TEXTRON INC, DEF 14A filed on 3/3/2023
Proxy Statement (definitive)
v3.22.4
Cover
12 Months Ended
Dec. 31, 2022
Cover [Abstract]  
Document Type DEF 14A
Entity Registrant Name TEXTRON INC.
Entity Central Index Key 0000217346
Amendment Flag false
v3.22.4
Pay vs Performance Disclosure
12 Months Ended
Dec. 31, 2022
USD ($)
Dec. 31, 2021
USD ($)
Dec. 31, 2020
USD ($)
Pay vs Performance Disclosure [Table]      
Pay vs Performance [Table Text Block]
 
            Value of Initial Fixed $100 Investment based on:(2)    
    Summary
Compensation
Table Total for
PEO ($)
Compensation
Actually Paid
to PEO ($)(1)
Average
Summary
Compensation
Table Total
for Non-PEO
NEOs ($)
Average
Compensation
Actually Paid
to Non-PEO
NEOs ($)(1)
Company
Total
Shareholder
Return(TSR)
($)
Peer Group
TSR
S&P 500
A&D Index
TSR ($)
Peer Group
TSR
S&P 500
Industrials
Index TSR ($)
Net
Income
($) (in millions)
Manufacturing
Cash Flow
before
Pension
Contributions
                     
2022   15,367,279 18,736,482 3,881,920 4,533,894 159.5 111.5 127.2 861 1,188(3)
2021   18,576,014 45,821,710 4,819,441 9,366,481 173.7 95.0 134.5 746 1,149
2020   17,770,781 15,822,859 4,206,109 3,770,432 108.6 83.9 111.1 309 596
   
Named Executive Officers, Footnote [Text Block] As reflected in the Summary Compensation Table on page 38, during each year in the table above, Mr. Donnelly was Textron’s Principal Executive Officer (“PEO”) and our other Named Executive Officers (“Non-PEO NEOs”) consisted of Mr. Connor, Mr. Lupone and Ms. Duffy.    
PEO Total Compensation Amount $ 15,367,279 $ 18,576,014 $ 17,770,781
PEO Actually Paid Compensation Amount [1] $ 18,736,482 45,821,710 15,822,859
Adjustment To PEO Compensation, Footnote [Text Block]

“Compensation Actually Paid” is defined by the SEC to include amounts not actually received by the PEO or non-PEO NEOs. The calculation of CAP is required to include, not only actual take-home pay for the reported year, but (i) an alternate valuation of pension benefits accrued during the year, (ii) the year-end value of equity awards granted during the reported year, and (iii) the change in the value of equity awards that were unvested at the end of the prior year, measured through the date the awards vested or through the end of the reported fiscal year. The reconciliation below sets forth adjustments made to the Summary Compensation Table Total for Mr. Donnelly and the average of the Summary Compensation Table Total for the Non- PEO NEOs to arrive at “Compensation Actually Paid to PEO” and “Average Compensation Actually Paid to Non-PEO NEOs”, in the manner prescribed by SEC rules.

 

    PEO   Non-PEO NEOs (average)  
                             
    2022   2021   2020     2022   2021   2020  
                             
Summary Compensation Table (“SCT”) Total   $15,367,279   $18,576,014   $17,770,781     $3,881,920   $4,819,441   $4,206,109  
Adjustments:                            
Deduction for Change in Actuarial Present Values reported under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the SCT     (95,972 ) (2,838,193 )     (216,984 ) (708,553 )
Increase for “Service Cost” for pension plans   576,449   580,054   512,139     162,591   165,031   188,354  
Deduction for the grant date fair value of stock awards (PSUs and RSUs) awarded during the year, reported under the “Stock Awards” column in the SCT   (8,314,479 ) (10,500,442 ) (10,522,576 )   (1,444,119 ) (1,828,820 ) (1,797,292 )
    PEO   Non-PEO NEOs (average)
                 
    2022 2021 2020   2022 2021 2020
                 
Deduction for the grant date fair value of options awarded during the year, reported under the “Option Awards” column in the SCT    (2,905,358)  (3,011,625) (2,493,513)       (504,602)    (527,116)   (429,833)
                 
Increase for year-end fair value of awards granted during year that remain outstanding and unvested as of year-end(1)   12,650,262 22,165,513 13,307,527   2,190,502 3,879,540 2,293,943
                 
Increase/deduction for change in fair value from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end(1)     1,079,909 14,602,311 1,043,862       194,183 2,484,003    170,048
                 
Increase/deduction for change in fair value from prior year-end to vesting date of awards granted prior to year that vested during the year        264,240    3,486,240   (977,153)          50,307     588,100   (155,581)
                 
Increase for value of dividend equivalents earned on RSUs   18,180 19,617 19,985   3,112 3,286 3,237
Total Adjustments   3,369,203 27,245,696 (1,947,922)   651,974 4,547,040 (435,677)
“Compensation Actually Paid”   $18,736,482 $45,821,710 $15,822,859   $4,533,894 $9,366,481 $3,770,432

 

 

(1) We calculate the fair value of our PSUs, which are settled in cash, in accordance with GAAP, based on the closing price of our common stock and the number of units, as adjusted based on estimates with respect to performance on the relevant metrics. On the grant date, we assume performance at target on the metrics. Following the grant date, we apply the actual rTSR as of the valuation date, and, for the remaining performance periods, we utilize estimates of performance against the target for each operating metric.
   
