “good reason”, change in control—and
is based upon the named executive’s compensation and service levels as of such date and, if applicable, based on the Company’s
closing stock price on that date.
In addition, in connection with
any future actual termination of employment, the Company may determine to enter into an agreement or to establish an arrangement
providing additional benefits or amounts or altering the terms of benefits described below, as the Organization and Compensation
Committee believes appropriate. The actual amounts that would be paid upon a NEO’s termination of employment can be determined
only at the time of such executive’s separation from the Company. Due to the number of factors that affect the nature and
amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be higher or lower
than reported below. Factors that could affect these amounts include the timing during the year of any such event, the Company’s
share price and the executive’s age.
Payments
Made Upon a Voluntary Termination by an Executive
Voluntary termination occurs
when the NEO leaves the Company at his or her own will (e.g., voluntary resignation or retirement). Upon a voluntary termination,
executives are entitled only to their vested or accrued obligations. Additionally, because Mr. Donnelly and Mr. Connor are retirement
eligible (age 55 with at least ten years of service to Textron), they also would be entitled to the following:
|
|
● |
RSUs would continue
to vest according to their vesting schedules |
● |
PSUs would continue
to vest according to their vesting schedules |
● |
Unvested stock options
would continue to vest per their respective vesting schedules; vested stock options would remain exercisable until the earlier
of the remaining term of the stock options or 48 months after termination |
Payments
Made Upon a Termination in Connection with Death or Disability
Upon a termination in connection
with death or disability, each of the NEOs would be entitled to their vested or accrued obligations as well as the following:
|
|
● |
RSUs would vest
in full upon the occurrence of the event |
● |
PSUs would accelerate
and vest pro-rata |
● |
In the event of
disability, vested stock options issued prior to 2014 would remain exercisable until the original expiration date; in the
event of death, they would remain exercisable until the earlier of the remaining term of the option or 12 months after the
date of death. Unvested stock options issued in 2014 or later would vest in full; stock options would be exercisable until
the earlier of the remaining term of the option or five years after the date of disability/death |
● |
Full vesting of
benefits under the Textron Savings Plan, SSP, DIP and Retirement Account Plan |
Payments
Made Upon a Termination “For Cause” by the Company
A “for cause” termination
occurs when a NEO is separated from Textron after engaging in one or more activities including, but not limited to: (i) conviction
of, or pleading nolo contendere or guilty to, a felony (other than a traffic infraction or a crime involving vicarious
liability under certain circumstances), (ii) willful misrepresentation, fraud or dishonesty for personal enrichment at the expense
of Textron, (iii) willful misconduct or behavior, willful violation of the Company’s Business Conduct Guidelines, or breach
of the NEO’s fiduciary duties, in each case, that results in material harm to Textron, or (iv) willful failure to attempt
to perform his or her duties or willful failure to attempt to follow the legal written direction of the Board. Upon a termination
“for cause,” each of the NEOs would be entitled only to their vested or accrued obligations.
Payments
Made Upon a “Not For Cause” Termination by the Company or by an Executive for “Good Reason”
Mr. Donnelly
A “not for cause”
termination (also called “involuntary termination”) occurs when employment ends either at the initiation of Textron,
but without circumstances that would indicate a “for cause” situation, or at the initiation of the executive for “Good
Reason.” Mr. Donnelly’s letter agreement with the Company provides certain severance benefits in the event of a “not
for cause” or “Good Reason” termination. “Good Reason” means the occurrence of one or more of the
following: (i) the assignment to
46
TEXTRON 2020 PROXY STATEMENT
Mr. Donnelly of duties that
are materially inconsistent with his position, (ii) the material reduction of Mr. Donnelly’s position, (iii) the forced
relocation of Mr. Donnelly’s principal office, (iv) a reduction in Mr. Donnelly’s salary or other benefits, (v) the
failure of the Company to deliver to Mr. Donnelly a satisfactory written agreement from any successor to the Company to assume
and agree to perform under the letter agreement, or (vi) other material breach by Textron of the letter agreement. Upon a termination
“not for cause,” or for “Good Reason,” Mr. Donnelly would be entitled to his vested or accrued obligations
as well as the following:
|
|
|
● |
Cash
Severance Benefit Comprised of: |
|
– |
Two times the sum
of (i) base salary and (ii) the greater of (a) the termination year target annual cash incentive compensation and (b) the
average annual cash incentive compensation earned during the last three fiscal years, paid in monthly installments over two
years |
|
– |
A pro-rated annual
cash incentive compensation payment (based on actual performance) for the year of termination, paid in a lump sum in the year
following termination |
● |
Treatment
of Long-Term Incentive Awards: |
|
– |
RSUs would continue
to vest according to their vesting schedules |
|
– |
PSUs would continue
to vest according to their vesting schedules |
|
– |
Unvested stock options
would continue to vest per their respective vesting schedules; vested stock options would remain exercisable until the earlier
of the remaining term of the stock options or 48 months after termination |
● |
Benefits
under Retirement Plans: |
|
– |
Credit for an additional
two and one half years of age and service and compensation under all defined benefit-type retirement plans (including
the SPP) |
|
– |
A lump sum payment
equal to two times the amount of maximum Company annual contribution or match to any defined contribution-type plan in which
the executive participates |
● |
Continuation
of Insurance Coverage: Continued coverage (or the cash equivalent thereof) for two years under the Company’s term life
insurance and long-term disability insurance plans, and, to the extent eligible on the date of termination, under the accidental
death and dismemberment insurance and dependent life insurance plans |
Other NEOs
The Severance Plan for Textron
Key Executives, in which each of the other NEOs participates, provides severance pay for involuntary termination only if the executive
signs a release provided in and required by the plan document. This severance pay is equal to the sum of: (i) the executive’s
annual rate of base salary at the date of severance, and (ii) the larger of (a) the average of his or her three most recent actual
awards of annual incentive compensation (whether or not deferred) and (b) his or her current target incentive compensation under
the annual incentive compensation plan.
