Use these links to rapidly review the document
TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrantý | ||
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
ý | Definitive Proxy Statement | |
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 |
Abbott Laboratories | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): | ||||
ý | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
(1) | Title of each class of securities to which transaction applies: | |||
(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
(4) | Proposed maximum aggregate value of transaction: | |||
(5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: |
Abbott Laboratories
100 Abbott Park Road
Abbott Park, Illinois 60064-6400 U.S.A.
On the Cover:FreeStyle Libre SystemTyrone Morris
GABRIELLE WEMPEFreeStyle LibreuserThe NetherlandsMilwaukee, Wisconsin
Since 2015, Gabrielle has relied onTyrone Morris is a very busy man. With
a restaurant to run and a weekly bowling
league to dominate, he doesn't let
anything slow him down—not even heart
failure. Abbott technologies have let him
get back to leading the life he wants torevolutionary technology in Abbott'sFreeStyleLibresystem to monitor her glucose levels.live.
TABLE OF CONTENTS
| PAGE | |
---|---|---|
| | |
Notice of Annual Meeting of Shareholders | 2 | |
Proxy Summary | 3 | |
Information About the Annual Meeting | ||
Who Can Vote | ||
Notice and Access | ||
Cumulative Voting | ||
Voting by Proxy | ||
Revoking a Proxy | ||
Discretionary Voting Authority | ||
Quorum and Vote Required to Approve Each Item on the Proxy | ||
Effect of Withhold Votes, Broker Non-Votes, and Abstentions | ||
Inspectors of Election | ||
Cost of Soliciting Proxies | ||
Abbott Laboratories Stock Retirement Plan | ||
Confidential Voting | ||
Householding of Proxy Materials | ||
Nominees for Election as Directors | ||
The Board of Directors and its Committees | ||
The Board of Directors | ||
Leadership Structure | ||
Director Selection | ||
Board Diversity and Composition | ||
Board Evaluation Process | 23 | |
Committees of the Board of Directors | ||
Communicating with the Board of Directors | ||
Corporate Governance Materials | ||
| ||
Security Ownership of Executive Officers and Directors | ||
Executive Compensation | ||
Compensation Discussion and Analysis | ||
Compensation Committee Report | ||
Compensation Risk Assessment | ||
Summary Compensation Table | ||
| ||
| ||
| ||
Pension Benefits | ||
| ||
Potential Payments Upon Termination or Change in Control | ||
CEO Pay Ratio |
| PAGE | |
---|---|---|
| | |
Ratification of Ernst & Young LLP as Auditors (Item 2 on Proxy Card) | ||
Report of the Audit Committee | ||
Say on Pay—An Advisory Vote on the Approval of Executive Compensation (Item 3 on Proxy Card) | ||
Shareholder | ||
Shareholder Proposal on | ||
Proponent's Statement in Support of Shareholder Proposal | ||
Board of Directors' Statement in Opposition to the Shareholder Proposal | ||
Shareholder Proposal on Non-GAAP Financial Performance Metrics Disclosure (Item 5 on Proxy Card) | 74 | |
Proponent's Statement in Support of Shareholder Proposal | 74 | |
Board of Directors' Statement in Opposition to the Shareholder Proposal | 75 | |
Shareholder Proposal on Shareholder Voting on By-law Amendments (Item 6 on Proxy Card) | 76 | |
Proponent's Statement in Support of Shareholder Proposal | 76 | |
Board of Directors' Statement in Opposition to the Shareholder Proposal | 77 | |
Shareholder Proposal on Simple Majority Vote (Item 7 on Proxy Card) | 78 | |
Proponent's Statement in Support of Shareholder Proposal | 78 | |
Board of Directors' Statement in Opposition to the Shareholder Proposal | 79 | |
Approval Process for Related Person Transactions | ||
Additional Information | ||
Information Concerning Security Ownership | ||
| ||
| ||
Date for Receipt of Shareholder Proposals for the | ||
Procedure for Recommendation and Nomination of Directors and Transaction of Business at Annual Meeting | ||
General | ||
Exhibit A—Director Independence Standard | A-1 | |
| ||
Reservation Form for Annual Meeting | Back Cover |
Abbott Laboratories 1
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
YOUR VOTE IS IMPORTANT
Please sign and promptly return your proxy
in the enclosed envelope, or vote your
shares by telephone or using the Internet.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on April 27, 201824, 2020
The Annual Meeting of the Shareholders of Abbott Laboratories will be held at Abbott's headquarters, 100 Abbott Park Road, at the intersection of Route 137 and Waukegan Road, Lake County, Illinois, on Friday, April 27, 2018,24, 2020, at 9:00 a.m. for the following purposes:
The Board of Directors recommends that you vote FOR Items 1, 2, and 3.
The Board of Directors recommends that you vote AGAINST Item 4.Items 4, 5, 6, and 7.
The close of business on February 28, 2018,26, 2020, has been fixed as the record date for determining the shareholders entitled to receive notice of and to vote at the Annual Meeting.
Abbott's 20182020 Proxy Statement and 20172019 Annual Report to Shareholders are available at www.abbott.com/proxy.
If you are a registered shareholder, you may access your proxy card by either:
Admission to the meeting will be by admission card only. If you plan to attend, please complete and return the reservation form on the back cover, and an admission card will be sent to you. Due to space limitations, reservation forms must be received before April 20, 2018.17, 2020. Each admission card, along with photo identification, admits one person. A shareholder may request two admission cards, but a guest must be accompanied by a shareholder.
By order of the Board of Directors.
Hubert L. Allen
Secretary
March 16, 201813, 2020
2 Abbott Laboratories
This summary contains highlights about Abbott and the upcoming 20182020 Annual Meeting of Shareholders. This summary does not contain all of the information that you should consider in advance of the meeting, and we encourage you to read the entire proxy statement carefully before voting.
The accompanying proxy is solicited on behalf ofby the Board of Directors on behalf of Abbott for use at the Annual Meeting of Shareholders. The meeting will be held on April 27, 2018,24, 2020, at Abbott's headquarters, 100 Abbott Park Road, at the intersection of Route 137 and Waukegan Road, Lake County, Illinois. This proxy statement and the accompanying proxy card are being mailed to shareholders on or about March 16, 2018.13, 2020.
ACHIEVING LEADING |
In 2017, Abbott's three-year total shareholder return (TSR) of 139.5% is more than twice that of the peer group median and the broader Standard & Poor's 500 (S&P 500) and Dow Jones Industrial Average (DJIA) market indices. These consistent above-market returns are driven by the strength of our leadership positions in some of the largest and fastest growing markets in healthcare and innovative product portfolios across our businesses.
Abbott delivered strong returns for shareholders in 2019 and achieved outstandingor exceeded the financial targets set at the beginning of last year. Abbott's one-year TSR was 22.1%, delivering significant shareholder returns to shareholders, rankingon top of the one-year TSR of 29% in 2018, which ranked #1 in our peer group. Abbott's one-year total
In addition to delivering significant shareholder return (TSR) was 52.0%, which was 30.2 and 23.9 percentage points above the robust growth of both the Standard & Poor's 500 Index (S&P 500) and the Dow Jones Industrial Average (DJIA), respectively. Abbott continues to be recognized as a member of the S&P 500 Dividend Aristocrat Index, having increased the dividend payout for 46 consecutive years.
