Copyright 2006 EDGAR Online, Inc.
EDGAR Online
TEXTRON INCFORM TYPE: DEF
14A
DOCUMENT DATE: April 26, 2006
FILING DATE: March 21, 2006
* * * * * * * * * * COMPANY INFORMATION * * * * * * * * * *ADDRESS: PROVIDENCE, Rhode Island, 02903
CIK:
0000217346
TICKER: TXTEXCHANGE:
NYSE
SIC CODES: 3720 - Aircraft and Parts
INDUSTRY TYPE: Conglomerates
SECTOR ID:
Conglomerates
* * * * * * * * * * FILING DATA *
* * * * * * * * *REPORT PERIOD: April 26, 2006
SEC FILE NUMBER: 001-05480
* * * * *
* * * * * CONTENTS * * * * * * * * * *
* * * * * * *
* * * TEXT * * * * * * * * * *UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549SCHEDULE 14AProxy
Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934 (Amendment No. )
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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 |
| o |
Soliciting Material Pursuant to
§240.14a-12 |
| Textron Inc. |
| (Name of Registrant as Specified In Its
Charter) |
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other than the Registrant) |
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No fee required. |
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Fee computed on table below per Exchange Act
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applies: |
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the filing fee is calculated and state how it was determined): |
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Total fee paid: |
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Fee paid previously with preliminary
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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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Date Filed: |
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Persons who are to respond to the collection of
information contained in this form are not required to respond unless the
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Return to ContentsNOTICE OF ANNUAL
MEETINGTo the Shareholders of Textron
Inc.:The 2006 annual meeting of shareholders of
Textron Inc. will be held on Wednesday, April 26, 2006, at 11:00 a.m. at The
Rhode Island Convention Center, One Sabin Street, Providence, Rhode Island for
the following purposes:
1. To elect three directors in
Class I for a term of three years in accordance with Textron's By-Laws (Item 1
on the proxy card).
2. To ratify the appointment by the
Audit Committee of Ernst & Young LLP as Textron's independent auditors for
2006, which is
recommendedby the Board of Directors (Item 2 on the proxy card).
3. To consider and act upon two shareholder proposals set forth at
pages 32 through 34 in the accompanying proxy statement, each of which is
opposedby the Board of
Directors (Items 3 and 4 on the proxy card).
4. To
transact any other business as may properly come before the meeting.
You are entitled to vote all shares of common and
preferred stock registered in your name at the close of business on March 3,
2006. If you attend the meeting and desire to vote in person, your proxy will
not be used. If your shares are held in the name of your broker or bank and you
wish to attend the meeting in person, you should request your broker or bank to
issue you a proxy covering your shares.
Whether or
not you plan to attend the meeting, we urge you to complete, sign and date the
enclosed proxy card and return it in the accompanying postage-paid envelope as
soon as possible so that your shares may be represented at the meeting.
Shareholders of record also have the option of voting their shares via the
Internet or by using a toll-free telephone number. Instructions to vote either
via the Internet or by telephone are included on the proxy card.A list of shareholders entitled to vote at the 2006 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.
|
Sincerely, |
|
Lewis B. Campbell |
|
Chairman, President and Chief Executive
Officer |
| Providence, Rhode Island |
|
| March 17, 2006 |
|
CONTENTS
|
Page |
| Proxy Statement |
1 |
|
| General |
1 |
|
| Shareholders Who May Vote |
1 |
|
| Voting |
1 |
|
| Savings Plan Participants |
1 |
|
| Revoking a Proxy |
2 |
|
| Required Vote |
2 |
|
| Costs of Proxy Solicitation |
2 |
|
| Confidential Voting Policy |
2 |
|
| Attending the Meeting |
3 |
|
| Election of Directors (Item 1 on the Proxy
Card) |
4 |
|
| Security Ownership of Certain Beneficial
Holders |
12 |
|
| Security Ownership of Management |
13 |
|
| Section 16(a) Beneficial Ownership Reporting
Compliance |
14 |
|
| Report of the Audit Committee |
14 |
|
| Report of the Organization and Compensation Committee
on Executive Compensation |
15 |
|
| Executive Compensation |
20 |
|
| Summary Compensation Table |
20 |
|
| Stock Option/SAR Grants in Last Fiscal Year |
23 |
|
| Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option and SAR Values |
24 |
|
| Long-Term Incentive Plan Awards in Last Fiscal
Year |
24 |
|
| Pension Plan Table |
26 |
|
| Performance Graph |
30 |
|
| Ratification of Appointment of Independent Auditors
(Item 2 on the Proxy Card) |
31 |
|
| Shareholder Proposals relating to : |
|
|
| Report on the Use of Depleted Uranium (Item 3 on the
Proxy Card) |
32 |
|
| Director Election Majority Vote (Item 4 on the Proxy
Card) |
33 |
|
| Other Matters to Come Before the Meeting |
34 |
|
| Shareholder Proposals and Other Matters for 2007 Annual
Meeting |
35 |
|
YOUR VOTE IS IMPORTANTIf you are a
shareholder of record you can now vote your shares via the Internet or by using
a toll-free telephone number by following the instructions on your proxy card.
If voting by mail, please complete, date and sign your proxy card and return it
as soon as possible in the enclosed postage-paid envelope.
TEXTRON INC.Return to ContentsPROXY
STATEMENTGeneralThis proxy statement, which is being mailed on or about March 17, 2006,
to each person entitled to receive the accompanying notice of annual meeting, 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 26, 2006, at 11:00 am, and at any adjournments thereof. Textron's
principal executive office is located at 40 Westminster Street, Providence,
Rhode Island 02903.
Shareholders Who May VoteAll shareholders of record at the close of business on
March 3, 2006, will be entitled to vote. As of March 3, 2006, Textron had
outstanding 130,152,216 shares of Common Stock; 82,510 shares of $2.08
Cumulative Convertible Preferred Stock, Series A; and 44,176 shares of $1.40
Convertible Preferred Dividend Stock, Series B (preferred only as to dividends),
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.
VotingAll shareholders may vote by
mail.
Shareholders of record can also vote via the
Internet or by using the toll-free telephone number listed on the proxy
card.Internet and telephone voting information is
provided on the proxy card. A control number, located on the lower right portion
of the proxy card, is designated to verify a shareholder's identity and allow
the shareholder to vote the shares and confirm that the voting instructions have
been recorded properly.
