L3HARRIS TECHNOLOGIES, INC. /DE/
For the period ended May 11, 2026. Filed Apr 1, 2026.
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What shareholders are asked to vote on at a company's meeting. It is where to find what directors and top executives are paid, and who owns the most shares.
May 11, 2026 · Filed Apr 1, 2026
Contents
Elements of our Compensation Program
The overall objectives of our compensation program are to encourage and reward the creation of sustainable and long-term shareholder value.
Our Compensation Committee believes that the major elements of our executive compensation program further this objective. They directly align the interests of our executives and shareholders, are competitive, motivate achievement of our short- and long-term financial goals and strategic objectives, and align pay with performance.
Overview of Main Pay Elements for Fiscal 2025
| | | | Pay Element | | Form of Compensation | | | Purpose | |
|---|---|---|---|---|---|---|---|---|---|
| | FIXED | | Base Salary | | Cash | | | Intended to provide a stable portion of income to attract and retain executive talent. | |
| | VARIABLE | | Annual IncentiveAT-RISK | | Cash | | | Motivates our executives to focus on achieving or exceeding pre-determined short-term financial targets and individual objectives strategically chosen to align with the interests of our shareholders. | |
| | | | Long-term IncentiveAT-RISK | | Performance share units (50%) | | | Motivates our executives to achieve long-term financial and operating goals. As the majority of each named executive officer’s total equity grant is performance based, the ultimate value each named executive officer realizes at the end of the three-year performance period is highly correlated with Company performance. | |
| | | | | | Stock options(25%) | | | Motivates our executives to increase shareholder value. Executives only realize benefits if share price exceeds the exercise price. Options vest in equal installments on the first, second and third anniversaries following the grant date with a ten-year term. | |
| | | | | | Restricted stock units (25%) | | Primarily facilitates retention and succession planning. The restricted stock units cliff vest after a three-year period. | | |
Base Salary
Our Compensation Committee reviews executive base salaries early in each fiscal year and whenever there is a substantial change in an executive’s responsibilities or in market conditions. In addition to the competitive considerations discussed on pages 44-45, an executive’s base salary is influenced by the individual’s experience, position, responsibilities, tenure, contributions and individual performance, as well as current business conditions and our business outlook. Executive base salaries are not subject to automatic annual adjustments.
The table below shows the fiscal 2025 base salary for each named executive officer, including a comparison with fiscal 2024.
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | | Fiscal 2024 Annual | | Fiscal 2025 Annual | | | | | |
| | | Base Salary | (1) | Base Salary | (1) | | | | |
| | | $ | | $ | | % Change | | Reason for Change | |
| Mr. Kubasik | | 1,550,000 | | 1,550,000 | | 0.0% | | unchanged since 2023 | |
| Mr. Bedingfield | | 875,000 | | 950,000 | | 8.6% | | expanded responsibilities | (2) |
| Mr. Mehta | | 750,000 | | 825,000 | | 10.0% | | expanded responsibilities | (2) |
| Mr. Zoiss | | 750,000 | | 775,000 | | 3.3% | | merit/market | |
| Mr. Rambeau | | 750,000 | | 775,000 | | 3.3% | | merit/market | |
| (1) | For actual base salary amounts paid for fiscal 2025 and prior periods, see the “Salary” column of the Fiscal 2025 Summary Compensation Table on page 48. |
| (2) | In 2025, Mr. Bedingfield, then CFO, was appointed President, Aerojet Rocketdyne in addition to his responsibilities as CFO, and Mr. Mehta’s role was expanded to oversee strategic collaboration agreements across the enterprise, in addition to his responsibilities as Communication Systems segment president in 2025. |
Annual Cash Incentive
We provide our executive officers the opportunity to earn annual cash incentive compensation under our AIP. Awards under this plan are variable in nature and structured to provide payouts ranging from 0% to 200% of pre-established award target values, depending on our performance against specific pre-determined financial performance measures. For executives, this structure creates the upside potential of above-target payouts if our financial performance is above target, and the downside risk of below-target payouts if our financial performance is below target, aligning our executives with our shareholders.