WELL-POSITIONED FOR LONG-TERM GROWTH
In 2017,returns, Abbott continued to strategically shape its business throughtake important steps to position the additionsCompany for long-term, sustainable growth.
Abbott Laboratories 3
|
Abbott is celebrating an important milestone in 2018:SHAREHOLDER FEEDBACK
During 2019, we conducted extensive shareholder outreach to discuss our compensation program, among other topics. In the company's 130th anniversary. A key elementspring, we engaged shareholders representing over 65% of our longevityoutstanding shares in an open dialogue to discuss various topics, including the enhanced disclosures in our 2019 proxy that furthered shareholder understanding of how pay decisions are made and success has beenhow the abilitymetrics we use are linked to adaptbusiness strategy and change continually to ensure Abbott remains current and relevant. Today, Abbott operates a diverse and balanced portfolio of businesses that are all leaders in large, attractive markets and aligned with favorable, long-term healthcare trends. The strategic actions we've taken over the last several years have created leading positionsgoals. Their feedback was overwhelmingly positive, which was reflected in the segments94% support for Say-on-Pay Vote.
In the fall, we continued our dialogue with shareholders and shared the process we used to review and update our peer group in 2019 to better reflect Abbott's size and complexity. Shareholders were highly supportive of healthcare where we compete.our approach and agreed with the changes approved by the Compensation Committee. Additional information regarding the changes to Abbott's peer group can be found on page 32 of this proxy statement.
KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM
The following practices and policies ensure alignment of interests between shareholders and executives, and effective ongoing compensation governance.
|
| |||||||||||||||||
| ABBOTT POLICY | |||||||||||||||||
| ON PAGE |
|
|
|
Our shareholders compare us to other global multinational companies, only some of which are in healthcare. These companies share similar investment identities and operating characteristics aligned with diversified growth, returns to shareholders, and capital structure.
The peer group used for performance and compensation benchmarking prior to 2017 was established at the time of the AbbVie separation in 2013. That group has been used without change from 2013 through 2016. Due to the acquisitions of St. Jude Medical and Alere Inc. and significant changes in several peers due to corporate transactions, the Compensation Committee (the Committee) and its consultant reviewed the peer group to be used for 2017 benchmarking. Based on that review, the Committee approved an update to the peer group to better align to our current size, scope, and global footprint.
In determining changes to our peer group for 2017 performance and compensation benchmarking, as in prior years, we considered:
| ||||||
|
|
|
| |||
|
|
|
| |||
|
|
|
|
4 Abbott Laboratories
|
Over the past four years, we have averaged 95% shareholder support for our annual advisory vote on "Say on Pay", demonstrating strong support for our approach to executive compensation. Our compensation program provides an appropriate and competitive mix of elements to incentivize our executives to achieve the Company's business strategies and goals, while also aligning executive performance and awards with shareholder interests.
COMPENSATION ALIGNED WITH PERFORMANCE
The vast majority of compensation for our executive officers is performance-based and objectively determined. Long Term Incentives (LTI), which comprise the largest percentage of compensation for our executive officers, are directly linked to shareholder returns. Each year, LTI award guidelines are determined based on relative TSR performance compared to our peer group. The Compensation Committee looks at 1-, 3-, and 5-year TSR in making these determinations. The table below illustrates the relative TSR and award guidelines since 2013 for executive officers at Abbott.
Relative TSR Percentile vs. Peers | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| 1-Year | | 26th | | 89th | | 61st | | 0th | | 100th | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
3-Year | 84th | 53rd | 44th | 17th | 63rd | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| 5-Year | | 11th | | 47th | | 83rd | | 28th | | 50th | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Average | | 40th | | 63rd | | 63rd | | 15th | | 71st | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
LTI Award Guideline Percentile | 37th | 50th | 50th | 25th | 75th | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Not only is a direct link evident in these results; it can reasonably be concluded that Abbott has been conservative in setting target payout levels. This linkage translates into significant differentiation of pay for our executives, aligned with returns to our shareholders. The table below illustrates the pay outcomes for our CEO based on results each year since the separation of AbbVie. Again, a direct pay for performance link is very evident.
Pay Linked to Performance | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CEO Pay Decisions* | | $ | 15,766,044 | | $ | 19,905,536 | | $ | 17,403,023 | | $ | 15,062,628 | | $ | 23,572,774 | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
% Change in Pay vs. Prior Year | –30% | +26% | –13% | –13% | +56% | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1-Year TSR | | | +24% | | | +20% | | | +2% | | | –12% | | | +52% | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM
| | | | | | | | | ||||||||
| | | | |||||||||||||
| | Yes | | Benchmark peers with investment profiles, operating characteristics, and employment and business markets similar to | | |||||||||||
| | | | | | | | | | | | | ||||
Yes | Short-term and long-term incentive awards are 100% performance based. Annual incentive plan goals are set to exceed market growth in | |||||||||||||||
33 | ||||||||||||||||
| | | | | | | | | | | | | | | | |
| Double-Trigger Change in Control | | Yes | | Provide change in control benefits under double-trigger circumstances only | | 65-67 | | ||||||||
| | | | | | | | | | | | | | | | |
Recoupment Policy | Yes | Forfeiture for misconduct provision in equity grants and recoup compensation when warranted | 50 | |||||||||||||
| | | | | | | | | | | | | | | | |
| Robust Share Ownership Guidelines | | Yes | | Require significant share ownership for officers and directors, and share retention requirements until guidelines are met | | 27-28 and 49 | | ||||||||
| | | | | | | | | | | | | | | | |
Capped Incentive Awards | Yes | Incentive award payments are capped | 33 and 51 | |||||||||||||
| | | | | | | | | | | | | | | | |
| Independent Compensation Committee Consultant | | Yes | | Committee consultant performs no other work for Abbott | | 25 | | ||||||||
| | | | | | | | | | | | | | | | |
Tax Gross Ups | No | No tax gross ups under our executive officer pay program | 48-49 and 66 | |||||||||||||
| | | | | | | | | | | | | | | | |
| Guaranteed Bonuses | | No | | No guaranteed bonuses | | 33 | | ||||||||
| | | | | | | | | | | | | | | | |
Employment Contracts | No | No employment contracts | 65 | |||||||||||||
| | | | | | | | | | | | | | | | |
| Excessive Risk Taking | | No | | No highly leveraged incentive plans that encourage excessive risk taking | | 51-52 | | ||||||||
| | | | | | | | | | | | | | | | |
Hedging of Company Shares | No | No hedging of Abbott shares is allowed | 49 | |||||||||||||
| | | | | | | | | | | | | | | | |
| Discounted Stock Options | | No | | No discounted stock options are allowed or granted | | 51 | | ||||||||
| | | | | | | | | | | | | | | | |
Details of the compensation decisions made for our named executive officers are outlined on pages 38 to 47.