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 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.
If your shares are held in the name of
your broker or bank and you wish to vote in person at the meeting, you should
request your broker or bank to issue you a proxy covering your shares.
Savings Plan ParticipantsIf you are a participant in a Textron savings plan with a Textron stock
fund as an investment option, the accompanying proxy card shows the number of
shares allocated to your account under the plan. 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
1
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.
Revoking a ProxyWhether you vote by
mail, via the Internet or by telephone, you may 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 corporate secretary, or voting in person at the
meeting.
Required VoteA 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 votes entitled to be cast 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. Under
those circumstances, your broker may be authorized to vote for you on some
routine items but is prohibited from voting on other items. Those items for
which your broker cannot vote result in broker non-votes.
The three nominees for director receiving the greatest number of votes
at the meeting will be elected. Abstentions and broker non-votes are not counted
for this purpose and will have no effect on the outcome of the election.
Approval of the ratification of the appointment of
auditors and the two shareholder proposals requires the affirmative vote of a
majority of shares present in person or represented by proxy, and entitled to
vote on the matter. For this purpose, if you vote to "abstain" on a proposal,
your shares will be treated as present and will have the same effect as if you
voted against the proposal. Broker non-votes, however, are not counted for this
purpose and have no effect on the outcome of the vote. All shareholders vote as
one class.
Costs of Proxy SolicitationTextron pays all 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 D.F. King & Co., Inc., of New York, New York, a
proxy solicitation organization, to assist in this solicitation process for a
fee of $14,000, plus reasonable out-of-pocket expenses.
Confidential Voting PolicyUnder
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 corporate
secretary. Votes are counted by employees of American Stock Transfer & Trust
Company ("AST"), Textron's independent transfer agent and registrar, and
certified by Inspectors of Election who are employees of AST.
2
Attending the MeetingIf 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 3, 2006, is acceptable proof. If you are a shareholder of
record, no proof is required.
3
ELECTION OF DIRECTORSThe Board of
Directors is composed of three classes of directors, designated Class I, Class
II and Class III. One class of directors is elected each year to hold office for
a three-year term and until successors of such class are duly elected and
qualified. Brian H. Rowe is retiring from the Board in April 2006. It is the
intention of the persons named in the accompanying proxy card, unless otherwise
instructed, to vote to elect Lewis B. Campbell, Lawrence K. Fish and Joe T. Ford
to Class I. Each nominee presently serves as a director of Textron. Information
is furnished below with respect to each nominee for election and each director
continuing in office.
The Board of Directors
recommends a vote FOR each of the director nominees (Item 1 on the proxy
card).Return to ContentsNOMINEES FOR
DIRECTOR
| Class I -- Nominees for Terms Expiring in
2009 |
|
|
Lewis B. Campbell |
Director Since 1994 |
|
|
Mr. Campbell, 59, is Chairman, President and
Chief Executive Officer of Textron. He joined Textron in 1992 as Executive
Vice President and Chief Operating Officer, became President and Chief
Operating Officer in 1994, assumed the title of Chief Executive Officer
and relinquished the title of Chief Operating Officer in July 1998,
assumed the title of Chairman and relinquished the title of President in
February 1999, and reassumed the title of President in September 2001.
Prior to joining Textron he was a Vice President of General Motors
Corporation and General Manager of its GMC Truck Division. Mr. Campbell is
a director of Bristol-Myers Squibb Co. and Dow Jones & Company, and a
member of The Business Council and The Business Roundtable. |
|
|
Lawrence K. Fish |
Director Since 1999 |
|
|
Mr. Fish, 61, is Chairman and Chief Executive
Officer of Citizens Financial Group, Inc., a multi-state bank holding
company. He was named Chairman, President and Chief Executive Officer upon
joining the bank in 1992 and held that position until relinquishing the
title of President in October 2005. He is a director of The Royal Bank of
Scotland Group and a member of the Board of Trustees of The Brookings
Institution. Mr. Fish is an overseer of the Boston Symphony Orchestra and
an Incorporator of the Massachusetts Institute of Technology
Corporation. |
4
Return to Contents
|
|
Joe T. Ford |
Director Since 1998 |
|
|
Mr. Ford, 68, is Chairman of the Board of
ALLTEL Corporation, a telecommunications company. He was named President
of ALLTEL upon its formation in 1983 from a merger between Allied
Telephone Company and Mid-Continent Telephone Corporation, became Chief
Executive Officer in 1987, assumed the title of Chairman in 1991 and
retired as the Chief Executive Officer in July 2002. Mr. Ford is a
director of EnPro Industries, Inc. and the Stephens Group,
Inc. |
| DIRECTORS CONTINUING IN OFFICE |
| Class II -- Terms Expiring in 2007 |
|
|
Kathleen M. Bader |
Director Since 2004 |
|
|
Ms. Bader, 55, was President and Chief
Executive Officer of NatureWorks LLC, which makes proprietary, corn-based
plastic resins and was formerly known as Cargill Dow LLC, an equal joint
venture between The Dow Chemical Company and Cargill, Incorporated and now
a wholly-owned subsidiary of Cargill. She joined Dow in 1973, held
numerous sales, marketing, operations and business management jobs in
Dow's global and North American operations, became Business Group
President and Corporate Vice President, Quality & Business Excellence
in 2000 and Chairman, President and Chief Executive Officer of Cargill Dow
LLC 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 and served in that position
until her retirement in January 2006. Ms. Bader is a member of the United
States Homeland Security Advisory Council, the International Board of
Directors of Habitat for Humanity and the Dean's Council at Harvard's John
F. Kennedy School of Government. |
|
|
R. Kerry Clark |
Director Since 2003 |
|
|
Mr. Clark, 53, is 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. He joined Procter
and Gamble in 1974 and served in various key executive positions before
assuming his current position in 2004. Mr. Clark is also a Trustee of the
Cincinnati Zoo and Botanical Gardens and on the Board of the Greater
Cincinnati United Way. |
5
Return to Contents
|
|
Ivor J. Evans |
Director Since 2003 |
|
|
Mr. Evans, 63, was Vice Chairman of Union
Pacific Corporation, one of America's leading transportation companies. He
joined Union Pacific in 1998 as President and Chief Operating Officer of
the Union Pacific Railroad, and became Vice Chairman in January 2004. Mr.