Payments
Made Upon a Termination in Connection with a “Change in Control”
Mr. Donnelly
A “change in control”
termination would occur if Mr. Donnelly experiences a “not for cause” termination during the period beginning 180
days before a change in control and ending on the second anniversary of the change in control. Mr. Donnelly’s letter agreement
with the Company provides certain severance benefits in the event of a “change in control” termination. For purposes
of Mr. Donnelly’s letter agreement, a “change in control” means the occurrence of any of the following events:
(i) any person unrelated to Textron acquires more than 30% of Textron’s then outstanding voting stock, (ii) a majority of
the members of the Board of Directors are replaced in any two-year period other than in specific circumstances, (iii) the consummation
of a merger or consolidation of Textron with any other corporation, other than a merger or consolidation in which Textron’s
voting securities outstanding immediately prior to such merger or consolidation continue to represent at least 50% of the combined
voting securities of Textron or such surviving entity immediately after such merger or consolidation, or (iv) shareholder approval
of an agreement for the sale or disposition of all or substantially all of Textron’s assets or a plan of complete liquidation.
Upon a termination in connection with a “change in control,” Mr. Donnelly would be entitled to his vested or accrued
obligations as well as the following:
|
|
|
● |
Cash
Severance Benefit, Payable in a Lump Sum, Comprised of: |
|
– |
Three times base
salary |
|
– |
Pro-rated portion
of the greater of (i) the termination year target annual cash incentive compensation and (ii) the prior year annual cash incentive
compensation |
|
– |
Three times the
greater of (i) the average annual cash incentive compensation over the three years prior to the earlier of the change of control
or the termination and (ii) the termination year target annual cash incentive compensation |
TEXTRON 2020 PROXY STATEMENT 47
● |
Treatment
of Long-Term Incentive Awards: |
|
– |
Outstanding unvested
stock options, PSUs and RSUs would be subject to immediate and full vesting acceleration as of the change in control. |
|
– |
PSUs granted in
2018 and 2019 will be paid based on actual performance through the change in control and based on target performance after
the change in control. |
● |
Benefits
under Retirement Plans: |
|
– |
Full vesting and
credit for an additional three years of age and service and compensation under all defined benefit-type retirement plans (including
the SPP) |
|
– |
Full vesting acceleration
under the Spillover Savings Plan |
|
– |
A payment equal
to three times the amount of maximum Company annual contribution or match to any defined contribution- type plan in which
the executive participates |
● |
Continuation
of Insurance Coverage: Continued coverage (or the cash equivalent thereof) for three years under the Company’s term
life insurance and long-term disability insurance plans, and, to the extent eligible on the date of termination, under the
accidental death and dismemberment insurance and dependent life insurance plans |
● |
Additional
Perquisites: Outplacement assistance for up to one year following termination |
● |
Tax
Gross-Up Payment: Subject to certain conditions, the Company would gross-up severance payments to cover the executive’s
excise taxes, if any, determined in accordance with Sections 4999 and 280G of the Internal Revenue Code |
Other NEOs
The Severance Plan for Textron
Key Executives, in which each of the other NEOs participates, provides severance pay and severance benefits in the event of an
involuntary termination or termination for “good reason” by the executive following a change of control only if the
executive signs a release provided in and required by the plan document. The severance pay, payable in a lump sum, is equal to
the sum of: (i) the executive’s annual rate of base salary at the date of severance, and (ii) the larger of (a) the average
of his or her three most recent actual awards of annual incentive compensation (whether or not deferred) and (b) his or her current
target incentive compensation under the annual incentive compensation plan. In addition, medical and dental benefits would be
provided by Textron to the executive and to his or her dependents, on terms which are not less favorable to them than the terms
existing immediately before severance. Such severance benefits would be continued for eighteen months following severance (or,
if less, until the executive or dependent obtains comparable coverage under another employer’s plan or Medicare).
Under the Severance Plan for
Textron Key Executives, “change of control” means the occurrence of any of the following events: (i) any person unrelated
to Textron (a) becomes (other than by acquisition from Textron) the beneficial owner of more than 50% of Textron’s then
outstanding voting stock, (b) acquires more than 30% of Textron’s then outstanding voting stock, or (c) acquires all or
substantially all of the total gross fair market value of all of the assets of Textron, (ii) a merger or consolidation of Textron
with any other corporation occurs, other than a merger or consolidation that would result in the voting securities of Textron
outstanding immediately before the merger or consolidation continuing to represent 50% or more of the combined voting power of
the voting securities of Textron or such surviving entity outstanding immediately after such merger or consolidation, or (iii)
during any 12-month period, a majority of the members of the Board is replaced by directors whose appointment or election is not
endorsed by a majority of the members of the Board of Directors before the date of their appointment or election.