Abbott Laboratories 54
DIRECTOR NOMINEES |
The Board of Directors recommends a voteFOR the election of each of the following nominees for director. All nominees are currently serving as directors. Additional information about each director's background and experience can be found beginning on page 12.13.
Name | Principal Occupation | | Age | Director Since | Committee Memberships | | Name | Principal Occupation | | Age | Director Since | Committee Memberships | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||
| Robert J. Alpern, M.D. | Professor and Former Dean, | | 69 | 2008 | • Nominations and | | |||||||||||||||||||
| Yale School of Medicine | | | | Governance | | ||||||||||||||||||||
| | | | | | • Public Policy | | |||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||
Roxanne S. Austin | President and CEO, | 59 | 2000 | • Audit | ||||||||||||||||||||||
Austin Investment Advisors | • Compensation (Chair) | |||||||||||||||||||||||||
• Executive | ||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||
| Sally E. Blount, Ph.D. | Professor and Former Dean, | | 58 | 2011 | • Nominations and | | |||||||||||||||||||
| J.L. Kellogg Graduate School | | | | Governance | | ||||||||||||||||||||
| | of Management | | | | • Public Policy | | |||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||
Robert B. Ford | President and COO, Abbott Laboratories | 46 | 2019 | • Executive | ||||||||||||||||||||||
| Robert J. Alpern, M.D. | Professor and Dean, | | 67 | 2008 | • Nominations & | | | | | | | | | | | | | | |||||||
| Yale School of Medicine | | | | Governance | | Michelle A. Kumbier | Chief Operating Officer, | | 52 | 2018 | • Audit | | |||||||||||||
| | | | | • Public Policy | | | Harley-Davidson Motor Company | | | | • Compensation | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |||
Roxanne S. Austin | President and CEO, | 57 | 2000 | • Audit | Edward M. Liddy | Retired Chairman and CEO, | 74 | 2010 | • Audit (Chair) | |||||||||||||||||
Austin Investment Advisors | • Compensation (Chair) | The Allstate Corporation | • Compensation | |||||||||||||||||||||||
• Executive | • Executive | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |||
| Sally E. Blount, Ph.D. | Professor and Dean, | | 56 | 2011 | • Nominations & | | Darren W. McDew | Retired General, U.S. Air Force, and | | 59 | 2019 | • Nominations and | | ||||||||||||
| | J.L. Kellogg Graduate School | | | | Governance | | | Former Commander of U.S. | | | | Governance | | ||||||||||||
| | of Management | | | | • Public Policy | | | Transportation Command | | | | • Public Policy | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||
Edward M. Liddy | Retired Chairman and CEO, | 72 | 2010 | • Audit (Chair) | Nancy McKinstry | CEO and Chairman of the | 61 | 2011 | • Audit | |||||||||||||||||
The Allstate Corporation | • Compensation | Executive Board, | • Nominations and | |||||||||||||||||||||||
• Executive | Wolters Kluwer N.V. | Governance | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||
| Nancy McKinstry | CEO and Chairman, | | 59 | 2011 | • Audit | | Phebe N. Novakovic | Chairman and CEO, | | 62 | 2010 | • Compensation | | ||||||||||||
| Wolters Kluwer N.V. | | | | • Nominations & | | | General Dynamics Corporation | | | | • Public Policy (Chair) | | |||||||||||||
| | | | | Governance | | | | | | | • Executive | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Phebe N. Novakovic | Chairman and CEO, | 60 | 2010 | • Compensation | William A. Osborn | Retired Chairman and CEO, | 72 | 2008 | • Compensation | |||||||||||||||||
General Dynamics Corporation | • Public Policy (Chair) | (Lead Independent Director) | Northern Trust Corporation | • Nominations and Governance (Chair) | ||||||||||||||||||||||
• Executive | • Executive | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||
| William A. Osborn | Retired Chairman and CEO, | | 70 | 2008 | • Compensation | | Daniel J. Starks | Retired Chairman, President and CEO, | | 65 | 2017 | • Public Policy | | ||||||||||||
| | Northern Trust Company | | | | • Nominations & | | | St. Jude Medical, Inc. | | | | | | ||||||||||||
| | | | | Governance (Chair) | | | | | | | | | | | | | | | |||||||
| | | | | • Executive | | ||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||
Samuel C. Scott III | Retired Chairman, President and CEO, | 73 | 2007 | • Audit | ||||||||||||||||||||||
Corn Products International, Inc. | • Compensation | |||||||||||||||||||||||||
| | | | | | | | | | | | |||||||||||||||
| Daniel J. Starks | Retired Chairman, President and CEO, | | 63 | 2017 | • Public Policy | | |||||||||||||||||||
| | St. Jude Medical, Inc. | | | | | | |||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||
John G. Stratton | Executive Vice President and | 57 | 2017 | • Nominations & | John G. Stratton | Retired Executive Vice President and | 59 | 2017 | • Nominations and | |||||||||||||||||
President of Global Operations, | Governance | President of Global Operations, | Governance | |||||||||||||||||||||||
Verizon Communications, Inc. | • Public Policy | Verizon Communications Inc. | • Public Policy | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||
| Glenn F. Tilton | Retired Chairman, President and CEO, | | 69 | 2007 | • Audit | | Glenn F. Tilton | Retired Chairman, President and CEO, | | 71 | 2007 | • Audit | | ||||||||||||
| UAL Corporation | | | | • Public Policy | | | UAL Corporation | | | | • Public Policy | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||
Miles D. White | Chairman and CEO, | 63 | 1998 | • Executive (Chair) | Miles D. White | Chairman and CEO, | 65 | 1998 | • Executive (Chair) | |||||||||||||||||
Abbott Laboratories | Abbott Laboratories | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
6 Abbott Laboratories 5
CORPORATE GOVERNANCE |
Abbott is committed to goodstrong corporate governance andthat is aligned with shareholder interests. Our Board spends significant time with the Company's senior management to understand the dynamics, issues, and opportunities for Abbott. During these interactions, directors provide insights and ask probing questions which guide management decision-making. This collaborative approach to risk oversight and emphasis on long term sustainability begins with our leaders and is engrained in the culture of our Company. The Board of Directorsalso regularly monitors bestleading practices in governance and adopts measures that it determines are in the best interest of Abbott and its shareholders.
GOVERNANCE HIGHLIGHTSCEO SUCCESSION PLANNING:
In November 2019, Abbott announced that Miles D. White will be stepping down as Chief Executive Officer on March 31, 2020, after a remarkable 21-year tenure. The Board of Directors appointed Robert B. Ford, Abbott's President and Chief Operating Officer and a 24-year Abbott veteran, to succeed Miles White as Chief Executive Officer. Mr. White will remain Executive Chairman of the Board.
With this transition, Mr. Ford will become the 13th CEO of Abbott in its 131-year history, all having been appointed from within, a testament to Abbott's strong management philosophy and succession-planning discipline.
