DEF 14A of RTX Corp
Filed Mar 11, 2024 · FY20230001308179-24-000096
How does our executive compensation program align pay with performance?
| ● | Performance Metrics. We use performance metrics that recognize and reward performance contributions that drive strategy, maximize performance and deliver results for our shareowners and customers. | | ● | “At-Risk” Compensation. The largest portion of compensation for our Named Executive Officers (“NEOs”) is “at-risk” compensation—annual and long-term incentive awards that are contingent upon Company performance in our key financial and Corporate Responsibility Scorecard metrics (see page 5), and our stock price performance. |
2023 Pay Decisions
2023 Pay Decisions In making annual pay decisions, the Committee focuses primarily on “total direct compensation,” which includes our three principal elements of executive compensation: base salary, annual incentives and long-term incentives (“LTI”). Total direct compensation is set each year to reflect the Committee’s assessment of Company, business unit and individual performance. 2023 total direct compensation includes 2023 base salary, 2023 annual incentives paid in the first quarter of 2024 and the LTI grant values approved by the Committee in February 2024, which were based on its assessment of 2023 performance and the competitive market pay for each NEO’s role. The February 2023 LTI award grant date fair values (accounting values at the time of grant) shown in the Summary Compensation Table on page 68 reflect the Committee’s assessment of 2022 performance and the competitive market pay for each NEO’s role at that time, and therefore are excluded from 2023 total direct compensation. Total direct compensation, as presented below, also uses year-end salary levels and does not reflect any salary changes that may have occurred during the year, as the Summary Compensation Table does. For more details on our principal elements of compensation, see pages 49-55, and on total direct compensation, see page 57. The table below shows 2023 total direct compensation for our NEOs, as described above.
2023 PAY DECISIONS AND PAY MIX
| | ■ Base Salary | ■ Annual Incentive | ■ LTI | Base Salary ($K) | Annual Incentive ($K) | LTI ($K)(1) | Total ($K) | | Gregory J. Hayes | | | | $1,675 | $2,780 | $10,000 | $14,455 | | Neil G. Mitchill, Jr. | | | | $975 | $1,100 | $5,500 | $7,575 | | Christopher T. Calio | | | | $1,010 | $1,410 | $13,500 | $15,920 | | Stephen J. Timm | | | | $850 | $840 | $4,500 | $6,190 | | Wesley D. Kremer(2) | | | | $905 | $820 | $0 | $1,725 | | | “At-Risk” | | | | | | |
2023 PAY DECISIONS AND PAY MIX
| (1) Reflects values approved by the Committee for the LTI award granted on February 8, 2024. These values differ from those that will be reported in the Summary Compensation Table in 2025, which will be calculated in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Compensation—Stock Compensation. | | (2) Mr. Kremer served in the role of President, Raytheon during 2023. On January 4, 2024, we announced that effective January 7, 2024, he would step down from this role and would continue to operate in a transitional capacity as Special Advisor to the President & Chief Operating Officer until his retirement in March 2024. As a result, Mr. Kremer was not granted an LTI award on February 8, 2024. |
2023 Performance Metrics
2023 Performance Metrics The Committee believes that the metrics used for our annual and long-term incentive plans are essential indicators of the long-term health of our Company and measure particularly salient aspects of Company performance, therefore serving the fundamental objective of our executive compensation program.
Metrics for the Annual Incentive Plan (“AIP”)(1)
Metrics for the Annual Incentive Plan (“AIP”)(1)
Metrics for Performance Share Units (“PSUs”)(1)
Metrics for Performance Share Units (“PSUs”)(1) Adjusted Earnings Per Share (“EPS”) measures the Company’s ability to create long-term, sustainable earnings that will ultimately drive total shareowner return. Return on Invested Capital (“ROIC”) measures the efficiency with which we allocate capital resources, considering not just the quantity of earnings but also the quality of earnings and investments that drive sustainable growth. Relative Total Shareowner Return (“TSR”) measures our ability to return value to our shareowners compared to competing investment opportunities like the S&P 500 Index and our Core Aerospace & Defense (“A&D”) Peers and reinforces our program’s pay-for-performance objectives.
Metrics for Performance Share Units (“PSUs”)(1)
| (1) See Appendix B on page 122 for definitions of financial metrics and page 51 for definitions of Corporate Responsibility Scorecard metrics. |
How 2023 Performance Affected Incentive Payouts
How 2023 Performance Affected Incentive Payouts 2023 Annual Incentives. The following chart shows the RTX-wide goals established by the Committee for AIP purposes, our 2023 performance relative to these goals, how these results translated into the 2023 RTX performance factor and the discretionary adjustments made by the Committee.
How 2023 Performance Affected Incentive Payouts
| Metric(2) | Weight | Threshold | Target | Maximum | Actual | Performance Factor | | RTX Earnings—Adjusted Net Income ($M) | 40% | $6,305 | $7,420 | $8,680 | $7,436 | 101% | | RTX Free Cash Flow ($M) | 40% | $3,750 | $4,750 | $6,350 | $4,753 | 100% | | RTX Total Representation (%) | 5% | 42.6% | 43.3% | 44.6% | 42.9% | 71% | | RTX Employee Retention Rate (%) | 5% | 92.0% | 93.3% | 95.5% | 95% | 177% | | RTX Greenhouse Gas Emissions (metric tons of CO2) | 5% | 1,694,499 | 1,472,665 | 1,275,242 | 1,452,220 | 110% | | RTX Water Usage (gallons) | 5% | 1,743,109,069 | 1,586,117,140 | 1,439,015,871 | 1,613,500,499 | 91% | | 2023 RTX Performance Factor (calculated based on formula) | | | | | | 103% | | 2023 RTX Performance Factor (with Committee discretion) | | | | | | 98% |
How 2023 Performance Affected Incentive Payouts
| (2) Financial results for our business units differ from the above table (see page 52 for details). Adjusted net income and free cash flow are financial metrics used solely for AIP purposes and are defined in Appendix B on page 122. These metrics may differ from other non-GAAP metrics used and described in Appendix A. See page 51 for definitions of the Corporate Responsibility Scorecard metrics. |
How 2023 Performance Affected Incentive Payouts
As discussed in more detail on page 51, the financial performance definitions used for AIP purposes exclude the impact of changes in tax laws and accounting rules, restructuring costs, acquisitions and divestitures (including acquisition accounting adjustments), and significant and/or nonrecurring items. These adjustments help to align our annual incentive goals and results with the non-GAAP financial expectations and performance we communicate to shareowners and ensures our annual incentive plan drives short-term decision-making made in the best interests of RTX’s long-term business strategies. Consistent with how we reported adjusted net income to our shareowners for the year, the AIP definition excludes the impact of the Pratt & Whitney powder metal manufacturing matter. Nevertheless, the Committee considered the impact of this matter on our shareowners and customers and reduced the RTX performance factor from 103% to 98%, and further reduced the performance factors used for Mr. Hayes and Mr. Calio’s annual incentive awards to 83% and 93% of target, respectively. The Committee believes these actions reinforce our program’s pay-for-performance objectives. 2021–2023 PSUs. As previously disclosed, due to the challenges in setting long-term financial performance goals in early 2021, as a result of the COVID-19 pandemic and its significant impact on the aerospace industry, the Committee used a modified PSU design for 2021, setting one-year EPS and ROIC goals and increasing the three-year TSR weighting from 30% to 50%. As the uncertainty around the pandemic waned, the Committee returned to three-year financial performance goals for all metrics and our prior metric weightings, thus ensuring that PSUs granted in 2022 and thereafter align with our long-term strategic plan. The table below shows RTX’s performance for each of the four metrics used for the PSUs granted in 2021, resulting in the award vesting at a 143% performance factor. Though the Pratt & Whitney powder metal manufacturing matter (discussed on page 1) did not impact the adjusted EPS and ROIC performance metrics, both relative TSR metrics, which accounted for 50% of the total vesting, were calculated based on RTX's stock price performance after disclosure of the powder metal matter.
How 2023 Performance Affected Incentive Payouts
| Metric* | Weight | Threshold | Target | Maximum | Actual | Payout Factor | | Adjusted EPS | 25% | $3.00 | $3.55 | $3.90 | $4.27 | 200% | | Return on Invested Capital | 25% | 3.20% | 3.70% | 4.05% | 4.54% | 200% | | TSR vs. S&P 500 Index Companies | 25% | 25th percentile | 50th percentile | 75th percentile | 55.4th percentile | 122% | | TSR vs. Core A&D Peers | 25% | 25th percentile | 50th percentile | 75th percentile | 33.3rd percentile | 50% | | Performance Factor | | | | | | 143% |
How 2023 Performance Affected Incentive Payouts
| * See Appendix B of our proxy statement filed on March 14, 2022, for a definition of adjusted EPS and return on invested capital used for the purposes of the 2021-2023 PSUs. |
How 2023 Performance Affected Incentive Payouts
The Committee believes that the impact of the Pratt & Whitney powder metal manufacturing matter on 2021–2023 PSU vesting results, and the actions it took to reduce the Corporate performance factor for the 2023 AIP, demonstrate that our program is achieving its fundamental objective of aligning executive pay with the interests of our shareowners.
Nominees
Nominees The Board, upon the recommendation of the Governance Committee, has nominated for election the thirteen individuals listed in this Proxy Statement. All are current directors of RTX.
Nominees
| | The Board of Directors unanimously recommends a vote FOR each of the following nominees: |
Nominees
| Tracy A. Atkinson | | | | | | | | INDEPENDENT DIRECTOR Retired Executive Vice President & Chief Administrative Officer, State Street Corporation AGE 59 DIRECTOR SINCE 2020 BOARD COMMITTEES Human Capital & Compensation (Chair), Finance | | | | | | | | Key Skills and Expertise | | | | | | | | | FINANCIAL | | SENIOR LEADERSHIP | | RISK MANAGEMENT/OVERSIGHT | |
Nominees
Qualifications Ms. Atkinson provides the Board with significant experience in finance, risk management and compliance matters, as well as executive leadership experience developed through her senior finance and compliance leadership roles at State Street and MFS Investment Management. She also brings valuable accounting expertise derived from her experience as a Certified Public Accountant and a partner at PricewaterhouseCoopers LLP.
Experience
Experience
Experience
| ● | Chief Administrative Officer, State Street Corporation (financial services firm), 2019–2020 | | ● | Executive Vice President & Chief Compliance Officer, State Street Corporation, 2017–2019 | | ● | Executive Vice President, Finance, State Street Corporation, 2010–2017 |
Experience
| ● | Treasurer, State Street Corporation, 2016–2017 | | ● | Executive Vice President, Chief Compliance Officer, State Street Corporation, 2009–2010 | | ● | Executive Vice President, Chief Compliance Officer, State Street Global Advisors, 2008–2009 | | ● | Senior positions with MFS Investment Management and PricewaterhouseCoopers LLP, 1999–2008 |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | Citizens Financial Group, Inc., since March 2024 | | ● | United States Steel Corporation, since 2020 | | ● | Affiliated Managers Group, since 2020 |
Former Public Company Directorships
Former Public Company Directorships
Former Public Company Directorships
| ● | Raytheon Company, 2014–2020 |
Former Public Company Directorships
| ● | Director and Past President, The Arc of Massachusetts |
Former Public Company Directorships
| Christopher T. Calio | | | | | | | | President, Chief Operating Officer and Director, RTX Corporation AGE 50 DIRECTOR SINCE 2023 BOARD COMMITTEES Finance, Special Activities | | | | | | | | Key Skills and Expertise | | | | | | | | | EXPERIENCE IN INDUSTRY | | RISK MANAGEMENT/OVERSIGHT | | SENIOR LEADERSHIP | |
Former Public Company Directorships
Qualifications Mr. Calio has substantial experience in the aerospace and defense industry and executive leadership experience gained through his President and COO roles at RTX and other senior leadership roles at RTX and Pratt & Whitney. Through these roles and his legal roles at RTX-affiliated companies, he also brings risk management experience, as well as a significant background in manufacturing, operations and supply chain.
Experience
Experience
Experience
| ● | President, Chief Operating Officer and Director, RTX Corporation, since December 2023 | | ● | President & Chief Operating Officer, RTX Corporation (formerly Raytheon Technologies Corporation), March 2023–December 2023 | | ● | Chief Operating Officer, Raytheon Technologies Corporation, March 2022–February 2023 |
Experience
| ● | President, Pratt & Whitney, Raytheon Technologies Corporation (formerly United Technologies Corporation ("UTC")), January 2020–February 2022 | | ● | President, Commercial Engines, Pratt & Whitney, UTC, February 2017–December 2019 | | ● | Chief of Staff to the Chairman and Chief Executive Officer, UTC, February 2015–January 2017 | | ● | Various senior positions since joining UTC in 2005, including as Vice President and General Counsel of UTC Aerospace Systems and Vice President and Counsel, Commercial Engines, Pratt & Whitney |
Other Leadership Experience and Service
Other Leadership Experience and Service
Other Leadership Experience and Service
| ● | Board of Directors, US-India Strategic Partnership Forum |
Other Leadership Experience and Service
| Leanne G. Caret | | | | | | | | INDEPENDENT DIRECTOR Retired Executive Vice President, The Boeing Company and Former CEO, Boeing Defense, Space and Security AGE 57 DIRECTOR SINCE 2023 BOARD COMMITTEES Audit (Chair), Special Activities | | | | | | | | Key Skills and Expertise | | | | | | | | | FINANCIAL | | EXPERIENCE IN INDUSTRY | | MANUFACTURING, OPERATIONS & SUPPLY CHAIN | |
Other Leadership Experience and Service
Qualifications Ms. Caret provides the Board with significant experience in the aerospace and defense industry and finance experience gained through her CEO and CFO roles with Boeing Defense, Space and Security and other senior leadership roles at The Boeing Company. Through these roles she also brings executive leadership experience, as well as a significant background in oversight of risk management and of manufacturing, operations and supply chain.
Experience
Experience
Experience
| ● | Executive Vice President and Senior Advisor, The Boeing Company (aerospace and defense systems & services), April 2022–December 2022 | | ● | President & CEO, Defense, Space & Security, The Boeing Company, 2016–2022 | | ● | President, Global Services & Support, The Boeing Company, 2015–2016 |
Experience
| ● | Chief Financial Officer, Defense, Space & Security, The Boeing Company, 2014–2015 | | ● | Vice President & General Manager, Vertical Lift, The Boeing Company, 2013–2014 | | ● | Vice President, H-47 Programs, The Boeing Company, 2009–2013 | | ● | General Manager, Global Transport & Executive Systems, The Boeing Company, 1998–2009 |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | Deere & Company, since 2021 |
Other Current Directorships
| ● | Board of Directors, FIRST® (For Inspiration and Recognition of Science and Technology) | | ● | Associate Fellow, American Institute of Aeronautics and Astronautics | | ● | Fellow, Royal Aeronautical Society |
Other Current Directorships
| Bernard A. Harris, Jr. | | | | | | | | INDEPENDENT DIRECTOR Chief Executive Officer and Managing Partner, Vesalius Ventures, Inc. AGE 67 DIRECTOR SINCE 2021 BOARD COMMITTEES Audit, Special Activities | | | | | | | | Key Skills and Expertise | | | | | | | | | EXPERIENCE IN INDUSTRY | | ESG | | TECHNOLOGY/CYBERSECURITY | |
Other Current Directorships
Qualifications Dr. Harris has significant aerospace industry knowledge, a deep understanding of science and technology, and executive leadership experience gained through his CEO and other senior leadership roles at Vesalius Ventures and the National Math and Science Initiative, his service as Chief Medical Officer of SPACEHAB and his years as an astronaut and flight surgeon at NASA. He has significant experience in technology innovation and strategic planning. He also brings valuable expertise in guiding organizations to leverage their resources in support of business operations, investment, community development and philanthropic endeavors.
Experience
Experience
Experience
| ● | Chief Executive Officer and Managing Partner, Vesalius Ventures (venture capital), since 1998 | | ● | Executive Director, National Math and Science Initiative Inc. (education nonprofit), August 2022–March 2023 | | ● | Chief Executive Officer, National Math and Science Initiative Inc., 2018–2022 |
Experience
| ● | Vice President, Business Development, Space Media Inc., 1999–2001 | | ● | Vice President, Chief Medical Officer and Scientist, SPACEHAB Inc., 1996–2001 | | ● | Astronaut, NASA, 1991–1996 | | ● | Clinical Scientist & Flight Surgeon, Johnson Space Center, NASA, 1987–1990 |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | U.S. Physical Therapy, since 2005 | | ● | MassMutual (non-public) |
Former Public Company Directorships
Former Public Company Directorships
Former Public Company Directorships
| ● | Sterling Bancshares Inc., 2006–2011 |
Other Leadership Experience and Service
Other Leadership Experience and Service
Other Leadership Experience and Service
| ● | Board of Trustees, Barings Fund & Barings BDC | | ● | Board of Directors, Texas Medical Center | | ● | The Harris Foundation (founder) | | ● | Board of Trustees, Salient & Forward Funds |
Other Leadership Experience and Service
| Gregory J. Hayes | | | | | | | | Chairman & Chief Executive Officer, RTX Corporation AGE 63 DIRECTOR SINCE 2014 BOARD COMMITTEES Finance, Special Activities | | | | | | | | Key Skills and Expertise | | | | | | | | | SENIOR LEADERSHIP | | FINANCIAL | | EXPERIENCE IN INDUSTRY | |
Other Leadership Experience and Service
Qualifications Mr. Hayes has substantial experience in executive leadership, finance, strategic planning, mergers and acquisitions, business development and global operations and management. He has a deep knowledge of the aerospace and defense industry and the Company’s business, strategy, operations and global markets gained through his CEO and other senior leadership roles at RTX and affiliated companies. He brings a track record of successfully managing complex businesses and developing people. He also provides public company board leadership experience gained as Chairman of the UTC Board.