In addition, in the event of
a not for cause or good reason termination in connection with a change of control, the other NEOs would receive (i) full vesting
acceleration under the SPP, SSP and TSP and (ii) full vesting of long-term incentive awards which would be payable in the same
manner described above for Mr. Donnelly.
The following tables show additional
or accelerated payments which would be payable to our NEOs under existing agreements, plans or other arrangements, for various
scenarios triggered by a termination of employment, assuming the termination date to be January 3, 2020, and, where applicable,
using the closing price of our common stock of $44.74 (as reported on the New York Stock Exchange on January 3, 2020, the last
trading day of our fiscal year).
48
TEXTRON 2020 PROXY STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
C. Donnelly |
|
|
Voluntary(1) |
|
|
Disability |
|
|
Death |
|
|
For
Cause |
|
|
Not
For
Cause |
|
|
Change
in
Control(2) |
|
Annual
Incentive / Severance |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
6,552,000 |
|
|
$ |
9,828,000 |
|
RSU
settled in stock or cash(3) |
|
|
|
11,303,337 |
|
|
|
11,303,337 |
|
|
|
11,303,337 |
|
|
|
0 |
|
|
|
11,303,337 |
|
|
|
11,303,337 |
|
Stock
Options(3) |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Cash
settlement of PSUs(3) |
|
|
|
7,398,355 |
|
|
|
3,538,298 |
|
|
|
3,538,298 |
|
|
|
0 |
|
|
|
7,398,355 |
|
|
|
7,398,355 |
|
Pension
benefit(4) |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
4,849,719 |
|
|
|
6,468,148 |
|
Other
benefits(5) |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
147,164 |
|
|
|
395,746 |
|
Amount
Triggered due to Termination |
|
|
$ |
18,701,692 |
|
|
$ |
14,841,635 |
|
|
$ |
14,841,635 |
|
|
$ |
0 |
|
|
$ |
30,250,575 |
|
|
$ |
35,393,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
T. Connor |
|
|
Voluntary(1) |
|
|
Disability |
|
|
Death |
|
|
For
Cause |
|
|
Not
For
Cause |
|
|
Change
in
Control(2) |
|
Annual
Incentive / Severance |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
2,000,000 |
|
|
$ |
2,000,000 |
|
RSU
settled in stock or cash(3) |
|
|
|
3,276,534 |
|
|
|
3,276,534 |
|
|
|
3,276,534 |
|
|
|
0 |
|
|
|
3,276,534 |
|
|
|
3,276,534 |
|
Stock
Options(3) |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Cash
settlement of PSUs(3) |
|
|
|
2,165,248 |
|
|
|
1,032,396 |
|
|
|
1,032,396 |
|
|
|
0 |
|
|
|
2,165,248 |
|
|
|
2,165,248 |
|
Pension
benefit |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Other
benefits(5) |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
22,945 |
|
Amount
Triggered due to Termination |
|
|
$ |
5,441,782 |
|
|
$ |
4,308,930 |
|
|
$ |
4,308,930 |
|
|
$ |
0 |
|
|
$ |
7,441,782 |
|
|
$ |
7,464,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E.
Robert Lupone |
|
|
Voluntary |
|
|
Disability |
|
|
Death |
|
|
For
Cause |
|
|
Not
For
Cause |
|
|
Change
in
Control(2) |
|
Annual
Incentive / Severance |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
1,434,000 |
|
|
$ |
1,434,000 |
|
RSU
settled in stock or cash(3) |
|
|
|
0 |
|
|
|
1,454,900 |
|
|
|
1,454,900 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,454,900 |
|
Stock
Options(3) |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Cash
settlement of PSUs(3) |
|
|
|
0 |
|
|
|
452,684 |
|
|
|
452,684 |
|
|
|
0 |
|
|
|
0 |
|
|
|
944,534 |
|
Pension
benefit |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Other
benefits(5) |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
14,931 |
|
Amount
Triggered due to Termination |
|
|
$ |
0 |
|
|
$ |
1,907,584 |
|
|
$ |
1,907,584 |
|
|
$ |
0 |
|
|
$ |
1,434,000 |
|
|
$ |
3,848,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julie
G. Duffy |
|
|
Voluntary |
|
|
Disability |
|
|
Death |
|
|
For
Cause |
|
|
Not
For
Cause |
|
|
Change
in
Control(2) |
|
Annual
Incentive / Severance |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
1,000,000 |
|
|
$ |
1,000,000 |
|
RSU
settled in stock or cash(3) |
|
|
|
0 |
|
|
|
614,907 |
|
|
|
614,907 |
|
|
|
0 |
|
|
|
0 |
|
|
|
614,907 |
|
Stock
Options(3) |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Cash
settlement of PSUs(3) |
|
|
|
0 |
|
|
|
276,539 |
|
|
|
276,539 |
|
|
|
0 |
|
|
|
0 |
|
|
|
597,880 |
|
Pension
benefit |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Other
benefits(5) |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
22,945 |
|
Amount
Triggered due to Termination |
|
|
$ |
0 |
|
|
$ |
891,446 |
|
|
$ |
891,446 |
|
|
$ |
0 |
|
|
$ |
1,000,000 |
|
|
$ |
2,235,732 |
|
(1) |
Mr. Donnelly
and Mr. Connor are retirement eligible (age 55 with at least ten years of service to Textron) which entitles them to continued
vesting of their unvested RSUs, stock options and PSUs upon a voluntary termination. |
(2) |
Amounts reported
in the “Change in Control” column are paid only upon a “not for cause” or “good reason”
termination in connection with a Change in Control. |
(3) |
Amounts reported for
RSUs, stock options and PSUs reflect accelerated, prorated and/or continued vesting triggered by termination event under each
scenario, respectively. PSU amounts have been calculated assuming that the 2018-2020 PSU cycle will be paid at 81.8% of
target and the 2019–2021 PSU cycle will be paid at 79.1% of target. These figures are based on actual Company
performance against goals for 2018 and 2019, and target Company performance against goals for 2020 and 2021. In addition, the
figures assume median total shareholder return performance over each three-year PSU cycle. |
(4) |
Potential pension
benefits have been calculated assuming a discount rate of 3.45%. |
(5) |
Other benefits (i)
for Mr. Donnelly, includes, under the “Not for Cause” scenario, $12,364 in continuation of insurance coverage
and $134,800 in additional benefits under retirement plans, and, under the “Change in Control” scenario, $18,546
in continuation of insurance coverage, $202,200 in additional benefits under retirement plans and outplacement assistance
valued at $175,000, (ii) for the other NEOs, represents continuation of health benefits. |
TEXTRON 2020 PROXY STATEMENT 49
PAY RATIO
We are required by the Dodd-Frank
Wall Street Reform and Consumer Protection Act and Securities and Exchange Commission (“SEC”) rules to provide the
ratio of the annual total compensation of Mr. Donnelly, our Chief Executive Officer, to that of an employee whose annual compensation
is at the median of all our employees.