Lead Independent Director with Distinct Responsibilities |
✓ | Elected annually by independent directors | ✓ | Authority to call meetings of independent directors | |||
✓ | Liaises between chairman and independent directors | ✓ | Reviews matters such as meeting topics and schedules | |||
✓ | Consults and engages directly with major shareholders | ✓ | Presides over executive sessions of independent directors at each regularly scheduled Board meeting |
Robust Board Evaluation and Refreshment Process |
Other Board Governance Highlights |
Our goal is to maintain a diverse board representing a wide range of skills, experience, and perspectives.
Highly qualified Board, with broad diversity across backgrounds, skills and experiences |
Active shareholder engagement throughout the year is essential to maintaining good corporate governance. We routinely seek investor input on a variety of topics, including corporate governance, executive compensation, financial performancesustainability and other strategic matters. During 2017,2019, we conducted outreach with a cross-section of shareholders representing more than 60%65% of our outstanding shares. Investor sentiment and specific feedback was summarized and shared with executive management and the Board of Directors for their respective decision making process.as appropriate.
Abbott Laboratories 7
SUSTAINABILITY |
At Abbott, we believe that being a responsible and sustainable business is an essential foundation for helping people live fuller, healthier lives. Abbott works hardOur Sustainability efforts are focused on the most relevant industry and company-specific risks and opportunities. The key areas of focus listed below are the basis of our Sustainability strategy. These areas have been identified through an in-depth materiality analysis, directed by executive management, and in partnership with several, diverse stakeholders. We aim to maximize the impact of the businessdeliver sustainable, responsible growth that improves lives and creates value in creating stronger communities around the world—focusing on operating responsibly and earning trust by doing the right things, for the long term.
Product Excellence—Committed to offering products and services consistent with the highest standards of quality and safety.
Improving Access—Dedicated to creating technologies and products that meet local needs around the world, as well as informing and empowering people to make well-informed choices about healthcare.
Safeguarding the Environment—We've set goals to significantly reduce our environmental impacts in the areas of carbon dioxide emissions, total water intake and total generated waste.
RECOGNITION BY THIRD-PARTY ORGANIZATIONS
world.
Innovation, Access & Affordability | Talent | Product Quality | ||
Robust internal innovation process that targets the world's most pressing healthcare challenges and incorporates access and affordability considerations into the design process | Award winning development programs, integrated talent management and succession planning processes | Focused on ensuring the highest quality standards and systems |
Active management of our environmental impact throughout our value chain | Committed to maintaining a high-quality, sustainable and resilient supply chain | Utilizing data to create healthcare solutions while ensuring responsible data protection |
To learn more about Abbott's sustainability efforts, please visitwww.abbott.com/citizenship.responsibility/sustainability.
|
• Fortune's Most Admired Companies list in the Medical Products and Equipment sector for the past 7 years. • Dow Jones Sustainability Index Industry Group Leader for 7 consecutive years. • Recognized by Working Mother, Great Place to Work, DiversityInc, Science and many other publications for workplace leadership and diversity. • Member of the elite S&P 500 Dividend Aristocrats Index, which recognizes companies who have raised their dividend payout annually for at least 25 consecutive years. In December 2019, Abbott announced the 48th consecutive year of increasing the quarterly dividend. |
8
VOTING MATTERS AND BOARD RECOMMENDS |
Election of 14 Directors Named in this Proxy Statement: The Board recommends a vote • Highly qualified Board, with diversity in backgrounds, skills and experiences. • Relevant expertise to provide oversight and guidance for Abbott's diversified operating model. See pages 13 to 19 for more information. | ||||||||||||||||
| ||||||||||||||||
Ratification of Ernst & Young • Independent firm with significant industry and financial reporting expertise. • See pages 68 to 69 for more information. | ||||||||||||||||
| ||||||||||||||||
Say on Compensation: The Board recommends a voteFOR • Market-based structure producing differentiated awards based on both company and individual performance, managed with independent oversight by the Compensation Committee. • Aligned to drive Abbott's strategic priorities, reflects consistent above-market TSR including #1 Relative TSR for 3-year timeframe. See page 70 for more information. | ||||||||||||||||
| ||||||||||||||||
AGAINST • Proposal 4: Lobbying Disclosure • Proposal 5: Non-GAAP Financial Performance Metrics Disclosure • Proposal 6: Shareholder Voting on By-law Amendments • Proposal | 7: Simple Majority Vote •
| |||||||||||||||
8 Abbott Laboratories 9
INFORMATION ABOUT THE ANNUAL MEETING
Shareholders of record at the close of business on February 28, 201826, 2020 will be entitled to notice of and to vote at the Annual Meeting. As of January 31, 2018,2020, Abbott had 1,746,333,8921,763,433,243 outstanding common shares, which are Abbott's only outstanding voting securities. All shareholders have cumulative voting rights in the election of directors and one vote per share on all other matters.
In accordance with the Securities and Exchange Commission's "Notice and Access" rules, Abbott mailed a Notice of Internet Availability of Proxy Materials (the "Notice") to certain shareholders in mid-March of 2018.2020. The Notice describes the matters to be considered at the Annual Meeting and how the shareholders can access the proxy materials online. It also provides instructions on how those shareholders can vote their shares. If you received the Notice, you will not receive a print version of the proxy materials, unless you request one. If you would like to receive a print version of the proxy materials, free of charge, please follow the instructions on the Notice.
Cumulative voting allows a shareholder to multiply the number of shares owned by the number of directors to be elected and to cast the total for one nominee or distribute the votes among the nominees, as the shareholder desires. Shareholders may not cumulate their votes against a nominee. If shares are voted cumulatively and there are more nominees than there are director vacancies, nominees who receive the greatest number of votes will be elected. If you wish to cumulate your votes, you must sign and mail in your proxy card or attend the Annual Meeting.
All of Abbott's shareholders may vote by mail or at the Annual Meeting. Abbott's By-Laws provide that a shareholder may authorize no more than two persons as proxies to attend and vote at the meeting. Most of Abbott's shareholders may also vote their shares by telephone or the Internet. If you vote by telephone or the Internet, you do not need to return your proxy card. The instructions for voting can be found with your proxy card or on the Notice.
You may revoke your proxy by voting in person at the Annual Meeting or, at any time prior to the meeting:
DISCRETIONARY VOTING AUTHORITY
Unless authority is withheld in accordance with the instructions on the proxy, the persons named in the proxy will vote the shares covered by proxies they receive to elect the 1214 nominees named in Item 1 on the proxy card. Should a nominee become unavailable to serve, the shares will be voted for a substitute designated by the Board of Directors, or for fewer than 1214 nominees if, in the judgment of the proxy holders, such action is necessary or desirable. The persons named in the proxy may also decide to vote shares cumulatively in their sole discretion so that one or more of the nominees may receive fewer votes than the other nominees (or no votes at all), although they have no present intention of doing so. The proxy holders may not cast your vote for any nominee from whom you have withheld authority to vote.