30 L3HARRIS 2026 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS ELEMENTS OF OUR COMPENSATION PROGRAM
AWARD TARGET VALUES
For our named executive officers, annual cash incentive target values generally are set as a percentage of base salary.Cash incentive award targets as a percentage of base salary for fiscal 2025 were unchanged from fiscal 2024. Further, the target incentive percentages applicable to each executive have not changed since the executives assumed their current roles or in the case of our CEO since fiscal 2022. See “Establishing Compensation Levels” on page 28 for more information on how we set our target values.
| | | | | | |
|---|---|---|---|---|---|
| | | Fiscal 2024 Cash | | Fiscal 2025 Cash | |
| | | Incentive Target | | Incentive Target | |
| | | % | | % | |
| Mr. Kubasik | | 200% | | 200% | |
| Mr. Bedingfield | | 100% | | 100% | |
| Mr. Mehta | | 100% | | 100% | |
| Mr. Zoiss | | 100% | | 100% | |
| Mr. Rambeau | | 100% | | 100% | |
PERFORMANCE MEASURES
The graphic below shows the five financial performance measures and relative weighting for fiscal 2025 awards under our AIP, which remained consistent with 2024. For 2026, the strategic goals component will be removed, and the AIP will be focused solely on the four remaining financial metrics — free cash flow, adjusted EBIT, revenue and segment operating margin weighted 40%, 20%, 20% and 20%, respectively.
| | | | | | |
|---|---|---|---|---|---|
| Adjusted Free Cash Flow (50%)Adjusted Free Cash Flow measures how much cash we generate after accounting for capital expenditures such as buildings or equipment and merger, acquisition and severance expenses. This can be used for expansion, dividends, reducing debt, pension funding or other purposes. We can influence adjusted free cash flow by accelerating the receipt of cash, improving payment terms, reducing inventory, timely invoicing, increasing selling prices of products and services and reducing expenses. | | | Adjusted EBIT (20%)Adjusted EBIT measures our ability to generate enough earnings to be profitable, pay down debt and fund ongoing operations after adjusting for significant and/or non-recurring items included in our operating income (see Appendix A). Our adjusted EBIT improves when we grow revenue while reducing costs and operating expenses, improving procurement practices, increasing efficiencies within our businesses and achieving operational excellence. | | Revenue (10%)Revenue measures what we generate from the delivery of products and services to our customers. We can have an impact on revenue generation by scaling our businesses to meet demand, improving market share, introducing new products, enhancing program execution, entering new markets and pricing effectively. |
| Adjusted Segment Operating Margin (10%)Adjusted segment operating margin measures how much profit we make on a dollar of sales after paying for variable costs of production and certain overhead charges, such as wages and raw materials, but before FAS/CAS operating adjustment*, corporate expenses, other unallocated items, non-operating income/expense, interest or tax. It represents how efficiently we are able to generate profit through our core operations. | | Strategic Goals - LHX NeXt Cost Savings (10%)LHX NeXt Cost Savings measured gross cumulative annual run rate savings driven by our LHX NeXt transformation initiative. It was an operational measure that included savings from initiatives related to labor and function optimization, direct and indirect procurement, and infrastructure expected to recur on an ongoing basis. |
|---|
*Represents the difference between the service cost component of Financial Accounting Standards (“FAS”) pension and Other Postretirement Benefits (“OPEB”) income or expense and total U.S. Government Cost Accounting Standards (“CAS”) pension and OPEB cost.
We apply these financial measures to L3Harris as a whole and to our four business segments. For corporate executives, such as Mr. Kubasik and Mr. Bedingfield in 2025, payouts are based 100% on consolidated L3Harris results. Payouts for our other named executive officers, who were only segment presidents in 2025 — Messrs. Mehta, Rambeau and Zoiss — are based 50% on segment results and 50% on consolidated L3Harris results. The LHX NeXt cost savings is measured at the L3Harris consolidated level only, and is applied equally to corporate and segment executives.
L3HARRIS 2026 PROXY STATEMENT 31
COMPENSATION DISCUSSION AND ANALYSIS ELEMENTS OF OUR COMPENSATION PROGRAM
PERFORMANCE TARGETS AND PAYOUT PERCENTAGES
The independent directors of our Board (based on the recommendation of our Compensation Committee, in the case of our CEO), and our Compensation Committee (in the case of other executive officers), seek to establish targets for our financial performance measures at levels we believe require significant effort on the part of executives, but also represent a reasonable expectation of financial results based on prior-year performance, existing business conditions, the markets in which we participate and our outlook. AIP targets are established at the start of each fiscal year and are not expected to be routinely modified. However, the Compensation Committee retains limited authority to adjust targets or results in the event of significant, non-recurring or unforeseen events that were not contemplated at the time goals were set. The Committee’s guiding principle in exercising any such discretion is to reinforce pay-for-performance alignment. Consistent with past practice, the Compensation Committee approved predefined adjustments to the 2025 AIP targets to exclude the impact of certain items not reflective of core operating performance, including divestitures, business restructuring and tax reforms.
