Scott Donnelly
TEXTRONAbout Scott Donnelly
Scott C. Donnelly, 63, is Chairman, President, and Chief Executive Officer of Textron (TXT). He joined Textron in June 2008 as EVP & COO, became President & COO in January 2009, was appointed to the Board in October 2009, became CEO in December 2009, and Chairman in September 2010. Prior roles include President & CEO of GE Aviation (2005–2008) and Senior Vice President of GE Global Research, with various management positions at GE since 1989. Under his leadership in 2024, Textron generated $13.7B in revenues (up $19M YoY), $1.2B segment profit (down $127M YoY), backlog grew 29% to $17.9B, and net cash from operations reached $1.0B; company net income was $824M and Manufacturing Cash Flow before pension contributions was $695M, while Say‑on‑Pay support was ~94.1% .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| GE Aviation | President & CEO | 2005–2008 | Led a leading maker of commercial and military jet engines and aircraft systems, expanding integrated digital/electric/mechanical systems offerings . |
| GE Global Research | Senior Vice President | Pre‑2005 | Oversaw diversified global R&D across U.S., India, China, Germany, scaling innovation programs and talent . |
| General Electric | Various management roles | 1989–2005 | Progressive leadership roles across GE businesses, building operating depth in manufacturing, sales/marketing, portfolio management . |
| Textron | EVP & COO; President & COO | 2008–2009 | Led operating execution during transition, prior to CEO appointment . |
External Roles
| Organization | Role | Years |
|---|---|---|
| Medtronic plc | Director | Since 2013 |
Fixed Compensation
| Year | Base Salary ($) | Target Bonus (%) | Target Bonus ($) | Actual Bonus Paid ($) |
|---|---|---|---|---|
| 2022 | 1,282,769 | 162% (implied from target $/salary trend; see CD&A narratives) | 2,080,000 | 2,704,000 |
| 2023 | 1,352,500 | 171% (implied; see CD&A) | 2,320,500 | 2,621,000 |
| 2024 | 1,413,461 (paid) / 1,425,000 (target base) | 170% | 2,422,500 | 1,641,000 |
Notes:
- Committee increased Donnelly’s base salary by 4.4% in 2024; target long-term incentive raised +5.4% to $13.7M .
- 2024 at‑risk pay mix: ~92% of CEO’s target pay tied to performance/stock .
Performance Compensation
Annual Incentive Plan (2024)
| Metric | Weighting | Threshold | Target | Maximum | Actual | Component Payout |
|---|---|---|---|---|---|---|
| Enterprise Net Operating Profit (Segment profit) | 60% | $983M | $1,384M | $1,804M | $1,203M (adjusted) | 32.9% |
| Manufacturing Cash Flow (before pension contributions) | 35% | $328M | $759M | $1,190M | $695M (adjusted) | 29.8% |
| ESG (qualitative) | 5% | — | 100% | 200% | 100% | 5.0% |
| Total Earned | 67.7% |
2024 design emphasized profitability (NOP), cash flow, and ESG; NOP target +8% vs 2023 target and +4.3% vs 2023 actual; cash flow target ~10% lower than prior year target given program investments (e.g., FLRAA) .
Long-Term Incentives: PSUs (2022–2024 cycle)
| Financial Metric | Weighting | Threshold | Target | Maximum | Actual | Earned % |
|---|---|---|---|---|---|---|
| Average ROIC | 50% | 7.3% | 11.3% | 14.3% | 11.8% (adjusted) | 58.7% |
| Cumulative Manufacturing Cash Flow | 30% | $892M | $2,148M | $3,406M | $2,941M (adjusted) | 48.9% |
| Relative TSR vs S&P 500 | 20% | 25th percentile | 50th percentile | 75th percentile | 41.2th percentile | 14.7% |
| Total PSU Earned | 122.3% |
PSU payout value for Donnelly: $7,271,007 on 2022–2024 cycle (units earned 95,395 vs 77,993 granted; settlement based on 10‑day average stock price) .
