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PROXY SUMMARY

This summary highlights selected information contained in this proxy statement, but it does not contain all the information you should consider. We urge you to read the whole proxy statement before you vote. This proxy statement is being made available to shareholders on or about April 17, 2018.

WE WILL BE VOTING ON THE FOLLOWING MATTERS:
Agenda Item Voting Recommen­dation More Information
1. Election of twelve directors nominated by Raytheon’s Board FOR EACH NOMINEE Page 7
2. Advisory vote to approve named executive officer compensation FOR Page 28
3. Ratification of the independent auditors FOR Page 62
4. Shareholder proposal to amend the proxy access by-law AGAINST Page 69
CURRENT COMMITTEE MEMBERSHIPS
Independent Directors Age Director Since Audit Committee Governance and Nominating Committee Management Development and Compensation Committee Public Affairs Committee Special Activities Committee
Tracy A. Atkinson 53 2014 CHAIR o
Robert E. Beauchamp 58 2015 o o
Adriane M. Brown 59 2018 o o
Vernon E. Clark (Lead Director) 73 2005 CHAIR
Stephen J. Hadley 71 2009 CHAIR o o
Letitia A. Long 59 2015 o CHAIR o
George R. Oliver 56 2013 o o o
Dinesh C. Paliwal 60 2016 o o
William R. Spivey 71 1999 o CHAIR
James A. Winnefeld, Jr. 62 2017 o o
Robert O. Work 65 2017 o o o
Inside Director
Thomas A. Kennedy 62 2014
Number of Meetings in 2017 9 6 6 6 11
COMPOSITION OF THE BOARD

COMPOSITION OF THE BOARD
COMPOSITION OF THE BOARD
COMPOSITION OF THE BOARD

BOARD TENURE AND REFRESHMENT

Our Board represents a balance of long-term members with in-depth knowledge of our business and newer members who bring valuable additional attributes, skills and experience. The Board has undergone significant refreshment over the last five years.

Director Nominees

DIVERSITY OF SKILLS AND EXPERIENCE

Our Board embodies a broad and diverse set of experiences, qualifications, attributes and skills.
Below are the attributes, skills and experience of our director nominees.

OUR 2017 PERFORMANCE

In 2017, our growth strategy continued to deliver results for our shareholders and customers, and we also maintained strong program performance and operating margins. Our global team built upon Raytheon’s return to growth in 2015, driven by increases in both domestic and international sales. In fact, 2017 was the 14th consecutive year of international sales growth, which reflects the continued success of our differentiated international strategy. Highlights of our 2017 performance include:

RECORD FULL-YEAR NET SALES OF
$25.3 BILLION
UP 5.1% FOR THE YEAR
STRONG BOOKINGS OF
$27.7 BILLION
FOR THE YEAR
FULL-YEAR EPS FROM CONTINUING OPERATIONS OF
$6.94
(reflecting an unfavorable $0.59 impact from the Tax Cuts and Jobs Act of 2017 and an unfavorable $0.09 impact from a discretionary pension plan contribution)
STRONG OPERATING CASH FLOW FROM CONTINUING OPERATIONS OF
$2.7 BILLION
FOR THE YEAR
(after a 4th quarter $1.0 billion pretax discretionary pension plan contribution)
14TH
CONSECUTIVE YEAR OF INTERNATIONAL SALES GROWTH
2017 TOTAL SHAREHOLDER RETURN OF
34.0%

OUR EXECUTIVE COMPENSATION PROGRAM

Our Management Development and Compensation Committee (MDCC) designed our executive compensation program to attract and retain highly-qualified executives, motivate our executives to achieve our overall business objectives, reward individual performance, and align our executives’ interests with those of our shareholders. Our program’s primary direct compensation elements are base salary, annual cash incentives, and long-term equity incentives. The MDCC focuses on the appropriate mix between fixed and at-risk variable compensation, and between short-term cash and long-term equity compensation, to provide total direct compensation opportunities that meet our objectives. Our base salaries are competitive and reflect an executive’s experience and scope of responsibilities. Our annual cash incentives and long-term equity incentives motivate and reward both Raytheon and individual performance. Our long-term equity incentives also align executives’ interests with those of our shareholders, and help retain highly-qualified executives.


CEO Compensation


Other NEOs (Named Executive Officers) Compensation

(1) Base salary includes a lump-sum payment to Mr. Wajsgras in 2017 in lieu of a base salary merit increase. This amount appears in the “Bonus” column of the Summary Compensation Table on page 49. Restricted Stock excludes a retention award of restricted stock granted to Mr. Yuse in 2017. For more information, see the Summary Compensation Table on page 49.

Most of our executives’ compensation is at risk and varies based on performance. Due to Raytheon’s strong 2017 financial performance, our annual cash incentive (RBI) was funded, and our long-term equity performance plan (LTPP) paid out, above predetermined targets. Our Named Executive Officers also achieved strong results against their individual performance goals in 2017.