Evans retired in March 2005. From 1989 to 1998, he served in various
executive positions at Emerson Electric Company, including Senior Vice
President, Industrial Components and Equipment. Mr. Evans is a director of
Cooper Industries, Arvin Meritor, Inc., and is an Operating Partner of
Thayer Capital Partners and Chairman of Suntron, a portfolio
company. |
|
|
Lord Powell of Bayswater KCMG |
Director Since 2001 |
|
|
Lord Powell, 64, was Private Secretary and
advisor on foreign affairs and defence to British Prime Ministers Lady
Margaret Thatcher and John Major from 1983 to 1991. He is currently
Chairman of Safinvest Limited and of LVMH (UK). From 1992 until the end of
2000 he served as a member of the Board of Jardine Matheson Holdings, Ltd.
and associated companies and from the end of 2000 until December 2005
served as the non-executive Chairman of Sagitta Asset Management. He is
President of the China-Britain Business Council, Chairman of the Trustees
of the Oxford University Business School, Chairman of Atlantic
Partnership, a Trustee of the British Museum and a Trustee of the Aspen
Institute. He is a director of Louis-Vuitton Moët Hennessy (LVMH),
Caterpillar Inc., Mandarin Oriental Hotel Group, Yell Group, British
Mediterranean Airways and Schindler Corporation. He is a member of the
Upper House of the British Parliament and Chairman of the All-Party
Parliamentary Group on Entrepreneurship. |
|
|
Class III -- Terms Expiring in
2008 |
|
|
H. Jesse Arnelle |
Director Since 1993 |
|
|
Mr. Arnelle, 72, was a senior partner in the
law firm of Arnelle & Hastie, San Francisco, which later became
Arnelle, Hastie, McGee, Willis & Greene, with which he had been
associated from 1985 through his retirement in 1996. Following his
retirement, he was Of Counsel to the North Carolina law firm of Womble,
Carlyle, Sandridge & Rice until his retirement in December 2005. Mr.
Arnelle is a director of FPL Group, Inc., Armstrong Holdings, Inc., URS
Corporation and Metropolitan Life Series Fund. Mr. Arnelle is the past
Chairman of the Board of Trustees of Pennsylvania State University and a
director of the Eisenhower Fellows Program and the National Football
Foundation and College Hall of Fame. |
6
Return to Contents
|
|
Paul E. Gagné |
Director Since 1995 |
|
|
Mr. Gagné, 59, was President and Chief
Executive Officer of Avenor Inc., a Canadian forest products company. He
joined Avenor in 1976, became President and Chief Operating Officer in
1990 and assumed the additional position of Chief Executive Officer in
1991, serving in that capacity until November 1997, when he left the
company. In 1998, Mr. Gagné joined Kruger Inc., a major Canadian
privately held producer of paper and tissue, as a consultant in corporate
strategic planning, serving in that capacity until December 2002. He is a
director of CAE Inc., Fraser Papers Inc., Inmet Mining Corporation and
Wajax Income Fund. |
|
|
Dain M. Hancock |
Director Since 2005 |
|
|
Mr. Hancock, 64, was Executive Vice President
of Lockheed Martin Corporation and President of Lockheed Martin's
Aeronautics Company, and is now a consultant of Lockheed Martin. Lockheed
Martin is principally engaged in the research, design, development,
manufacture and integration of advanced technology systems, products and
services. He joined Lockheed Martin in 1993 as Vice President when
Lockheed acquired General Dynamics Corporation's military aircraft
business, with which Mr. Hancock began his industrial career. Mr. Hancock
served in various key executive positions before becoming President of
Lockheed Martin Tactical Aircraft Systems in 1995 and Executive Vice
President of the Corporation and President, Aeronautics Company in 2000,
serving in that position until he retired in January 2005. |
|
|
Thomas B. Wheeler |
Director Since 1993 |
|
|
Mr. Wheeler, 69, was the Chairman and Chief
Executive Officer of Massachusetts Mutual Life Insurance Company,
presently known as MassMutual Financial Group. He was a member of the
Massachusetts Mutual field sales force from 1962 to 1983, served as
Executive Vice President of Massachusetts Mutual's insurance and financial
management line from 1983 to 1986, became President and Chief Operating
Officer in 1987, President and Chief Executive Officer in 1988 and
Chairman and Chief Executive Officer in 1996. He relinquished the title of
Chief Executive Officer in January 1999 and retired as Chairman in January
2000. Mr. Wheeler is a trustee of the Conservancy of S.W. Florida and the
Woods Hole Oceanographic Institution and a director of Genworth
Financial. |
7
The Board of DirectorsMeetings and OrganizationDuring 2005,
the Board of Directors met seven times and the Executive Committee of the Board
met five times. The Board has standing Audit, Nominating and Corporate
Governance, and Organization and Compensation committees. Directors are expected
to regularly attend Board meetings and meetings of committees on which they
serve and also the annual meeting of shareholders. All directors attended at
least 75% of the total number of Board and committee meetings. All then-serving
directors attended the 2005 annual meeting of shareholders.
Corporate GovernanceTextron's
Corporate Governance Guidelines, originally adopted in 1996 and most recently
revised in July 2005, meet or exceed the new listing standards adopted by the
New York Stock Exchange and are posted on Textron's website,
www.textron.comunder "Investor
Relations--Corporate Governance,'' and is also available in print upon request
to Textron's corporate secretary.
Code of
EthicsTextron's Business Conduct Guidelines,
originally adopted in 1979 and most recently revised in February 2004, 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 under "Investor
Relations--Corporate Governance,'' and is also available in print upon request
to Textron's corporate secretary.
Director
IndependenceThe Board of Directors has determined
that Ms. Bader, Messrs. Arnelle, Clark, Evans, Fish, Ford, Gagné, Hancock, Rowe
and Wheeler and Lord Powell, are independent as defined under the listing
standards of the New York Stock Exchange, based on the criteria set forth in the
Corporate Governance Guidelines. The portion of the Corporate Governance
Guidelines relating to director independence is attached hereto as Appendix A.
In making its determination the Board examined relationships between directors
or their affiliates with Textron and its affiliates including those reported
below under the heading "Transactions with Management and Others" on page 28.
Lead DirectorTextron's
Corporate Governance Guidelines require that the Board will meet in executive
session for non-employee directors without management present at each regularly
scheduled Board meeting. A Lead Director (currently Lawrence K. Fish), has been
appointed to preside at such sessions. Additional sessions may be convened at
any time at the request of a director, and in such event the Lead Director shall
preside. Shareholders may communicate with the Lead Director by using one of the
methods described in the following section, "Shareholder Communications to the
Board."