2024 Equity Grants (mix maintained: 50% PSUs, 25% options, 25% RSUs)
| Grant Type | Units/Count | Key Terms | Grant Date Fair Value |
|---|---|---|---|
| PSUs (2024–2026 cycle) | Threshold 21,777; Target 87,106; Max 174,212 | ROIC (50%), Cumulative MCF (30%), Relative TSR (20%); 3‑year performance; typically settled in cash at cycle end | $7,724,560 |
| RSUs | 43,553 units | Vest in full on 3rd anniversary; dividend equivalents; share delivery at vest | $3,862,280 |
| Stock Options | 142,531 options @ $88.68; expire 3/1/2034 | Vest ratably over 3 years; exercise price = grant date close | $3,946,683 |
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total Beneficial Ownership | 2,009,891 shares; 1.1% of outstanding . |
| Shares Obtainable within 60 days (as of Jan 2, 2025) | Options: 1,380,314 shares; RSUs: 38,997 shares . |
| Unvested (not obtainable within 60 days) | RSUs: 89,555 shares; PSUs (cash-settled if earned): 179,109 share equivalents . |
| 2024 Realized Transactions | Exercised 433,124 options ($20,570,955 realized); vested 95,395 PSUs ($7,365,448 valued at fiscal year-end; settled $7,271,007), and 80,357 RSUs ($7,126,059) . |
| Ownership Guidelines | 5x base salary for CEO; all NEOs currently compliant . |
| Hedging/Pledging | Prohibited for executives and directors; includes bans on short sales, derivatives, and pledging . |
| Insider Trading Controls | Pre‑clearance and blackout periods; policy filed as Exhibit 19 to 2024 10‑K . |
Employment Terms
| Term | CEO (Scott Donnelly) |
|---|---|
| Start at Textron | June 2008 (EVP & COO); CEO since Dec 2009; Chairman since Sept 2010 . |
| Severance (Not for Cause / Good Reason) | Cash: 2x (base + greater of target annual incentive or 3‑year average), paid monthly over 2 years; Awards: RSUs/PSUs/options continue per schedules; Pensions: +2.5 years credit; Defined contribution: lump sum = 2x max company contribution/match; Insurance: 2 years continuation/cash equivalent . |
| Change‑in‑Control (Double‑Trigger) | Cash: 3x base and 3x greater of 3‑year average incentive or target; Awards: immediate full acceleration; PSUs paid based on actual performance to CI and target thereafter; Pensions: full vesting +3 years credit; Savings Plan: full vesting; Defined contribution: payment = 3x max company contribution/match; Insurance: 3 years continuation; Outplacement up to 1 year; Excise Tax: Gross‑up if applicable (legacy term) . |
| Clawback | Dodd‑Frank/NYSE/SEC compliant “no‑fault” recovery for restatements; LTIs include non‑compete forfeiture/repayment within 2 years post‑termination; SOX 304 applies . |
| Pension | Present value: $16,928,343 total; TRP $720,632; Spillover $7,539,111; Wrap‑Around $8,668,600; wrap‑around designed to reflect GE service, vested at 10 years at Textron . |
| Deferred Compensation | SSP registrant contributions $53,423; 2024 earnings $(55,201); aggregate SSP balance $1,412,053 . |
| Perquisites (2024) | Corporate aircraft personal use $41,108; physical exam $5,701; parking $3,000; plan contributions (Spillover Savings Plan/TSP/TRP) detailed in SCT footnote . |
| Non‑Compete | Violations trigger forfeiture/repayment of LTIs during employment or within 2 years after termination . |
Board Governance and Director Service
- Board service: Director since October 2009; Chairman since September 2010; CEO is the only management director; 9 of 10 nominees are independent .
- Board structure: Combined Chair/CEO reviewed biennially; independent Lead Director (R. Kerry Clark) with expansive duties (agendas, information flow, executive sessions, shareholder liaison) .
- Committees: Audit, Nominating & Corporate Governance, Organization & Compensation are fully independent; Donnelly serves on the Executive Committee (with Clark, James, Nowell, Zuber) .
- Meetings: 6 regular Board meetings in 2024; all directors attended ≥75% of applicable meetings .
- Director pay: Employee directors (incl. Donnelly) do not receive Board fees; non‑employee director retainer and RSU program disclosed; ownership requirement 8x cash retainer; anti‑hedging/pledging for directors .
Dual-role implications:
- Combined Chair/CEO centralizes authority; mitigants include strong Lead Independent Director role, fully independent key committees, frequent executive sessions, robust evaluation processes, and majority independent Board .
Related Party Transactions and Red Flags
- Aircraft arrangements: Donnelly’s LLC pays $1,500/month for hangar space; paid $22,220 in 2024 for services; Company’s dry lease of his aircraft on business flights (maintenance reserves allocation $14,767; incremental hangar $34,187); Donnelly’s maintenance at Textron Aviation service centers billed $108,755 at arm’s length; all arrangements approved by Nominating & Corporate Governance Committee .