Textron and its consolidated
subsidiaries together have approximately 35,000 employees located throughout the world, with approximately 75% in the U.S., 12%
in Europe, 7% in Canada and Mexico combined, 5% in Asia and1% elsewhere.
To identify the employee with
compensation at the median of all employees for our 2017 fiscal year, we used “annual rate”, as reflected in our enterprise-wide
human resources information system, as of October 1, 2017, for all of our employees, including part time, temporary and seasonal
employees. The annual rate for salaried employees reflects base salary paid on an annual basis. For hourly employees, the annual
rate is arrived at using their hourly rate and standard work hours. We did not make any cost-of-living adjustments despite the
large variety of labor markets in which our employees work, nor did we make any adjustments to account for the variety of compensation
arrangements used to pay employees in varying roles (e.g., we did not include overtime, commissions, bonuses or other types of
non-fixed compensation).
Using this methodology for 2017,
we determined that the “median employee” was a full-time, hourly employee located in the U.S. As permitted by SEC
rules, we utilized the same median employee for 2018 and 2019 because we believe there was no material change to our employee
population or employee compensation arrangements during 2018 or 2019 that would significantly impact our pay ratio disclosure.
Total compensation for the median employee in the 2019 fiscal year was in the amount of $99,196. “Annual total compensation”
of the median employee includes regular and overtime earnings, any applicable annual bonus payment, Company contributions to a
401(k) plan on behalf of the employee, and the Company-paid portion of health and welfare benefits.
“Annual total compensation”
for Mr. Donnelly for the 2019 fiscal year was $18,942,936, which is a $21,338 increase over the amount reflected in the “Total”
column in the Summary Compensation Table on page 38. The increase reflects the inclusion of Mr. Donnelly’s health and welfare
benefits which are excluded from the Summary Compensation Table amounts under SEC rules. Based upon this information, for 2019
the ratio of the annual total compensation of Mr. Donnelly to the annual total compensation of the median employee was 191 to
1.
50
TEXTRON 2020 PROXY STATEMENT
EQUITY COMPENSATION
PLAN INFORMATION
The following table sets forth
certain information, as of the end of Textron’s 2019 fiscal year, for all Textron compensation plans previously approved
by shareholders. There are no compensation plans not previously approved by shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
(a) |
|
|
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b) |
|
|
|
Number
of Securities
Remaining Available for
Future Issuance Under Equity
Compensation Plans
(Excluding Securities Reflected
in Column (a))
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by shareholders |
|
9,295,804 |
(1) |
|
|
|
44.00 |
(2) |
|
|
|
10,869,772 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by shareholders |
|
N/A |
|
|
|
|
N/A |
|
|
|
|
N/A |
|
Total |
|
9,295,804 |
|
|
|
|
44.00 |
|
|
|
|
10,869,772 |
|
(1) |
Includes
543,260 unvested shares that may be issued under previously granted RSUs. |
(2) |
This value reflects
the weighted average exercise price of outstanding stock options only. |
(3) |
Consists of shares
remaining available for issuance under the Textron Inc. 2015 Long-Term Incentive Plan that may be issued pursuant to stock
options, stock appreciation rights, performance stock, restricted stock, RSUs and other awards, provided that no more than
3,670,780 shares may be issued pursuant to awards other than stock options and stock appreciation rights. |
|
|
EVALUATION OF RISK
IN COMPENSATION PLANS
In addition to the Company’s
incentive compensation arrangements applicable to senior executives throughout the enterprise, the Company’s business units
maintain incentive compensation plans and programs in which business unit employees below the senior executive level participate
(such as sales incentive plans and incentive programs linked to safety and customer service, etc.). Textron’s management
reviews these business unit incentive compensation plans and programs as they relate to risk management practices and risk-taking
incentives.
TEXTRON 2020 PROXY STATEMENT 51
TRANSACTIONS WITH
RELATED PERSONS
Except as described below, since
the beginning of Textron’s 2019 fiscal year, there have been no transactions and there are no currently proposed transactions,
in which Textron was or is to be a participant and the amount involved exceeds $120,000 and in which any related person had or
will have a direct or indirect material interest.