We established targets for our consolidated L3Harris and individual segment results, and the payout for varying performance levels was linked to specific resulting payout percentages for each performance measure. Performance below threshold for each metric results in 0% payout for the weighted percentage of such metric. Payouts are interpolated on a linear basis between threshold and maximum payouts. Performance at or in excess of the cap for each metric results in a payout factor of 200% for the weighted percentage of such metric.
To incentivize management to achieve the financial framework announced in 2023, our Board and Compensation Committee focused on target rigor in fiscal 2025. Targets for financial performance measures were set above prior year actual performance reflecting our philosophy of setting rigorous targets to incentivize year over year growth. Targets for consolidated results and the percentage change is shown in the table below.
| | | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| Financial Performance Measure (L3Harris consolidated) | | Fiscal 2024 Actuals(1) | | | Fiscal 2025 Target | | % Change | |
| Adjusted Free Cash Flow | $2,319 | | $2,582 | | 11% | | ||
| Adjusted EBIT | $2,698 | (2) | $2,820 | | 5% | | ||
| Revenue | $21,325 | | $21,657 | | 2% | | ||
| Adjusted Segment Operating Margin | | 15.4% | | | 15.5% | | 1% | |
| (1) | Restated actuals to exclude the impact of divestitures. |
| (2) | Adjusted to exclude amortization of acquisition related intangible assets for comparability with fiscal 2025. In fiscal 2025, we stopped adjusting amortization of acquisition related intangible assets from our operating results in our earnings. |
32 L3HARRIS 2026 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS ELEMENTS OF OUR COMPENSATION PROGRAM
RESULTS AND PAYOUT PERCENTAGES FOR FISCAL 2025
For 2025, our Compensation Committee determined payouts for performance-based, cash incentive compensation under our AIP based on formulaic calculations of our results against the targets. The independent directors of our Board (for our CEO) and Compensation Committee (for other executive officers) maintain discretion to further adjust final payouts from 0% to 200% of target based on assessments of performance relative to pre-determined objectives for the fiscal year.
The table below shows targets and results for each financial performance measure for L3Harris as well as for our former Space & Airborne Systems, Communication Systems and Integrated Mission Systems segments.* It also shows how we used those results to calculate weighted payout percentages for annual cash incentive awards under our AIP.
| · · · · · · · · · · · · · · · · · · · · · | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | Threshold | | Target | | Maximum | | | | | Result | | | | | |
| Financial Performance | | | | (50% | | (100% | | (200% | | | | | Relative to | | Resulting | | | Weighted |
| Measure | | Weighting | | Payout)(1) | | Payout)(1) | | Payout)(1) | | Result(2) | | Target(2) | | Payout % | | | Payout% | |
| L3HARRIS (100% for Kubasik and Bedingfield; 50% for other named executive officers) | | | | |||||||||||||||
| Adjusted Free Cash Flow | | 50% | $2,066 | | $2,582 | | $2,970 | | $2,814 | 109% | 160% | | | |||||
| Adjusted EBIT | | 20% | $2,397 | | $2,820 | | $3,243 | | $2,950 | 105% | 131% | | | |||||
| Revenue | | 10% | $19,491 | | $21,657 | | $23,822 | | $21,865 | 101% | 110% | > | 153% | |||||
| Adjusted Segment Operating Margin | | 10% | | 14.7% | | | 15.5% | | | 16.0% | | | 15.8% | 102% | 160% | | | |
| LHX NeXt Cost Savings | | 10% | $900 | | $1,200 | | $1,500 | | $1,500 | 125% | 200% | | | |||||
| SPACE & AIRBORNE SYSTEMS SEGMENT (50% for Zoiss) | | | | | ||||||||||||||
| Adjusted Free Cash Flow | | 50% | $676 | | $845 | | $972 | | $868 | 103% | 118% | | | |||||
| Adjusted EBIT | | 20% | $761 | | $895 | | $1,029 | | $852 | 95% | 84% | | | |||||
| Revenue | | 10% | $6,390 | | $7,100 | | $7,810 | | $6,946 | 98% | 89% | > | 112% | |||||
| Segment Operating Margin | | 10% | | 12.0% | | | 12.6% | | | 13.1% | | | 12.3% | 98% | 76% | | | |
| LHX NeXt Cost Savings | | 10% | $900 | | $1,200 | | $1,500 | | $1,500 | 125% | 200% | | | |||||
| COMMUNICATION SYSTEMS SEGMENT (50% for Mehta) | | | | | ||||||||||||||
| Adjusted Free Cash Flow | | 50% | $1,120 | | $1,400 | | $1,610 | | $1,432 | | 102% | 115% | | | ||||
| Adjusted EBIT | | 20% | $1,211 | | $1,425 | | $1,639 | | $1,432 | | 101% | 103% | | | ||||