- Tax gross‑ups: Company policy prohibits gross‑ups for officers hired after 2008; Donnelly (hired 2008) has legacy excise tax gross‑up under CI terms—note investor sensitivity .
- Compensation risk review: Independent consultant concluded no elements likely to cause material adverse outcomes; no option repricing/exchange without shareholder approval .
Compensation Peer Group and Benchmarking
- Peer group refreshed for 2024 target setting: Added Howmet Aerospace, Huntington Ingalls, TransDigm; removed Goodyear, KBR, Terex to better align with A&D focus .
- Peer group revenue context (2022): Textron $12.9B; General Dynamics $39.4B; Northrop $36.6B; Honeywell $35.5B; L3Harris $17.1B; etc. .
- Target pay set near median with greater emphasis on long‑term incentives for CEO given tenure and contributions .
Say‑on‑Pay & Shareholder Feedback
- 2024 Say‑on‑Pay approval ~94.1%; strong support; no program changes due to prior vote .
- Engagement: Reached out to top 25 investors (~60% of shares) on governance/comp topics; ongoing IR outreach and Board involvement .
Performance & Track Record
| Measure | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Company TSR ($ value of $100 invested) | 108.6 | 173.7 | 159.5 | 181.4 | 174.3 |
| Net Income ($MM) | 309 | 746 | 861 | 921 | 824 |
| Manufacturing Cash Flow before Pension ($MM) | 596 | 1,149 | 1,188 | 931 | 695 |
Business highlights in 2024: FLRAA program ramp with ~$3.0B awards; backlog +$4.0B; Aviation Gen3 platform upgrades; Systems SSC craft deliveries and awards; eAviation FAA exemption for Pipistrel Velis Electro; Industrial powersports review amid softer demand .
Director Compensation (context)
Employee directors do not receive Board fees; non‑employee directors’ 2024 annual retainer $130,000 and RSUs valued $165,000 (increasing to $185,000 for 2025); committee chair/membership retainers disclosed; director ownership 8x cash retainer, anti‑hedging/pledging in effect .
Compensation History (CEO)
| Year | Salary ($) | Stock Awards ($) | Option Awards ($) | Non‑Equity Incentive ($) | Pension/Deferred ($) | All Other ($) | Total ($) |
|---|---|---|---|---|---|---|---|
| 2022 | 1,282,769 | 8,314,479 | 2,905,358 | 2,704,000 | 0 | 160,672 | 15,367,279 |
| 2023 | 1,352,500 | 10,100,586 | 3,477,679 | 2,621,000 | 2,682,449 | 157,548 | 20,391,762 |
| 2024 | 1,413,461 | 11,586,840 | 3,946,683 | 1,641,000 | 894,425 | 161,569 | 19,643,978 |
Pay ratio (2024): 171:1 (CEO vs median employee, $114,864) .
Equity Award Overhang and Availability (context)
- Outstanding options/warrants/rights: 6,978,436; weighted average exercise $61.70; shares available for future issuance: 9,897,702 under 2024 LTIP .
Investment Implications
- Alignment: Very high proportion of CEO pay in performance-based/stock-linked LTIs; robust ownership guideline (5x salary) and anti‑hedging/pledging policies support long‑term alignment; PSU metrics emphasize ROIC and cash flow with relative TSR overlay .
- Retention/exit economics: Not‑for‑Cause/Good Reason severance (2x) with continued award vesting and pension credits; CI (double‑trigger) elevates to 3x cash plus immediate vesting—strong retention but generous parachute; legacy excise tax gross‑up is a governance headwind vs peers .
- Selling pressure: 2024 option exercises ($20.6M realized) and sizeable vesting events indicate liquidity events; however hedging/pledging bans and ownership compliance mitigate misalignment; monitor ongoing Form 4 activity around March grant cycles and PSU settlements .
- Governance checks: Combined Chair/CEO offset by strong Lead Independent Director authorities and fully independent key committees; shareholder engagement robust; Say‑on‑Pay support high (94.1%)—limited pressure for program changes .
- Performance lens: 2024 operational headwinds (Aviation strike, Industrial softness) weighed on annual payouts (67.7% of target), while multi‑year ROIC/cash flow delivery drove above‑target PSU outcomes (122.3%), consistent with Textron’s capital discipline and program wins (FLRAA) .