8
Shareholder
Communications to the BoardShareholders wishing to
communicate with the Board of Directors, the Lead Director or with any
individual director may do so by calling (866) 698-6655 (toll-free) or
401-457-2269, writing to Board of Directors, Textron Inc., 40 Westminster
Street, Providence, Rhode Island 02903, or by e-mail at
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 or to the specified director.
Return to ContentsCompensation of
DirectorsFor their service on the Board,
non-employee directors are paid an annual retainer of $110,000, reflecting an
increase from $100,000 in 2005, plus $1,500 for each meeting of the Board
attended. Non-employee directors who serve on the Executive Committee or one of
the standing committees, other than the Audit Committee, receive $1,500 for each
committee meeting attended, and the chairman of each such standing committee
receives an additional $5,000 per year. Non-employee directors who serve on the
Audit Committee receive $2,500 for each committee meeting attended, and the
chairman of the Audit Committee receives an additional $15,000 per year.
Textron maintains a deferred income plan for non-employee
directors under which they may 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 the greater of 8% or the Moody's
Corporate Bond Yield Index rate, or into an account consisting of Textron stock
units, which are equivalent in value to Textron common stock. Directors must
defer a minimum of $65,000 of their annual retainer into the stock unit account.
At the end of each calendar quarter, Textron will contribute to the stock unit
account an additional amount equal to 10% of the amount deferred by the director
into this account during the quarter in excess of the minimum deferral amount.
One half of this additional amount will vest on December 31 of the year in which
payment was deferred and one half on the next December 31. Textron also credits
dividend equivalents to the stock unit account. In addition, once a year, on
April 30, Textron will contribute to the stock unit account an amount equal to
20% of the then current annual retainer for each director who is serving as a
director on the date of Textron's annual meeting of shareholders and has been a
director for more than three months.
Each non-employee
director received 1,000 restricted shares of Textron common stock upon joining
the Board. Except in the case of the director's death or disability, or a change
in control of Textron (as described below under the heading "Employment
Contracts and Change In Control Arrangements" on page 28), the director may not
sell or transfer the shares until he or she has completed all of his or her
successive terms as a director and at least five years of Board service.
Employee directors do not receive fees or other
compensation for their service on the Board or its committees. Each member of
the Board is reimbursed for expenses incurred in connection with each Board or
committee meeting attended.
Textron sponsors a program
under which it contributes up to $1,000,000 to the Textron Charitable Trust on
behalf of each 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. Payment of the contributions ultimately are recovered
from life insurance policies that Textron maintains on the lives of directors
for this purpose. In 2005, Textron paid a total of approximately $656,777 in
premiums on policies
9
covering ten current directors and eight retired directors. The
directors do not receive any direct financial benefit from this program since
the insurance proceeds and charitable deductions accrue solely to Textron. The
program was closed to new participants in 2004.
Non-employee directors also participate in the CitationShares
Director's Evaluation Program established by Textron to provide ongoing
evaluation of the performance of the CitationShares fractional ownership
program, a joint venture between Cessna Aircraft Company, a wholly-owned
subsidiary of Textron, and TAG Aviation USA. Under the program, Textron
purchased a one-eighth ownership share of two Cessna Citation aircraft from
CitationShares entitling it to a fixed number of hours of usage of the aircraft
during the year, and makes ten hours of flight time per calendar year available
for personal use to the non-employee directors. Following each flight, a
participating director is expected to complete an evaluation of his or her
travel experience to assist Textron in ensuring that CitationShares maintains
its customer service focus. The aircraft also are utilized by Textron for travel
by executives and directors to and from Board meetings and other Board-related
activities. Directors are not charged for their participation in the program or
use of the aircraft, however, directors pay tax on the imputed income
attributable to their personal use of the aircraft and the program requires
participating directors to reimburse Textron for its cost per hour of flight
time, to the extent their personal use of the aircraft exceeds ten hours of
flight time per calendar year. The cost to Textron of providing ten hours of
free flight time to a director under the program is approximately $30,000 per
year, but the extent of use of the program may vary by director. Textron absorbs
the cost of the ownership shares to the extent the aircraft are not fully
utilized.
Non-employee directors are also eligible to
receive grants of options to purchase Textron common stock under the 1999
Textron Long-Term Incentive Plan.
In late 2004,
Congress passed legislation that affects non-qualified deferred compensation
arrangements. During 2006 the Board will assess the impact of the new
legislation on Textron's overall remuneration structure (including plans that
comprise the Directors' compensation structure) and will effect changes
accordingly.
Audit CommitteeThe Audit Committee pursuant to its charter, as amended in September
2005, assists Board of Directors 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,
and (iv) the performance of Textron's internal audit function and independent
auditor. The Audit Committee is directly responsible for the appointment,
retention, compensation and oversite of Textron's independent auditors. A copy
of the charter is attached hereto as Appendix B and is also posted on Textron's
website. The following five independent directors presently comprise the
committee: Mr. Gagné (Chairman), Ms. Bader, Mr. Clark, Mr. Hancock and Mr.
Rowe. Each member of the committee has been determined by the Board to be
independent as independence of audit committee members is defined 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, except for Mr. Gagné who serves on three audit committees in
addition to Textron's. The Board of Directors has determined that Mr. Gagné's
simultaneous service does not impair his ability to effectively serve on
Textron's Audit Committee. The Board of Directors has also determined that Mr.
Gagné satisfies the criteria adopted by the Securities and
10
Exchange Commission to serve as an "audit
committee financial expert." During 2005, the committee met eleven times.