| Revenue | | 10% | $5,130 | | $5,700 | | $6,270 | | $5,673 | | 100% | 98% | > | 122% | ||||
| Segment Operating Margin | | 10% | | 23.8% | | | 25.0% | | | 25.5% | | | 25.2% | 101% | 140% | | | |
| LHX NeXt Cost Savings | | 10% | $900 | | $1,200 | | $1,500 | | $1,500 | 125% | 200% | | | |||||
| INTEGRATED MISSION SYSTEMS SEGMENT (50% for Rambeau) | | | | | ||||||||||||||
| Adjusted Free Cash Flow | | 50% | $510 | | $638 | | $734 | | $719 | | 113% | 185% | | | ||||
| Adjusted EBIT | | 20% | $620 | | $730 | | $839 | | $812 | | 111% | 175% | | | ||||
| Revenue | | 10% | $5,680 | | $6,311 | | $6,942 | | $6,630 | | 105% | 151% | > | 183% | ||||
| Segment Operating Margin | | 10% | | 11.0% | | | 11.6% | | | 12.1% | | | 12.2% | 105% | 200% | | | |
| LHX NeXt Cost Savings | | 10% | $900 | | $1,200 | | $1,500 | | $1,500 | 125% | 200% | | | |||||
| * | All segment payouts are based on our 2025 segment structure, prior to our segment reorganization, effective January 3, 2026. Targets and results for our Aerojet Rocketdyne reporting segment are omitted as permitted under applicable rules because they are not relevant for payouts for named executive officers for fiscal 2025. |
|---|
| (1) | For comparability of performance targets with full-year results due to a divestiture of a business during fiscal 2025 impacting L3Harris and Integrated Mission Systems, each was decreased by excluding, as applicable, the pro-rata amounts for the divested business’ adjusted free cash flow, adjusted EBIT, revenue and segment operating margin attributable to the remainder of fiscal 2025 following the applicable divestiture date, based on our original fiscal 2025 annual operating plan. Additionally, the L3Harris adjusted free cash flow target was adjusted upward to reflect tax reform benefits. |
| (2) | Calculations are based on our financial results calculated in accordance with GAAP, adjusted as permitted under the AIP in recognition of unusual or nonrecurring events affecting us or our financial statements. These adjustments are made in accordance with pre-established guidelines. See Appendix A for reconciliations of GAAP to non-GAAP financial measures. |
L3HARRIS 2026 PROXY STATEMENT 33
COMPENSATION DISCUSSION AND ANALYSIS ELEMENTS OF OUR COMPENSATION PROGRAM
Payouts for Fiscal 2025
The table below shows how the weighted payout percentages in the previous table were used to determine payouts for our named executive officers, linking their annual cash incentive award payouts under our AIP to our fiscal 2025 results for each pre-established financial performance measure.
| · · · · · · · · · · · · · · | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| · · · · · · · · Adjustment based · · · · · · | |||||||||
| · · Annual Incentive · · Weighted Payout % Under · · on individual · · · · Actual Payout · | |||||||||
| · · Plan Target Granted · · Annual Incentive Plan(1) · · performance (+/-) · · · · (in $) · | |||||||||
| Mr. Kubasik | | $3,100,000 | 153% | | 31% | (2) | | $6,200,000 | |
| Mr. Bedingfield | | $950,000 | 153% | | 10% | (2) | | $1,600,000 | |
| Mr. Mehta | | $825,000 | 138% | > | 10% | (2) | | $1,250,000 | |
| Mr. Zoiss | | $775,000 | 133% | | —% | | | $1,030,800 | |
| Mr. Rambeau | | $775,000 | 168% | | 10% | (2) | | $1,432,000 | |
| (1) | Weighted payout percentage reflects 50% of the calculated weighted payout percentage for the applicable segment (Communication Systems for Mr. Mehta, Integrated Mission Systems for Mr. Rambeau and Space & Airborne Systems for Mr. Zoiss) and 50% of calculated weighted payout percentage for L3Harris in accordance with provisions designed to incentivize segment executives to drive both segment and overall Company results. |
| (2) | See “Adjustments for Individual Performance” below for a discussion on adjustments shown in the table. |
Payouts are shown in the “Non-Equity Incentive Plan Compensation” column of the Fiscal 2025 Summary Compensation Table on page 48.
Adjustments for Individual Performance
During our engagement with shareholders, some requested additional information on the Compensation Committee’s use of discretionary adjustments for individual performance. The individual performance modifier in our AIP is a tool that allows the Committee to reward performance against individual factors that may not be fully recognized through the annual financial metrics but materially contributes to the long-term value growth for our key stakeholders.