Experience
Experience
Experience
| ● | Chairman & Chief Executive Officer, RTX Corporation (formerly Raytheon Technologies Corporation), since March 2023 | | ● | Chairman, President & Chief Executive Officer, Raytheon Technologies Corporation, June 2021–February 2023 |
Experience
| ● | President, Chief Executive Officer and Director, Raytheon Technologies Corporation, April 2020–June 2021 | | ● | Chairman, President & Chief Executive Officer, UTC, 2016–April 2020 | | ● | President, Chief Executive Officer and Director, UTC, 2014–2016 | | ● | Senior Vice President & Chief Financial Officer, UTC, 2008–2014 | | ● | Various senior positions since joining UTC in 1999 through the acquisition of Sundstrand Corporation, including Vice President, Accounting and Finance, and responsibility for UTC’s Corporate Strategy function |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | Phillips 66 Company, since 2022 |
Other Current Directorships
| ● | Nucor Corporation, 2014-2018 |
Other Current Directorships
| George R. Oliver | | | | | | | | INDEPENDENT DIRECTOR Chairman & Chief Executive Officer, Johnson Controls International plc AGE 63 DIRECTOR SINCE 2020 BOARD COMMITTEES Human Capital & Compensation, Finance | | | | | | | | Key Skills and Expertise | | | | | | | | | INTERNATIONAL | | SENIOR LEADERSHIP | | MANUFACTURING, OPERATIONS & SUPPLY CHAIN | |
Other Current Directorships
Qualifications Mr. Oliver provides the Board with substantial executive leadership experience and global operational and management expertise, gained through his CEO and other leadership roles at the global industrial and technology companies Johnson Controls, Tyco International and General Electric. He also has significant experience in strategic planning, mergers and acquisitions, finance, risk management and technology.
Experience
Experience
Experience
| ● | Chairman of the Board & Chief Executive Officer, Johnson Controls International plc (diversified technology and multi-industrial company), since 2017 | | ● | President & Chief Operating Officer, Johnson Controls International plc, 2016–2017 | | ● | Chief Executive Officer, Tyco International Ltd., 2012–2016 | | ● | President, Tyco International Ltd., 2011–2012 | | ● | President, Tyco Electrical and Metal Products, 2007–2010 |
Experience
| ● | President, Tyco Safety Products, 2006–2010 | | ● | Various leadership roles of increasing responsibility at several General Electric divisions, culminating as President of GE Water and Process Technologies, until 2006 |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | Johnson Controls International plc, since 2016 |
Former Public Company Directorships
Former Public Company Directorships
Former Public Company Directorships
| ● | Raytheon Company, 2013–2020 | | ● | Tyco International Ltd., 2012–2016 |
Other Leadership Experience and Service
Other Leadership Experience and Service
Other Leadership Experience and Service
| ● | Board of Trustees, Worcester Polytechnic Institute | | ● | Board of Directors, United Way of Greater Milwaukee & Waukesha Counties | | ● | Board of Directors, Greater Milwaukee Committee | | ● | Board of Directors, Metropolitan Milwaukee Association of Commerce |
Other Leadership Experience and Service
| Robert K. (Kelly) Ortberg | | | | | | | | INDEPENDENT DIRECTOR Retired Chairman, President & Chief Executive Officer, Rockwell Collins, Inc. AGE 63 DIRECTOR SINCE 2020 BOARD COMMITTEES Finance, Special Activities | | | | | | | | Key Skills and Expertise | | | | | | | | | EXPERIENCE IN INDUSTRY | | SENIOR LEADERSHIP | | TECHNOLOGY/CYBERSECURITY | |
Other Leadership Experience and Service
Qualifications Mr. Ortberg has significant aerospace and defense industry expertise and business experience gained through his CEO and other senior leadership roles at Rockwell Collins. Through these roles he also brings executive leadership experience, as well as a significant background in global management and operations, engineering, technology and innovation.
Experience
Experience
Experience
| ● | Special Advisor to the Office of the CEO, Raytheon Technologies Corporation, 2020–February 2021 | | ● | Chief Executive Officer, Collins Aerospace Systems, UTC, 2018–2020 | | ● | Chairman, President & CEO, Rockwell Collins, Inc. (aerospace and defense systems & services), 2015–2018 |
Experience
| ● | President & CEO, Rockwell Collins, Inc., 2013–2015 | | ● | President, Rockwell Collins, Inc., 2012–2013 | | ● | Various senior positions since joining Rockwell Collins in 1987 |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | Aptiv PLC, since 2018 |
Former Public Company Directorships
Former Public Company Directorships
Former Public Company Directorships
| ● | Rockwell Collins, Inc., 2013–2018 |
Former Public Company Directorships
| ● | Past Chairman, Board of Governors, Aerospace Industries Association | | ● | Co-Chairman, Board of Directors, FIRST® |
Former Public Company Directorships
| Ellen M. Pawlikowski | | | | | | | | INDEPENDENT DIRECTOR General, U.S. Air Force (Retired) and Former Commander, Air Force Materiel Command AGE 67 DIRECTOR SINCE 2020 BOARD COMMITTEES Audit, Special Activities | | | | | | | | Key Skills and Expertise | | | | | | | | | GOVERNMENT | | SENIOR LEADERSHIP | | EXPERIENCE IN INDUSTRY | |
Former Public Company Directorships
Qualifications General Pawlikowski delivers deep defense industry-specific expertise, senior leadership experience and understanding of leading-edge science and technology through her extensive military service, including as Commander, U.S. Air Force Materiel Command. She provides the Board with important insights regarding military critical mission needs, advanced weapons systems management and acquisition and national security policy.
Experience
Experience
Experience
| ● | Commander, Air Force Materiel Command (military leadership), 2015–2018 | | ● | Various positions of increasing responsibility during a 36-year career in the U.S. Air Force, including Military Deputy for the Assistant Secretary for Acquisition; Commander/Program Executive Officer, Space and Missile Systems Center; Commander, Air Force Research Laboratory; and Deputy Director and Chief Operating Officer, National Reconnaissance Office |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | RPM International Inc., since 2022 | | ● | Applied Research Associates (non-public) | | ● | SRI International (non-public) | | ● | CEM Defense Materials (non-public) |
Former Public Company Directorships
Former Public Company Directorships
Former Public Company Directorships
| ● | Velo3D, Inc., March 2022–July 2023 | | ● | Intelsat S.A., 2019–February 2022 | | ● | Raytheon Company, 2018–2020 |
Other Leadership Experience and Service
Other Leadership Experience and Service
Other Leadership Experience and Service
| ● | Fellow, American Institute of Aeronautics and Astronautics | | ● | Member, National Academy of Engineers | | ● | Chairperson, Air Force Studies Board | | ● | Co-Chair, Defense Science Board Task Force |
Other Leadership Experience and Service
| Denise L. Ramos | | | | | | | | INDEPENDENT DIRECTOR Retired Chief Executive Officer & President, ITT Inc. AGE 67 DIRECTOR SINCE 2018 BOARD COMMITTEES Audit, Governance and Public Policy | | | | | | | | Key Skills and Expertise | | | | | | | | | MANUFACTURING, OPERATIONS & SUPPLY CHAIN | | SENIOR LEADERSHIP | | FINANCIAL | |
Other Leadership Experience and Service
Qualifications Ms. Ramos provides the Board with executive leadership and substantial global operational and management experience gained through her CEO and other leadership roles at ITT Inc. She has extensive financial expertise and experience in strategic planning and mergers and acquisitions, having served as the Chief Financial Officer at ITT and other large global companies. She also brings experience and insights from her current and past service on boards of other public companies in a range of industries.
Experience
Experience
Experience
| ● | Chief Executive Officer & President, ITT Inc. (formerly ITT Corporation—diversified manufacturer), 2011–2019 | | ● | Senior Vice President & Chief Financial Officer, ITT Corporation, 2007–2011 |
Experience
| ● | Chief Financial Officer, Furniture Brands International (home furnishings), 2005–2007 | | ● | Senior Vice President & Corporate Treasurer, Yum! Brands, Inc., and Chief Financial Officer, KFC Corporation (U.S. Division), 2000–2005 | | ● | Various finance positions of increasing responsibility during more than 20 years at Atlantic Richfield Company |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | Bank of America Corp., since 2019 | | ● | Phillips 66 Company, since 2016 |
Other Current Directorships
| ● | ITT Inc., 2011–2019 | | ● | Praxair, Inc., 2014–2016 |
Other Current Directorships
| Fredric G. Reynolds | | | | | | | | INDEPENDENT LEAD DIRECTOR Retired Executive Vice President & Chief Financial Officer, CBS Corporation AGE 73 DIRECTOR SINCE 2016 BOARD COMMITTEES Governance and Public Policy, Human Capital & Compensation | | | | | | | | Key Skills and Expertise | | | | | | | | | FINANCIAL | | RISK MANAGEMENT/OVERSIGHT | | SENIOR LEADERSHIP | |
Other Current Directorships
Qualifications Mr. Reynolds brings to the Board substantial financial and risk management expertise, as well as executive leadership and strategic planning experience gained through his Chief Financial Officer and other leadership roles at large global companies CBS, Viacom and PepsiCo. He also brings his experience and insights from his current and past service on boards of other public companies in a range of industries.
Experience
Experience
Experience
| ● | Executive Vice President & Chief Financial Officer, CBS Corporation (media), 2005–2009 | | ● | President & Chief Executive Officer, Viacom Television Stations Group (CBS predecessor), 2001–2005 |
Experience
| ● | Executive Vice President & Chief Financial Officer, Viacom, Inc., 2000–2001 | | ● | Executive Vice President & Chief Financial Officer, Westinghouse Electric Corporation, 1994–2000 | | ● | Various positions at PepsiCo, Inc., 1982–1994 |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | Pinterest, Inc., since 2017 |
Former Public Company Directorships
Former Public Company Directorships
Former Public Company Directorships
| ● | Mondelez International, Inc., 2007–May 2022 | | ● | AOL, Inc., 2009–2015 | | ● | Hess Corporation, 2013–2019 |
Former Public Company Directorships
| Brian C. Rogers | | | | | | | | INDEPENDENT DIRECTOR Retired Chairman, T. Rowe Price Group, Inc. AGE 68 DIRECTOR SINCE 2016 BOARD COMMITTEES Finance (Chair), Human Capital & Compensation | | | | | | | | Key Skills and Expertise | | | | | | | | | FINANCIAL | | RISK MANAGEMENT/OVERSIGHT | | SENIOR LEADERSHIP | |
Former Public Company Directorships
Qualifications Mr. Rogers provides the Board with extensive financial and investment expertise and risk management experience through his Chief Investment Officer and other investment management roles at T. Rowe Price, as well as significant executive leadership and governance experience gained through his service as the Chairman of the Board of T. Rowe Price. Mr. Rogers also provides the Board with important insights into the perspectives of institutional investors.
Experience
Experience
Experience
| ● | Chairman of the Board of Directors, T. Rowe Price Group, Inc. (investment management), 2007–2017 | | ● | Chief Investment Officer, T. Rowe Price Group, Inc., 2004–2017 | | ● | Various other senior leadership roles since joining T. Rowe Price Group, Inc., in 1982 |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | Lowe’s Companies, Inc., since 2018 |
Former Public Company Directorships
Former Public Company Directorships
Former Public Company Directorships
| ● | Chairman of the Board (non-executive), T. Rowe Price Group, Inc., 2017–2019 |
Former Public Company Directorships
| ● | Trustee, Brookings Institution | | ● | Board of Directors, Harvard Management Company | | ● | Trustee, Johns Hopkins Medicine |
Former Public Company Directorships
| James A. Winnefeld, Jr. | | | | | | | | INDEPENDENT DIRECTOR Admiral, U.S. Navy (Retired) and Former Vice Chairman of the Joint Chiefs of Staff AGE 67 DIRECTOR SINCE 2020 BOARD COMMITTEES Special Activities (Chair), Human Capital & Compensation, Governance and Public Policy | | | | | | | | Key Skills and Expertise | | | | | | | | | GOVERNMENT | | EXPERIENCE IN INDUSTRY | | RISK MANAGEMENT/OVERSIGHT | |
Former Public Company Directorships
Qualifications Admiral Winnefeld brings extensive senior leadership, strategic planning and management experience developed through his various roles of increasing responsibility in the U.S. military, culminating in his service as the Ninth Vice Chairman of the Joint Chiefs of Staff. He provides the Board with deep defense industry-specific domain knowledge and expertise with respect to the global security environment and our core defense customers.
Experience
Experience
Experience
| ● | Vice Chairman of the Joint Chiefs of Staff (military leadership), 2011–2015 | | ● | Various positions of increasing responsibility during a 37-year career in the U.S. Navy, including Commander, U.S. Northern Command (USNORTHCOM); Commander, North American Aerospace Defense Command (NORAD); Commander, U.S. Sixth Fleet; and Commander, Allied Joint Command Lisbon |
Other Current Directorships
Other Current Directorships
Other Current Directorships
| ● | Molson Coors Beverage Company, since 2020 | | ● | Alliance Laundry Systems LLC (non-public) | | ● | CEM Defense Materials (non-public) | | ● | Enterprise Holdings, Inc. (non-public) |
Former Public Company Directorships
Former Public Company Directorships
Former Public Company Directorships
| ● | Raytheon Company, 2017–2020 |
Other Leadership Experience and Service
Other Leadership Experience and Service
Other Leadership Experience and Service
| ● | Co-founder and Co-chair, SAFE Project | | ● | Trustee, Georgia Tech Foundation | | ● | Chairman, President's Intelligence Advisory Board |
Other Leadership Experience and Service
| Robert O. Work | | | | | | | | INDEPENDENT DIRECTOR Retired Deputy Secretary of Defense, U.S. Department of Defense AGE 71 DIRECTOR SINCE 2020 BOARD COMMITTEES Governance and Public Policy (Chair), Audit, Special Activities | | | | | | | | Key Skills and Expertise | | | | | | | | | GOVERNMENT | | EXPERIENCE IN INDUSTRY | | ESG | |
Other Leadership Experience and Service
Qualifications Mr. Work provides the Board with significant insight into customer needs acquired through his command, leadership and management positions, including as a U.S. Marine Corps officer, Undersecretary of the Navy and Deputy Secretary of Defense. He has broad expertise in global security matters, including in the areas of defense strategy, advanced technologies, international studies and acquisition reform. He also brings experience with corporate governance and oversight of ESG risks from current and past board service, including his leadership of the Governance Committee.
Board Committees
| | Human Capital & Compensation Tracy A. Atkinson Chair | | | 2023 MEETINGS: 5 COMMITTEE MEMBERS George R. Oliver Fredric G. Reynolds Brian C. Rogers James A. Winnefeld, Jr. Fredric G. Reynolds joined the Human Capital & Compensation Committee effective February 15, 2024. | ●Reviews RTX’s executive compensation policies and practices to ensure that they adequately and appropriately align executive and shareowner interests ●Reviews and approves the design of, and sets performance goals for, our executive annual and long-term incentive programs ●Evaluates the performance of RTX, our business units and our NEOs relative to performance goals set by the Committee for the annual and long-term incentive programs ●Reviews and approves compensation for the CEO and other executive officers of the Company ●Reviews a risk assessment of RTX’s compensation policies, plans and practices ●Reviews the Company’s initiatives relating to recruiting, retention, career development, DE&I and other aspects of human capital management | |
Compensation Risk Oversight
| ● | Align with the Company’s financial performance | | ● | Be earned in a manner consistent with RTX’s Code of Conduct | | ● | Promote long-term, sustainable value for shareowners | | ● | Provide fair and equitable pay regardless of race and gender | | ● | Strike a balance between appropriate levels of financial opportunity and risk |
Compensation Risk Oversight
| Sound Incentive Plan Design | Our annual and long-term incentive plans use complementary performance metrics that are essential indicators of the financial health of our Company. The Committee establishes financial performance goals that are challenging, yet realistic, and maintains the ability to use its discretion to adjust payouts under our annual incentive plan, to the extent it believes the calculated results do not accurately reflect the overall quality of performance for the year. Further, payouts for both annual incentive awards and PSUs are capped at 200% of target. | | Emphasis on Long-Term Performance | Long-term incentives (“LTI”) are the cornerstone of RTX’s executive compensation program. Our LTI program incorporates long-term financial performance metrics that are designed to align executive interests with shareowner interests. | | Rigorous Share Ownership Requirements | RTX maintains significant share ownership requirements for our senior executives and directors. These requirements are intended to reduce risk by aligning the economic interests of executives and directors with those of our shareowners. A significant stake in future performance discourages the pursuit of short-term opportunities that can create excessive risk. See page 38 for more information. | | Prohibition on Short Sales, Pledging and Hedging of RTX Securities | RTX prohibits directors, officers and employees from entering into transactions involving short sales of our securities. Directors and executive officers are also prohibited from pledging or assigning RTX stock, stock options or other equity interests as collateral for a loan. Transactions in put options, call options or other derivative securities that have the effect of hedging the value of RTX securities also are prohibited, whether or not those securities were granted to or held, directly or indirectly, by a director, officer or employee. |
2023 SHAREOWNER ENGAGEMENT OUTSIDE OF PROXY SEASON
| When | Who | Topics | Objectives | | Outcome | | Fall of 2023 | Institutional investors representing nearly 38% of our shares | ●Updates on our ESG accomplishments and progress against the metrics we have outlined ●Ongoing integration of our ESG strategy throughout our business, addressing several areas across our three ESG pillars ●Highlights of our 2022 ESG Report and preparations for our 2023 report | ●Enhance investor understanding of our ESG journey, including our areas of focus, our progress to date and our roadmap for increased transparency and accountability ●Grow our understanding of which ESG issues are of greatest interest and importance to our stakeholders | | ●Used feedback to inform refinements to our ESG roadmap, as well as the content of our third annual ESG Report and other ESG disclosures | | | | ●Board leadership | ●Enhance our understanding of investors’ views on board leadership structures | | ●Communicated to the Governance Committee that our largest investors have a range of views on board leadership structures | | | | ●Key elements of our 2023 executive compensation program, including the revised Corporate Responsibility Scorecard | ●Obtain feedback on our executive compensation program, including the implementation of quantitative goals for the Corporate Responsibility Scorecard used for AIP purposes | | ●Provided feedback to the Human Capital & Compensation Committee |
Political Activities and Public Policy Engagement
| Compensation of Directors |
DEFERRED RESTRICTED STOCK UNITS
DEFERRED RESTRICTED STOCK UNITS Directors appointed to the Board before October 2019 received a one-time deferred restricted stock unit ("RSU") award. This award vested in equal portions over five years but distribution does not occur until a director retires from the Board. Non-employee directors appointed after October 2019 did not receive a deferred RSU award upon joining the Board. All deferred RSUs are fully vested.
PLAN DISTRIBUTIONS
PLAN DISTRIBUTIONS DSUs and deferred RSUs are not distributed to directors until they retire from the Board. Upon retirement, RTX DSUs and deferred RSUs are converted into shares of RTX Common Stock. For our legacy UTC directors, upon the 2020 spinoff by UTC of Carrier and Otis, vested DSUs and deferred RSUs originally based in UTC stock were converted into vested DSUs and deferred RSUs in the stock of RTX, Carrier and Otis. When these directors retire from the RTX Board, the Carrier and Otis DSUs and deferred RSUs (if any) will be distributed in cash. Directors can elect to receive distributions in either a lump sum or in 10- or 15-year installments.