Nominating and Corporate Governance CommitteeThe Nominating and Corporate Governance Committee pursuant
to its charter, as revised in February 2005, (i) identifies individuals to
become Board members, and recommends that the Board select the director nominees
for the next annual meeting of shareholders, (ii) develops and recommends to the
Board a set of corporate governance principles applicable to Textron and (iii)
makes recommendations on compensation of the Board of Directors. A copy of the
committee's charter is posted on Textron's website. In making its
recommendations to the Board, the committee will consider suggestions regarding
possible candidates from a variety of sources, including shareholders. The
committee may also retain 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
other than those made by the Board. Shareholders wishing to recommend
individuals as candidates for nomination by the Board must submit timely notice
of nomination within the time limits described below under the heading
"Shareholder Proposals and Other Matters for 2007 Annual Meeting" on page 35, to
the committee, c/o Textron's corporate secretary, along with a description of
the proposed candidate's qualifications and other pertinent biographical
information, as well as a written consent from the proposed candidate. The
committee annually reviews the Board of Directors' retirement schedule, the
results of the review of the Board's overall performance and the impact of the
strategy of the company to determine future requirements for Board members over
the next year or two. All candidates are evaluated against those requirements
and the criteria for membership to the Board set forth in the Corporate
Governance Guidelines including: (i) high personal ethics and integrity; (ii)
specific skills and experience aligned with Textron's strategic direction and
operating challenges; (iii) the core business competencies of high achievement,
a record of success, financial literacy, a history of making good business
decisions and exposure to best practices; (iv) interpersonal skills that
maximize group dynamics, including respect for others, strong communication
skills and confidence to ask tough questions; (v) enthusiasm for Textron and
sufficient available time to be fully engaged; and (vi) if a non-employee,
satisfies the independence standards established by the New York Stock Exchange
and the Securities and Exchange Commission.
All
recommendations of nominees to the Board by the committee are made solely on the
basis of merit.
The following five directors presently
comprise the committee: Mr. Fish (Chairman), Mr. Arnelle, Ms. Bader, Mr. Ford
and Mr. Wheeler. The Board of Directors has determined that each member of the
committee is independent under the New York Stock Exchange listing standards.
During 2005, the committee met four times.
Organization and Compensation CommitteeThe Organization and Compensation Committee pursuant to its charter as
revised in October 2003, (i) recommends to the Board compensation arrangements
for the Chief Executive Officer and other executive officers and reviews their
responsibilities and performance and plans for their succession, and (ii)
approves compensation arrangements and for changes in officers. A copy of the
committee's charter is posted on Textron's website. The following five directors
presently comprise the committee: Mr. Rowe (Chairman), Mr. Arnelle, Mr. Clark,
Mr. Evans and Lord Powell. The Board of Directors has determined
11
that each member of the committee is
independent under the New York Stock Exchange listing standards. During 2005,
the committee met six times.
Return to ContentsSECURITY
OWNERSHIP OF CERTAIN BENEFICIAL HOLDERSThe
following table lists all shareholders known by Textron to own beneficially more
than 5% of any class of Textron's voting stock as of December 31, 2005:
Return to Contents
| Title of Class |
|
|
|
Name and Address of Beneficial Owner |
|
Number of Shares and Nature of Beneficial
Ownership |
|
Percent of Class |
|
| Common Stock |
|
AXA Financial, Inc. 1290 Avenue of the Americas New
York, New York 10104 |
|
|
15,918,719 |
(1) |
|
|
12.20 |
% |
|
| Common Stock |
|
Fidelity Management Trust Company 82 Devonshire Street
Boston, Massachusetts 02109 |
|
|
15,347,699 |
(2) |
|
|
11.76 |
% |
|
(1)
Pursuant to Rule 13d-1 of the Securities Exchange Act of 1934, on behalf of AXA
Financial, Inc. ("AXF") as set forth in Schedule 13G reported as of December 31,
2005; AXA Rosenberg Investment Management LLC, which is an affiliate of AXF, has
sole voting power with respect to 95,520 shares and sole dispositive power with
respect to 97,173 shares. Alliance Capital Management L.P. ("Alliance"), a
subsidiary of AXF, has sole voting power with respect to 9,991,622 shares,
shared voting power with respect to 1,568,846 shares and sole dispositive power
with respect to 15,821,546 shares. Alliance's shares are held by unaffiliated
third-party client accounts and managed by Alliance as investor advisor.
(2) Fidelity Management Trust Company ("Fidelity") is the
trustee of the Textron Savings Plan. Participants in the plan have the right to
direct Fidelity regarding how to vote the shares of Textron common stock
credited to their individual account. Unless otherwise required by law, Fidelity
will vote as directed by participants and will vote any shares for which it does
not receive participant direction in accordance with the plan.
12
SECURITY OWNERSHIP OF MANAGEMENTThe column headed "Number of Shares of Common Stock"
includes all shares of Textron stock beneficially owned by directors and
executive officers of Textron, shares held for the executive officers by the
trustee under the Textron Savings Plan, shares obtainable upon the exercise of
stock options exercisable within 60 days of December 31, 2005, and shares held
jointly. No director or executive officer beneficially owned in excess of 1% of
the outstanding shares of common stock. Directors and executive officers as a
group beneficially owned approximately 1.1% of the outstanding shares of common
stock. Ownership indicated is as of December 31, 2005.
Each director and executive officer has sole voting and investment
power over his or her shares, except in those cases in which the voting or
investment power is shared with the trustee or as otherwise noted. An objective
of Textron's director and executive compensation programs is to align the
financial interests of the directors and the executive officers with that of
shareholders. Accordingly, the value of a significant portion of the directors'
and the executive officers' total compensation is dependent upon the value they
generate on behalf of shareholders. The column headed "Total Common Stock-Based
Holdings" includes the common stock from the "Number of Shares of Common Stock"
column along with restricted stock and other common stock-based holdings in the
form of stock units, performance share units, unvested stock awards and cash
equivalent share awards (the value of which will increase or decrease in
relation to the increase or decrease in the price of common stock).
| Name |
|
|
|
Number of Shares of Common Stock(1) |
|
Total Common Stock- Based Holdings |
|
| H. Jesse Arnelle |
|
|
2,537 |
|
|
|
19,850 |
|
|
| Kathleen M. Bader |
|
|
1,024 |
|
|
|
5,125 |
|
|
| John D. Butler |
|
|
179,905 |
|
|
|
305,110 |
|
|
| Lewis B. Campbell |
|
|
643,784 |
|
|
|
1,200,219 |
|
|
| R. Kerry Clark |
|
|
1,000 |
|
|
|
6,323 |
|
|
| Ivor J. Evans |
|
|
1,000 |
|
|
|
6,448 |
|
|
| Lawrence K. Fish |
|
|
1,000 |
|
|
|
18,008 |
|
|
| Joe T. Ford |
|
|
2,000 |
|
|
|
20,887 |
|
|
| Ted R. French |
|
|
240,255 |
|
|
|
351,220 |
|
|
| Paul E. Gagné |
|
|
2,415 |
|
|
|
20,989 |
|
|
| Dain M. Hancock |
|
|
1,000 |
|
|
|
2,705 |
|
|
| Mary L. Howell |
|
|
184,159 |
|
|
|
319,146 |
|
|
| Terrence O'Donnell |
|
|
158,385 |
|
|
|
263,493 |
|
|
| Lord Powell of Bayswater KCMG |
|
|
1,000 |
|
|
|
8,473 |
|
|
| Brian H. Rowe |
|
|
11,910 |
|
|
|
27,899 |
|
|
| Thomas B. Wheeler |
|
|
2,657 |
|
|
|
33,593 |
|
|
| All current directors and executive officers
as a group (16 persons) |
|
|
1,434,031 |
|
|
|
2,609,488 |
|
|
(1)
Includes the following shares obtainable upon the exercise of stock options
exercisable within 60 days of December 31, 2005: Mr. Campbell -- 627,165; Mr.