Where a shareholder has specified a choice for or against the ratification of the appointment of Ernst & Young LLP as auditors, the advisory vote on the approval of executive compensation, or the approval of a shareholder proposal, or where the shareholder has abstained on these matters, the shares represented by the proxy will be
10
voted (or not voted) as specified. Where no choice has been specified, the proxy will be voted FOR the ratification of Ernst & Young LLP as auditors, FOR the approval of executive compensation, and AGAINST the shareholder proposal.
Abbott Laboratories 9
Table of Contentsproposals.
TheAside from matters set forth in this proxy statement, the Board of Directors is not aware of any other issue which may properly be brought before the meeting. If other matters are properly brought before the meeting, the accompanying proxy will be voted in accordance with the judgment of the proxy holders.
QUORUM AND VOTE REQUIRED TO APPROVE EACH ITEM ON THE PROXY
A majority of the outstanding shares entitled to vote on a matter, represented in person or by proxy, constitutes a quorum for consideration of that matter at the meeting. The affirmative vote of a majority of the shares represented at the meeting and entitled to vote on a matter shall be the act of the shareholders with respect to that matter.
EFFECT OF WITHHOLD VOTES, BROKER NON-VOTES, AND ABSTENTIONS
Shares represented by proxies which are present and entitled to vote on a matter but which have elected to withhold authority to vote for one or more directors or to abstain from voting on another matter will have the effect of votes against those directors or that matter. A proxy submitted by an institution, such as a broker or bank that holds shares for the account of a beneficial owner, may indicate that all or a portion of the shares represented by that proxy are not being voted with respect to a particular matter. This could occur, for example, when the broker or bank is not permitted to vote those shares in the absence of instructions from the beneficial owner of the shares. These "non-voted shares" will be considered shares not present and, therefore, not entitled to vote on those matters, although these shares may be considered present and entitled to vote for other purposes. Brokers and banks have discretionary authority to vote shares in the absence of instructions on matters the New York Stock Exchange considers "routine", such as the ratification of the appointment of the auditors. They do not have discretionary authority to vote shares in absence of instructions on "non-routine" matters. The election of directors, the advisory vote on the approval of executive compensation, and shareholder proposals are "non-routine" matters. Non-voted shares will not affect the determination of the outcome of the vote on any matter to be decided at the meeting.
The inspectors of election and the tabulators of all proxies, ballots, and voting tabulations that identify shareholders are independent and are not Abbott employees.
Abbott will bear the cost of making solicitations from its shareholders and will reimburse banks and brokerage firms for out-of-pocket expenses incurred in connection with this solicitation. Proxies may be solicited by mail, telephone, Internet, or in person by directors, officers, or employees of Abbott and its subsidiaries.
Abbott has retained GeorgesonMorrow Sodali LLC to aid in the solicitation of proxies at an estimated cost of $19,500 plus reimbursement for reasonable out-of-pocket expenses.
ABBOTT LABORATORIES STOCK RETIREMENT PLAN
Participants in the Abbott Laboratories Stock Retirement Plan will receive voting instructions for their shares held in the Abbott Laboratories Stock Retirement Trust. The Stock Retirement Trust is administered by both a trustee and an Investment Committee. The trustee of the Trust is The Northern Trust Company. The members of the Investment Committee are Stephen R. Fussell,Mary K. Moreland, Karen M. Peterson, and Brian P. Wentworth, employees of Abbott. The voting power with respect to the shares is held by and shared between the Investment Committee and the participants. The Investment Committee must solicit voting instructions from the participants and follow the voting instructions it receives. The Investment Committee may use its own discretion with respect to those shares for which no voting instructions are received.
10 Abbott Laboratories 11
It is Abbott's policy that all proxies, ballots, and voting tabulations that reveal how a particular shareholder has voted be kept confidential and not be disclosed, except:
HOUSEHOLDING OF PROXY MATERIALS
Shareholders sharing an address may receive only one copy of the proxy materials or the Notice of Internet Availability of Proxy Materials, unless their broker, bank, or other intermediary has received contrary instructions from any shareholder at that address. This is known as "householding." Shareholders wishing to discontinue householding and receive separate copies of the proxy materials or the Notice of Internet Availability of Proxy Materials should notify their broker, bank, or other intermediary.
Abbott Laboratories 1112
NOMINEES FOR ELECTION AS DIRECTORS
| ROBERT J. ALPERN, M.D. Director since 2008 Age Ensign Professor of Medicine and Professor of Internal Medicine, and Former Dean of Yale School of Medicine, New Haven, Connecticut | |
Dr. Alpern has served as the Ensign Professor of Medicine and Professor of Internal Medicine and Dean ofat Yale School of Medicine since June 2004. From June 2004 to January 2020, Dr. Alpern served as Dean of Yale School of Medicine. From July 1998 to JuneMay 2004, Dr. Alpern was the Dean of The University of Texas Southwestern Medical Center. Dr. Alpern also serves as a Director of AbbVie Inc. and Tricida, Inc. and served as a Director on the Board of Yale—Yale New Haven Hospital.Hospital from October 2005 through January 2020.
As the Ensign Professora result of Medicine, Professor of Internal Medicine, and Dean ofhis long-tenured leadership positions at the Yale School of Medicine Dean ofand The University of Texas Southwestern Medical Center, and as a former Director on the Board of Yale—Yale New Haven Hospital, Dr. Alpern contributes valuable insights to the Board through his medical and scientific expertise and his knowledge of the health care environment and the scientific nature of Abbott's key research and development initiatives.
| ROXANNE S. AUSTIN Director since 2000 Age President and Chief Executive Officer, Austin Investment Advisors, Newport Coast, California (Private Investment and Consulting Firm) |
Ms. Austin is President and Chief Executive Officer of Austin Investment Advisors, a private investment and consulting firm, and chairs the U.S. Mid-Market Investment Advisory Committee of EQT Partners. Previously, Ms. Austin also served as the President and Chief Executive Officer of Move Networks, Inc., a provider of Internet television services. Ms. Austin served as President and Chief Operating Officer of DIRECTV, Inc. Ms. Austin also served as Executive Vice President and Chief Financial Officer of Hughes Electronics Corporation and as a partner of Deloitte & Touche LLP. Ms. Austin served on the Board of Directors of Telefonaktiebolaget LM Ericsson from 2008 to 2016. Ms. Austin currently serves on the Board of Directors of AbbVie Inc., CrowdStrike Holdings, Inc., Target Corporation, and Teledyne Technologies, Inc. Ms. Austin will not stand for re-election at Target Corporation's June 2020 annual meeting of shareholders.
Through her extensive management and operating roles, including her financial roles, Ms. Austin contributes significant oversight and leadership experience, including financial expertise and knowledge of financial statements, corporate finance and accounting matters.