Consistent with our compensation objectives, our Named Executive Officers, or NEOs, received the following compensation in 2017:

Annual Cash Incentive Long-Term Equity Incentives(1)
NEO Salary Bonus RBI LTPP Restricted Stock Total
Thomas A. Kennedy
Chairman and Chief Executive Officer
$1,403,211 $3,434,000 $5,499,988 $4,400,045 $14,737,244
Anthony F. O’Brien
Vice President and Chief Financial Officer
$721,159 $912,400 $1,299,946 $1,249,928 $4,183,433
David C. Wajsgras
Vice President, and President of Intelligence, Information and Services (IIS)
$977,101
$19,542(3)
$1,171,500 $1,250,011 $1,300,065 $4,718,219
Richard R. Yuse(2)
Vice President, and President of Space and Airborne Systems (SAS)
$821,290 $984,700 $1,250,011 $1,300,065 $4,356,066
Taylor W. Lawrence
Vice President, and President of Missile Systems (MS)
$756,473 $932,000 $1,250,011 $1,300,065 $4,238,549

(1) Reflects the NEO’s restricted stock/unit award and 2017–2019 LTPP award (at target) granted in 2017 based on the number of shares/units multiplied by the closing price of our common stock on the award determination date.
(2) This table excludes the value of a retention award of restricted stock granted to Mr. Yuse in 2017.
(3) This amount represents a lump sum payment to Mr. Wajsgras in 2017 in lieu of a base salary merit increase.

For a complete discussion of our executive compensation program, see the “Compensation Discussion and Analysis” section of this proxy statement.


SHAREHOLDER ENGAGEMENT AND ADVISORY SAY-ON-PAY VOTE

For each of the last eight years, we have communicated with a significant percentage of our shareholders (typically representing between 30% and 40% of our shares) on governance and compensation matters. Since 2011, the first year we offered a shareholder advisory say-on-pay vote, Raytheon’s shareholders have consistently voted overwhelmingly for our executive compensation program, with an average of 95.0% voting in favor.

We view this support as an indication of broad shareholder agreement with the philosophy and policies underpinning our executive compensation program.

Votes Cast “FOR” Our Executive Compensation

Votes Cast

GOVERNANCE HIGHLIGHTS

Major elements of our governance profile are summarized below. We discuss most of these matters in greater detail in this proxy statement.

RECENT DEVELOPMENTS

  • Significant Board Refreshment
    Four new directors added in the last two years; a total of nine directors added and six departed in the last five years.
  • Redesigned Proxy Statement in 2017
    Proxy statement revamped to be more readable and useful for shareholders.
  • Introduction in 2017 of Individual Director Self-Assessments
    Tied to director development and Board/committee leadership planning, overseen by the Board’s Governance and Nominating Committee.
INDEPENDENCE

  • All non-employee directors are independent
  • Independent directors regularly meet in executive session
  • Rigorous compensation consultant independence policy
ALIGNMENT WITH SHAREHOLDER INTERESTS

  • Pay-for-performance executive compensation program
  • Rigorous stock ownership and retention guidelines for directors and officers
  • Prohibition against director and officer hedging of Raytheon stock
SHAREHOLDER ACCESS

  • Active company outreach and engagement with shareholders throughout the year
  • Shareholders may include nominees in Raytheon proxy materials (proxy access)
  • Shareholders may call special shareholder meetings
  • Shareholders may act by written consent
TRANSPARENCY

  • Clear, understandable and detailed financial reporting and proxy statement disclosure
  • Extensive voluntary website disclosure regarding Raytheon’s political expenditures and lobbying activities
  • Annual Corporate Responsibility Report addressing sustainability, ethics and business conduct, safety and wellness, and community support
ACCOUNTABILITY

  • Annual election of all directors and majority voting in uncontested elections
  • Annual shareholder advisory vote to approve named executive officer compensation
  • Annual Board evaluation of CEO performance
  • Restatement Clawback Policy
  • No ‘poison pill’
BOARD PRACTICES

  • Robust annual Board and committee self-evaluation process, including a mid-year review and independent director discussions in executive session
  • Individual director self-assessments
  • Mandatory director retirement at age 74
  • Periodic Board review of management succession planning
  • Balanced and diverse Board composition
  • Limits on outside public company board service
INDEPENDENT LEAD DIRECTOR

  • Fully independent and empowered Lead Director with broadly defined authority and responsibilities
  • Position currently held by Vernon E. Clark, Retired Chief of Naval Operations for the U.S. Navy
RISK OVERSIGHT

  • Regular Board review of enterprise risk management and related policies, processes and controls
  • Board committees exercise oversight of risk matters under their purview

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