French -- 194,665; Mr. Butler -- 176,953; Ms. Howell -- 168,732; Mr. O'Donnell
-- 155,511; and all current directors and executive officers as a group --
1,323,026.
13
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCESection
16(a) of the Securities Exchange Act of 1934 requires Textron's directors,
executive officers and certain other officers to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission and to provide copies of such reports to Textron. Based solely upon a
review of such copies and written representations of the reporting persons,
during the 2005 fiscal year no director or officer had a reportable transaction
for which a filing was made after the due date.
Return to ContentsREPORT OF THE
AUDIT COMMITTEEThe 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 schedules in the Annual Report with management. The
committee also reviewed with management and the independent auditors the
reasonableness of significant judgements 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 Statement on Auditing Standards No. 61 (as amended). In
addition, the committee discussed with the independent auditors the auditors'
independence from management and the company including the matters in the
written disclosures and the letter from the independent auditors required by
Independence Standards Board No. 1 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. Eleven 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 schedules be included
in the Annual Report on Form 10-K for the year ended December 31, 2005, 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 2006, and that this selection will be submitted to the
shareholders for ratification.
PAUL E. GAGNÃ,
CHAIRMAN
KATHLEEN M. BADER
R.
KERRY CLARK
DAIN M. HANCOCK
BRIAN H. ROWE
14
Return to ContentsREPORT OF THE
ORGANIZATION AND COMPENSATION COMMITTEEON EXECUTIVE COMPENSATIONThe Organization and Compensation Committee of the Board
of Directors has furnished the following report on executive compensation:
Return to ContentsExecutive
Compensation PhilosophyThe objective of Textron's
executive compensation program is to attract and retain the most qualified
executives to lead the corporation and to motivate executives to produce strong
financial performance for the long-term benefit of shareholders. The committee
seeks to establish a total compensation program that is not only competitive by
industry standards, but also demonstrates a bias towards performance and stock
ownership. To meet this objective, the total compensation program is designed to
be competitive with the total compensation programs provided by other
corporations of comparable revenue size in industries in which we compete for
customers and/or executives.
To this end, the committee
has retained a third-party compensation consultant to provide data, analysis,
and market perspective to supplement and support the committee's decision-making
process.
Executive Compensation ProgramEach year the committee, which is comprised entirely of
independent directors, recommends to the Board compensation arrangements for the
officers named in the Summary Compensation Table on page 20 and approves
compensation arrangements for other executive officers. These compensation
arrangements include annual salary levels, annual incentive plan design and
payments, and long-term incentive plan design, grant levels, standards of
performance for new grants, and payouts for past grants. In addition, the Board
has periodically chosen to provide additional share equivalent awards to enhance
retention efforts for selected key executives. All such "retention awards'
granted to the officers named in the Summary Compensation Table are reported in
the "Restricted Stock Awards" column of that table in the year of the grant and
are described in detail in Footnote 2 to that table.
Textron's executive compensation program is comprised of salary plus
variable compensation in the forms of annual incentive compensation and
long-term incentive compensation. In 2005, Textron performed a market analysis
study to benchmark approximately 1,200 of the top executives in the organization
to external data sources. A compensation alignment program is underway in 2006,
the result of which will be implemented in January 2007.
SalaryIndividual salaries are
considered for adjustment periodically, based on comparison to external
benchmark data, individual performance and potential, and/or change in duties or
level of responsibility. Based on this information, in December 2005, the
committee reviewed the base salaries for the executive officers and deemed them
to be appropriate. Thus the committee recommended, and the Board approved, no
increase for the CEO or the four other executive officers. The base salaries of
the officers named in the Summary Compensation Table are reported in the
"Salary" column of that table.
Variable Compensation
PlansTextron's variable compensation plans seek to
motivate executives to achieve financial and strategic goals by defining
performance criteria that (1) can be affected by the executive's efforts, and
therefore
15
provide greater
incentive, and (2) are widely viewed as commonly accepted indicators of a
company's performance in the marketplace. The amount of compensation from these
plans is earned to the extent that these performance criteria are met.
Performance criteria that historically have been used include Earnings per
Share, Return on Invested Capital (ROIC), subsidiary-level measures of
profitability, and a discretionary portion (known as leadership initiatives),
which will vary based on each executive's individual contribution. Textron
continues to emphasize the link between pay plans and the interests of
shareholders by measuring an executive's variable compensation using a
combination of financial performance and individual contribution.
Annual Incentive CompensationAll executive officers participate in the Textron Annual Incentive
Compensation Plan. Annual incentive payments are generally limited to twice the
target award level, but the committee can make payments above these levels if it
deems performance warrants. Each year, the committee establishes a set of
performance objectives and financial metrics (earnings per share and ROIC) for
officers that are used to directly calculate individual annual incentive
payments. The annual incentive compensation earned by the officers named in the
Summary Compensation Table is reported in the "Bonus" column of that table.
Long-Term Incentive CompensationThrough the Textron 1999 Long-Term Incentive Plan, executive officers
may be granted awards of stock options and restricted stock. Shareholders
approved the removal of Performance Share Units ("PSUs") from the 1999 plan in
2004 since the awards are payable in cash rather than stock. Accordingly,
Textron established a separate plan, the Performance Share Unit Plan for Textron
Employees, under which all grants of PSUs will be made and governed. The Board
set the level of 2005 long-term incentive compensation grants based on relevant
benchmark data provided by a third-party executive compensation consultant to
the committee. When determining the level of grant, the committee also
considered each executive officer's functions and responsibilities, past and
expected future performance, potential contributions to Textron's profitability
and growth, and the value of prior long-term incentive grants. This total
long-term incentive value was allocated among three separate long-term incentive
vehicles described below: stock options, restricted stock and performance share
units. The actual grant sizes, then, were calculated based on the fair market
value (average of high and low share prices) on the date of grant in February
2005.