Both Mr. Donnelly and Mr. Connor
are licensed pilots who each own a Citation business jet which they use for both personal and business purposes. Each executive
holds their aircraft through a limited liability company (“LLC”) which has entered into an Amended and Restated Hangar
License and Services Agreement with the Company related to the sublease by the respective LLCs of a portion of the Company’s
leased hangar space and the provision of other services.
These Amended and Restated Hangar
License and Services Agreements each provide that the Company will provide certain aircraft maintenance and other services, including
pilot services, for the executives’ personal aircraft. Each of Mr. Donnelly and Mr. Connor pays $1,500 per month rent for
the hangar space used by his aircraft. The Company pays the difference in cost for the portion of hangar space utilized by Mr.
Connor’s aircraft above this monthly payment which amount is included in “All Other Compensation” in the Summary
Compensation Table on page 38. Fees for maintenance, pilot services and all other services are set at market rates, and the executives’
LLCs fully reimburse the Company at such market rates. Pursuant to the Hangar Agreements, the Company permits the executives’
LLCs to purchase fuel from the Company’s bulk fuel storage facility at the discounted bulk rate paid by the Company, and
the Company’s Aviation Department facilitates the executives’ personal flights and performs various administrative
duties in connection with these aircraft. Both Amended and Restated Hangar License and Services Agreements have been approved
by the Nominating and Corporate Governance Committee. During our 2019 fiscal year, Mr. Donnelly’s LLC and Mr. Connor’s
LLC paid total costs to Textron under these agreements of $74,490 and $58,559, respectively.
In December 2018, Textron entered
into a non-exclusive, non-continuous Aircraft Dry Lease Agreement with Mr. Donnelly’s LLC pursuant to which the Company
leases Mr. Donnelly’s aircraft in order to enable the Company to use his aircraft for business flights on an as-needed basis.
This arrangement is beneficial to the Company as Mr. Donnelly travels frequently for business, and his aircraft is more economical
for many of his flights than the larger business jets operated by the Company’s flight department. In addition, the Dry
Lease enables the flight department to have operational control of the aircraft while it is being flown on Textron business flights.
The Dry Lease is for a term of one year, automatically renewable for subsequent one-year terms, subject to the parties’
termination rights. The Company pays no lease payment for its use of the aircraft; it is responsible only for costs directly attributable
to the Textron business flight, including maintenance reserve payments allocated to the Company’s flights based upon flight
hours in respect of maintenance service program agreements that apply to Mr. Donnelly’s aircraft. In addition, the Company
pays rent for hangar space in excess of the amount paid by Mr. Donnelly as described above. The Nominating and Corporate Governance
Committee has approved the Aircraft Dry Lease Agreement.
During 2019, pursuant to the
terms of the Dry Lease, the Company’s allocation of maintenance reserves for Company business flights on Mr. Donnelly’s
aircraft was $54,863 and the Company incurred $24,224 for the incremental cost of hangar space utilized by Mr. Donnelly’s
aircraft. In turn, Mr. Donnelly’s LLC and Mr. Connor’s LLC each engaged Textron Aviation’s service centers to
perform maintenance work on their aircraft during 2019 for which they were charged an arm’s length price of $42,744 and
$4,445, respectively, and Mr. Connor paid TRU Simulation + Training, a Textron subsidiary, $12,495 for his recurrent pilot training.
Under Textron’s Corporate
Governance Guidelines and Policies, all related party transactions are subject to approval or ratification by the Nominating and
Corporate Governance Committee. Related party transactions, referred to as “Interested Transactions with Related Parties”
under the Guidelines, are generally defined as any transaction, arrangement or relationship or series of similar transactions,
arrangements or relationships (including any indebtedness or guarantee of indebtedness) where the Company is a participant, in
which the aggregate amount involved since the beginning of the Company’s last fiscal year exceeds or is expected to exceed
$100,000 and an executive officer, director, nominee or greater than 5% beneficial holder or immediate family member of any of
the foregoing has or will have a direct or indirect interest (other than solely as a result of being a director or a less than
10% beneficial owner of another entity). In determining whether to approve or ratify such a transaction, the committee takes into
account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally
available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s
interest in the transaction.
52
TEXTRON 2020 PROXY STATEMENT
|
|
ADVISORY
VOTE TO APPROVE TEXTRON’S EXECUTIVE COMPENSATION |
|
The Board has adopted a policy
providing for an annual “say-on-pay” advisory vote. In accordance with this policy and Section 14A of the Securities
Exchange Act of 1934, as amended, enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and as a matter
of good corporate governance, we are providing our shareholders with an advisory (non-binding) vote to approve the compensation
of our named executive officers as disclosed in this proxy statement. This vote is advisory only, and it is not binding on Textron
or on our Board of Directors. Although the vote is non-binding, the Organization and Compensation Committee (the “Committee”)
and the Board will carefully consider the outcome of the vote when making future compensation decisions.
Textron’s compensation
philosophy is to establish target total pay with reference to a talent peer group and to tie a substantial portion of our executives’
compensation to performance against objective business goals and stock price performance. This approach helps us to recruit and
retain talented executives, incentivizes our executives to achieve desired business goals and aligns their interests with the
interests of our shareholders. For a full discussion of our executive compensation programs and 2019 compensation decisions made
by the Committee, see “Compensation Discussion and Analysis” beginning on page 21.