In evaluating individual performance, the Committee reviews a comprehensive performance assessment for each named executive officer across a range of strategic, financial and operating criteria. Individual performance adjustments, if any, are made based on a holistic evaluation of performance. The independent directors of our Board (for our CEO) and our Compensation Committee (for other executive officers) has historically applied a disciplined approach to adjustments, which has resulted in upward adjustment only in the event of significant outperformance and downward adjustment for underperformance. Adjustments, up and down, have been limited in both frequency and materiality, as evidenced by the fact that 2025 was the first time Mr. Kubasik received an adjustment since his appointment as CEO in 2021. Based on direct engagement with investors in 2025 and in consideration of their feedback, we chose to continue this aspect of our legacy plan design, while also continuing to provide clear rationale for any adjustments.
5-Year History of Adjustments based on Individual Performance
| Fiscal Year | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| CEO | +7% | 0% | 0% | 0% | +31% |
| (upward adjustment) | (no adjustment) | (no adjustment) | (no adjustment) | (upward adjustment) | |
| Other NEOs | -14% to +6% | -2% to +4% | 0% | 0% | 0% to +10% |
| (downward & upward adj) | (downward & upward adj) | (no adjustment) | (no adjustment) | (select upward adjustment) |
For fiscal 2025, the independent directors of our Board (on recommendation of our Compensation Committee) approved a +31% individual performance adjustment for Mr. Kubasik, which was the largest individual adjustment in the past five years.
Mr. Kubasik’s strategic vision and unparalleled knowledge of our business and customers was the driving force behind the announced first-of-its-kind proposed partnership with the Department of War (“DoW”). Not only does the partnership strengthen our long-term relationship with our largest customer, it aligns with the "Modernizing Defense Acquisitions and Spurring Innovation in the Defense Industrial Base" Executive Order's mandate to accelerate defense procurement and revitalize the defense industrial base by prioritizing speed, flexibility, and execution to restore peace through strength. Investor engagement following the announcement suggested overwhelming investor support for Mr. Kubasik’s strategic plan.
During 2025, we also continued to execute with speed and discipline, meeting customer commitments, improving on-time delivery, and investing to expand production capacity, while delivering strong full-year financial results. In addition, we concluded the CEO-led LHX NeXt initiative, which was initially announced to investors in 2023 as an enterprise transformation program intended to drive operational efficiency, cost savings, and continuous program improvement. Through this initiative we exceeded our fiscal 2025 cost savings target of $1.2 billion in LHX NeXt Cost Savings. This directly contributed to our ability to continue to invest in technology, capacity, and R&D, explore strategic partnerships, and deliver on our commitments to our clients with speed and agility.
34 L3HARRIS 2026 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS ELEMENTS OF OUR COMPENSATION PROGRAM
The Compensation Committee also approved individual performance adjustments for three other named executive officers. Mr. Bedingfield received a +10% individual performance adjustment in recognition of his incremental performance in connection with his appointment as President, Aerojet Rocketdyne, in addition to his responsibilities as CFO, delivering strong results in both roles. Mr. Mehta received a +10% individual performance adjustment to recognize his expanded role overseeing strategic collaboration agreements across the enterprise, and for outperforming against his objectives. Mr. Rambeau received a +10% individual performance adjustment for driving strong performance above plan and record backlog, key wins and expansion opportunities.
Overall, the Committee recognized meaningful progress under the Trusted Disruptor strategy for fiscal 2025.
Long-Term Incentives
LTIP motivates our executives to focus on achieving long-term financial goals and strategic objectives, and creating shareholder value.
EQUITY GRANTS FOR FISCAL 2025
The table below shows the total target value of our fiscal 2025 LTIP awards for our named executive officers as compared to fiscal 2024.
Long-term incentive awards are tied to rigorous, multi-year performance metrics, including financial and market-based measures, with payouts contingent on achieving pre-established goals. Long-term incentives include awards that are subject to meaningful downside risk, such as the potential for below-target or zero payouts if performance objectives are not achieved. Importantly, the value ultimately realized by the CEO is directly linked to stock price performance over extended periods. Equity awards vest over multiple years and are not adjusted to offset stock price volatility. As a result, realized compensation may be significantly lower than grant-date values if long-term performance does not meet expectations.