2005 Grants of Stock OptionsIn accordance with the 1999 plan, the February 2005 stock
options were granted at a purchase price equal to 100% of the fair market value
of Textron common stock at the time of the option grant. The stock options
granted to executive officers vest ratably over three years which is consistent
to established norms in the marketplace. Information on the stock options
granted during the fiscal year 2005 to the officers named in the Summary
Compensation Table appears in the table on page 20.
2005 Grants of Restricted SharesIn
2005, restricted shares granted pursuant to the 1999 Plan were similar to shares
of Textron common stock except for the following features: (1) they have
restrictions on the ability to sell the shares for a pre-defined period of time
(minimum of three years from date of grant), (2) they do not earn
16
dividends until these
restrictions lapse, and (3) they do not provide voting rights. Restrictions
lapse for one-third of the shares granted in 2005 on the three-year anniversary
of the date of the grant, an additional one-third on the four-year anniversary
of the date of the grant, and the final one-third on the five-year anniversary
of the date of the grant. Information on the value of restricted shares granted
during fiscal year 2005 to the officers named in the Summary Compensation Table
appears in the "Restricted Stock Awards" column of that table.
2005 Grants of Performance Share UnitsFor the three-year performance cycle starting at the beginning of 2005,
the value for payment purposes of each performance share unit granted and earned
will be determined at the average closing market value of Textron common stock
for the first ten days of the fiscal year following the end of the three-year
performance period. Information on the 2005 grants of performance share units
granted in accordance with the 1999 Plan appears in the "Long-Term Incentive
Plan Awards in the Last Fiscal Year" table on page 24.
Payouts for Previously-Granted Performance Share UnitsIn early 2006, the committee recommended, and the Board
approved award payments to executive officers that corresponded to performance
share units granted for the three-year performance cycle ending December 31,
2005. All payouts were based (1) 60% on aggregate earnings per share, (2) 25% on
the committee's subjective assessment of performance against pre-specified
leadership initiatives, including continuing to execute the restructuring plan,
increased cost savings throughout the supply chain, the implementation of
Textron Six Sigma and improved talent base, and (3) 15% on return on invested
capital (ROIC) performance. In addition, executive officers had the opportunity
to earn up to an additional 30% to the extent that ROIC performance exceeded the
performance goal. Final payout amounts for eligible executives were calculated
by multiplying the number of units earned (at 107% for the CEO, and 110% for the
other executive officers) by the ten-day average closing share price at the
beginning of fiscal year 2006. Information on the payouts related to the
performance cycle ending December 31, 2005 to the officers named in the Summary
Compensation Table is reported in the "LTIP Payouts" column of that table.
Stock OwnershipAn
objective of Textron's executive compensation program is to align the financial
interests of the executive officers with the interests of shareholders. As a
result, the committee requires a minimum level of stock ownership and bases a
substantial portion of the executive officers' total compensation opportunity on
the value generated on behalf of Textron's shareholders. The following are
minimum ownership levels, expressed as a multiple of base salary: five times for
the chief executive officer, three times for the officers named in the Summary
Compensation Table and either two or three times base salary for other officers.
Newly named officers have five years to bring their holdings up to these minimum
levels.
The Deferred Income Plan for Textron Key
Executives, in which all executive officers are eligible to participate,
requires that annual incentive compensation earned in excess of 100% of an
executive's annual incentive target opportunity must be deferred into a Textron
stock unit account (which is based on the current value of a share of Textron
common stock) if the officer has not maintained the required minimum stock
ownership level. The deferred income plan also provides participants the
opportunity to defer
17
voluntarily up to 25% of base salary and up to 100% of annual and
long-term incentive compensation and other compensation. Elective deferrals may
be put into either a stock unit account or an interest bearing account. Textron
contributes a 10% premium on amounts deferred into the stock unit account.
Participants in the plan cannot move amounts between the two accounts while an
active employee of Textron and cannot receive distributions from the Plan until
termination of employment. In late 2004, Congress passed legislation that
affects non-qualified arrangements (such as this plan). During 2006 the Board
will assess the impact of the new legislation and will effect plan changes
accordingly.
CEO CompensationAs in the past, in determining the overall level of Mr. Campbell's
compensation and each component thereof, the committee took into consideration
information provided by independent, professional compensation consultants. Mr.
Campbell's most recent base salary increase was effective January 1, 2003. In
late 2005, the committee reviewed current benchmark data for Mr. Campbell's
position and deemed his base salary to be appropriate.
The committee recommended, and the Board approved, a 2005 annual
incentive compensation award of $2,200,000. The level of the award was
determined 70% directly from pre-set financial goals (earnings per share) and
30% directly from the committee's assessment of the CEO's performance against
specific leadership goals. These leadership goals were set by the full Board in
early 2005 and incorporated key business objectives such as revenue growth,
supply chain, talent development and information technology strategies. The
total of these two components were then multiplied by a factor calibrated to the
achievement of Textron ROIC performance in comparison to the cost of capital.
Mr. Campbell's 2005 payout was above target levels, reflecting performance that
also exceeded pre-set goals.
The performance share
units granted to Mr. Campbell for the 2003-2005 performance cycle were based 60%
on aggregate earnings per share, 25% on discretionary performance measures
(known as leadership initiatives) and 15% on ROIC. In addition, Mr. Campbell was
eligible to earn up to an additional 30% to the extent that actual ROIC
performance exceeded the performance goal. The committee recommended, and the
Board approved, an award of $9,996,614, which represented an award of slightly
over 107% of the units granted. The final payout amount was calculated by
multiplying the number of units earned by the average closing share price for
the first ten days of fiscal year 2006.
In early 2005,
Mr. Campbell was granted 30,130 stock options, 20,090 restricted shares, and
72,820 performance share units.
Mr. Campbell also
received compensation under various Textron benefit and compensation plans (see
footnotes to the Summary Compensation Table).
