Recent Governance Enhancements

In the past year, the company adopted a number of important governance enhancements. First, the Board amended the company's Governance Principles to add a Restatement Clawback Policy. This policy gives the Board the right to recover incentive compensation or stock awards made to any elected officer, to the extent that such payments or awards were inflated due to erroneous financial reporting knowingly caused by the executive. This policy is designed to maximize the likelihood that the company will be successful in seeking to recover incentive compensation attributable to improperly inflated financial results.

Second, the Board amended the company's Governance Principles to establish a formal policy limiting the number of public company boards on which a director may serve. The limits adopted are five public company boards (including Raytheon) for any director who does not serve as a current CEO of a public company and three public company boards (including Raytheon) for any director who does currently serve as a CEO. This latter limitation applies to our Chairman and CEO.

Third, the MDCC adopted a formal policy to ensure that its compensation consultant meets robust independence requirements. This policy requires the MDCC to assess annually the independence of its compensation consultant. As part of this assessment, the MDCC reviews any services proposed to be provided by the consultant to the company, and considers whether the provision of such non-MDCC services might impair the consultant's independence. Such non-MDCC services may be provided only with the MDCC's pre-approval.

Finally, to achieve greater transparency, we instituted a new website disclosure of the company's so-called "soft money" contributions — direct corporate contributions to political parties, state and local political candidates, and political organizations established under section 527 of the tax code.

In recognition of its leadership on governance, Raytheon's Board was named the 2008 "Board of the Year" by the New England Chapter of the National Association of Corporate Directors.