2023 Director Compensation
2023 Director Compensation
2023 Director Compensation
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | | Tracy A. Atkinson | $147,000 | $216,000 | $25,997 | $388,997 | | Leanne G. Caret(4) | $201,000 | $297,000 | $25,997 | $523,997 | | Bernard A. Harris, Jr. | $133,000 | $195,000 | $18,825 | $346,825 | | George R. Oliver | $3,000 | $325,000 | $328 | $328,328 | | Robert K. (Kelly) Ortberg | $133,000 | $195,000 | $984 | $328,984 | | Margaret L. O’Sullivan(5) | $0 | $0 | $35,997 | $35,997 | | Dinesh C. Paliwal(5) | $3,000 | $405,000 | $30,328 | $438,328 | | Ellen M. Pawlikowski | $3,000 | $325,000 | $10,997 | $338,997 | | Denise L. Ramos | $3,000 | $325,000 | $1,325 | $329,325 | | Fredric G. Reynolds(6) | $165,000 | $243,000 | $1,325 | $409,325 | | Brian C. Rogers | $3,000 | $350,000 | $26,325 | $379,325 | | James A. Winnefeld, Jr. | $3,000 | $350,000 | $20,403 | $373,403 | | Robert O. Work | $143,000 | $210,000 | $8,628 | $361,628 |
2023 Director Compensation
| (1) Reflects the portion of the directors’ annual retainer paid in cash. Messrs. Oliver, Paliwal, Rogers and Winnefeld, Jr. and Mses. Pawlikowski and Ramos elected to receive their annual cash retainer in DSUs, as detailed in footnote (2). | | (2) Reflects the grant date fair value of DSU awards credited to the director’s account, including any portion of the annual cash retainer that the director elected to receive as DSUs. The value of DSU awards is calculated in accordance with FASB ASC Topic 718 using assumptions described in Note 19: Stock Based Compensation, to the Consolidated Financial Statements in RTX’s 2023 Annual Report on Form 10-K. The number of units credited to each director in 2023 was calculated by dividing the value of the award by the NYSE closing price per share of RTX Common Stock on May 2, 2023, which was the date of the 2023 Annual Meeting of Shareowners, or for retainers paid to directors upon joining the Board or being appointed to a leadership role, the RTX closing stock price on the grant date. DSU awards are credited with additional units each time the Company pays a dividend to shareowners and are restricted from distribution while a non-employee director serves on the Board. | | (3) Amounts in this column include incidental benefits and matching contributions to eligible nonprofit organizations under the Company’s matching charitable gift program that covers non-employee directors, as well as Company employees. The Company’s matching charitable gifts paid in 2023 were as follows: Ms. Atkinson, $25,000; Ms. Caret, $25,000; Mr. Harris, $17,500; Ms. O’Sullivan, $35,000; Mr. Paliwal, $30,000; Ms. Pawlikowski, $10,000; Mr. Rogers, $25,000; Mr. Winnefeld, Jr., $15,000; and Mr. Work, $8,300. | | (4) Ms. Caret joined the Board in January 2023, and as a result was paid: (i) 50% of the base annual retainer for the 2022/2023 Board cycle; and (ii) 100% of the base annual retainer for the 2023/2024 Board cycle. Due to an administrative error, the cash portion of the retainer for the 2022/2023 Board cycle was paid to Ms. Caret in early 2024. | | (5) Ms. O’Sullivan and Mr. Paliwal retired from the Board on May 2, 2023 and December 1, 2023, respectively. | | (6) Mr. Reynolds was appointed the independent Lead Director of the Board on December 1, 2023, following Mr. Paliwal’s retirement. As a result, during 2023, Mr. Reynolds was paid: (i) 50% of the Lead Director retainer for the 2023/2024 Board cycle; (ii) 100% of the base annual retainer for the 2023/2024 Board cycle; and (iii) 100% of the Audit Committee chair retainer for the 2023/2024 Board cycle. |
CHANGES TO DIRECTOR COMPENSATION FOR 2024
CHANGES TO DIRECTOR COMPENSATION FOR 2024 In its review of directors’ compensation for the 2024/2025 Board cycle, the Committee on Governance and Public Policy decreased the lead director retainer from $80,000 to $50,000 to better align with the competitive market. This change will become effective on May 2, 2024, the date of the 2024 Annual Meeting of Shareowners.
CHANGES TO DIRECTOR COMPENSATION FOR 2024
| Share Ownership |
Why should I vote for this proposal?
| ● | Facilitate the retention of highly talented executives who are critical to our long-term success | | ● | Deliver fair and equitable pay to executives of comparable experience and performance who perform similar work, regardless of race or gender | | ● | Require ethical and responsible conduct in pursuit of these goals |
Why should I vote for this proposal?
Further, the performance metrics used in our incentive programs directly align with shareowner interests by correlating the timing and amount of actual payouts to our short-, medium- and long-term performance. Over the past several years, the Committee has taken several actions to reinforce these objectives, such as replacing RSUs with SARs, incorporating into our Executive Annual Incentive Plan a Corporate Responsibility Scorecard that includes quantitative goals and eliminating certain executive perquisites.
PROPOSAL 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
| Executive Summary | 43 | | Shareowner Engagement on Compensation | 43 | | 2023 Performance Overview | 43 | | How We Align Pay and Performance | 45 | | How We Make Pay Decisions and Assess Our Programs | 47 | | Roles and Responsibilities | 47 | | 2023 Independent Consultant Engagement | 48 | | Our Compensation Peer Group and Use of Market Data | 48 | | 2023 Principal Elements of Compensation | 49 | | Base Salary | 49 | | Annual Incentive Awards | 49 | | Long-Term Incentive (“LTI”) Awards | 54 | | 2023 CEO Pay Decisions | 56 | | 2023 Pay Decisions for Other NEOs | 58 | | Other Compensation Elements | 62 | | Retirement and Deferred Compensation Benefits | 62 | | Perquisites and Other Benefits | 63 | | Severance and Change-in-Control Arrangements | 64 | | Other Executive Compensation Policies and Practices | 65 | | Post-Employment Restrictive Covenants | 65 | | Clawback Policies | 65 | | Prohibition on Certain Transactions Involving RTX Stock | 66 | | Employment Agreements | 66 | | Tax Deductibility of Incentive Compensation | 66 |
Executive Summary
This past year, our shareowner outreach efforts focused on our ongoing progress toward our corporate responsibility objectives, the Committee’s pay decisions for our NEOs and how we can enhance our proxy disclosure to ensure it is clear and concise. Overall, investors were supportive of our current executive compensation program design, including our shift from qualitative to quantitative Corporate Responsibility Scorecard goals for our Annual Incentive Plan (“AIP”). The feedback we received on our proxy disclosure in response to these outreach efforts has been incorporated into this year’s disclosure. For more information on our shareowner engagement, see page 34.
Long-Term Focus
Long-Term Focus For our most senior executives, long-term, stock-based compensation opportunities should significantly outweigh short-term, cash-based opportunities. Annual objectives should complement sustainable, long-term performance.
2023 Total Direct Compensation
2023 Total Direct Compensation In making annual pay decisions, the Committee focuses primarily on “total direct compensation,” which includes our three principal elements of executive compensation: base salary, annual incentives and long-term incentives. These elements are discussed in detail on pages 49-55. Total direct compensation is set each year to reflect the Committee’s assessment of Company, business unit and individual performance for the year. 2023 total direct compensation includes 2023 base salary, 2023 annual incentives paid in the first quarter of 2024 and the LTI grant values approved by the Committee in February 2024, which were based on its assessment of 2023 performance and the competitive market pay for each NEO’s role. This differs from the February 2023 LTI award grant date fair values (accounting values at the time of grant) shown in the Summary Compensation Table on page 68, which were based on the Committee’s assessment of 2022 performance and the competitive market pay for each NEO’s role at that time. For more details on total direct compensation, see page 57. As previously discussed on pages 5-6, in making 2023 total direct compensation decisions, the Committee took into consideration the impact of the Pratt & Whitney powder metal manufacturing matter (see page 1) on our shareowners and customers and reduced the RTX performance factor from 103% to 98%, and further adjusted the performance factors used for Mr. Hayes and Mr. Calio’s annual incentive awards to 83% and 93% of target, respectively. The Committee believes these actions reflect the pay-for-performance objectives of our executive compensation programs. The following chart shows the 2023 total direct compensation of our NEOs:
2023 Total Direct Compensation
| | Base Salary ($K)(1) | Annual Incentive ($K) | LTI ($K)(2) | Total Direct Compensation ($K) | | Gregory J. Hayes | $1,675 | $2,780 | $10,000 | $14,455 | | Neil G. Mitchill, Jr. | $975 | $1,100 | $5,500 | $7,575 | | Christopher T. Calio | $1,010 | $1,410 | $13,500 | $15,920 | | Stephen J. Timm | $850 | $840 | $4,500 | $6,190 | | Wesley D. Kremer(3) | $905 | $820 | $0 | $1,725 |
Oversees our programs
| ● | Sets financial, strategic and operational goals and objectives for the Company, our business units and the Chairman and CEO, as they relate to the Company’s annual and long-term incentive programs. | | ● | Assesses Company, business unit and NEO performance relative to the preestablished goals and objectives set for the year. | | ● | Evaluates the competitiveness of officers’ compensation and approves compensation adjustments, as appropriate. | | ● | Approves all executive compensation program design changes, including severance, change-in-control, supplemental benefit arrangements and the Company’s Executive Leadership Group (“ELG”) program. | | ● | Appoints executives to the ELG. | | ● | Reviews risk assessments as they relate to RTX’s compensation plans, policies and practices. | | ● | Considers shareowner input regarding executive compensation decisions and policies. | | ● | Reviews the Company’s initiatives relating to its human capital management function. | | ● | Engages the Committee’s independent consultant, including approving the consultant’s compensation, determining the nature and scope of its services, evaluating its performance, terminating the engagement and replacing or adding consultants as needed. |
Provides an independent perspective and assessment
| ● | Advises the Committee on a variety of subjects, including compensation plan design and trends, pay-for-performance analytics, benchmarking data, setting performance goals, risk assessment and related matters. | | ● | Reports directly to the Committee, participates in meetings as requested and communicates with the Committee Chair between meetings as necessary. |
2023 Independent Consultant Engagement
2023 Independent Consultant Engagement In early 2023, the Committee again engaged Frederic W. Cook & Co. (“FW Cook”) as its independent consultant for the year. Prior to the engagement, the Committee reviewed the firm’s qualifications, independence and any potential conflicts of interest. FW Cook did not perform other services for or receive other fees from the Company. As a result, the Committee determined that FW Cook qualified as an independent consultant. During 2023, FW Cook representatives attended all Committee meetings. No other consulting firm made recommendations to the Committee on RTX’s peer group composition or on the form, amount or design of executive compensation in 2023. However, the Committee did obtain market data from other compensation consulting firms for various purposes, including benchmarking. Generally, such data is also available to other consulting clients of these firms.
Our Compensation Peer Group and Use of Market Data
Our Compensation Peer Group and Use of Market Data How We Use Peer Group Data. The Committee believes that to keep our executive compensation program sufficiently competitive, the target value of each principal element of compensation should approximate the market median of the companies RTX views as competitors for senior executive talent. For this reason, we compare our executive compensation program to the programs of companies within our Compensation Peer Group (“CPG”). In addition, we use market data from the aerospace and defense sector, the Fortune 100 and a broader group of companies to gain insight into general compensation trends and to supplement CPG market data when the Committee finds it necessary or appropriate. The Committee annually evaluates each compensation element relative to the market for each officer’s role and makes adjustments as appropriate. However, individual compensation may vary from market median benchmarks based on the Committee’s assessment of other factors that it considers relevant, including Company, business unit, function and/or individual performance, job scope, retention risk, internal pay equity and sustained performance over time. How Our Compensation Peer Group is Constructed. The CPG, shown below, is composed of a mix of industry and non-industry peers. The Committee believes these 20 companies provide a relevant comparison based on their similarity to RTX in size, geographic footprint and operational complexity, taking into account factors such as revenue, market capitalization, global scope of operations, manufacturing footprint, research and development activities, and technology and engineering focus. We use the CPG solely for the purpose of benchmarking executive compensation. As a result, we do not use the relative financial performance of the CPG as a performance metric in our incentive compensation programs.
OUR COMPENSATION PEER GROUP (CPG)
OUR COMPENSATION PEER GROUP (CPG)
OUR COMPENSATION PEER GROUP (CPG)
| | | | | | Aerospace & Defense | Equipment & Machinery | Technology/Communications | Oil & Gas | | Boeing General Dynamics L3Harris Technologies Lockheed Martin Northrop Grumman | 3M Caterpillar Deere | AT&T Cisco HP Inc. IBM Intel Verizon | Chevron | | | | | | | Chemicals | Diversified Industrials | Automotive | Freight & Logistics | | Dow | General Electric Honeywell | General Motors | UPS |
TIMELINE FOR COMPENSATION DECISIONS
| February 2023 | April 2023 | December 2023* | February 2024* | 1st Quarter of 2024 | | Approved 2023 base salary merit adjustments. Approved 2023 annual incentive performance goals. | 2023 base salary merit adjustments took effect. | Reviewed preliminary 2023 Company, business unit and individual NEO performance. | Reviewed final 2023 Company, business unit and individual NEO performance. Approved performance factors and individual 2023 annual incentive awards. Approved and granted 2024 LTI awards reflective of 2023 performance. | 2023 annual incentive awards paid. |
TIMELINE FOR COMPENSATION DECISIONS
| * In connection with the leadership transition announced in December 2023, the Committee made 2024 LTI award decisions for Mr. Hayes and Mr. Calio at its December 2023 meeting. |
Annual Incentive Awards
Annual Incentive Awards Annual incentive awards, which are granted under the RTX Corporation Executive Annual Incentive Plan (“AIP”), are an integral component of our executive compensation program. The AIP reinforces Company and business unit goals, promotes the achievement of these goals and enables us to attract, retain and motivate the highest caliber of executive talent.
HOW ANNUAL INCENTIVE AWARDS ARE DETERMINED
HOW ANNUAL INCENTIVE AWARDS ARE DETERMINED The following formula is the basis for determining annual incentive awards for our NEOs: Though performance relative to preestablished financial and Corporate Responsibility Scorecard goals is the primary basis for determining the performance factors under the AIP, the Committee retains the right to make discretionary adjustments to the overall performance factors if it determines that such performance does not accurately reflect the overall quality of performance for the year. In the past, the Committee has made both positive and negative adjustments (see Appendix B on page 122 for additional details). Examples of situations that could result in discretionary adjustments to performance factors include:
HOW ANNUAL INCENTIVE AWARDS ARE DETERMINED
| ● | Significant, unforeseen circumstances beyond management’s control that affected performance relative to the established goals, including certain nonrecurring charges and credits unrelated to operating performance |
HOW ANNUAL INCENTIVE AWARDS ARE DETERMINED
| ● | Changes in tax laws and accounting rules that positively or negatively impact performance |
HOW ANNUAL INCENTIVE AWARDS ARE DETERMINED
| ● | Changes to the Company’s capital structure (restructuring, acquisitions and divestitures) |
HOW ANNUAL INCENTIVE AWARDS ARE DETERMINED
In addition, our NEOs begin the year with individual financial, strategic and/or operational objectives. Based on the CEO’s performance assessment, it may be recommended that the Committee use its discretion to increase or decrease the award an NEO would otherwise receive based on the performance factor approved by the Committee. The Committee considers these recommendations and makes adjustments it deems appropriate, ranging anywhere from -100% to +30% of the approved performance factor. In making its annual incentive decisions, the Committee also considers each executive’s responsibility to act at all times in accordance with our Code of Conduct, Company policies and compliance initiatives.
2023 ANNUAL INCENTIVE TARGETS
2023 ANNUAL INCENTIVE TARGETS Each NEO has an annual incentive target that is expressed as a percentage of the NEO’s base salary as in effect on December 1, 2023. These targets are based on relevant market data for each NEO’s role and generally approximate the median of our CPG. Changes in target percentages that occur during the year (usually due to a change in role) are prorated. For the 2023 plan year, the Committee increased annual incentive targets for certain NEOs to maintain market competitiveness, as shown below:
2023 ANNUAL INCENTIVE TARGETS
| NEO | 2022 | 2023 | | Gregory J. Hayes | 200% | 200% | | Neil G. Mitchill, Jr. | 110% | 115% | | Christopher T. Calio | 150% | 150% | | Stephen J. Timm | 100% | 105% | | Wesley D. Kremer | 100% | 105% |
PERFORMANCE METRICS
PERFORMANCE METRICS 2023 Performance Metrics and Weightings The charts below show the 2023 performance metrics and weightings for our Corporate and business unit executives.
PERFORMANCE METRICS
| | Financial Goals | | Corporate Responsibility Scorecard (“CRS”) | | | | Earnings | Free Cash Flow | People & Culture | Sustainability | | Corporate Executives Funding based entirely on Company-wide performance | | | | | | Business Unit Executives Funding based equally on business unit performance and Company-wide performance for financial metrics, and entirely on Company-wide performance for CRS metrics Company-Wide Business Unit | | | | |
PERFORMANCE METRICS
As shown above, for our Corporate executives, performance for all metrics are measured on a Company-wide basis. For business unit executives, our financial metrics are based on both business unit results and Company-wide results, while our CRS metrics are measured at the RTX level. The Committee believes that, at the business unit level, financial metrics should motivate executives both to deliver on customer commitments and to leverage Company-wide resources to advance technology and innovation. Payout funding ranges from 0% to 200% of target for all metrics.