12 Abbott Laboratories 13
| SALLY E. BLOUNT, PH.D. Director since 2011 Age Graduate School of Management at Northwestern University, Evanston, Illinois | |
Ms. Blount has served asis the Michael L. Nemmers Professor of Strategy and former Dean of the J.L. Kellogg Graduate School of Management and the Michael L. Nemmers Professor of Management and Organizations at Northwestern University since July 2010.from 2010 to 2018. From 2004 to 2010, she served as the Vice Dean and Dean of the undergraduate collegeUndergraduate College of New York University's Leonard N. Stern School of Business. Ms. Blount joined the faculty of New York University's Leonard N. Stern School of Business in 2001 and was the Abraham L. Gitlow Professor of Management and Organizations. Prior to joining NYU in 2001, Ms. Blount held academic posts at the University of Chicago's Graduate School of Business from 1992 to 2001. Ms. Blount currently serves on the Board of Directors of Ulta Beauty, Inc. and the Joyce Foundation.
AsHaving served as Dean of the J.L. Kellogg Graduate School of Management at Northwestern University and as the Vice Dean and Dean of the undergraduate collegeUndergraduate College of New York University's Leonard N. Stern School of Business, Ms. Blount provides Abbott's Board with expertise on business organization, governance and business management matters.
| ROBERT B. FORD Director since 2019 Age 46 President and Chief Operating Officer, Abbott Laboratories | |
Mr. Ford has served as Abbott's President and Chief Operating Officer since 2018 and will succeed Mr. White as Abbott's Chief Executive Officer on March 31, 2020. Mr. Ford served as the Executive Vice President, Medical Devices from 2015 to 2018, Senior Vice President, Diabetes Care from 2014 to 2015, and Vice President, Diabetes Care, Commercial Operations from 2008 to 2014. Prior to 2008, he served in various leadership roles across Abbott's Diagnostics, Nutrition, and Diabetes Care businesses in the U.S. and Latin America. Mr. Ford joined Abbott in 1996.
Having held leadership positions across several of Abbott's businesses and ultimately assuming responsibility for all of Abbott's operating businesses as Chief Operating Officer, Mr. Ford contributes an extensive knowledge of the Company's global operations, a wide breadth of experience in strategy and execution, and valuable insights into global healthcare markets.
14
| MICHELLE A. KUMBIER Director since 2018 Age 52 Senior Vice President and Chief Operating Officer of Harley-Davidson Motor Company, Milwaukee, Wisconsin (Motorcycle and Related Products Manufacturer) |
Ms. Kumbier has served as Senior Vice President and Chief Operating Officer of Harley-Davidson Motor Company since October 2017. Previously, she served as its Senior Vice President, Motor Company Product and Operations from May 2015 to October 2017, as its Senior Vice President of Motorcycle Operations from September 2012 to April 2015, and as its Senior Vice President, Product Development from November 2010 to August 2012.
As the Senior Vice President and Chief Operating Officer of Harley-Davidson Motor Company, Ms. Kumbier contributes extensive experience in the management of a multinational public company, including significant manufacturing, product development, business development, and strategic planning experience.
| EDWARD M. LIDDY Director since 2010 Age Retired Chairman & CEO, The Allstate Corporation, Northbrook, Illinois (Insurance Company) | |
Mr. Liddy served as a partner in the private equity investment firm Clayton, Dubilier & Rice, LLC from January 2010 to December 2015. At the request of the Secretary of the U.S. Department of Treasury, Mr. Liddy served as Interim Chairman and Chief Executive Officer of American International Group, Inc., a global insurance and financial services holding company, from September 2008 until August 2009. From January 1999 to April 2008, Mr. Liddy served as Chairman of the Board of the Allstate Corporation. He served as Chief Executive Officer of Allstate from January 1999 to December 2006, President from January 1995 to May 2005, and Chief Operating Officer from August 1994 to January 1999. Mr. Liddy currently serves on the Board of Directors of AbbVie Inc., 3M Company, and The Boeing Company. Mr. Liddy has reached the mandatory retirement age for directors at both Boeing and 3M and will not stand for re-election at either company's 2020 Annual Meeting.
Through his executive leadership at Allstate and American International Group, and his board service at several Fortune 100 companies across a broad range of industries, Mr. Liddy provides valuable insights on corporate strategy, risk management, corporate governance and many other issues facing large, global enterprises. Additionally, as a former chief financial officer, audit committee chair at Goldman Sachs and 3M Company, and partner at Clayton, Dubilier & Rice, LLC, Mr. Liddy provides significant knowledge and understanding of corporate finance, capital markets, financial reports and accounting matters.
Abbott Laboratories 13 15
| DARREN W. MCDEW Director since 2019 Age 59 Retired General, United States Air Force, and Former Commander of U.S. Transportation Command, Scott Air Force Base, Illinois |
TableGeneral McDew is a retired four-star general who served for 36 years in the United States military before retiring in October 2018. From August 2015 to August 2018, General McDew served as Commander, U.S. Transportation Command, the single manager for global air, land and sea transportation for the U.S. Department of ContentsDefense. Previously, he also served as Vice Director for Strategic Plans and Policy for the Joint Chiefs of Staff, Military Aide to the President, Director of Air Force Public Affairs, and Chief of Air Force Senate Liaison Division. General McDew currently serves on the Board of Directors of the Boys and Girls Club of America, United Services Automobile Association, and Rolls-Royce, North America, Inc.
Through his extensive leadership in the U.S. Air Force, General McDew contributes significant experience managing large, complex global operations, including strategic planning, security and risk management, cybersecurity, and supply chain and infrastructure management.
| NANCY MCKINSTRY Director since 2011 Age Chief Executive Officer and Chairman of the Executive Board of Wolters Kluwer N.V., Alphen aan den Rijn, the Netherlands (Global Information, Software, and Services Provider) | |
Ms. McKinstry has been the Chief Executive Officer and Chairman of the Executive Board of Wolters Kluwer N.V. since September 2003 and a member of its Executive Board since June 2001. Ms. McKinstry also serves on the Board of Accenture plc, the Board of Overseers of Columbia Business School, and the Board of Directors of Russell Reynolds Associates. Ms. McKinstry is also a member of the European Round Table of Industrialists. Ms. McKinstry served on the Board of Directors of Telefonaktiebolaget LM Ericsson (LM Ericsson Telephone Company) from 2004 to 2012.
As the Chief Executive Officer and Chairman of the Executive Board of Wolters Kluwer N.V., Ms. McKinstry contributes global perspectives and management experience, including an understanding of key issues facing a multinational business such as Abbott's.
16
| PHEBE N. NOVAKOVIC Director since 2010 Age Chairman and Chief Executive Officer, General Dynamics Corporation, Falls Church, Virginia (Worldwide Defense, Aerospace, and Other Technology Products Manufacturer) | |
Ms. Novakovic has been Chairman and Chief Executive Officer of General Dynamics Corporation since January 1, 2013. Previously, she served as President and Chief Operating Officer from May 2012 to December 2012 and as Executive Vice President, Marine Systems of General Dynamics from May 2010 to May 2012. From May 2005 to April 2010, Ms. Novakovic served as its Senior Vice President—Planning and Development. She was elected Vice President of General Dynamics in October 2002 after joining the company in May 2001. Previously, Ms. Novakovic was Special Assistant to the Secretary and Deputy Secretary of Defense, and had been a Deputy Associate Director of the Office of Management and Budget.