Textron’s Board of Directors
believes that the Company’s executive compensation program is working to align management’s interests with those of
our shareholders to support long-term value creation. Accordingly, Textron shareholders are being asked to vote “FOR”
the following advisory resolution at the annual meeting:
“RESOLVED, that the shareholders
approve, on an advisory basis, the Company’s compensation of its named executive officers, as disclosed in the Proxy Statement
for the 2020 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission,
including the Compensation Discussion and Analysis and the compensation tables regarding named executive officer compensation,
together with the accompanying narrative disclosure.”
Unless the Board modifies its
policy on the frequency of future say-on-pay advisory votes, the next say-on-pay advisory vote will be held at the 2021 Annual
Meeting of Shareholders.
|
|
|
The
Board of Directors recommends a vote “FOR” the resolution approving
the Company’s executive compensation
(Item 2 on the proxy card). |
TEXTRON 2020 PROXY STATEMENT 53
|
|
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
|
The Audit Committee is responsible
for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit
Textron’s financial statements. The Audit Committee has appointed Ernst & Young LLP to serve as the Company’s
independent registered public accounting firm for 2020. Ernst & Young LLP or its predecessors have served as the independent
registered public accounting firm for the Company for over twenty years. In addition to ensuring the regular rotation of the lead
audit partner as required by law, the Audit Committee is involved in the selection of, and reviews and evaluates, the lead audit
partner.
The Audit Committee and the
Board believe that the appointment of the firm of Ernst & Young LLP to audit Textron’s consolidated financial statements
for 2020 is in the best interests of the Company and its shareholders and propose and recommend that the shareholders ratify the
Audit Committee’s appointment of Ernst & Young LLP as independent registered public accounting firm for 2020.
Although ratification is not
required by our By-Laws or otherwise, the Audit Committee is submitting the selection of Ernst & Young LLP to shareholders
as a matter of good corporate governance. If shareholders do not ratify the appointment, the Audit Committee will reconsider its
selection. A representative or representatives of Ernst & Young LLP will be present at the annual meeting and will have the
opportunity to make a statement and be available to respond to appropriate questions.
FEES TO
INDEPENDENT AUDITORS
The following table presents
fees billed for professional services rendered by Ernst & Young LLP for the audit of Textron’s annual financial statements,
the reviews of the financial statements in Textron’s Forms 10-Q, and other services in connection with statutory and regulatory
filings and engagements for 2018 and 2019 and fees billed for audit-related services, tax services and all other services rendered
by Ernst & Young LLP in 2018 and 2019.
|
|
|
|
|
|
|
|
|
Fee
Type |
|
|
|
2018 |
|
|
2019 |
|
|
|
|
|
($
in thousands) |
|
Audit
Fees |
|
|
|
$ |
9,531 |
|
|
$ |
12,094 |
|
Audit-Related
Fees(1) |
|
|
|
|
922 |
|
|
|
579 |
|
Tax
Fees(2) |
|
|
|
|
61 |
|
|
|
11 |
|
All
Other Fees |
|
|
|
|
0 |
|
|
|
0 |
|
Total
Fees |
|
|
|
$ |
10,514 |
|
|
$ |
12,684 |
|
(1) |
Audit-related
fees include fees for employee benefit plan audits, attest services not required by statute or regulation, and consultations
concerning financial accounting and reporting matters not classified as audit. |
(2) |
Tax fees include
fees for tax services relating to consultations and compliance. |
Under the Audit and Non-Audit
Services Pre-Approval Policy approved by the Audit Committee, all audit and non-audit services to be performed by the independent
auditor for Textron require pre-approval by the Audit Committee. The Audit Committee may delegate pre-approval authority to one
or more of its members. Any pre-approvals pursuant to delegated authority shall be reported to the Audit Committee at its next
scheduled meeting. The Audit Committee cannot delegate pre-approval authority to management.
All audit-related services,
tax services and other services for 2019 were pre-approved by the Audit Committee, which determined that such services would not
impair the independence of the auditor and are consistent with the Securities and Exchange Commission’s rules on auditor
independence.
|
The
Board of Directors recommends a vote “FOR” ratification of
the appointment by the Audit Committee of Ernst &
Young LLP
(Item 3 on the proxy card). |
54
TEXTRON 2020 PROXY STATEMENT
|
|
|
OTHER
MATTERS TO COME BEFORE THE MEETING |
|
The Board of Directors does
not know of any matters which will be brought before the meeting other than those specifically set forth in the notice thereof.
If any other matter properly comes before the meeting, it is intended that the persons named in and acting under the enclosed
form of proxy or their substitutes will vote thereon in accordance with their best judgment.
|
|
SHAREHOLDER
PROPOSALS AND OTHER MATTERS FOR 2021 ANNUAL MEETING |
|
Shareholder proposals to be
considered for inclusion in the proxy statement and form of proxy relating to the 2021 annual meeting of shareholders under Rule
14a-8 under the Securities Exchange Act of 1934, as amended, must be received by Textron, at 40 Westminster Street, Providence,
Rhode Island 02903, Attention: Executive Vice President, General Counsel and Secretary, on or before November 6, 2020.