OUR FINANCIAL PERFORMANCE METRICS
OUR FINANCIAL PERFORMANCE METRICS
OUR FINANCIAL PERFORMANCE METRICS
| | Company-Wide Metrics | | Business Unit Metrics | | | | RTX Earnings | RTX FCF | Business Unit Earnings | Business Unit FCF | | How are AIP financial metrics defined? | We start with a GAAP measure: RTX’s net income attributable to common shareowners.* | We start by subtracting one GAAP measure from another: RTX’s consolidated net cash flow from operating activities, less RTX’s capital expenditures.* | We start with a GAAP measure: business unit operating income.* | We start with an internal measure based on business unit net cash flow from operating activities, less capital expenditures. | | | Then we adjust for the impact of certain items and external events unrelated to our operating performance. These may include, in any given year, changes in tax laws and accounting rules, restructuring costs, the impact of acquisitions and divestitures (including acquisition accounting adjustments), and significant and/or nonrecurring items. See Appendix B on page 122 for additional details. | | | | | Why did the Committee choose these metrics? | The Committee believes adjusted net income is relevant because it measures the immediate impact of operating decisions on RTX’s overall performance, and includes the impact of items such as tax, interest and foreign exchange fluctuations, which are managed at the Corporate level. | The Committee believes that FCF performance is a relevant measure of our ability to generate cash to fund our operations and key business investments and to return capital to our shareowners. | The Committee believes that operating income, exclusive of tax, interest and foreign exchange exposure, should be the focus of our business units. | The Committee believes that FCF performance is a relevant measure of the business units’ ability to generate cash to fund their operations and key business investments. |
OUR FINANCIAL PERFORMANCE METRICS
| * As reported in our 2023 Annual Report on Form 10-K. |
OUR FINANCIAL PERFORMANCE METRICS
| Why we use non-GAAP financial metrics for our annual incentives | | The Committee believes annual incentives should not be positively or negatively impacted by short-term decisions made in the best interest of RTX’s long-term business strategies. Our non-GAAP performance measures encourage decision-making that considers long-term value creation but does not conflict with our short-term incentive metrics. Adjustments noted above allow for a clearer assessment of business performance and more closely align our annual incentive goals with the non-GAAP financial expectations we communicate to shareowners. |
OUR CORPORATE RESPONSIBILITY SCORECARD
OUR CORPORATE RESPONSIBILITY SCORECARD RTX is committed to building a company that embraces diversity, equity and inclusion, attracts and retains the talented employees necessary to drive our mission, and ensures our operations do not compromise the environmental health of future generations. For us, advancing these commitments is both a business and social imperative, and requires our leadership team to be held accountable for making tangible progress. RTX management and the Board of Directors view corporate responsibility as integral to our long-term strategy, our business operations, our values and how we engage with our stakeholders. To accelerate the pace of our progress, our Executive Annual Incentive Plan incorporates a Corporate Responsibility Scorecard (“CRS”), which includes two categories—People & Culture and Sustainability. As part of our continued emphasis on our corporate responsibility initiatives, the Committee determined that for 2023, our CRS would be evaluated based on four RTX-wide metrics with preestablished quantitative goals, rather than on a qualitative basis. These CRS goals, listed below, reinforce our commitment to our long-term goals and strengthen alignment between the interests of executives and shareowners.
HOW WE PERFORMED ON OUR 2023 FINANCIAL GOALS
HOW WE PERFORMED ON OUR 2023 FINANCIAL GOALS The Committee established goals for earnings and free cash flow at threshold, target and maximum performance levels both for the Company overall and for each business unit. Performance relative to these goals determines the financial performance factors used to fund the annual incentive pool for Corporate executives and for executives in each business unit. Performance below the threshold level will result in 0% funding for that metric, while performance above the maximum level cannot exceed the maximum funding level of 200%. Performance that falls between the threshold, target and maximum levels results in funding between the applicable levels.
2023 COMPANY-WIDE FINANCIAL GOALS, RESULTS AND FINANCIAL PERFORMANCE FACTORS
| (1) Adjusted net income and free cash flow are metrics used solely for AIP purposes and are defined in Appendix B on page 122. These metrics may differ from other non-GAAP metrics used and described in Appendix A. |
2023 BUSINESS UNIT FINANCIAL GOALS, RESULTS AND FINANCIAL PERFORMANCE FACTORS
| | Business Unit Goals and Results(2) | | | | Business Unit Earnings | Business Unit FCF | | What 2023 financial goals were set for annual incentive purposes? | Adjusted operating income goals ranged from $1,535 million to $3,910 million for our business units. | FCF goals ranged from $1,150 million to $2,935 million for our business units. | | What were the financial results used for annual incentive purposes? | Adjusted business unit operating income ranged from $1,570 million to $3,905 million. | FCF results ranged from $1,179 million to $2,695 million. | | What were the resulting financial performance factors for each metric? | Ranged from 0% to 114% of target. | Ranged from 56% to 116% of target. | | What were the financial performance factors after applying the 50% weighting of the Company-wide factor for each metric? | Ranged from 51% to 108% of target. | Ranged from 78% to 108% of target. |
HOW WE PERFORMED ON THE CORPORATE RESPONSIBILITY SCORECARD
HOW WE PERFORMED ON THE CORPORATE RESPONSIBILITY SCORECARD The 2023 Corporate Responsibility Scorecard goals, results and performance factors are shown below:
HOW PERFORMANCE AFFECTED PAYOUTS AND THE COMMITTEE’S USE OF DISCRETION
HOW PERFORMANCE AFFECTED PAYOUTS AND THE COMMITTEE’S USE OF DISCRETION The table below shows the weighted performance factors for each financial and CRS metric, resulting mathematically in the overall RTX performance factor, and the reduction of that RTX performance factor through Committee discretion.
HOW PERFORMANCE AFFECTED PAYOUTS AND THE COMMITTEE’S USE OF DISCRETION
| RTX Metrics(2) | Weight | Unweighted Performance Factor | Weighted Performance Factor | | Earnings (adjusted net income) | 40% | 101% | 40.4% | | Free Cash Flow | 40% | 100% | 40.0% | | Total Representation % | 5% | 71% | 3.6% | | Employee Retention Rate | 5% | 177% | 8.9% | | GHG Emissions | 5% | 110% | 5.5% | | Water Usage | 5% | 91% | 4.6% | | 2023 RTX Performance Factor (calculated based on formula) | | | 103% | | 2023 RTX Performance Factor (with Committee discretion) | | | 98% |
HOW PERFORMANCE AFFECTED PAYOUTS AND THE COMMITTEE’S USE OF DISCRETION
| (2) Adjusted net income and free cash flow are financial metrics used solely for AIP purposes and are defined in Appendix B on page 122. These metrics may differ from other non-GAAP metrics used and described in Appendix A. See page 51 for definitions of the Corporate Responsibility Scorecard metrics. |
HOW PERFORMANCE AFFECTED PAYOUTS AND THE COMMITTEE’S USE OF DISCRETION
For our business units, the weighted performance factors ranged from 86% to 107% of target. After the Committee applied discretion, the final business unit performance factors ranged from 86% to 98% of target. As previously mentioned, the definition of adjusted net income used for AIP purposes excludes the impacts of changes in tax laws and accounting rules, restructuring costs, acquisitions and divestitures (including acquisition accounting adjustments), and significant and/ or nonrecurring items. These adjustments help to more closely align our annual incentive goals and results with the non-GAAP financial expectations and performance we communicate to shareowners, and ensure that our AIP drives short-term decision-making that is in the best interests of RTX’s long-term business strategies.
HOW PERFORMANCE AFFECTED PAYOUTS AND THE COMMITTEE’S USE OF DISCRETION
| Consistent with how we reported adjusted net income to our shareowners for the year, the AIP definition excludes the impact of the Pratt & Whitney powder metal manufacturing matter (see page 1). Nevertheless, the Committee considered the impact of this matter on our shareowners and customers and reduced the RTX performance factor from 103% to 98%, and further reduced the performance factors used for Mr. Hayes and Mr. Calio’s annual incentive awards to 83% and 93% of target, respectively. |
Long-Term Incentive (“LTI”) Awards
Long-Term Incentive (“LTI”) Awards
LTI MIX
LTI MIX The Committee annually reviews the design of our LTI awards to ensure consistency with our program’s fundamental objective of aligning the interests of executives and shareowners while attracting and retaining talented senior leaders. In 2023, the LTI mix for our NEOs was 60% performance share units (“PSUs”) and 40% stock appreciation rights (“SARs”). The Committee believes each LTI vehicle serves a specific objective:
LTI MIX
| ● | PSUs encourage the achievement of important financial goals and align payouts with the shareowner experience. | | ● | SARs motivate prudent long-term decision-making and have strong pay-for-performance alignment since they have no value if the stock price does not increase from the price on the grant date. |
PERFORMANCE SHARE UNITS
PERFORMANCE SHARE UNITS 2023-2025 PSUs. 2023 PSUs will vest following the end of a three-year performance period, subject to Company performance relative to preestablished financial performance goals. Executives must also be employed by the Company on the vesting date, with exceptions in the case of death, disability, qualifying separation within two years of a change-in-control, retirement and certain involuntary terminations. PSUs are designed to deliver market median compensation at target levels of performance. Below- or above-target performance will result in variations from market median payouts. Payouts range from 0%, if all metrics fall below threshold-level performance, to 200% of target, if all metrics meet or exceed the maximum-level performance. Each PSU converts into one share of RTX Common Stock upon vesting. Unvested PSUs do not earn dividend equivalents. The goals established for our 2023–2025 PSUs are as follows:
PERFORMANCE GOALS AND WEIGHTINGS FOR 2023–2025 PSUs
PERFORMANCE GOALS AND WEIGHTINGS FOR 2023–2025 PSUs
PERFORMANCE GOALS AND WEIGHTINGS FOR 2023–2025 PSUs
| Metric | Weighting | Threshold (25% payout) | Target (100% payout) | Maximum (200% payout) | | Adjusted Earnings Per Share(1) ●Measured using a compound annual growth rate (CAGR) over the three-year performance period ●Goals align with our mid-range strategic business plan ●Reflects what the Committee determined to be a challenging, yet attainable goal | | 5.7% | 11.6% | 15.1% | | Return on Invested Capital (“ROIC”)(1) ●Calculated using a quarterly average over the three-year performance period | | 6.5% | 7.5% | 8.3% | | Total Shareowner Return (“TSR”) vs. Core A&D Peers(2) ●Measures RTX’s cumulative three-year TSR(3) percentile rank relative to our nine Core A&D Peers ●Payout for this portion of the award is capped at 100% of target if RTX’s TSR is negative | | 25th percentile | 50th percentile | 75th percentile | | TSR vs. S&P 500 Index Companies ●Measures RTX’s cumulative three-year TSR(3) percentile rank relative to the companies within the S&P 500 Index at the beginning of the performance period ●Payout for this portion of the award is capped at 100% of target if RTX’s TSR is negative | | 25th percentile | 50th percentile | 75th percentile |
PERFORMANCE GOALS AND WEIGHTINGS FOR 2023–2025 PSUs
| (1) Adjusted EPS and ROIC are financial metrics used solely for PSU purposes and are defined in Appendix B on page 122. These metrics differ from other non-GAAP metrics used and described in Appendix A. | | (2) Core A&D Peers include: Airbus, Boeing, General Electric, General Dynamics, Honeywell, L3Harris, Lockheed Martin, Northrop Grumman and Safran. | | (3) See Appendix B on page 122 for details on how TSR is calculated. |
PERFORMANCE GOALS AND WEIGHTINGS FOR 2023–2025 PSUs
What the Committee Considers when Setting Performance Goals. When setting financial performance goals for our PSU awards, the Committee considers various long-term business factors, including, but not limited to, planned share buybacks, macroeconomic market trends and cost-reduction plans. As defined in Appendix B, adjusted EPS and ROIC exclude the impact of changes in tax laws and/or accounting rules, acquisitions and divestitures (including acquisition accounting adjustments), restructuring, nonrecurring and other significant, nonoperational items, nonoperating pension and post-retirement income or expense, and changes in asset or liability valuations of deferred compensation plans recognized in interest income/expense. The Committee may also adjust (positively or negatively) to exclude certain items unrelated to operational performance, such as unplanned share buybacks, when necessary to maintain the validity of the targets as originally formulated. Limit on Maximum Vesting Value. If the value of PSUs at vesting (valued by multiplying the number of PSUs vesting by the closing RTX stock price on the vest date) is greater than 400% of the value of the PSUs at grant (valued by multiplying the number of PSUs at target-level performance by the closing RTX stock price on the grant date), the vesting factor will be reduced so that the value delivered to our executives will be no greater than 400% of the grant value. 2021-2023 PSU Vesting. As previously disclosed, the economic environment caused by the COVID-19 pandemic made setting long-term financial performance goals in early 2021 challenging, especially given the adverse impact of that environment on commercial aviation and uncertainty about when conditions would improve. As a result, for our PSUs granted on February 8, 2021, the Committee set one-year adjusted EPS and ROIC goals, followed by a two-year, time-based vesting period. For relative TSR performance vs. our Core A&D Peers and the companies within the S&P 500 Index, we maintained a three-year performance period. To balance the change to our adjusted EPS and ROIC goals, the Committee increased the total portion of our PSUs that vest subject to three-year TSR performance from 30% to 50%. For the PSUs granted after 2021, the Committee reverted back to three-year adjusted EPS and ROIC performance goals and to our historical metric weightings. The table below shows RTX’s performance for each of the four metrics used for the PSUs granted in 2021, resulting in the award vesting at a 143% performance factor. Though the Pratt & Whitney powder metal manufacturing matter (discussed on page 1) did not impact the adjusted EPS and ROIC performance metrics, both relative TSR metrics, which accounted for 50% of the total vesting, were calculated based on RTX’s stock price performance after disclosure of the powder metal matter.
PERFORMANCE GOALS AND WEIGHTINGS FOR 2023–2025 PSUs
| Metric* | Weight | Threshold | Target | Maximum | Actual | Payout Factor | | Adjusted EPS | 25% | $3.00 | $3.55 | $3.90 | $4.27 | 200% | | Return on Invested Capital | 25% | 3.20% | 3.70% | 4.05% | 4.54% | 200% | | TSR vs. S&P 500 Index Companies | 25% | 25th percentile | 50th percentile | 75th percentile | 55.4th percentile | 122% | | TSR vs. Core A&D Peers | 25% | 25th percentile | 50th percentile | 75th percentile | 33.3rd percentile | 50% | | Final Performance Factor | | | | | | 143% |
PERFORMANCE GOALS AND WEIGHTINGS FOR 2023–2025 PSUs
| * See Appendix B of our proxy statement filed on March 14, 2022, for a definition of adjusted EPS and return on invested capital used for the purposes of the 2021-2023 PSUs. |
2023 CEO Pay Decisions
2023 CEO Pay Decisions
2023 CEO Pay Decisions
| Gregory J. Hayes Chairman & Chief Executive Officer AGE 63 RTX EXPERIENCE 34 YEARS | |
2023 CEO Pay Decisions
Mr. Hayes served in the role of Chairman & Chief Executive Officer throughout 2023. On December 14, 2023, we announced that Mr. Hayes would step down as Chief Executive Officer effective May 2, 2024, but would continue to serve as Executive Chairman. Base Salary. During the Committee’s annual compensation review in February 2023, it did not adjust Mr. Hayes’ base salary, deeming that it aligned with the market for his role and was reflective of his long tenure and sustained performance. Annual Incentive Award. As discussed in detail on page 53, the Corporate performance factor of 103% of target was a result of RTX’s performance relative to the preestablished financial and Corporate Responsibility Scorecard goals. However, the Committee considered the impact of the Pratt & Whitney powder metal manufacturing matter (see page 1) on our shareowners and customers and reduced the Corporate performance factor from 103% to 98% and further reduced the performance factor used for Mr. Hayes’ annual incentive award to 83% of target. The Committee considered this factor, Mr. Hayes’ leadership during 2023 and the individual performance considerations noted here, and approved an annual incentive award of $2.78 million. This amount aligns with the reduced performance factor used for Mr. Hayes. LTI. The Committee approved a 2024 long-term incentive award of $10 million. This amount was less than his 2023 award due to his announced transition to the role of Executive Chairman, effective May 2, 2024. Mr. Hayes exhibited strong leadership in:
2023 CEO Pay Decisions
| ● | Exceeding the financial expectations we communicated to investors early in the year, despite inflationary challenges and supply chain pressure, which included: |
2023 CEO Pay Decisions
| – | Net sales growth of 2.8% (GAAP), 10.8% (adjusted) and 11% (organic).(1) | | – | Diluted earnings per share of $2.23 (GAAP) and $5.06 (adjusted).(1) | | – | $7.9 billion in cash flow from operations and $2.4 billion invested in capital expenditures, resulting in $5.5 billion in free cash flow.(1) | | – | Returning $16.1 billion to shareowners through dividends and share buybacks. |
2023 CEO Pay Decisions
| ● | Achieving a record backlog of $196 billion, with a pipeline of both existing franchises and new technology development. | | ● | Delivering on the promise of the Merger, including: |
2023 CEO Pay Decisions
| – | Returning $29.4 billion to shareowners through dividends and share buybacks through the end of 2023, exceeding our original 2025 goal of $20 billion, and putting us on track to achieve the revised $36-$37 billion goal we announced during the year. | | – | Capturing $1.7 billion in cost synergies through 2023, exceeding both our original and revised 2025 goal ($1 billion and $1.5 billion, respectively). As a result, we also announced during the year a new 2025 target of $2 billion. |
2023 CEO Pay Decisions
| (1) See Appendix A on pages 120-121 for details. |
2023 CEO Pay Decisions
COMPENSATION DISCUSSION AND ANALYSIS | 2023 CEO PAY DECISIONS
2023 CEO Pay Decisions
| ● | Actively managing our portfolio, including: |
2023 CEO Pay Decisions
| – | Realignment of our four operating segments into three market-leading businesses to enable us to better meet our customers’ needs, leverage our scale and drive additional technology and cost synergies. | | – | Divestiture of noncore businesses by entering into definitive agreements to sell Raytheon’s Cybersecurity, Intelligence & Services business and Collins Aerospace’s actuation and flight control business. |
2023 CEO Pay Decisions
| ● | Driving an ethical culture that values transparency and prioritizes the safety of our products. In 2023, these values were on full display when we discovered, promptly announced and worked diligently to develop a fleet management plan to address the rare condition in the powder metal used in the manufacturing of certain Pratt & Whitney engine parts that require accelerated fleet inspection (see page 30). |
2023 CEO Pay Decisions
| What is “total direct compensation?” |
2023 CEO Pay Decisions
In contrast to the Summary Compensation Table (on page 68), our discussion of CEO and NEO pay decisions in this proxy (pages 56-61) uses a measure called “total direct compensation,” which the Committee believes provides a more accurate picture of its annual pay decisions and reflects its most recent assessment of Company, business unit and individual performance, and the competitive market for each NEO’s role. Total direct compensation includes the 2023 salary (effective at the end of the year), 2023 annual incentive for the completed performance year and long-term incentives as described below.
How the Committee Views LTI Award Values
How the Committee Views LTI Award Values
How the Committee Views LTI Award Values
| Total Direct Compensation | Includes the value of LTI awards approved by the Committee and granted in February 2024. | Award values relate to the Committee’s assessment of 2023 performance and the competitive market pay for each NEO’s role. | | Summary Compensation Table | Includes the grant date fair value of LTI awards granted in February 2023. | Award values relate back to the Committee’s assessment of 2022 performance and the competitive market pay for each NEO’s role. |
How the Committee Views LTI Award Values
The SEC rules require the LTI awards granted in February 2023 to be reported in the Summary Compensation Table in this 2024 Proxy Statement, with a different valuation methodology than we use for total direct compensation. In addition, the compensation values reported in the Summary Compensation Table include certain elements (e.g., changes in pension values, which are impacted by assumptions, such as interest rates, and other formulaic compensation and benefit components) that we exclude from total direct compensation because they are not tied to performance and fall outside the scope of the Committee’s annual pay decisions. CEO TOTAL DIRECT COMPENSATION: THREE-YEAR COMPARISON As shown in the chart below, and as discussed in our Guiding Principles on page 45, the Committee believes that a substantial portion of total direct compensation should be variable, contingent and directly linked to Company and individual performance. 88% of Mr. Hayes’ 2023 total direct compensation was “at-risk” variable compensation.