See “Establishing Compensation Levels” on page 28 for more information on how we set our target values.
| · · · · · · · · · · · | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| · · Fiscal 2024 · · Fiscal 2025 · · · · | |||||||||
| | | Target Value | (1) | Target Value | (1) | % Change | | Reason for Change | |
| Mr. Kubasik | | $13,500,000 | | $14,175,000 | | 5.0% | | merit/market | |
| Mr. Bedingfield | | $3,750,000 | | $4,500,000 | | 20.0% | | expanded responsibilities | (2) |
| Mr. Mehta | | $2,600,000 | | $3,500,000 | | 34.6% | | expanded responsibilities | (2) |
| Mr. Zoiss | | $2,600,000 | | $2,800,000 | | 7.7% | | merit/market | |
| Mr. Rambeau | | $2,600,000 | | $2,800,000 | | 7.7% | | merit/market | |
| (1) | We value performance share units based on the closing market price of our common stock on the grant date, which differs from the valuation method required for calculating amounts shown in the “Stock Awards” column of the Summary Compensation Table on page 48, and we value restricted stock units and options using the grant date fair value method, consistent with the valuation method required for calculating amounts shown in the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table on page 48. |
| (2) | In 2025, Mr. Bedingfield was appointed President, Aerojet Rocketdyne, in addition to his responsibilities as CFO, and Mr. Mehta’s role was expanded to oversee strategic collaboration agreements across the enterprise, in addition to his responsibilities as Communication Systems segment president. |
Types and Mix of Equity-Based Compensation for Named Executive Officers for Fiscal 2025
The target values for fiscal 2025 annual cycle awards were allocated as follows:
| | | | | |
|---|---|---|---|---|
| 50% | | 25% | | 25% |
| as performance share units | | as stock options | | as restricted stock units |
This equity-based compensation mix was determined after considering relevant data for our compensation comparison peer group, the retention value of each type of equity-based compensation, and other factors important to us, including linking incentive compensation to performance, tax and accounting treatment, anticipated effects on mitigating shareholder dilution, and the recommendations of Frederic W. Cook & Co., Inc. (“FW Cook”), our Compensation Committee’s independent compensation consultant. For further information related to grants to our named executive officers of fiscal 2025 annual compensation cycle equity-based awards and related terms and conditions, see the Grants of Plan-Based Awards in Fiscal 2025 Table on page 51 and related notes.
OUR PERFORMANCE SHARE UNITS
Establishing the Performance Measures
Early in the first fiscal year of each multi-year performance period (generally three years), we establish specific financial performance measures and their relative weighting and associated targets and thresholds, which serve as the basis for measuring how we perform and for determining payouts. The independent directors of our Board (based on the recommendation of our Compensation Committee, in the case of our CEO), and our Compensation Committee (in the case of other executive officers), establish the measures for our CEO and other executive officers, which have typically been the same.
The graphic below shows the financial performance measures and their relative weighting for the fiscal 2025-2027 cycle performance share units granted in fiscal 2025 to named executive officers under our 2024 Equity Incentive Plan, as approved early in fiscal 2025 in accordance with the discussion above.
L3HARRIS 2026 PROXY STATEMENT 35
COMPENSATION DISCUSSION AND ANALYSIS ELEMENTS OF OUR COMPENSATION PROGRAM
Performance Measures, Weighting and Rationale for Fiscal 2025-2027 Cycle Performance Share Unit Awards
| | | |
|---|---|---|
| 33%3-year Cumulative EPS | 33%3-year Average ROIC | 33%Relative TSR |
| EPS is an indicator of profitability, often considered an important factor in determining share price, impacted by our operating income, our tax rate and the number of shares outstanding. Calculated for the 3-year cumulative performance period as follows: net income (after tax) from continuing operations / diluted weighted-average shares of common stock outstanding, adjusting for significant and/or non-recurring items (see Appendix A) | ROIC is an indicator of efficiency in using capital to generate returns (allocating capital to profitable investments). Calculated for the 3-year performance period as follows: net operating profit (after tax)/(debt + equity + minority interest – cash) | TSR measures cumulative value to shareholders through stock price appreciation and dividends. Relative TSR compares our TSR ranking with the rankings of other companies in the S&P 500 (a broad market index of companies with which we compete for shareholder investment) and a TSR performance peer group* (a custom peer group of companies more closely aligned with our industry), each weighted equally at 50%). Calculated for the 3-year performance period as follows: (ending average stock price – beginning average stock price) / beginning average stock price |
- See “TSR performance peer group” on page 45 for further details on our TSR performance peer group.
Performance Targets for Fiscal 2023-2025 Cycle Performance Share Unit Awards
Our Compensation Committee seeks to establish targets for our performance measures that are aligned to our Board’s long-term strategic plan and create a“pay for profitable growth” environment, thereby encouraging and rewarding the creation of sustainable, long-term value for our shareholders. The targets are designed to ensure that executives are motivated to achieve the Board’s long-term strategic and financial objectives.