Our shareholders have proxy
access, which allows a shareholder or group of up to 20 shareholders owning in the aggregate 3% or more of our outstanding common
stock continuously for at least three years to nominate and include in our proxy materials director nominees constituting up to
20% of the number of directors in office or two nominees, whichever is greater, provided the shareholder(s) and nominee(s) satisfy
the requirements in Textron’s By-Laws. If a shareholder or group of shareholders wishes to nominate one or more director
candidates to be included in the Company’s proxy statement for the 2021 annual meeting, we must receive proper written notice
of the nomination not less than 120 or more than 150 days before the anniversary date that the definitive proxy statement was
first released to shareholders in connection with the immediately preceding annual meeting, or between the close of business on
October 7, 2020 and the close of business on November 6, 2020 for the 2021 annual meeting, and the nomination must otherwise comply
with our By-Laws. If the annual meeting is called for a date that is more than 30 days before or after the anniversary date, then
the notice must be received no later than the close of business on the 120th day prior to such meeting and no earlier than the
close of business on the 150th day prior to such meeting or 10 days after public disclosure of the meeting is first made, whichever
occurs later.
If shareholders instead wish
to bring other business before a shareholder meeting, timely notice must be received by Textron in advance of the meeting. Under
Textron’s By-Laws, such notice must be received not less than 90 nor more than 150 days before the anniversary date of the
immediately preceding annual meeting of shareholders or between November 30, 2020 and the close of business on January 29, 2021
for the 2021 annual meeting (but if the annual meeting is called for a date that is more than 30 days before or more than 60 days
after the anniversary date, then the notice must be received no later than the close of business on the 90th day before the date
of the annual meeting or 10 days after public disclosure of the meeting is first made, whichever occurs later). The notice must
include the information required by our By-Laws. These requirements are separate from the requirements a shareholder must meet
to have a proposal included in Textron’s proxy statement under Rule 14a-8. These time limits also apply to nominations submitted
by shareholders under our By-Laws and in determining whether notice is timely for purposes of rules adopted by the Securities
and Exchange Commission relating to the exercise of discretionary voting authority by Textron.
TEXTRON 2020 PROXY STATEMENT 55
|
|
|
DELIVERY
OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS |
|
The broker, bank or other nominee
for any shareholder who is a beneficial owner, but not the record holder, of the Company’s shares may deliver only one copy
of the Company’s proxy statement and annual report, or a Notice of Internet Availability (a “Notice”), as applicable,
to multiple shareholders who share the same address, unless that broker, bank or other nominee has received contrary instructions
from one or more of the shareholders. The Company will deliver promptly, upon written or oral request, a separate copy of the
proxy statement and annual report or a Notice, as applicable, to a shareholder at a shared address to which a single copy was
delivered. A shareholder who wishes to receive a separate copy of the proxy statement and annual report or a Notice, now or in
the future, should submit their request to the Company by telephone at (401) 457-2288 or by submitting a written request to the
Secretary at Textron Inc., 40 Westminster Street, Providence, Rhode Island 02903. Beneficial owners sharing an address who are
receiving multiple copies of these materials and wish to receive a single copy of such materials in the future will need to contact
their broker, bank or other nominee to request that only a single copy of each document be mailed to all shareholders at the shared
address in the future.
By order of the Board of Directors,
E. Robert Lupone
Executive Vice President,
General Counsel and Secretary
March 6, 2020
YOUR
VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE VOTE
YOUR PROXY VIA INTERNET OR TELEPHONE OR, IF YOU RECEIVED PRINTED PROXY MATERIALS, FILL IN, SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENVELOPE PROVIDED.
56
TEXTRON 2020 PROXY STATEMENT
Corporate
Information
Corporate
Headquarters
Textron
Inc.
40 Westminster
Street
Providence,
RI 02903
(401)
421-2800
www.textron.com
Annual
Meeting
Textron’s
annual meeting of shareholders will be
held
on Wednesday, April 29, 2020, at 11 a.m.
at Textron
Inc., 40 Westminster Street, 18th Floor,
Providence,
RI 02903.
Transfer
Agent, Registrar and
Dividend
Paying Agent
For
shareholder services such as change of address,
lost
certificates or dividend checks, change in
registered
ownership or the Dividend Reinvestment
Plan,
write or call:
American
Stock Transfer & Trust
Company,
LLC
Operations
Center
6201
15th Avenue
Brooklyn,
NY 11219
phone:
(866) 621-2790
email:
info@amstock.com
Stock
Exchange Information
(Symbol:
TXT)
Textron
common stock is listed on the New York
Stock
Exchange. |
Investor
Relations
Textron
Inc.
Investor
Relations
40 Westminster
Street
Providence,
RI 02903
Investor
Relations phone line:
(401)
457-2288
News
media phone line:
(401) 457-2362
For
more information, visit our website at
www.textron.com.
Company
Publications and
General
Information
To receive
a copy of Textron’s Forms 10-K and
10-Q,
Proxy Statement or Annual Report without
charge,
visit our website at www.textron.com or send
a written
request to Textron Investor Relations at the
address
listed above. For the most recent company
news
and earnings press releases, visit our website
at www.textron.com.
Textron
is an Equal Opportunity Employer.