Non-PEO NEO Average Total Compensation Amount $ 3,881,920 4,819,441 4,206,109
Non-PEO NEO Average Compensation Actually Paid Amount $ 4,533,894 9,366,481 3,770,432
Compensation Actually Paid vs. Total Shareholder Return [Text Block]

CAP versus TSR

 

As shown in the chart below, the calculated CAP for both the PEO and the Non-PEO NEOs is correlated with the Company’s TSR for each of the years set forth in the table above. This is due primarily to the Company’s use of equity awards in the long-term incentive compensation plan, which results in the alignment of the value of our executives’ outstanding and unvested awards with shareholders’ interests. As described in detail in the Compensation Discussion and Analysis beginning on page 24, awards issued under our long-term incentive compensation program are directly linked to stock price and represent a substantial portion of our NEOs’ compensation which serves to align our executives’ interests with our shareholders’ interests. Textron’s common stock price increased 59.7%, from $48.33 at the end of the 2020 fiscal year to $77.20 at the end of the 2021 fiscal year, resulting in a substantially greater fair value of outstanding and unvested equity awards and a substantial increase in year- over-year CAP. The impact of equity incentive compensation is greater for the PEO’s CAP calculation because the portion of his compensation that is delivered in the form of equity incentives is greater than that portion for the Non-PEO NEOs.

 

 

CAP Versus TSR

   
Compensation Actually Paid vs. Net Income [Text Block]

CAP versus Net Income

 

As shown in the chart below, the Company’s net income increased significantly from 2020 to 2021 and also increased from 2021 to 2022. This measure is somewhat aligned with the calculated CAP for both the PEO and the Non-PEO NEOs, although, the correlation related to Net Income impact is overshadowed by the impact of changes in the Company’s stock price on CAP primarily due to the Company’s use of equity incentives that are tied directly to stock price, as described above. Notably, the Company does not use Net Income to determine compensation levels or long-term incentive plan payouts.

 

 

   
Compensation Actually Paid vs. Company Selected Measure [Text Block]

CAP versus Manufacturing Cash Flow before Pension Contributions

 

As shown in the chart below, the Company’s Manufacturing Cash Flow before Pension Contributions increased significantly from 2020 to 2021 and modestly from 2021 to 2022, despite a significant increase in cash taxes due to a change in tax law that became effective in 2022. This measure affects CAP for both the PEO and the Non-PEO NEOs by impacting the extent to which performance share units were earned in 2022, although that impact was overshadowed by the impact of changes in the Company’s stock price on CAP, primarily due to the Company’s use of equity incentives that are tied directly to stock price, as described above. In particular, Textron’s common stock price increased 59.7%, from $48.33 at the end of the 2020 fiscal year to $77.20 at the end of the 2021 fiscal year, resulting in a substantially greater fair value of outstanding and unvested equity awards and a substantial increase in year-over-year CAP. Likewise, while Manufacturing Cash Flow before Pension Contributions increased modestly from 2021 to 2022, year-over-year CAP decreased, primarily due to an 8.3% decrease in

Textron’s common stock price from $77.20 at the end of 2021 to $70.80 at year end 2022.

 

 

   
Total Shareholder Return Vs Peer Group [Text Block]

Company’s TSR versus Peer Groups’ TSR

 

As shown in the chart below, the Company’s cumulative TSR is correlated with the S&P 500 Industrials index cumulative TSR. It is not as closely aligned with the S&P 500 A&D index cumulative TSR. Because Textron is a multi-industry company with businesses in the aerospace and defense industry as well as other industrial manufacturing businesses, both indices are relevant for comparison, although neither is an ideal peer group. Due to consolidation in the A&D industry, that index reflects the results of only ten companies, including Textron, making each company’s impact arguably outsized, especially the impact of large companies, given that the returns shown are weighted based on market capitalization. Since the S&P 500 Industrials index includes a greater number of companies than the S&P 500 A&D index, using this index for comparison mitigates the effect of companies with outlying performance.

 

 

   
Tabular List [Table Text Block]

Financial Performance Measures

 

The following list of financial performance measures represents, in the Company’s assessment, the most important financial performance measures used by the Company to link Compensation Actually Paid (“CAP”) to the NEOs to company performance for the 2022 fiscal year. Please see the Compensation Discussion and Analysis for additional discussion of how these factors affected our NEOs’ compensation.

 

Manufacturing Cash Flow before Pension Contributions

Average Return on Investment Capital

Cumulative Manufacturing Cash Flow

Enterprise Net Operating Profit

Relative TSR compared to the S&P 500

 

Set forth below is a description of the relationship between CAP and the financial performance metrics set forth in the Pay versus Performance table above, as well as a description of the relationship of the Company’s Total Shareholder Return (“TSR”) compared to our Peer Groups’ TSR.