In 2005,
the committee recommended, and the Board approved, a proposal to eliminate
performance share units from pensionable earnings prospectively for the CEO for
the Supplemental Retirement Plan for Textron Key Executives. This action
commences with the 2005-2007 performance cycle and will apply to all future
performance cycles. In addition, the Board approved a cap on the amount of
payments from the 2003-2005 and 2004-2006 performance cycles that can be
included in pensionable earnings for purposes of benefit calculations under this
plan. In 2006, the committee will explore alternatives to remove PSUs from
pensionable earnings for other Management Committee members for the Supplemental
Retirement Plan for Textron Key Executives.
18
Tax ConsiderationsSection
162(m) of the Internal Revenue Code provides that no U.S. income tax deduction
is allowable to a publicly held corporation for non-performance-based
Compensation in excess of $1 million paid to the chief executive officer or any
other employee whose compensation is required to be reported in the Summary
Compensation Table, if those individuals are employed by the corporation at year
end. "Performance-Based Compensation" is exempt from the $1 million limitation.
Performance-Based Compensation must be based upon meeting pre-established and
objective performance goals under a plan approved by shareholders. Per Section
162(m), performance goals are not objective if the committee does not set
performance standards in a timely fashion, has any discretion to pay amounts in
excess of those earned in accordance with the achievement of these
pre-established performance standards, or pays such compensation when the
performance criteria are not met.
Textron's policy has
been to maximize the compensation that would qualify as Performance-Based
Compensation under section 162(m) of the Internal Revenue Code while preserving
the committee's discretionary ability to reward individual performance. Textron
stock options and restricted stock granted under the 1999 Long-Term Incentive
Plan qualify as Performance-Based Compensation. Performance share unit awards
and annual incentive awards each have financial components that do qualify as
Performance-Based Compensation; each program also includes a discretionary
component based on completion of individual performance objectives that does not
qualify as Performance-Based Compensation.
Textron's
deferred income plan encourages individuals, including those whose income might
otherwise be subject to the $1 million limitation, to voluntarily defer
compensation into the Deferred Income Plan for Textron Key Executives.
Compensation thus deferred is not counted toward the $1 million limitation. This
opportunity to defer compensation is anticipated to minimize the impact of this
Section 162(m) provision on Textron's income tax expense in the near term. The
committee will continue to assess the impact of these tax rules on Textron.
This report is submitted by the Organization and
Compensation Committee.
BRIAN H. ROWE, CHAIRMAN
H. JESSE ARNELLE
R. KERRY
CLARK
IVOR J. EVANS
LORD
POWELL OF BAYSWATER KCMG
19
Return to ContentsEXECUTIVE
COMPENSATIONThe following Summary Compensation
Table sets forth information concerning compensation of (i) Textron's chief
executive officer at the end of 2005 and (ii) the four most highly compensated
executive officers of Textron, other than the chief executive officer, who were
serving as executive officers at the end of 2005 for Textron's 2003, 2004 and
2005 fiscal years. Compensation which was deferred by these officers under the
Deferred Income Plan, is included below as compensation paid.
Summary Compensation Table
|
|
Annual Compensation |
|
Long-Term Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
Payouts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted |
|
Underlying |
|
LTIP |
|
All Other |
|
| Name and Principal |
|
|
|
|
|
|
|
Other Annual |
|
Stock Awards |
|
Options/ |
|
Payouts |
|
Compensation |
|
| Position |
|
Year |
|
Salary ($) |
|
Bonus ($) |
|
Compensation(1) |
|
($)(2) |
|
SARs (#) |
|
($) |
|
($)(3) |
|
| L.B. Campbell |
|
|
2005 |
|
|
$ |
1,100,000 |
|
$ |
2,200,000 |
|
|
$ |
377,436 |
|
|
|
$ |
1,538,200 |
|
|
|
30,130 |
|
|
$ |
9,996,614 |
|
|
$54,991 |
|
|
| Chairman, President and |
|
|
2004 |
|
|
1,100,000 |
|
2,065,800 |
|
|
304,677 |
|
|
|
1,455,894 |
|
|
|
39,100 |
|
|
6,775,531 |
|
|
39,134 |
|
|
| Chief Executive Officer |
|
|
2003 |
|
|
1,100,000 |
|
1,900,000 |
|
|
176,172 |
|
|
|
1,453,980 |
|
|
|
50,000 |
|
|
2,135,200 |
|
|
19,165 |
|
|
| T.R. French |
|
|
2005 |
|
|
700,000 |
|
910,000 |
|
|
132,863 |
|
|
|
531,950 |
|
|
|
27,790 |
|
|
2,131,197 |
|
|
34,991 |
|
|
| Executive Vice President |
|
|
2004 |
|
|
650,000 |
|
793,455 |
|
|
68,064 |
|
|
|
547,371 |
|
|
|
29,100 |
|
|
1,129,255 |
|
|
23,125 |
|
|
| and Chief Financial Officer |
|
|
2003 |
|
|
650,000 |
|
600,000 |
|
|
117,161 |
|
|
|
528,720 |
|
|
|
36,000 |
|
|
533,800 |
|
|
11,665 |
|
|
| J.D. Butler |
|
|
2005 |
|
|
560,000 |
|
728,000 |
|
|
107,546 |
|
|
|
366,150 |
|
|
|
19,130 |
|
|
1,704,957 |
|
|
27,991 |
|
|
| Executive Vice President |
|
|
2004 |
|
|
480,000 |
|
585,936 |
|
|
54,045 |
|
|
|
310,365 |
|
|
|
22,700 |
|
|
1,129,255 |
|
|
17,069 |
|
|
| Administration and Chief |
|
|
2003 |
|
|
480,000 |
|
450,000 |
|
|
0 |
|
|
|
308,420 |
|
|
|
29,000 |
|
|
533,800 |
|
|
8,833 |
|
|
| Human Resources Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| M.L. Howell |
|
|
2005 |
|
|
525,000 |
|
682,500 |
|
|
121,369 |
|
|
|
366,150 |
|
|
|
19,130 |
|
|
1,704,957 |
|
|
26,241 |
|
|
| Executive Vice President |
|
|
2004 |
|
|
470,000 |
|
573,729 |
|
|
91,493 |
|
|
|
310,365 |
|
|
|
22,700 |
|
|
1,129,255 |
|
|
16,724 |
|
|
|
|
|
2003 |
|
|
470,000 |
|
450,000 |
|
|
111,436 |
|
|
|
308,420 |
|