As a member of the Board of DirectorsChairman and Chief Executive Officer of General Dynamics Corporation, Ms. Novakovic has strong management experience with a major public company, including significant marketing, operational and manufacturing experience, and contributes valuable insights into finance and capital markets. Her tenure with the Office of Management and Budget and as Special Assistant to the Secretary and Deputy Secretary of Defense enables her to provide government perspective and experience in a highly regulated industry.
14 Abbott Laboratories
| WILLIAM A. OSBORN Lead Independent Director Director since 2008 Age Retired Chairman and Chief Executive Officer of Northern Trust Corporation (Multibank Holding Illinois (Banking Services Company) |
Mr. Osborn was Chairman of Northern Trust Corporation from 1995 through 2009 and served as its Chief Executive Officer from 1995 through 2007. Mr. Osborn currently serves as a Director of Caterpillar Inc. and General Dynamics Corporation. Mr. Osborn served on the Board of Directors of Nicor, Inc. from 1999 to 2006 and on the Board of Directors of Tribune Company from 2001 to 2012.
As the Chairman and Chief Executive Officer of Northern Trust Corporation and The Northern Trust Company, Mr. Osborn acquired broad experience in successfully overseeing complex global businesses operating in highly regulated industries.
17
|
Mr. Scott retired as Chairman, President and Chief Executive Officer of Corn Products International in 2009. He served as Chairman, President, and Chief Executive Officer from February 2001 until he retired in May of 2009. He was President and Chief Operating Officer from January 1998 until February 2001. He was President of the Corn Refining Division of CPC International from 1995 through 1997, when CPC International spun off Corn Products International as a separate corporation. Mr. Scott currently serves on the Board of Directors of Bank of New York Mellon Corporation and Motorola Solutions, Inc.
As the Chairman, President and Chief Executive Officer of Corn Products International, Mr. Scott acquired valuable business, leadership and management experience, including critical insights into matters relevant to a major public company and experience in finance and capital markets matters.
Abbott Laboratories 15
DANIEL J. STARKS Director since 2017 Age Retired Chairman, President and Chief Executive Officer of St. Jude Medical, Inc., St. Paul, Minnesota (Medical Device Manufacturer) |
Mr. Starks served as the Chairman, President and Chief Executive Officer of St. Jude Medical, Inc., from 2004 until his retirement in January 2016, after which he served as its Executive Chairman of the Board until January 2017, when Abbott completed the acquisition of St. Jude Medical, Inc.Medical. Mr. Starks also served as President and Chief Operating Officer of St. Jude Medical Inc. from 2001 to 2004 and as its President and CEO, Cardiac Rhythm Management Business from 1997 to 2001.
Having served as St. Jude Medical's Executive Chairman and its Chairman, President and Chief Executive Officer, and having joined St. Jude Medical in 1996, Mr. Starks contributes not only comprehensive and critical knowledge of St. Jude Medical's operations, but also extensive business and management experience operating a global public company in a highly regulated industry.
| JOHN G. STRATTON Director since 2017 Age Retired Executive Vice President and President of Global Operations, Verizon Communications Inc., New York, New York | |
Mr. Stratton has served as Executive Vice President and President of Global Operations sinceof Verizon Communications Inc. from February 2015.2015 to December 2018. Previously, he served as Executive Vice President and President of Global Enterprise and Consumer Wireline from April 2014 to February 2015, as President of Verizon Enterprise Solutions from January 2012 to April 2014, and as Chief Operating Officer and Executive Vice President of Verizon Wireless from October 2010 to January 2012. Since October 2012, Mr. Stratton hascurrently serves on the Board of Directors of General Dynamics Corporation. Mr. Stratton also served as a member of The President's National Security Telecommunications Advisory Committee.Committee from October 2012 to July 2018 and as Director of the Cellular Telecommunications Industry Association from February 2015 to July 2018.
Through his executive leadership at Verizon Communications, Mr. Stratton contributes extensive business and management experience operating a global public company such as Abbott, including valuable insights on corporate strategy and risk management. His service on the National Security Telecommunications Advisory Committee enables him to provide government perspective and experience in a highly regulated industry.
16 Abbott Laboratories18
| GLENN F. TILTON Director since 2007 Age Retired Chairman, President and Chief Executive Officer of UAL Corporation, Chicago, Illinois (Airline Holding Company) | |
Mr. Tilton served as Chairman, President and Chief Executive Officer of UAL Corporation, and Chairman and Chief Executive Officer of United Air Lines, Inc., an air transportation company and wholly owned subsidiary of UAL Corporation, from September 2002 to October 2010. Mr. Tilton also served on the Board of United Continental Holdings, Inc. from 2001 to 2013 and served as its Non-Executive Chairman of the Board from October 2010 to December 2012. Mr. Tilton is also a Director of AbbVie Inc. and Phillips 66. Mr. Tilton also served on the Board of Directors of Lincoln National Corporation from 2002 to 2007, of TXU Corporation from 2005 to 2007, of Corning Incorporated from 2010 to 2012, and as Chairman of the Midwest for JPMorgan Chase & Co. and a member of its companywide Executive Committee from June 2011 to June 2014.
Having previously served as Chief Executive Officer of UAL Corporation and United Air Lines, Non Executive Chairman of the Board of United Continental Holdings, Inc., Chairman of the Midwest for JPMorgan Chase & Co., Chairman, President, and Vice Chairman of Chevron Texaco, and as Interim Chairman of Dynegy, Inc., Mr. Tilton acquired strong management experience overseeing complex multinational businesses operating in highly regulated industries, as well as expertise in finance and capital markets matters.
| MILES D. WHITE Director since 1998 Age Chairman of the Board and Chief Executive Officer, Abbott Laboratories | |
Mr. White has served as Abbott's Chairman of the Board and Chief Executive Officer since 1999. He served as an Executive Vice President of Abbott from 1998 to 1999. He joined Abbott in 1984. He currently serves as a Director of Caterpillar Inc. and McDonald's Corporation.
Serving as Abbott's Chairman of the Board and Chief Executive Officer since 1999 and having joined Abbott in 1984, Mr. White contributes not only his valuable business, management and leadership experience, but also his extensive knowledge of the Company and its global operations, as well as key insights into strategic, management and operation matters, ensuring the appropriate level of oversight and responsibility is applied to all Board decisions.
Abbott Laboratories 17 19
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held 7 meetings in 2017.2019. The average attendance of all directors at Board and committee meetings in 20172019 was ninety-nine percent95% and each director attended at least seventy-five percent75% of the total number of Board meetings and meetings of the committees on which he or she served. Abbott encourages its Board members to attend the annual shareholders meeting. Last year, all of Abbott's directors attended the annual shareholders meeting.