How the Committee Views LTI Award Values
| (1) Reflects annual LTI award values approved by the Committee. These values differ from the values reported in the Summary Compensation Table (on page 68), which are calculated in accordance with FASB ASC Topic 718. |
2023 Pay Decisions for Other NEOs
2023 Pay Decisions for Other NEOs The Committee makes annual compensation decisions for our NEOs based on their individual performance and the overall performance of the Company (and the NEO’s business unit/function, where applicable). In the following pages, we describe the components of total direct compensation for each NEO for 2023, noting aspects of their individual performance that contributed to the Committee’s pay decisions (see page 57 for an explanation of total direct compensation).
2023 Pay Decisions for Other NEOs
| Neil G. Mitchill, Jr. Executive Vice President & Chief Financial Officer AGE 48 RTX EXPERIENCE 9 YEARS | |
2023 Pay Decisions for Other NEOs
Base Salary. Mr. Mitchill received a base salary increase from $900,000 to $975,000 during 2023 to more closely align it with the CPG market median. Following the increase, Mr. Mitchill’s base salary is slightly below the CPG median for his role. Annual Incentive Award. As discussed in detail on page 53, the Committee reduced the Corporate performance factor from 103% to 98%. The Committee considered this factor, Mr. Mitchill’s leadership of the RTX finance function and the individual performance considerations noted here, and approved a $1.1 million award for 2023. This amount aligns with the reduced Corporate performance factor. LTI. In consideration of Mr. Mitchill’s strong 2023 performance, the Committee approved a $5.5 million 2024 LTI award, an amount that approximates the CPG median for his role and is above his 2023 LTI award.
2023 Pay Decisions for Other NEOs
| ● | Oversaw the Company’s finances, leading to RTX exceeding the adjusted sales, adjusted earnings per share and free cash flow goals we communicated to investors for the year. | | ● | Led RTX’s disciplined capital allocation strategy, which included: |
2023 Pay Decisions for Other NEOs
| – | Investing $9.7 billion in Company- and customer-funded research & development and capital expenditures. | | – | Launching a $10 billion Accelerated Share Repurchase program to capitalize on what we believe to be a discount in the intrinsic value of RTX. | | – | Returning $16.1 billion to shareowners through share repurchases and dividends. | | – | Increasing our dividend per share by 7.3%. |
2023 Pay Decisions for Other NEOs
| ● | Leading our robust investor outreach efforts, which included hosting two major investor conferences and our second annual Investor Day, in addition to meeting individually with most of our top investors. | | ● | Supporting our efforts to reach an agreement to divest Raytheon’s Cybersecurity, Intelligence & Services business and Collins Aerospace’s actuation and flight control business. | | ● | Delivering $295 million in cost synergies in 2023 and achieving, ahead of schedule, our original and revised 2025 goals ($1 billion and $1.5 billion, respectively) while announcing an increased cost synergy commitment of $2 billion by 2025. |
2023 Pay Decisions for Other NEOs
| Christopher T. Calio President & Chief Operating Officer AGE 50 RTX EXPERIENCE 18 YEARS | |
2023 Pay Decisions for Other NEOs
Mr. Calio served in the role of President & Chief Operating Officer throughout 2023. On December 14, 2023, we announced that he will be promoted to the role of President & Chief Executive Officer at our 2024 Annual Meeting of Shareowners on May 2, 2024. Mr. Calio was also appointed to the Board of Directors, effective December 14, 2023. Base Salary. Mr. Calio received a base salary increase from $900,000 to $1,010,000 during the year. Following this increase, Mr. Calio’s base salary was below the market median for the role of President & Chief Operating Officer. Annual Incentive Award. As discussed in detail on page 53, the Corporate performance factor of 103% of target was a result of RTX’s performance relative to the preestablished financial and Corporate Responsibility Scorecard goals. However, the Committee considered the impact of the Pratt & Whitney powder metal manufacturing matter on our shareowners and customers and reduced the Corporate performance factor from 103% to 98% and further reduced the performance factor used for Mr. Calio’s annual incentive award to 93% of target. The Committee considered this factor, Mr. Calio’s leadership during the year and the individual performance considerations noted here, and approved a $1.41 million award for 2023. This amount aligns with the reduced Corporate performance factor used for Mr. Calio. LTI. In consideration for Mr. Calio’s 2023 performance, and his pending transition to the role of President & CEO, the Committee approved a 2024 LTI award of $13.5 million. This amount is below the CPG median for his new role.
2023 Pay Decisions for Other NEOs
| ● | Led the realignment of our businesses from four to three segments to capitalize on evolving customer demands and generate additional revenue and technology synergies. | | ● | Captured $95 billion in new bookings, resulting in a backlog growth of 12% and a book-to-bill ratio of 1.28, ending the year with record backlog of $196 billion. | | ● | Led the Company’s response to the Pratt & Whitney powder metal manufacturing matter, including our prompt development of a fleet management and recovery plan. | | ● | Oversaw the operations of our business units, each of which saw several noteworthy customer achievements during the year, including: |
2023 Pay Decisions for Other NEOs
| – | Collins Aerospace successfully demonstrated its Common Tactical Edge Network (CTEN) program for the U.S. Air Force, which will enable time-sensitive tactical data to be shared across disparate networks for faster decision-making on today’s modern battlefield. | | – | Pratt & Whitney was awarded a Pentagon contract worth over $2 billion for additional F135 engines. | | – | Raytheon was awarded a $1.2 billion contract for C-8 AMRAAM and AIM-120 D-3 missiles, representing its largest AMRAAM missile contract to-date. |
2023 Pay Decisions for Other NEOs
| ● | Achieved key milestones toward our efforts to help our industry meet its ambitious goal of net-zero CO2 emissions by 2050, including: |
2023 Pay Decisions for Other NEOs
| – | Collins Aerospace and Pratt & Whitney completed a rated power test of the electric motor of the hybrid-electric demonstrator program, with flight testing to begin in 2024. | | – | Pratt & Whitney’s GTF Advantage engine completed successful flight test campaigns and is on track to achieve FAR-33 certification in 2024. |
2023 Pay Decisions for Other NEOs
| ● | Led our efforts to continue to mature our CORE operating system and our digital transformation initiatives to support business growth, operational excellence and productivity improvements. Examples include: |
2023 Pay Decisions for Other NEOs
| – | Structural cost reductions that resulted in decreased data center and office footprints. | | – | Increasing artificial intelligence and machine learning-enabled productivity hours. | | – | Connecting our priority factories and key systems to a common analytics platform to improve operational performance. | | – | Developing and implementing strategic sourcing mitigation plans to combat cost headwinds. |
2023 Pay Decisions for Other NEOs
| Stephen J. Timm President, Collins Aerospace AGE 55 RTX EXPERIENCE 27 YEARS | |
2023 Pay Decisions for Other NEOs
Base Salary. Mr. Timm received a merit increase from $800,000 to $850,000 during 2023. Following the adjustment, Mr. Timm’s base salary approximates the CPG median for his role. Annual Incentive Award. The Committee approved a performance factor of 94% of target for Collins Aerospace. The Committee considered this factor, Mr. Timm’s leadership of our Collins Aerospace business unit and the individual performance considerations noted here, and approved a $840,000 award, an amount that aligns with the Collins Aerospace performance factor. LTI. In consideration of Mr. Timm’s 2023 performance, the Committee approved a $4.5 million 2024 LTI award, an amount that is above the CPG median for his role, and his 2023 LTI award.
2023 Pay Decisions for Other NEOs
| ● | Collins Aerospace had significant financial achievements in 2023, including: |
2023 Pay Decisions for Other NEOs
| – | Sales growth of 13.9% (GAAP) and 13.6% (adjusted), which includes 13.8% organic sales growth.(1) | | – | Return on sales of 14.6% (GAAP) and 14.9% (adjusted).(1) | | – | Operating profit up 36% (GAAP) and 28% (adjusted).(1) |
2023 Pay Decisions for Other NEOs
| ● | Collins Aerospace achieved several substantial customer wins, which include: |
2023 Pay Decisions for Other NEOs
| – | Selection by BAE Systems to provide Large Area Display technology to be integrated into the future Eurofighter Typhoon aircraft—this technology represents a game-changing advancement in combat aviation, revolutionizing aerial operations by offering complete situational awareness and unparalleled operational effectiveness. | | – | Award by American Airlines of a contract to install Collins InteliSight Aircraft Interface Device on more than 500 aircraft, bringing the latest in aircraft data management technology to help improve safety, reliability and analytics. | | – | Selection by NASA to modify Collins’ new spacesuit design to develop elements that are compatible for use on the lunar surface as part of NASA’s Artemis missions. |
2023 Pay Decisions for Other NEOs
| ● | Collins Aerospace achieved several noteworthy operational accomplishments, which include: |
2023 Pay Decisions for Other NEOs
| – | Opening “The Grid,” an advanced electric-power systems lab in Rockford, Illinois, where Collins will develop and test key components for hybrid-electric propulsion and electric systems, key pillars of the aviation industry’s efforts to achieve net-zero carbon emissions by 2050. | | – | Conducting a successful lab test of the Enhanced Power and Cooling System, which, if selected, will provide significantly more cooling capacity on the F-35 Block 4 platform and require less energy from the engine, increasing engine performance and durability. | | – | Demonstrating its Common Tactical Edge Network (CTEN) program successfully for the U.S. Air Force; this program will enable time-sensitive tactical data to be shared across disparate networks for faster decision-making on today’s modern battlefield. |
2023 Pay Decisions for Other NEOs
| (1) See Appendix A on pages 120-121 for details. |
2023 Pay Decisions for Other NEOs
| Wesley D. Kremer Special Advisor to the President & Chief Operating Officer AGE 59 RTX EXPERIENCE 21 YEARS | |
2023 Pay Decisions for Other NEOs
Mr. Kremer served in the role of President, Raytheon during 2023. On January 4, 2024, we announced that effective January 7, 2024, he would step down from this role and would continue to operate in a transitional capacity as Special Advisor to the President & Chief Operating Officer until his retirement in March 2024. Base Salary. Mr. Kremer received a base salary increase from $875,014 to $905,008 during 2023. Following the adjustment, Mr. Kremer’s base salary is positioned moderately above the CPG median for his role, reflecting his long tenure as a business unit president. Annual Incentive Award. The Committee approved a performance factor of 86% of target for Raytheon. The Committee considered this factor, Mr. Kremer’s leadership of our Raytheon business unit and the individual performance considerations noted here, and approved a $820,000 award, an amount that aligns with the Raytheon performance factor. LTI. Given Mr. Kremer’s pending separation from the Company, the Committee did not grant him a 2024 LTI award.
2023 Pay Decisions for Other NEOs
| ● | Raytheon had significant achievements in 2023, which included: |
2023 Pay Decisions for Other NEOs
| – | Achieving bookings of $32 billion and a book-to-bill ratio of 1.22. | | – | Completing the four-to-three business unit realignment, resulting in the restructuring of key portfolios and the achievement of substantive cost synergies. |
2023 Pay Decisions for Other NEOs
| ● | Raytheon delivered notable products to key customers, which included: |
2023 Pay Decisions for Other NEOs
| – | Supporting Ukraine and the U.S. governments through rapid deployment of the Patriot missile system and accelerated deliveries of Javelin missiles and Excalibur rounds, in addition to implementing an accelerated timeline to refurbish/reprogram Advanced Medium-Range Air-to-Air Missiles (AMRAAMs) as part of a global buyback effort to get additional missiles to Ukraine. | | – | Installing the first SPY-6 radar on the USS Jack H. Lucas, a milestone in the planned deployment of SPY-6 on every new surface ship in the U.S. Navy, as well as on existing Flight IIA guided missile destroyers. |
2023 Pay Decisions for Other NEOs
| ● | Raytheon achieved several substantial customer wins, which included: |
2023 Pay Decisions for Other NEOs
| – | A $1.2 billion contract for AIM-120 D-3 and C-8 AMRAAM from the U.S. Air Force—our largest AMRAAM missiles contract to-date. | | – | A contract to outfit Korea Aerospace Industries’ FA-50 Light Combat Aircraft with the new PhantomStrike radar, a radar that is smaller, lighter and requires less power than similarly capable systems. | | – | An approved U.S. Army Letter of Acceptance to expand Poland’s air and missile defense capabilities with 48 Patriot Launchers and 12 Lower-Tier Air and Missile Defense Sensors (LTAMDS), making Poland the first international LTAMDS customer. | | – | A $1.2 billion contract from the U.S. Army to provide Switzerland with the Patriot air defense system, making them the 18th global Patriot partner. |
Nonqualified Plans
| ● | Effective January 1, 2023, eligible RTX employees (regardless of legacy company) may participate in two nonqualified plans—the UTC LTIP Performance Share Unit Deferral Plan, which has been renamed the RTX Corporation PSU Deferral Plan (“RTX PSU Deferral Plan”), and the new RTX Corporation Compensation Deferral Plan (“CDP”). The RTX PSU Deferral Plan allows eligible executives to defer between 10%-100% of their vested PSUs. The CDP provides eligible employees an opportunity to defer up to 50% of base salary and/or 80% of their annual incentive award, and to receive company matching and company retirement contributions once the participant can no longer receive these contributions into the qualified Savings Plan due to exceeding an Internal Revenue Code limit. |
Severance and Change-in-Control Arrangements
Severance and Change-in-Control Arrangements
EXECUTIVE LEADERSHIP GROUP PROGRAM
EXECUTIVE LEADERSHIP GROUP PROGRAM The ELG program covers the Company’s most senior leaders and key executives who are potential successors to senior leadership roles. The program has been in place since 1989 but has been modified a number of times over the years to align with best practices and to serve the evolving needs of the Company. The current program, which covers all of our NEOs, except Mr. Hayes, provides an RSU award with a grant value between $1 and $2 million (amount varies depending on role). The ELG RSU award is granted to executives upon their appointment to the ELG and vests only if there is a qualifying separation (defined below) and the executive enters into an agreement containing certain restrictive covenants (explained below). ELG RSUs earn dividend equivalents during the vesting period that are reinvested as additional RSUs each time the Company pays a dividend to shareowners. These RSUs are subject to the same vesting conditions as the underlying award. The ELG RSU award acts as a cash severance replacement tool, which the Committee believes more closely aligns our executives with the interest of our shareowners than an outright cash severance payment. The changes to the ELG separation benefit over the years have been applied prospectively due to existing contractual commitments. As a result, Mr. Hayes is eligible for an earlier iteration of the program that includes a cash payment equal to 2.5 times base salary upon a qualifying separation. The base salary that will be used to determine Mr. Hayes’ ELG separation benefit will be his base salary immediately prior to Mr. Hayes stepping down as CEO, effective May 2, 2024. The ELG separation benefit is not treated as compensation for purposes of determining benefits under the pension plans or any other benefit programs. ELG members are not eligible to participate in other company-sponsored severance plans, unless required by local law. Distributions are subject to certain restrictions imposed by Internal Revenue Code Section 409A. Under the ELG program, a “qualifying separation” is defined as:
EXECUTIVE LEADERSHIP GROUP PROGRAM
| ● | A mutually agreeable separation from the Company, including an ELG member’s position being eliminated or diminished by a divestiture, restructuring, shift in priorities or similar event following three years of ELG membership; | | ● | Retirement on or after age 62 following three years of ELG membership; or | | ● | Involuntary (not for cause) or voluntary (for good reason) terminations within two years of a change-in-control event. |
LEGACY UTC SENIOR EXECUTIVE SEVERANCE PLAN
LEGACY UTC SENIOR EXECUTIVE SEVERANCE PLAN Change-in-control severance protection under the legacy UTC Senior Executive Severance Plan (“SESP”) was designed to ensure continuity of management in potential change-in-control situations. In response to changing market practices, legacy UTC closed this program to new participants effective June 2009. Accordingly, Mr. Hayes is the only executive who remains eligible for the SESP benefit. All other ELG members instead are covered by the ELG program in a change-in-control event. The SESP cash severance benefit is equal to 2.99 times the sum of Mr. Hayes’ base salary and target annual incentive award for the year in which termination occurs, subject to various restrictive covenants. This benefit would be reduced by 1/36th for each month that termination occurs after age 62 and, accordingly, is completely phased out at age 65. Benefits under the SESP are subject to a “double trigger,” where benefits are provided only if a change-in-control is followed by an involuntary termination or termination by the executive for “good reason” within two years following a change-in-control. “Good reason” generally includes material-adverse changes in an executive’s compensation, responsibilities, authority, reporting relationship or work location. COMPENSATION DISCUSSION AND ANALYSIS | OTHER EXECUTIVE COMPENSATION POLICIES AND PRACTICES
RTX CORPORATION 2018 LONG-TERM INCENTIVE PLAN
RTX CORPORATION 2018 LONG-TERM INCENTIVE PLAN Under the RTX Corporation 2018 Long-Term Incentive Plan, as amended and restated (“RTX LTIP”), if a future RTX change-in-control event occurs and a plan participant has a qualifying termination within two years of that event, the vesting of outstanding LTI awards granted to such participant under the RTX LTIP would accelerate. For performance-based awards, performance goals would be deemed achieved at the greater of actual or target performance levels. A change-in-control is defined in the RTX LTIP to generally mean:
RTX CORPORATION 2018 LONG-TERM INCENTIVE PLAN