Since our EPS is a key factor in measuring growth in alignment with shareholder interests, our Compensation Committee has consistently set rigorous cumulative EPS targets, in alignment with the growth expected in our Board’s long-term strategic plan. As such, 2023-2025 cumulative EPS targets, established at the start of the 2023 fiscal year, assumed EPS growth of more than 5%. Historically (inclusive of our fiscal 2023-2025 cycle performance share unit awards), our Compensation Committee has maintained the targets for ROIC at 16%, despite the increase in invested capital associated with strategic transactions since 2023. This has made ROIC increasingly challenging over time. Our Compensation Committee has also historically maintained the Relative TSR target at 50th percentile because this has been nearly universal in our compensation comparison peer group. The committee revisits such targets each year to ensure they remain both challenging and aligned to our Board’s long-term strategic plan.
Relationship Between Performance Targets and Payout Percentage for Fiscal 2025-2027 Cycle Performance Share Units
In our long-term incentive plans, balancing transparency with protecting competitive interests is crucial. While we value providing our shareholders with meaningful information, we have strategically decided not to disclose forward-looking targets on our long-term financial performance measures in our proxy statements for the following reasons:
| > | Competitive advantage: Disclosing targets could reveal strategic plans to competitors, undermining our competitive position; |
| > | Market sensitivity: Such disclosures are based on assumptions sensitive to market conditions and internal developments, potentially leading to confusion and potential misinterpretation by investors and analysts; |
| > | Confidential business information: Forward-looking targets often involve proprietary information. Keeping these details confidential protects our business strategies; and |
| > | Focus on performance outcomes: We emphasize performance outcomes and strategic milestones. This proxy statement details the metrics used to evaluate performance, aligning executive compensation with shareholder value and ensuring accountability and transparency. |
Our target-setting process for long-term incentive plans is as rigorous as for short-term plans, incentivizing year-over-year growth and sustained performance with challenging, yet achievable, targets. Financial performance targets are disclosed after the performance period ends.
36 L3HARRIS 2026 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS ELEMENTS OF OUR COMPENSATION PROGRAM
The table below shows how varying results for each performance measure yield different payout percentages for fiscal 2025-2027 cycle performance share units.
| · · · · · · · · · · · | |||||||
|---|---|---|---|---|---|---|---|
| 2025-2027 Performance Goals | |||||||
| ROIC · EPS · Relative TSR(S&P 500) · Relative TSR(Performance Peers) | |||||||
| Goal | Payout | Goal | Payout | Percentile | Payout | Rank | Payout |
| 120% of Target | 200% | 110% of Target | 200% | 80th | 200% | 1st | 200% |
| Target | 100% | Target | 100% | 50th | 100% | 7th | 100% |
| 80% of Target | 50% | 90% of Target | 50% | 20th | 50% | 13th | 0% |
Beginning with the 2026–2028 LTIP, we revised the TSR payout structure by setting the threshold and maximum payout levels at the 25th and 75th percentiles, respectively, aligning with market practice and shareholder feedback.
Payout of Fiscal 2023-2025 Cycle Performance Share Unit Awards
Payouts for the multi-year performance period that concludes at the end of the relevant fiscal year are based on formulaic calculations of our financial results against pre-determined targets for such performance period. Performance share unit awards generally are structured to provide payouts in shares of our common stock ranging from 0% to 200% of the target number of units granted under such awards.
The fiscal 2023-2025 cycle performance share unit awards were based on the same performance measures as the fiscal 2025-2027 cycle performance share unit awards described above, except that 3-year Cumulative EPS and 3-year Average ROIC were weighted equally at 50%, and they had a Relative TSR performance adjustment of up to +/- 20% as compared to that of the S&P 500 (not a core metric).