Textron
Board of Directors
To contact
the Textron Board of Directors or to
report
concerns or complaints about accounting,
internal
accounting controls or auditing matters,
you
may write to Board of Directors, Textron Inc.,
40 Westminster
Street, Providence, RI 02903;
call
(866) 698-6655 or (401) 457-2269; or send
an email
to textrondirectors@textron.com. |
|
|
SCAN TO
VIEW MATERIALS & VOTE |
|
|
|
TEXTRON INC. |
VOTE BY INTERNET - www.proxyvote.com
or scan the QR Barcode above |
40 WESTMINSTER
STREET
PROVIDENCE, RI 02903 |
Use the Internet to transmit your voting
instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have
your proxy card in hand, and follow the instructions to cast your vote. |
|
|
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
|
If you would like to reduce the costs incurred
by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using
the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. |
|
|
|
VOTE BY PHONE -
1-800-690-6903
|
|
Use any touch-tone
telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy
card in hand when you call and then follow the instructions.
|
|
|
|
VOTE
BY MAIL
|
|
Mark, sign and date
your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51
Mercedes Way, Edgewood, NY 11717.
|
|
|
|
SAVING
PLAN SHARES
|
|
Voting instructions
for shares in the Textron savings plans, whether voted by Internet, phone or mail, must be received by 11:59 P.M. Eastern Time
on April 26, 2020.
|
|
|
TO VOTE, MARK BLOCKS
BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
|
E94785-P31864-Z76145 |
KEEP
THIS PORTION FOR YOUR RECORDS |
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
DETACH AND RETURN
THIS PORTION ONLY |
|
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|
TEXTRON INC. |
|
|
|
|
|
|
|
|
|
|
The Board of Directors recommends you vote “FOR”
the following nominees: |
|
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|
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|
|
1. |
Election of Directors |
|
For |
Against |
Abstain |
|
|
|
|
|
|
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|
|
|
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|
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|
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|
|
|
|
1a. Scott C. Donnelly |
|
o |
o |
o |
|
The Board of Directors recommends you vote |
For |
Against |
Abstain |
|
|
|
|
|
|
|
|
“FOR” Proposals 2 and
3. |
|
|
|
|
|
|
1b. Kathleen M.
Bader |
|
o |
o |
o |
|
2. Approval
of the advisory (non-binding) resolution to approve executive compensation. |
o |
o |
o |
|
|
1c. R. Kerry Clark |
|
o |
o |
o |
|
3. Ratification
of appointment of independent registered public accounting firm.
|
|
|
|
|
|
|
|
|
|
|
|
o |
o |
o |
|
|
1d. James T. Conway |
|
o |
o |
o |
|
|
|
|
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1e. Paul E. Gagné |
|
o |
o |
o |
|
|
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|
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|
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1f. Ralph D. Heath |
|
o |
o |
o |
|
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1g. Deborah Lee
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1h. Lionel L. Nowell III |
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1i. James L. Ziemer |
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1j. Maria T. Zuber |
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Note:
In their discretion, the proxies are authorized to vote on such other business as may properly come before the meeting
or any adjournment thereof. |
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For address changes and/or comments,
please check this box and write them on the back where indicated. |
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Please indicate if you plan
to attend this meeting. |
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Yes |
No |
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Note: Please sign exactly as your name or names
appear(s) on this proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If the signer is a partnership, please sign in partnership name by authorized
person. |
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Signature [PLEASE SIGN WITHIN BOX] |
Date |
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Signature (Joint Owners) |
Date |
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ANNUAL MEETING OF SHAREHOLDERS OF
TEXTRON INC.
Wednesday, April 29, 2020, 11:00 a.m. EDT
Textron Inc.
40 Westminster Street
Providence, Rhode Island
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 29, 2020
The Company’s Proxy Statement for the 2020 Annual Meeting of
Shareholders and
the Annual Report to Shareholders for the fiscal year ended January 4, 2020, including
the Company’s Annual Report on Form 10-K for the fiscal year ended January 4, 2020,
are available at https://investor.textron.com/investors/investor-resources/annual-report-and-proxy-materials/.
E94786-P31864-Z76145
TEXTRON INC.
Proxy Solicited on Behalf of the Board of Directors for Annual Meeting of Shareholders,
April 29, 2020
The undersigned hereby appoint(s) Scott C. Donnelly, Frank T. Connor and E.
Robert Lupone, or any one of them, attorneys with full power of substitution and revocation to each, for and in the name of the
undersigned with all the powers the undersigned would possess if personally present, to vote the shares of the undersigned in
Textron Inc. as indicated on the proposals referred to on the reverse side hereof at the Annual Meeting of its shareholders to
be held on Wednesday, April 29, 2020, and at any adjournments thereof, and in their or his discretion upon any other matter which
may properly come before said meeting.
This card also constitutes voting instructions to the trustees under the Textron
savings plans to vote, in person or by proxy, the proportionate interest of the undersigned in the shares of Common Stock of Textron
Inc. held by the trustees under the plans, as described in the proxy statement.
All voting instructions for shares in the Textron savings plans, whether voted
by mail, telephone or Internet, must be received by 11:59 p.m. Eastern Time on April 26, 2020, so that the trustees of the plans
(who vote the shares on behalf of participants in the plans) have adequate time to tabulate the voting instructions. Your voting
instructions will be kept confidential.
This proxy, when properly signed, will be voted as
directed by the undersigned shareholder(s). If no direction is made, this proxy will be voted FOR the nominees listed herein
and FOR Proposals 2 and 3. If the card constitutes voting instructions to a savings plan trustee, the
trustee will vote as described in the proxy statement.
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Address Changes/Comments: |
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(If you noted any Address Changes/Comments above, please mark corresponding box
on the reverse side.)
(Continued and to be signed on reverse side)
This regulatory filing also includes additional resources:
e20122_txt-def14a.pdf
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