| ● | The acquisition by a person or a group of 20% or more of RTX’s outstanding shares or the combined voting power of RTX’s outstanding voting securities entitled to vote generally in the election of directors; | | ● | Incumbent directors no longer constituting a majority of the Board; | | ● | A merger or similar event where RTX shareowners own less than 50% of the voting shares of the new organization; or | | ● | A complete liquidation or dissolution is approved by RTX’s shareowners. |
RTX CORPORATION 2018 LONG-TERM INCENTIVE PLAN
A qualifying termination is defined in the RTX LTIP to mean:
RTX CORPORATION 2018 LONG-TERM INCENTIVE PLAN
| ● | An involuntary (not for cause) termination; or | | ● | A voluntary termination for “good reason” (as defined in the Plan). |
RTX CORPORATION CLAWBACK POLICY
RTX CORPORATION CLAWBACK POLICY The RTX Corporation Clawback Policy, is our comprehensive policy on recoupment of compensation. This policy covers all RTX employees. We have enhanced this policy several times over the years in response to shareowner feedback and to ensure that it continues to meet the evolving needs of the Company. Under this policy, in the event of a financial restatement (whether or not this involves misconduct on the part of the employee) or a recalculation of a financial metric affecting an award, the Company has the right to recover from any employee (including our NEOs and officers) annual incentive payments and gains realized from vested long-term incentive awards. Clawbacks of annual and long-term incentive awards, and of compensation realized from prior awards, also may be triggered by violations of our Code of Conduct, failure to adhere to employee health and safety standards, violations of post-employment restrictive covenants or the exposure of RTX to excessive risk, as determined under our Enterprise Risk Management program (for details on this program refer to pages 29-30). In addition, we have the right to recover compensation when an employee’s negligence (including negligent supervision of a subordinate) causes significant harm to RTX. If required or otherwise appropriate, the Company may publicly disclose the circumstances surrounding the Committee’s decision to seek recoupment. The Policy can be found on the Corporate Governance page of our website at www.rtx.com/who-we-are/corporate-governance#documents. COMPENSATION DISCUSSION AND ANALYSIS | OTHER EXECUTIVE COMPENSATION POLICIES AND PRACTICES
Employment Agreements
Employment Agreements As a general matter, the Committee does not believe that fixed-term executive employment contracts guaranteeing minimum levels of compensation over multiple years enhance shareowner value. Accordingly, our U.S.-based executives do not have such contracts. However, in rare cases involving mergers and acquisitions, the Committee has found such contracts to be in the Company’s best interests. We also enter into employment agreements with executives based outside the U.S. when local regulations and practices require such agreements.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | | Gregory J. Hayes Chairman & Chief Executive Officer(7) | | | | | | | | | 2023 | $1,675,000 | $2,780,000 | $9,772,488 | $6,586,686 | $13,194 | $1,102,091 | $21,929,459 | | 2022 | $1,656,250 | $3,900,000 | $9,352,104 | $6,425,871 | $9,712 | $1,265,099 | $22,609,036 | | 2021 | $1,600,000 | $4,992,000 | $11,740,098 | $2,815,812 | $1,522,891 | $645,262 | $23,316,063 | | Neil G. Mitchill, Jr. Executive Vice President & Chief Financial Officer | | | | | | | | | 2023 | $956,250 | $1,100,000 | $2,813,482 | $1,896,354 | $0 | $235,785 | $7,001,871 | | 2022 | $876,250 | $1,200,000 | $2,453,365 | $1,686,546 | $0 | $228,389 | $6,444,550 | | 2021 | $760,606 | $1,200,000 | $2,424,908 | $584,773 | $0 | $165,108 | $5,135,395 | | Christopher T. Calio President & Chief Operating Officer(7) | | | | | | | | | 2023 | $986,667 | $1,410,000 | $5,922,384 | $3,992,454 | $77,771 | $354,156 | $12,743,432 | | 2022 | $875,000 | $1,600,000 | $4,293,029 | $2,950,366 | $0 | $283,460 | $10,001,855 | | 2021 | $723,083 | $1,200,000 | $2,833,966 | $679,572 | $0 | $209,797 | $5,646,418 | | Stephen J. Timm President, Collins Aerospace | | | | | | | | | 2023 | $839,231 | $840,000 | $2,369,146 | $1,597,968 | $20,531 | $218,992 | $5,885,868 | | 2022 | $788,462 | $900,000 | $3,066,587 | $2,107,093 | $0 | $199,731 | $7,061,873 | | 2021 | $718,500 | $1,200,000 | $2,833,966 | $679,572 | $0 | $176,193 | $5,608,231 | | Wesley D. Kremer Special Advisor to the President & Chief Operating Officer(8) | | | | | | | | | 2023 | $896,933 | $820,000 | $2,073,244 | $1,398,222 | $1,752,580 | $329,197 | $7,270,176 | | 2022 | $872,321 | $700,000 | $3,066,587 | $2,107,093 | $0 | $136,232 | $6,882,233 |
Summary Compensation Table
| (1) Salary. Base salary shown includes any midyear adjustments. | | (2) Bonus. Annual incentive awards provided under the RTX Corporation Executive Annual Incentive Plan are primarily based on measured performance against preestablished financial and Corporate Responsibility Scorecard goals (as detailed on pages 52-53). However, the Committee retains discretion to adjust annual incentive award amounts based on its assessment of overall performance. Consequently, we report annual incentive awards in the Bonus column rather than in a Non-Equity Incentive Plan Compensation column. | | (3) Stock Awards. Amounts shown include the grant date fair value of PSUs granted in 2023 under the RTX Corporation 2018 Long-Term Incentive Plan, as amended and restated (“RTX LTIP”). The assumptions made in calculating the fair value of these awards are set forth in Note 19: Stock Based Compensation, to the Consolidated Financial Statements in RTX’s 2023 Annual Report on Form 10-K (“2023 Form 10-K”). For the 2023 PSUs, if the highest level of performance is achieved for all performance metrics, the grant date fair values would be: Mr. Hayes, $16,262,220; Mr. Mitchill, $4,681,864; Mr. Calio, $9,855,332; Mr. Timm, $3,942,454; and Mr. Kremer, $3,450,048. | | (4) Option Awards. Amounts shown include the grant date fair value of SARs granted under the RTX LTIP during 2023. The assumptions made in the valuation of these awards are set forth in Note 19: Stock Based Compensation, to the Consolidated Financial Statements in RTX’s 2023 Form 10-K. | | (5) Change in Pension Value and Nonqualified Deferred Compensation Earnings. The amounts in this column reflect the change (if any) in the year-over-year actuarial present value of each NEO’s accrued benefit under the Company’s defined benefit plans and above-market earnings (if any) under the Company’s deferred compensation plans. Mr. Hayes had a negative change in present value (-$475,193) of his pension benefits from the prior year. As a result, per SEC rules, the change in present value of pension benefits included in this column is shown as zero. The legacy UTC pension plans were closed to new participants on January 1, 2010, and were closed to all participants effective December 31, 2019. As a result, for legacy UTC NEOs, the change in pension value is entirely attributable to year-over-year |
Summary Compensation Table
COMPENSATION TABLES | SUMMARY COMPENSATION TABLE
Summary Compensation Table
| changes in pension plan actuarial assumptions. Mr. Mitchill was hired after the legacy UTC pension plans were closed to new participants. Mr. Kremer was hired prior to January 1, 2007, the date legacy RTN closed its pension plans to new participants. As a result, he continues to accrue benefits under the legacy RTN pension plans. Actuarial value computations are based on the assumptions established in accordance with FASB ASC Topic 715 and are discussed in Note 10: Employee Benefit Plans, to the Consolidated Financial Statements in RTX’s 2023 Form 10-K. RTX’s deferred compensation plans do not provide above-market rates of return. However, an above-market interest rate is paid under the frozen Sundstrand Corporation Deferred Compensation Plan, which was assumed by the Company upon its acquisition of Sundstrand Corporation in 1999. Mr. Hayes accrued $13,194 in above-market earnings under this plan in 2023. | | (6) All Other Compensation. The 2023 amounts in this column consist of the following items shown in the table below. See page 63 for details on executive perquisites. |
Summary Compensation Table
| Name | Personal Use of Corporate Aircraft(a) | Company Car(b) | Executive Life Insurance Premiums(c) | Relocation Benefit(d) | Company Contributions to Defined Contribution Plans(e) | Charitable Matching Gifts(f) | Health & Welfare Benefits(g) | Misc.(h) | Total | | G. Hayes | $151,808 | $3,928 | $7,728 | $0 | $669,000 | $225,000 | $26,095 | $18,532 | $1,102,091 | | N. Mitchill, Jr. | $0 | $0 | $4,412 | $0 | $194,063 | $0 | $27,842 | $9,468 | $235,785 | | C. Calio | $0 | $28,766 | $7,288 | $0 | $284,533 | $0 | $20,299 | $13,270 | $354,156 | | S. Timm | $0 | $3,224 | $3,868 | $0 | $191,315 | $0 | $19,380 | $1,205 | $218,992 | | W. Kremer | $0 | $0 | $27,562 | $190,197 | $66,347 | $0 | $15,725 | $29,366 | $329,197 |
Summary Compensation Table
| (a) Incremental variable operating costs incurred for personal air travel, which includes fuel (calculated on the basis of aircraft-specific average consumption rates and fleet average fuel costs), fleet average landing and handling fees, crew lodging and meal allowances, and catering and hourly maintenance contract charges, when applicable. Because fleet-wide aircraft utilization is primarily for business purposes, capital and other fixed expenditures are not treated as an incremental cost. | | (b) Reflects annual costs incurred by the Company in connection with a leased vehicle provided to legacy UTC executives. This benefit program was closed to all legacy UTC participants in early 2024. During 2023, Messrs. Calio and Timm maintained their leased vehicles. For Messrs. Hayes and Calio, the values shown also include personal use of company-provided cars and drivers used for security purposes. | | (c) Reflects premiums paid on an enhanced basic life insurance benefit equal to three times base salary, provided to all NEOs except Mr. Kremer, who maintains a split dollar life insurance policy that was provided to him by Raytheon Company prior to the Merger. | | (d) Costs associated with Mr. Kremer’s relocation. | | (e) Amounts represent the total Company contributions into the Company’s defined contribution plans—the qualified RTX Corporation Savings Plan and the nonqualified RTX Corporation Compensation Deferral Plan. Under these plans, participants are eligible to receive company matching contributions and age-based company retirement contributions. However, Company retirement contributions are only provided to employees who are not accruing benefits under a company pension plan. As a result, Mr. Kremer does not receive company retirement contributions into these plans. For further details on RTX’s qualified and nonqualified defined contribution plans, refer to pages 62-63 and 76-77 of this Proxy Statement. | | (f) Under the Company’s charitable gift matching program, the Company matches charitable contributions of any employee up to an annual program limit. The Company decided to match Mr. Hayes’ charitable contributions in excess of the 2023 program limit. Since the program was offered to all RTX employees on a nondiscriminatory basis, the 2023 contributions shown for Mr. Hayes reflect the amount above the 2023 program limit. | | (g) Costs associated with annual executive physicals and Company-covered health and welfare benefits. The annual executive physical benefit is capped at $5,000. | | (h) Amounts include costs associated with membership and meeting attendance fees for an Aerospace & Defense industry club, a financial planning benefit, security monitoring for Mr. Hayes’ personal residence, as well as costs associated with a spouse joining an executive at business events, employee gifts and other miscellaneous items. Further, RTX’s senior executives participate in community and philanthropic activities for the benefit of the Company. This may include attending various cultural, charitable, civic, entertainment and sporting events for business development and relationship-building purposes and/or community involvement, and may require the purchase of tickets, catering and parking. Tickets may also be used for team-building events and sometimes are provided to employees, including our senior executives, for personal use; the incremental cost of such use is included in this column. |
Summary Compensation Table
| (7) On December 14, 2023, we announced Mr. Calio would be promoted to the role of President & Chief Executive Officer at our 2024 Annual Meeting of Shareowners on May 2, 2024. Mr. Hayes will continue to serve as the Company’s Executive Chairman of the Board. | | (8) Mr. Kremer served in the role of President, Raytheon during 2023. On January 4, 2024, we announced that effective January 7, 2024, he would step down from this role and would continue to operate in a transitional capacity as Special Advisor to the President & Chief Operating Officer until his retirement in March 2024. |
Summary Compensation Table
COMPENSATION TABLES | GRANTS OF PLAN-BASED AWARDS
Grants of Plan-Based Awards
Grants of Plan-Based Awards
Grants of Plan-Based Awards
| | Approval Date | Estimated Future Payouts under Equity Incentive Plan Awards(1) | | | All Other Option Awards: Number of Securities Underlying Options (#)(2) | Exercise or Base Price of Option Awards ($/Sh)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | | Grant Date | | Threshold (#) | Target (#) | Maximum (#) | | | | | G. Hayes | | | | | | | | | 2/8/2023 | 2/3/2023 | 3,802 | 101,390 | 202,780 | – | – | $9,772,488 | | 2/8/2023 | 2/3/2023 | – | – | – | 267,100 | $97.65 | $6,586,686 | | N. Mitchill, Jr. | | | | | | | | | 2/8/2023 | 2/3/2023 | 1,095 | 29,190 | 58,380 | – | – | $2,813,482 | | 2/8/2023 | 2/3/2023 | – | – | – | 76,900 | $97.65 | $1,896,354 | | C. Calio | | | | | | | | | 2/8/2023 | 2/3/2023 | 2,304 | 61,445 | 122,890 | – | – | $5,922,384 | | 2/8/2023 | 2/3/2023 | – | – | – | 161,900 | $97.65 | $3,992,454 | | S. Timm | | | | | | | | | 2/8/2023 | 2/3/2023 | 922 | 24,580 | 49,160 | – | – | $2,369,146 | | 2/8/2023 | 2/3/2023 | – | – | – | 64,800 | $97.65 | $1,597,968 | | W. Kremer | | | | | | | | | 2/8/2023 | 2/3/2023 | 807 | 21,510 | 43,020 | – | – | $2,073,244 | | 2/8/2023 | 2/3/2023 | – | – | – | 56,700 | $97.65 | $1,398,222 |
Grants of Plan-Based Awards
| (1) Reflects the number of PSUs granted under the RTX LTIP during 2023, which vest based on Company performance relative to four performance metrics and the executive’s continued employment, except in the case of death, disability, qualifying separation within two years of a change-in-control, retirement or certain involuntary terminations. Vesting occurs following the three-year performance period with payouts ranging from 3.75%, if threshold performance is achieved for one of the TSR metrics that are weighted at 15%, to a maximum payout of 200%, if maximum performance is achieved for all four metrics. If RTX’s three-year TSR is negative, the payout for each TSR portion of the award is capped at 100%, regardless of RTX’s performance relative to the S&P 500 Index and our Core A&D Peers. Unvested PSUs do not earn dividend equivalents. Vested PSUs are settled in unrestricted shares of RTX Common Stock at the end of the performance period following the Committee’s review and approval of performance achievement levels. | | (2) Reflects the number of SARs granted under the RTX LTIP during 2023, which vest and become exercisable three years from the grant date. Vesting is subject to the executive’s continued employment, except in the case of death, disability, qualifying separation within two years of a change-in-control, retirement and certain involuntary terminations. Exercised SARs are settled in unrestricted shares of RTX Common Stock. | | (3) The SAR exercise price equals the NYSE closing price of RTX Common Stock on the grant date. | | (4) Reflects the grant date fair value of awards granted in 2023, with vesting assumed at 100% of target for PSUs. Values are calculated in accordance with FASB ASC Topic 718, but excludes the effect of estimated forfeitures. |
Grants of Plan-Based Awards
COMPENSATION TABLES | OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End
| | Option Awards | | | | Stock Awards | | | | | Grant Date | Number of Securities Underlying Unexercised Options (#) (Exercisable) | Number of Securities Underlying Unexercised Options (#) (Unexercisable)(1) | Option Exercise Price ($)(2) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(5) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(6) | | G. Hayes | | | | | | | | | | 2/8/2023 | – | 267,100 | $97.65 | 2/7/2033 | – | – | 101,390 | $8,530,955 | | 2/15/2022 | – | 294,900 | $94.04 | 2/14/2032 | – | – | 97,300 | $8,186,822 | | 2/8/2021 | – | 181,900 | $72.49 | 2/7/2031 | 41,298(7) | $3,474,814 | 171,629 | $14,440,830 | | 2/4/2020 | 430,050 | – | $90.73 | 2/3/2030 | – | – | – | – | | 2/5/2019 | 541,357 | – | $71.62 | 2/4/2029 | – | – | – | – | | 1/2/2018 | 271,521 | – | $76.00 | 1/1/2028 | – | – | – | – | | 1/3/2017 | 128,541 | – | $82.35 | 1/2/2027 | – | – | – | – | | 1/4/2016 | 224,734 | – | $71.01 | 1/3/2026 | – | – | – | – | | 1/2/2015 | 140,884 | – | $85.47 | 1/1/2025 | – | – | – | – | | N. Mitchill, Jr. | | | | | | | | | | 2/8/2023 | – | 76,900 | $97.65 | 2/7/2033 | – | – | 29,190 | $2,456,047 | | 2/15/2022 | – | 77,400 | $94.04 | 2/14/2032 | – | – | 25,525 | $2,147,674 | | 4/26/2021 | – | 16,900 | $81.00 | 4/25/2031 | 3,961(7) | $333,279 | 15,894 | $1,337,359 | | 2/8/2021 | – | 18,900 | $72.49 | 2/7/2031 | 8,907(7) | $749,435 | 11,840 | $996,251 | | 2/4/2020 | 52,280 | – | $90.73 | 2/3/2030 | – | – | – | – | | 2/5/2019 | 46,377 | – | $71.62 | 2/4/2029 | – | – | – | – | | 1/2/2018 | 19,394 | – | $76.00 | 1/1/2028 | – | – | – | – | | 2/13/2017 | – | – | – | – | 18,021(8) | $1,516,287 | – | – | | 1/3/2017 | 8,938 | – | $82.35 | 1/2/2027 | – | – | – | – | | 1/4/2016 | 11,236 | – | $71.01 | 1/3/2026 | – | – | – | – | | 1/2/2015 | 5,873 | – | $85.47 | 1/1/2025 | – | – | – | – | | 9/2/2014 | 9,023 | – | $81.02 | 9/1/2024 | – | – | – | – | | C. Calio | | | | | | | | | | 2/8/2023 | – | 161,900 | $97.65 | 2/7/2033 | – | – | 61,445 | $5,169,982 | | 2/15/2022 | – | 135,400 | $94.04 | 2/14/2032 | – | – | 44,665 | $3,758,113 | | 2/8/2021 | – | 43,900 | $72.49 | 2/7/2031 | 9,956(7) | $837,698 | 41,427 | $3,485,676 | | 2/4/2020 | 91,912 | – | $90.73 | 2/3/2030 | – | – | – | – | | 2/5/2019 | 54,810 | – | $71.62 | 2/4/2029 | – | – | – | – | | 1/2/2018 | 31,199 | – | $76.00 | 1/1/2028 | – | – | – | – | | 1/18/2017 | – | – | – | – | 18,021(8) | $1,516,287 | – | – | | 1/3/2017 | 8,938 | – | $82.35 | 1/2/2027 | – | – | – | – | | 1/4/2016 | 11,236 | – | $71.01 | 1/3/2026 | – | – | – | – | | 1/2/2015 | 4,767 | – | $85.47 | 1/1/2025 | – | – | – | – | | 1/2/2014 | 4,000 | – | $83.58 | 1/1/2024 | – | – | – | – |
Outstanding Equity Awards at Fiscal Year-End
COMPENSATION TABLES | OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Outstanding Equity Awards at Fiscal Year-End
| | Option Awards | | | | Stock Awards | | | | | Grant Date | Number of Securities Underlying Unexercised Options (#) (Exercisable) | Number of Securities Underlying Unexercised Options (#) (Unexercisable)(1) | Option Exercise Price ($)(2) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(5) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(6) | | S. Timm | | | | | | | | | | 2/8/2023 | – | 64,800 | $97.65 | 2/7/2033 | – | – | 24,580 | $2,068,161 | | 2/15/2022 | – | 96,700 | $94.04 | 2/14/2032 | – | – | 31,905 | $2,684,487 | | 2/8/2021 | – | 43,900 | $72.49 | 2/7/2031 | 9,963(7) | $838,287 | 41,427 | $3,485,676 | | 2/20/2020 | – | – | – | – | 12,106(8) | $1,018,599 | – | – | | 2/4/2020 | 84,323 | – | $90.73 | 2/3/2030 | – | – | – | – | | 7/2/2019 | 21,249 | – | $78.25 | 7/1/2029 | – | – | – | – | | 2/5/2019 | 7,420 | – | $71.62 | 2/4/2029 | – | – | – | – | | W. Kremer | | | | | | | | | | 2/8/2023 | – | 56,700 | $97.65 | 2/7/2033 | – | – | 21,510 | $1,809,851 | | 2/15/2022 | – | 96,700 | $94.04 | 2/14/2032 | – | – | 31,905 | $2,684,487 | | 2/8/2021 | – | 43,900 | $72.49 | 2/7/2031 | 9,974(7) | $839,212 | 41,427 | $3,485,676 | | 12/16/2020 | – | – | – | – | 29,466(8) | $2,479,269 | – | – | | 3/25/2020 | – | – | – | – | 5,591(9) | $470,427 | – | – |