The targets and outcomes of the fiscal 2023-2025 measurement period are below:
| | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Financial Performance Measures(1) · · Weighting · · Threshold (50%) · · Target(2)(100%) · · Maximum(200%) · · · Result · · Result Relative to Target · · Resulting Payout % · · Weighted Payout % · | |||||||||||||||||||||
| 3-year Average ROIC | | 50% | | 12.8% | | 16.0% | | 19.2% | | 16.4% | 102.3% | 111.7% | 142.6% | ||||||||
| 3-year Cumulative EPS(3) | | 50% | $32.94 | | $36.60 | | $40.26 | | $39.29 | | 107.3% | 173.5% | | | |||||||
| | | | | | | | | | | | | | | | | | | | | | |
| TSR vs. S&P 500(4) | Modifier | | 20th percentile | | 50th percentile | | 80th percentile | | 58th percentile | | 116% | 5.3% | 5.3% | ||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| 2023-2025 Performance Share Units Awarded to Executives (% of Target) | | 150.2% | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| (1) | 3-year average ROIC and 3-year cumulative EPS are non-GAAP financial measures. Calculations are based on our financial results calculated in accordance with GAAP, adjusted as permitted under our Equity Incentive Plans in recognition of unusual or nonrecurring events affecting us or our financial statements. These adjustments are made in accordance with pre-established guidelines. See Appendix A for reconciliations of GAAP to non-GAAP financial measures for each of the 3 years. |
| (2) | The 3-year target for ROIC remained constant at 16% for each fiscal year during the three-year performance period and is not adjusted. |
The 3-year cumulative EPS target represents the sum of the EPS targets set by our Compensation Committee for each of fiscal 2023, fiscal 2024 and fiscal 2025 that were adjusted as follows: (i) the fiscal 2023 target of $12.20 was adjusted to $12.17 to reflect the impact of divestitures and acquisitions; (ii) the fiscal 2024 target of $12.45 was adjusted to $12.48 to reflect the impact of divestitures and acquisitions; and (iii) the fiscal 2025 target of $12.85 was adjusted to $11.95 to reflect the impact of divestitures, acquisitions, and tax reform impacts. See Appendix A for reconciliations of GAAP to non-GAAP financial measures for each of the 3 years.
| (3) | The 3-year cumulative EPS target reflects adjustments from the original target of $37.50 for acquisitions, divestitures, and tax reform impacts. See Appendix A for reconciliations of GAAP to non-GAAP financial measures for each of the 3 years. |
Beginning in fiscal 2025, we ceased adjusting for amortization of acquisition-related intangible assets from our Non-GAAP EPS. Fiscal 2023-2025 cycle performance share unit awards retain the adjustment for amortization of acquisition-related intangible assets based on the targets set by our Compensation Committee in fiscal 2023.
| (4) | For the 2023-2025 performance period, the Company’s percentile rank of the companies in the S&P 500 was 58th with a TSR of 44.54%. |
The number of performance share units granted to each named executive officer that received performance share units in 2023, and the number of shares earned following the fiscal 2023-2025 measurement period is presented below:
| | | | | |
|---|---|---|---|---|
| | | Number of performance | | |
| | | share units granted | | Number of shares earned |
| Mr. Kubasik | | 32,120 | | 48,245 |
| Mr. Mehta | | 6,068 | | 9,115 |
| Mr. Zoiss | 6,068 | | 9,115 | |
| Mr. Rambeau | | 6,068 | | 9,115 |
L3HARRIS 2026 PROXY STATEMENT 37
COMPENSATION DISCUSSION AND ANALYSIS ELEMENTS OF OUR COMPENSATION PROGRAM
STOCK OPTIONS
Stock options granted to our executive officers typically have the following terms:
| > | Exercise price equal to the closing price of our common stock on the grant date; |
| > | Vesting in equal installments of one-third each on the first, second and third anniversary of the grant date, subject to the recipient’s continued employment on such anniversary (except for certain new-hire grants described below); |
| > | Expiration 10 years from the grant date; and |
| > | “Double trigger” accelerated vesting following a change in control. |
Stock options may not be repriced, replaced, modified or regranted through cancellation if the effect thereof would be to reduce the exercise price of such stock options, except with prior approval of our shareholders, or in connection with a change in our capitalization, including spin-offs. Our Compensation Committee and Board, however, have discretion to set the exercise price of stock options higher than the closing market price of our common stock on the grant date.
RESTRICTED STOCK UNITS
Awards of restricted stock units, as noted above, are made primarily for retention purposes and as a recruitment mechanism to replace the value of equity awards that an executive may have forfeited upon leaving a former employer. They are granted to all executive officers, including our named executive officers.
These awards typically have 3-year “cliff” vesting, except for certain new-hire or off-cycle retention grants, meaning that the entire grant will vest on the third anniversary of the grant date if the recipient remains employed with L3Harris. Restrictions on these awards, which typically expire at the end of a three-year period, provide that the shares or units may not be sold or otherwise transferred and will be immediately forfeited if the recipient’s employment ends for any reason other than involuntary termination without cause, voluntary resignation for good reason (in certain limited circumstances), death, disability or retirement.
38 L3HARRIS 2026 PROXY STATEMENT
COMPENSATION DISCUSSION AND ANALYSIS OTHER COMPENSATION ELEMENTS
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.