   
Total Shareholder Return Amount [2] $ 159.5 173.7 108.6
Peer Group Total Shareholder Return Amount [2] 111.5 95.0 83.9
Net Income (Loss) $ 861,000,000 $ 746,000,000 $ 309,000,000
Company Selected Measure Amount 1,188 [3] 1,149 596
PEO [Member]      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount $ 3,369,203 $ 27,245,696 $ (1,947,922)
PEO [Member] | Deduction for Change in Actuarial Present Values reported under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the SCT      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount (95,972) (2,838,193)
PEO [Member] | Increase for “Service Cost” for pension plans      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount 576,449 580,054 512,139
PEO [Member] | Deduction for the grant date fair value of stock awards (PSUs and RSUs) awarded during the year, reported under the “Stock Awards” column in the SCT      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount (8,314,479) (10,500,442) (10,522,576)
PEO [Member] | Deduction for the grant date fair value of options awarded during the year, reported under the “Option Awards” column in the SCT      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount (2,905,358) (3,011,625) (2,493,513)
PEO [Member] | Increase for year-end fair value of awards granted during year that remain outstanding and unvested as of year-end      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount [4] 12,650,262 22,165,513 13,307,527
PEO [Member] | Increase/deduction for change in fair value from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount 1,079,909 14,602,311 1,043,862
PEO [Member] | Increase/deduction for change in fair value from prior year-end to vesting date of awards granted prior to year that vested during the year      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount 264,240 3,486,240 (977,153)
PEO [Member] | Increase for value of dividend equivalents earned on RSUs      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount 18,180 19,617 19,985
Non-PEO NEO [Member]      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount 651,974 4,547,040 (435,677)
Non-PEO NEO [Member] | Deduction for Change in Actuarial Present Values reported under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the SCT      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount (216,984) (708,553)
Non-PEO NEO [Member] | Increase for “Service Cost” for pension plans      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount 162,591 165,031 188,354
Non-PEO NEO [Member] | Deduction for the grant date fair value of stock awards (PSUs and RSUs) awarded during the year, reported under the “Stock Awards” column in the SCT      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount (1,444,119) (1,828,820) (1,797,292)
Non-PEO NEO [Member] | Deduction for the grant date fair value of options awarded during the year, reported under the “Option Awards” column in the SCT      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount (504,602) (527,116) (429,833)
Non-PEO NEO [Member] | Increase for year-end fair value of awards granted during year that remain outstanding and unvested as of year-end      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount [4] 2,190,502 3,879,540 2,293,943
Non-PEO NEO [Member] | Increase/deduction for change in fair value from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount 194,183 2,484,003 170,048
Non-PEO NEO [Member] | Increase/deduction for change in fair value from prior year-end to vesting date of awards granted prior to year that vested during the year      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount 50,307 588,100 (155,581)
Non-PEO NEO [Member] | Increase for value of dividend equivalents earned on RSUs      
Pay vs Performance Disclosure [Table]      
Adjustment to Compensation Amount $ 3,112 $ 3,286 $ 3,237
Donnelly [Member]      
Pay vs Performance Disclosure [Table]      
PEO Name Mr. Donnelly    
Measure [Axis]: 1      
Pay vs Performance Disclosure [Table]      
Other Performance Measure Amount [2] 127.2 134.5 111.1
Measure [Axis]: 2      
Pay vs Performance Disclosure [Table]      
Measure Name Manufacturing Cash Flow before Pension Contributions    
Measure [Axis]: 3      
Pay vs Performance Disclosure [Table]      
Measure Name Average Return on Investment Capital    
Measure [Axis]: 4      
Pay vs Performance Disclosure [Table]      
Measure Name Cumulative Manufacturing Cash Flow    
Measure [Axis]: 5      
Pay vs Performance Disclosure [Table]      
Measure Name Enterprise Net Operating Profit    
Measure [Axis]: 6      
Pay vs Performance Disclosure [Table]      
Measure Name Relative TSR compared to the S&P 500    
[1] As reflected in the Summary Compensation Table on page 38, during each year in the table above, Mr. Donnelly was Textron’s Principal Executive Officer (“PEO”) and our other Named Executive Officers (“Non-PEO NEOs”) consisted of Mr. Connor, Mr. Lupone and Ms. Duffy.
[2] Represents the value as of the end of each year indicated of $100 invested on December 31, 2019 in the Company’s stock or in one of the indicated Peer Group indices.
[3] Calculated as described in footnotes (2) and (4) to 2022 Annual Incentive Compensation Calculation chart on page 32.
[4] We calculate the fair value of our PSUs, which are settled in cash, in accordance with GAAP, based on the closing price of our common stock and the number of units, as adjusted based on estimates with respect to performance on the relevant metrics. On the grant date, we assume performance at target on the metrics. Following the grant date, we apply the actual rTSR as of the valuation date, and, for the remaining performance periods, we utilize estimates of performance against the target for each operating metric.