Outstanding Equity Awards at Fiscal Year-End
| (1) SARs scheduled to vest on the third anniversary of the grant date, subject to the executive’s continued employment with the Company, except in the case of death, disability, qualifying separation within two years of a change-in-control, retirement and certain involuntary terminations. SARs granted on February 8, 2021, vested on February 8, 2024. | | (2) The exercise price of each SAR is equal to the NYSE closing price of RTX Common Stock on the grant date. However, for SARs granted prior to April 3, 2020, exercise prices shown were adjusted upon the spinoffs of Carrier and Otis, in accordance with plan rules and the Employee Matters Agreement, as amended. | | (3) Unvested RSUs and Restricted Stock Awards (“RSAs”) outstanding as of year-end, including legacy UTC RSUs that were converted to RTX RSUs and legacy RTN RSAs that converted to RTX RSAs on April 3, 2020, the date of the spinoffs of Carrier and Otis, and the Merger. | | (4) Calculated by multiplying the number of unvested RSUs and RSAs by $84.14, the NYSE closing price of RTX Common Stock on the last trading day of 2023. | | (5) PSUs scheduled to vest following the three-year performance/time-based vesting period. Vesting is subject to Company performance relative to preestablished performance goals and the executive’s continued employment with the Company, except in the case of death, disability, qualifying separation within two years of a change-in-control, retirement and certain involuntary terminations. PSUs are settled following the Committee’s certification of performance achievement levels. Pursuant to SEC rules, the number of shares shown with respect to PSU awards granted in 2022 and 2023 assumes target-level performance, based on vesting estimates as of December 31, 2023. For PSUs granted on February 8, 2021, a performance factor of 143% is shown, reflecting the number of shares that vested on February 8, 2024. | | (6) Calculated by multiplying the number of unvested PSUs by $84.14, the NYSE closing price of RTX Common Stock on the last trading day of 2023. | | (7) RSUs scheduled to vest on the third anniversary of the grant date, subject to the executive’s continued employment with the Company, except in the case of death, disability, qualifying separation within two years of a change-in-control, retirement and certain involuntary terminations. Each time the Company pays a dividend to shareowners, dividend equivalents are reinvested as additional RSUs. The reinvested RSUs vest on the same date as the underlying RSUs. RSUs granted on February 8, 2021, vested on February 8, 2024. | | (8) ELG RSUs granted upon the executive’s appointment to the ELG, which vest in the event of a qualifying separation (as defined under the ELG program and detailed on page 64), death or disability. Each time the Company pays a dividend to shareowners, dividend equivalents are reinvested as additional RSUs. The reinvested RSUs vest on the same date as the underlying RSUs. | | (9) RSAs originally granted by RTN prior to the Merger under the legacy RTN 2019 Stock Plan and converted to RTX RSAs on April 3, 2020 (the closing date of the Merger), in accordance with the Merger Agreement. These RSAs vest in three annual installments on the second, third and fourth anniversaries of the grant date and pay cash dividends during the vesting period. RSAs granted by legacy RTN on March 25, 2020, will vest in full on March 25, 2024. |
Outstanding Equity Awards at Fiscal Year-End
Upon the spinoffs of Carrier and Otis that occurred on April 3, 2020, vested UTC SARs were adjusted and converted into vested SARs of RTX (as shown in the Outstanding Equity Awards at Fiscal Year-End table), Carrier and Otis. Both the number of outstanding SARs and the exercise price of each award were adjusted at the time of the spinoffs to reflect the post-spinoff stock prices of the three companies. Mr. Mitchill is the only NEO who holds SARs in a spinoff company as of December 31, 2023. The table below shows the outstanding Carrier SARs held by Mr. Mitchill as of fiscal year-end.
Outstanding Equity Awards at Fiscal Year-End
| Grant Date | Number of Securities Underlying Unexercised Options (#) (Exercisable) | Option Exercise Price ($) | Option Expiration Date | | N. Mitchill, Jr. | | | | | 1/3/2017 | 8,938 | $18.53 | 1/2/2027 |
Outstanding Equity Awards at Fiscal Year-End
Compensation Tables | Options Exercised and Stock Vested
Options Exercised and Stock Vested
Options Exercised and Stock Vested
Options Exercised and Stock Vested
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(2) | Value Realized on Vesting ($)(3) | | G. Hayes | – | – | 80,235 | $7,741,073 | | N. Mitchill, Jr. | – | – | 10,178 | $981,973 | | C. Calio | – | – | 18,428 | $1,767,048 | | S. Timm | – | – | 16,359 | $1,578,316 | | W. Kremer | – | – | 25,459 | $2,497,691 |
Options Exercised and Stock Vested
| (1) No RTX SARs were exercised during 2023. However, Mr. Mitchill exercised 13,023 Otis SARs for a gain of $455,889. This value is not included in the table above. | | (2) Restricted Stock Awards (granted by legacy RTN prior to the Merger) and RSUs (including legacy RTN and UTC PSUs that converted to RTX RSUs upon the spinoffs of Carrier and Otis, and the Merger) that vested in 2023. Amounts include shares withheld to cover U.S. Social Security and Medicare taxes due during the year as a result of the executive attaining retirement eligible status under the terms of RTX RSU awards. | | (3) Calculated by multiplying the number of vested stock awards by the market price of RTX Common Stock on the vest date. |
Pension Benefits
Pension Benefits Overview of Plans. The Company maintains various pension plans, described below, in which certain employees are eligible to participate. Over the years, as the competitive market has evolved, the eligible employee population and the pension benefit formulas used under these plans have changed. As a result, benefit accruals earned under these plans depend upon the employee’s legacy company, the date the employee was hired and which pension formula—the Final Average Earnings (“FAE”) or the Cash Balance formula—was applicable at the time of the accrual.
Pension Benefits
| ● | RTX Consolidated Pension Plan: A tax-qualified, defined benefit plan that is an accumulation of all qualified pension plans of our legacy companies. For legacy UTC participants, annual compensation and annual retirement benefits up to Internal Revenue Code ("IRC") limits are recognized through December 31, 2019, the date the plan was closed. For legacy RTN participants, the plan is subject to IRC provisions that, as of December 31, 2023, limit recognized annual compensation to $330,000 and annual retirement benefits to $265,000. | | ● | UTC Pension Preservation Plan (“UTC PPP”): An unfunded, nonqualified defined benefit plan that mirrors the legacy UTC benefit formulas, retirement eligibility and vesting provisions of the RTX Consolidated Pension Plan but provides benefits that could not be accrued under the qualified plan due to IRC limits. | | ● | Raytheon Company Parity Pension Plan (“RTN Parity Pension Plan”): An unfunded, nonqualified defined benefit plan that mirrors the legacy RTN benefit formulas, retirement eligibility and vesting provisions of the RTX Consolidated Pension Plan but provides benefits that could not be accrued under the qualified plan due to IRC limits. | | ● | Raytheon Company Supplemental Executive Retirement Plan (“RTN SERP”): An unfunded, nonqualified pension plan for eligible legacy RTN senior executives, designed to replicate, but not exceed, the retirement benefit that a mid-career person joining the Company would have received under the qualified and nonqualified pension plans had such person begun their career with the Company. |
Pension Benefits
Eligibility. The table below summarizes the status of accruals earned under the legacy UTC defined benefit pension plans.
Pension Benefits
| | Accruals Earned by Legacy UTC Employees | | | | Eligible Employees | Prior to 2015 | Between 2015 and 2019 | 2020 and later | | Hired prior to July 1, 2002 | FAE formula | Cash Balance formula | No further Cash Balance pay credits; interest credits only | | Hired on or after July 1, 2002, and prior to January 1, 2010 | Cash Balance formula | Cash Balance formula | No further Cash Balance pay credits; interest credits only | | Hired on or after January 1, 2010 | No pension benefit | No pension benefit | No pension benefit |
Pension Benefits
Compensation Tables | Pension Benefits The table below summarizes the status of accruals earned under the legacy RTN defined benefit pension plans.
Pension Benefits
| | Accruals Earned by Legacy RTN Employees | | | Eligible Employees | Prior to 2023 | 2023 and later | | Hired prior to January 1, 2007 | FAE formula | Cash Balance formula | | Hired on or after January 1, 2007 | No pension benefit | No pension benefit |
Pension Benefits
Select senior executives, including Mr. Kremer, are eligible for the RTN SERP, accruals for which are earned under the formula detailed below. Pension Formula. Pension benefit formulas vary depending upon the employee’s legacy company. Legacy UTC:
Pension Benefits
| ● | FAE formula: Participants are provided an annual benefit equal to 2% of an employee’s earnings (defined below) for each year of service up to a maximum of 20 years, plus 1% of earnings for each year of service thereafter, minus 1.5% of the employee’s Social Security benefit for each year of service (up to a maximum 50% offset of the annual Social Security benefit). Earnings recognized under this formula consisted of the highest average annual base salary and annual incentive awards received over any consecutive five-calendar-year period ending on or before December 31, 2014. | | ● | Cash Balance formula: The Cash Balance formula credited a legacy UTC participant’s account with two types of credits—pay credits and interest credits. Pay credits, which no longer accrue, ranged from 3% to 8% of base salary and annual incentives, depending on the participant’s age. Interest credits, which continue to accrue, are based on 30-year U.S. Treasury bond yields and are subject to annual adjustments but cannot fall below 3.8%. | | ● | Other formulas: For Mr. Hayes, benefits shown in the table on page 75 also include amounts accrued under a different formula used in a predecessor Sundstrand Corporation pension plan that was merged into the legacy UTC pension plan, upon UTC’s acquisition of Sundstrand Corporation in 1999. Benefits shown for Mr. Timm are based on the formula under the closed Rockwell Collins qualified pension plan that was merged into the legacy UTC pension plan on December 31, 2018. |
Pension Benefits
Legacy RTN:
Pension Benefits
| ● | FAE formula: Participants are provided an annual benefit equal to 1.8% of an employee's earnings (defined below) for each year of service up to a maximum of 20 years, plus 1.2% of earnings for each year of service thereafter, reduced by the same percentage as the employee’s estimated primary Social Security benefit. Earnings recognized under this formula consisted of the average of the 60 highest consecutive months of annual base salary and annual incentive awards in the final 120 months of employment. Effective December 31, 2022, this FAE formula was frozen. | | ● | Cash Balance formula: The Cash Balance formula credits a legacy RTN participant’s account with two types of credits—pay credits and interest credits. Pay credits range from 3% to 7% of base salary and annual incentives, depending on the participant’s age. Interest credits are based on 30-year U.S. Treasury bond yields and are subject to annual adjustments but cannot fall below 3.5%. | | ● | SERP formula. Benefits under the RTN SERP provide a pension of 35% of the FAE after 10 years of service, increased starting at age 55 by 3% of the FAE for every additional year of service up to a maximum of 50% of the FAE. Amounts payable under this plan are offset by amounts payable under other Company pension plans, any prior employer plans and Social Security. Service continues to be accrued under the RTN SERP, but the FAE formula used to determine the benefit prior to any offsets was frozen on December 31, 2022. |
Pension Benefits
Compensation Tables | Pension Benefits Distribution Options. Distribution options vary depending upon the employee’s legacy company and the benefits formula.
Pension Benefits
| Plan | FAE Benefit Formula | Cash Balance Benefit Formula | | RTX Consolidated Pension Plan (for legacy UTC participants) | ●Lump-sum payment ●Annuity payments | ●Lump-sum payment ●Annuity payments | | UTC Pension Preservation Plan | ●Lump-sum* payment ●Annuity payments ●Two- to 10-year annual installments | ●Lump-sum payment ●Annuity payments ●Two- to 10-year annual installments | | RTX Consolidated Pension Plan (for legacy RTN participants) | ●Annuity payments | ●Lump-sum payment ●Annuity payments | | RTN Parity Pension Plan | ●Annuity payments | ●Lump-sum payment ●Five- or 10-year annual installments | | RTN SERP | ●Annuity payments | ●Not applicable |
Pension Benefits
| * Uses a discount rate equal to the Barclay’s Capital Municipal Bond Index averaged over five years. This nontaxable investment index is intended to yield an after-tax income stream on the net after-tax proceeds reinvested in tax-free bonds that are comparable to a more tax-efficient annuity distribution. |
Pension Benefits
Retirement. The normal retirement age under both the FAE and the Cash Balance benefit formulas is 65. Early retirement benefits are available under the FAE formula beginning at age 55 with at least 10 years of service. Under the legacy RTN FAE formula of the RTX Consolidated Pension Plan and the RTN Parity Pension Plan, benefits are reduced for early retirement prior to age 60. There is no reduction for early retirement under the RTN SERP. Under the legacy UTC FAE formulas, benefits are reduced for early retirement prior to age 62. The value of the Cash Balance account is not impacted by an employee’s age at retirement. As of December 31, 2023, Mr. Hayes, Mr. Timm and Mr. Kremer were eligible for early retirement under the FAE formula of the pension plans in which they each participate.
Pension Benefits
| Name | Plan Name | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) | | G. Hayes(2) | RTX Consolidated Pension Plan | 30 | $1,516,706 | – | | | UTC Pension Preservation Plan | 30 | $14,650,943 | – | | | Total | | $16,167,649 | – | | N. Mitchill, Jr.(3) | RTX Consolidated Pension Plan | 0 | $0 | – | | | UTC Pension Preservation Plan | 0 | $0 | – | | | Total | | $0 | – | | C. Calio(2) | RTX Consolidated Pension Plan | 15 | $276,794 | – | | | UTC Pension Preservation Plan | 15 | $231,568 | – | | | Total | | $508,362 | – | | S. Timm(4) | RTX Consolidated Pension Plan | 10 | $207,584 | – | | | Total | | $207,584 | – | | W. Kremer(5) | RTX Consolidated Pension Plan | 20 | $1,132,876 | – | | | RTN Parity Pension Plan | 20 | $7,412,356 | – | | | RTN Supplemental Executive Retirement Plan | 20 | $3,336,789 | – | | | Total | | $11,882,021 | – |
Pension Benefits
| (1) The assumptions used to determine the present value of the accumulated pension benefit under the Company’s pension plans are generally consistent with those described in Note 10: Employee Benefit Plans, to the Consolidated Financial Statements in RTX’s 2023 Form 10-K. More specifically, discount rates ranging from 5.11% to 5.17% for the various pension plans, Pri-2012 mortality table with a plan specific adjustment and MP-2021 to project future improvements are used. | | (2) The following additional assumptions are used to determine the present value of the accumulated pension benefit under the legacy UTC pension plans: (i) retirement at age 62 for FAE benefits (the earliest date a participant can retire without a reduction of benefits due to age) and at age 65 for Cash Balance benefits; (ii) projected lump-sum payments under the UTC Pension Preservation Plan are calculated using a lump-sum interest rate of 1.88% for Mr. Hayes (age 62 in 2022); and (iii) the amounts shown assume the following forms of payment: (a) 70% in a monthly annuity and 30% in a lump-sum payment for benefits accrued under the FAE formula of the RTX Consolidated Pension Plan; (b) a lump-sum payment for benefits accrued under the Cash Balance formula of the RTX Consolidated Pension Plan and the UTC Pension Preservation Plan; and (c) payments are based on participant’s elections under the FAE formula of the UTC Pension Preservation Plan. |
Pension Benefits
Compensation Tables | Nonqualified Deferred Compensation
Pension Benefits
| (3) Mr. Mitchill was hired after January 1, 2010, and therefore does not participate in the legacy UTC pension plans. | | (4) The present value of the accumulated benefits shown for Mr. Timm is based on benefits earned under the legacy Rockwell Collins qualified defined benefit pension plan, which was closed in 2006 and has since merged into the RTX Consolidated Pension Plan. The number of years of credited service reflects the years of service he had when the plan was closed. Benefit calculations are based on age, years of service and average annual base salary and annual incentives. All of Mr. Timm’s nonqualified pension benefits were previously distributed to him upon UTC’s acquisition of Rockwell Collins in a lump-sum payment in accordance with the change-in-control provisions in that plan. The following additional assumptions are also used: (i) retirement at age 62, the earliest date Mr. Timm can retire without a reduction of benefits due to age; and (ii) 100% life annuity for benefits under the plan. | | (5) The following additional assumptions are used to determine the present value of the accumulated pension benefit under the legacy RTN pension plans: (i) retirement at age 60, the earliest date Mr. Kremer can retire without a reduction of benefits due to age, discounted to his current age with interest and based upon his current level of compensation; (i) no assumed incidence of preretirement mortality, disability or termination; and (iii) the amounts assume the following forms of payment: (a) a single life annuity for benefits accrued under the FAE formula and the RTN Supplemental Executive Retirement Plan, and (b) a lump-sum payment for benefits accrued under the Cash Balance formula. |
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation Effective December 31, 2022, all legacy UTC and RTN nonqualified savings and deferred compensation plans (except the UTC PSU LTIP Deferral Plan, which has been renamed and is described below) were closed to new contributions. Eligibility to participate in these closed plans depends on the NEO’s legacy company. Further, some of our NEOs have account balances in plans from companies previously acquired by our legacy companies; these plans have since been closed to new contributions. Details on these plans can be found in our previous proxy statements. The table below provides a description of the plans that were active during 2023.
Nonqualified Deferred Compensation
| Plan Name | Description | | RTX Corporation Compensation Deferral Plan ("RTX CDP") | Beginning January 1, 2023, eligible RTX employees participate in the RTX CDP, a nonqualified defined contribution plan that provides eligible employees an opportunity to defer up to 50% of base salary and/or 80% of annual incentive awards. Participants also continue to receive company matching and company retirement contributions once they can no longer receive these contributions into the qualified RTX Corporation Savings Plan due to Internal Revenue Code (“IRC”) limits. However, participants who accrue benefits under a company-sponsored pension plan are not eligible for company retirement contributions into this plan. The RTX CDP also provides missed matching and company retirement contributions (if applicable) for employees whose compensation has not reached the annual IRC compensation limit but whose contributions to the qualified RTX Corporation Savings Plan are limited by the IRC’s annual contributions limit. Participants are immediately vested in their own deferrals and vest in the Company contributions upon the earlier of two years of service or upon reaching age 65. Distributions of Company contributions begin upon a separation of service from the Company. Participants may elect to begin distributions of employee deferrals either upon a separation of service from the Company or upon a future date selected by the participant (which may be no earlier than five years from the date the election was made). RTX CDP balances are distributed in cash, in a lump-sum payment or in annual installments over periods ranging from two to 15 years per the participant’s election. | | RTX Corporation PSU Deferral Plan ("PSU Deferral Plan") (formerly the UTC LTIP PSU Deferral Plan) | The PSU Deferral Plan is an unfunded, nonqualified deferred compensation arrangement that enables executives to defer between 10% and 100% of their vested PSU awards that would otherwise be settled in unrestricted shares of RTX Common Stock. The deferred portion of the PSU award is converted into deferred stock units that accrue dividend equivalents. Participants may elect to receive distributions from the plan in a lump sum or in two to 15 annual installments, either upon separation of service from the Company or at a future date selected by the participant (which may be no earlier than five years from the year the PSUs are deferred). Distributions are made in whole shares of RTX Common Stock with any fractional units paid in cash. |
Nonqualified Deferred Compensation
| Name | Plan(1) | Executive Contributions in Last FY ($)(2) | Registrant Contributions in Last FY ($)(3) | Aggregate Earnings in Last FY ($)(4) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(5) | | G. Hayes | RTX Compensation Deferral Plan | $314,700 | $629,400 | $192,640 | $0 | $1,136,740 | | | UTC Company Automatic Contribution Excess Plan | $0 | $0 | $151,891 | $0 | $1,458,412 | | | UTC Deferred Compensation Plan | $0 | $0 | -$99,244 | $0 | $587,937 | | | UTC Savings Restoration Plan | $0 | $0 | $731,769 | $0 | $7,312,398 | | | Sundstrand Corporation Deferred Compensation Plan | $0 | $0 | $32,793 | -$15,934 | $705,159 | | N. Mitchill, Jr. | RTX Compensation Deferral Plan | $118,125 | $164,363 | $39,415 | $0 | $321,902 | | | UTC Company Automatic Contribution Excess Plan | $0 | $0 | $13,509 | $0 | $363,426 | | | UTC Savings Restoration Plan | $0 | $0 | $32,006 | $0 | $795,202 |
Nonqualified Deferred Compensation
| Name | Plan(1) | Executive Contributions in Last FY ($)(2) | Registrant Contributions in Last FY ($)(3) | Aggregate Earnings in Last FY ($)(4) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(5) | | C. Calio | RTX Compensation Deferral Plan | $143,700 | $248,873 | $30,804 | $0 | $423,377 | | | UTC Company Automatic Contribution Excess Plan | $0 | $0 | $11,583 | $0 | $311,616 | | | UTC Savings Restoration Plan | $0 | $0 | $15,914 | $0 | $578,238 | | S. Timm | RTX Compensation Deferral Plan | $713,923 | $155,015 | $130,752 | $0 | $999,691 | | | UTC Company Automatic Contribution Excess Plan | $0 | $0 | $28,116 | $0 | $225,070 | | | UTC Deferred Compensation Plan | $0 | $0 | $136,422 | $0 | $1,022,984 | | | UTC Savings Restoration Plan | $0 | $0 | $9,324 | $0 | $164,892 | | | Rockwell Collins Non-Qualified Savings Plan | $0 | $0 | $3,961 | $0 | $47,759 | | W. Kremer | RTX Compensation Deferral Plan | $172,478 | $53,147 | $19,543 | $0 | $245,167 | | | RTN Deferred Compensation Plan | $0 | $0 | $47,500 | $0 | $1,736,024 | | | RTN Excess Savings Plan | $0 | $0 | $247 | $0 | $2,770 |
Nonqualified Deferred Compensation
| (1) Our NEOs maintain account balances in the following plans from our legacy companies (and companies acquired by our legacy companies) that have since been closed to new contributions: (i) UTC Company Automatic Contribution Excess Plan, closed on December 31, 2022; (ii) UTC Deferred Compensation Plan, closed on December 31, 2022; (iii) UTC Savings Restoration Plan, closed on December 31, 2022; (iv) Sundstrand Corporation Deferred Compensation Plan, closed in 1999; (v) Rockwell Collins Non-Qualified Savings Plan, closed on December 31, 2018; (vi) RTN Deferred Compensation Plan, closed on December 31, 2022; and (vii) RTN Excess Savings Plan, closed on March 15, 2008. Details on these plans can be found in our previous proxy statements. | | (2) Amounts shown are included in the Salary and Bonus columns of the Summary Compensation Table on page 68. | | (3) Amounts shown are included in the All Other Compensation column of the Summary Compensation Table on page 68. | | (4) Amounts shown reflect hypothetical investment returns (less fees, if applicable) to accounts based on fixed income, bond and equity indices selected by the participant. Participants also may elect RTX stock units with dividend reinvestments (except for the CACEP and the Sundstrand Corporation Deferred Compensation Plan). These returns do not constitute above-market earnings, except for $13,194 credited to Mr. Hayes under the closed Sundstrand Corporation Deferred Compensation Plan, which is included in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column of the Summary Compensation Table on page 68. | | (5) The sum of contributions (by both the executive and RTX) and credited earnings on those deferrals, less withdrawals. Of these totals, the following amounts have been included in the Summary Compensation Table in prior years: $5,449,172 (Mr. Hayes); $651,085 (Mr. Mitchill); $442,105 (Mr. Calio); $1,288,992 (Mr. Timm); and $194,551 (Mr. Kremer). |
Potential Payments upon Termination or Change-in-Control
Potential Payments upon Termination or Change-in-Control Details of our Executive Leadership Group (“ELG”) program, and descriptions of the change-in-control benefit provided under the legacy UTC Senior Executive Severance Plan and the RTX Corporation 2018 Long-Term Incentive Plan (“RTX LTIP”), are provided on pages 64-65.
WESLEY D. KREMER
| CEO Pay Ratio |
Comparing RTX’s Ratio to Other Companies
| Pay versus Performance |
Pay versus Performance Table—Compensation Definitions
Pay versus Performance Table—Compensation Definitions The chart below outlines the differences between the values reported in the Summary Compensation Table (“SCT”) and the SEC-mandated CAP calculation:
Pay versus Performance Table—Compensation Definitions
| Summary Compensation Table | Basic Concept | ●Includes a mix of both compensation earned during the year (i.e., base salary and annual incentives) and estimated future pay opportunities (i.e., LTI and pension benefits). ●Uses accounting conventions to estimate the fair value of LTI awards on the grant date. This value can significantly differ from the value ultimately realized by the NEO. ●Includes aggregate change in the actuarial present value of pension benefits, which is impacted by various economic actuarial assumptions that do not necessarily represent the additional benefit earned by the NEO during the year. | | | How it is calculated | ●Base salary paid during the year ●Annual incentives earned for the applicable year’s performance ●Grant date accounting fair value of LTI awards granted during the year, which reflects the Committee’s evaluation of the prior year’s performance ●Change in the actuarial present value of pension benefits, plus above market earnings on nonqualified deferred compensation ●All other compensation | | Compensation Actually Paid | Basic Concept | ●Like the SCT, includes a mix of both compensation earned during the year (i.e., base salary and annual incentives), and estimated future pay opportunities (i.e., LTI and pension benefits). ●Uses the same accounting conventions as the SCT to estimate the value of LTI. However, the CAP LTI values represent a year-over-year change in the accounting values of unvested LTI awards, LTI awards that vested or forfeited during the year, as well as the year-end valuation for LTI awards granted during the year. For SARs, this accounting value at vest does not represent the actual value realized by the NEO, which will ultimately be realized when the NEO exercises vested SARs. ●Includes the pension benefit service cost for the year, which seeks to neutralize the effect of certain economic actuarial assumptions and more closely estimates the amount actually earned by the NEO in respect to the relevant year. | | | How it is calculated | ●Base salary paid during the year ●Annual incentives earned for the applicable year’s performance ●Change in accounting fair value of LTI awards that are unvested as of year-end and that vested or forfeited during the year (vs. prior year-end values), fair value at year-end of awards granted during the year, plus any cash dividends paid on these awards during the year ●Current year service cost of pension benefits and any prior year service cost of pension benefits (if a plan amendment occurred during the year), plus above market earnings of nonqualified deferred compensation ●All other compensation |
Pay versus Performance Table—Compensation Definitions
PAY VERSUS PERFORMANCE | PAY VERSUS PERFORMANCE TABLE
Pay versus Performance Table
Pay versus Performance Table The required SEC tabular disclosure for the Company’s Principal Executive Officer (“PEO”) and average NEO (excluding the PEO) is set forth below:
Pay versus Performance Table
| Year(1) (a) | Summary Compensation Table Total for PEO (b) | Compensation Actually Paid to PEO(2)(4)(5) (c) | Average Summary Compensation Table Total for Non-PEO NEOs (d) | Average Compensation Actually Paid to Non-PEO NEOs(3)(4)(5) (e) | Value of Initial Fixed $100 Investment Based on: | | Net Income (GAAP)(7) (h) | Adjusted Earnings Per Share(8) (i) | | | | | | | Total Shareowner Return(6) (f) | Peer Group Total Shareowner Return(6) (g) | | | | 2023 | $21,929,459 | -$3,811,432 | $8,225,337 | $267,298 | $103.08 | $116.38 | $3,195 | $5.06 | | 2022 | $22,609,036 | $45,201,677 | $7,597,628 | $12,510,354 | $120.47 | $109.00 | $5,216 | $4.78 | | 2021 | $23,316,063 | $39,680,968 | $9,666,013 | $11,257,846 | $100.38 | $92.87 | $3,897 | $4.27 | | 2020 | $20,970,890 | $5,272,381 | $6,600,910 | $2,373,738 | $81.44 | $82.03 | ($3,109) | $2.73 |
Pay versus Performance Table
| (1) The PEO in all four reporting years is Gregory J. Hayes. The NEOs in the 2023 and 2022 reporting years are: Neil G. Mitchill, Jr., Christopher T. Calio, Stephen J. Timm and Wesley D. Kremer. The NEOs in the 2021 reporting year are: Neil G. Mitchill, Jr., Christopher T. Calio, Stephen J. Timm, Michael R. Dumais, Anthony F. O’Brien III and Thomas A. Kennedy. The NEOs in the 2020 reporting year are: Neil G. Mitchill, Jr., Stephen J. Timm, Michael R. Dumais, Charles D. Gill, Jr., Robert K. Ortberg and Anthony F. O’Brien III. |
Pay versus Performance Table
| (2) The following amounts were deducted from and added to the Summary Compensation Table (SCT) to arrive at the Compensation Actually Paid (CAP) for each of the applicable years for the PEO, as shown in column (c): |
Pay versus Performance Table
| | 2023 | 2022 | 2021 | 2020 | | Summary Compensation Table | $21,929,459 | $22,609,036 | $23,316,063 | $20,970,890 | | Stock Awards | $9,772,488 | $9,352,104 | $11,740,098 | $7,417,686 | | Option Awards | $6,586,686 | $6,425,871 | $2,815,812 | $7,178,289 | | Change in Present Value of Pension Benefits | $0 | $0 | $1,513,140 | $1,563,318 | | Total Deductions from SCT | $16,359,174 | $15,777,975 | $16,069,050 | $16,159,293 | | Fair Value of Awards Granted During Year and Unvested as of Year-End | $9,249,682 | $18,142,022 | $23,685,247 | $10,808,662 | | Fair Value of Awards Granted and Vested During the Year | $0 | $0 | $0 | $0 | | Change in Fair Value of Prior Year Awards Unvested as of Year-End | -$17,590,182 | $15,968,806 | $8,869,318 | -$10,886,768 | | Change in Fair Value of Prior Year Awards that Vested During Year | -$1,041,217 | $4,259,788 | -$120,609 | $538,890 | | Change in Fair Value of Prior Year Awards that Forfeited During Year | $0 | $0 | $0 | $0 | | Dividends/Other Earnings Paid on Unvested Awards During Year | $0 | $0 | $0 | $0 | | Service Cost of Pension Benefits | $0 | $0 | $0 | $0 | | Prior Service Cost of Pension Benefits | $0 | $0 | $0 | $0 | | Total Additions to CAP | -$9,381,717 | $38,370,616 | $32,433,955 | $460,784 | | Compensation Actually Paid | -$3,811,432 | $45,201,677 | $39,680,968 | $5,272,381 |
Pay versus Performance Table
| (3) The following amounts were deducted from and added to the SCT to arrive at the CAP for each of the applicable years for the non-PEO NEOs, as shown in column (e): |
Pay versus Performance Table
| | 2023 | 2022 | 2021 | 2020 | | Summary Compensation Table | $8,225,337 | $7,597,628 | $9,666,013 | $6,600,910 | | Stock Awards | $3,294,564 | $3,219,892 | $4,389,543 | $1,700,332 | | Option Awards | $2,221,250 | $2,212,775 | $1,093,639 | $1,161,641 | | Change in Present Value of Pension Benefits | $462,721 | $0 | $1,461,448 | $1,033,681 | | Total Deductions from SCT | $5,978,534 | $5,432,667 | $6,944,629 | $3,895,654 | | Fair Value of Awards Granted During Year and Unvested as of Year-End | $3,118,865 | $6,246,737 | $6,453,006 | $2,565,703 | | Fair Value of Awards Granted and Vested During the Year | $0 | $0 | $0 | $0 | | Change in Fair Value of Prior Year Awards Unvested as of Year-End | -$5,105,124 | $3,459,419 | $1,880,243 | -$1,528,238 | | Change in Fair Value of Prior Year Awards that Vested During Year | -$150,609 | $440,110 | $104,110 | -$918,897 | | Change in Fair Value of Prior Year Awards that Forfeited During Year | $0 | $0 | -$326,443 | $0 | | Dividends/Other Earnings Paid on Unvested Awards During Year | $26,113 | $30,377 | $99,047 | $11,581 | | Service Cost of Pension Benefits | $131,250 | $168,750 | $326,500 | $38,667 | | Prior Service Cost of Pension Benefits | $0 | $0 | $0 | -$500,333 | | Total Additions to CAP | -$1,979,504 | $10,345,393 | $8,536,463 | -$331,518 | | Compensation Actually Paid | $267,298 | $12,510,354 | $11,257,846 | $2,373,738 |
Pay versus Performance Table
PAY VERSUS PERFORMANCE | RELATIONSHIP BETWEEN CAP AND TSR
Pay versus Performance Table
| (4) The fair value of SARs reported for CAP purposes in columns (c) and (e) is estimated using a binomial lattice model for the purposes of disclosure in accordance with the SEC’s PvP rules. The following table shows the assumptions used to determine the fair value for SARs granted during 2017–2023 at various dates, as required to calculate CAP. Lattice-based option models incorporate ranges of assumptions for inputs; those ranges are as follows: |
Pay versus Performance Table
| Grant Year | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | | Volatility | 30.19% | 28.51%–31.96% | 26.85%–33.77% | 27.99%–33.92% | 18.78%–31.85% | 20.14%–33.33% | 19.65%–19.91% | | Expected life (in years) | 6.31 | 5.21–5.64 | 3.81–5.79 | 3.60–6.47 | 3.51–6.15 | 3.75–4.65 | 3.52–3.65 | | Expected dividend yield | 2.8% | 2.18%–2.80% | 2.18%–2.80% | 2.17%–2.66% | 1.91%–2.83% | 1.99%–2.83% | 1.92%–1.96% | | Risk-free rate | 3.83% | 3.81%–3.94% | 1.31%–3.99% | 0.57%–4.16% | 0.32%–2.84% | 0.24%–1.67% | 1.55%–1.64% |
Pay versus Performance Table
| (5) The fair value of PSUs reported for CAP purposes in columns (c) and (e) assumes actual performance results (if known) or estimated performance results as of the end of each reporting year for internal metrics (i.e., EPS and ROIC), and the Monte Carlo value of target-level performance for the market metrics (i.e., TSR vs. companies in the S&P 500 Index and TSR vs. Core Aerospace & Defense peers), in accordance with FASB ACS 718. PSUs will ultimately vest based on measured performance through the end of the three-year performance period for all metrics. |
Pay versus Performance Table
| (6) Reflects total shareowner return indexed to $100 per share for RTX and the S&P 500 Aerospace & Defense Industry Index, which is the industry line peer group reported in our 2023 Form 10-K. See page 87 for the TSR measurement periods used for each reporting year. |
Pay versus Performance Table
| (7) Values shown are in millions. 2020 GAAP net income includes $438 million for Q1 for UTC pre-Merger (excluding net income generated by Carrier and Otis, which were spun off from UTC on April 3, 2020), and RTX’s post-Merger value of -$3,547 million for Q2–Q4. |
Pay versus Performance Table
| (8) Adjusted Diluted Earnings Per Share (“Adjusted EPS”) is defined in Appendix A on pages 120-121. Values shown reflect the Adjusted EPS value for the applicable reporting year. 2020 Adjusted EPS includes $1.38 per share for Q1 for UTC pre-Merger (excluding earnings generated by Carrier and Otis, which were spun off from UTC on April 3, 2020), and RTX’s post-Merger value of $1.69 for Q2–Q4. |