The Board has determined that each of the following directors is independent in accordance with the New York Stock Exchange listing standards: R. J. Alpern, R. S. Austin, S. E. Blount, W. J. Farrell,M. A. Kumbier, E. M. Liddy, D. W. McDew, N. McKinstry, P. N. Novakovic, W. A. Osborn, S. C. Scott III, D. J. Starks, J. G. Stratton, and G. F. Tilton. To determine independence, the Board applied the categorical standards attached as Exhibit A to this proxy statement. The Board also considered whether a director has any other material relationships with Abbott or its subsidiaries and concluded that none of these directors had a relationship that impaired the director's independence. This included consideration of the fact that some of the directors or their family members are officers or serve on boards of companies or entities to which Abbott sold products or made contributions or from which Abbott purchased products and services during the year. In making its determination, the Board relied on both information provided by the directors and information developed internally by Abbott.
The Board has risk oversight responsibility for Abbott and administers this responsibility both directly and with assistance from its committees.
The BoardMiles D. White has determined that the current leadership structure, in which the offices ofserved as Abbott's Chairman and Chief Executive Officer are held by one individualsince 1999. In November 2019, Abbott announced that Mr. White will step down as Chief Executive Officer on March 31, 2020 and an independent director actsremain Executive Chairman. The Board also unanimously appointed Robert B. Ford, the current President and Chief Operating Officer and a 24-year Abbott veteran, to succeed Mr. White as lead director, ensuresChief Executive Officer and named him to the appropriate levelBoard, effective November 12, 2019.
The Board is actively involved in succession planning and is focused on ensuring leadership continuity. The Board believes that the continuation of oversight, independence, and responsibility is applied to all Board decisions, including risk oversight, andMr. White's service as Executive Chairman is in the best interests of Abbott and its shareholders.
Chairman/Chief Executive Officer
The Board we benefit from his strategic and operational insights, enablingalso has a focused vision encompassing the full range, from long-term strategic direction to day-to-day execution
The Board reviews its leadership structure on at least an annual basis. The Board has determined that this leadership structure ensures the appropriate level of oversight, independence and responsibility is applied to all Board decisions, including risk oversight, and is in the best interests of Abbott and its shareholders.
18 Abbott Laboratories20
The Nominations and Governance Committee assists the Board of Directors in identifying individuals qualified to become Board members and recommends to the Board the nominees for election as directors at the next annual meeting of shareholders. The process used by the Nominations and Governance Committee to identify a nominee to serve as a member of the Board of Directors depends on the qualities being sought. From time to time, Abbott engages an executive search firm to assist the Committee in identifying individuals qualified to be Board members.
Abbott's outline of directorship qualifications, which is part of Abbott's corporate governance guidelines, is available in the corporate governance section of Abbott's investor relations website (www.abbottinvestor.com). These qualifications describe specific characteristics that the Nominations and Governance Committee and the Board take into consideration when selecting nominees for the Board, such as: strong management experience and senior levelsenior-level experience in medicine, hospital administration, medical and scientific research and development, finance, international business, technology, government, and academic administration. An individual nominee is not required to satisfy all the characteristics listed in the outline of directorship qualifications and there is no requirement that all such characteristics be represented on the Board.
In addition, Board members should have backgrounds that, when combined, provide a portfolio of experience and knowledge that will serve Abbott's governance and strategic needs. Board candidates will be considered on the basis of a range of criteria, including broad-based business knowledge and relationships, prominence, and excellent reputations in their primary fields of endeavor, as well as a global business perspective and commitment to good corporate citizenship. Directors should have demonstrated experience and ability that is relevant to the Board of Directors' oversight role with respect to Abbott's business and affairs. Each director's biography includes the particular experience and qualifications that led the Board to conclude that the director should serve on the Board. The directors' biographies are on pages 1213 through 17.19.
A description of the procedure for the recommendation and nomination of directors, including by proxy access, is on page 71.82.
21
In the process of identifying nominees to serve as a membermembers of the Board of Directors, the Nominations and Governance Committee considers the Board's diversity of relevant experience, areas of expertise, ethnicity, gender, and geography and assesses the effectiveness of the process in achieving that diversity. Five of the 12 directors nominated for election are women or minorities.
The process used to identify and select nominees has resulted in an experienced,a balanced, diverse, and well-rounded Board of Directors that possesses the skills, experiences, and perspectives necessary for its oversight role. All of Abbott's directors exhibit:
| Global business perspective | ✓
| Successful track record | ✓ | Innovative thinking | |||||
✓ | Knowledge of corporate governance requirements and practices |
| High integrity |
| Commitment to good corporate citizenship |
Abbott Laboratories 1922
The following table details some of the attributes, skills, and experience represented on Abbott's Board of Directors.
|
| |||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
|
Other Board Composition Metrics
The directors nominated for election bring diverse and relevant skills, experience, and perspectives.
20 Abbott Laboratories
BOARD EVALUATION PROCESS |
Each year, Abbott's directors evaluate the effectiveness of the Board and its Committees in performing its governance and risk oversight responsibilities. Directors assess the performance of their peers, as well as the full Board of Directors and each of the Committees on which they serve, as follows:
23
COMMITTEES OF THE BOARD OF DIRECTORS |
The Board of Directors has five committees established in Abbott's By-Laws: Audit Committee, Compensation Committee, Nominations and Governance Committee, Public Policy Committee, and Executive Committee. Each of the
All members of the Audit Committee, Compensation Committee, Nominations and Governance Committee, and Public Policy Committee isare independent. These Committees are governed by written charters setting forth their respective responsibilities, and each Committee reviews its charter at least annually, with any changes being recommended to the full Board for approval. Copies of the Committee charters are all available in the governance section of Abbott's investor relations website (www.abbottinvestor.com).
| Current Members | Audit* | Compensation | Nominations and Governance | Public Policy | Executive | | | Current Members | Audit* | Compensation | Nominations and Governance | Public Policy | Executive | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| R. J. Alpern | | | | | | | | R. J. Alpern | | | | | | | |||||||||||||
| R. S. Austin | | | | | | | | | | | R. S. Austin | | | | | | | | | | |||||||
| S. E. Blount | | | | | | | | S. E. Blount | | | | | | | |||||||||||||
| | E. M. Liddy | | | | | | | | | | | R. B. Ford | | | | | | | | | | | | ||||
| N. McKinstry | | | | | | | | M. A. Kumbier | | | | | | | |||||||||||||
| | P. N. Novakovic | | | | | | | | | | | E. M. Liddy | | | | | | | | | | ||||||
| W. A. Osborn | | | | | | | | D. W. McDew | | | | | | | |||||||||||||
| | S. C. Scott III | | | | | | | | | | | | N. McKinstry | | | | | | | | | | | ||||
| D. J. Starks | | | | | | | | P. N. Novakovic | | | | | | | |||||||||||||
| | J. G. Stratton | | | | | | | | | | | | W. A. Osborn | | | | | | | | | ||||||
| G. F. Tilton | | | | | | | | S. C. Scott III | | | | | | | |||||||||||||
| | M. D. White | | | | | | | | | | | | | D. J. Starks | | | | | | | | | | | | ||
| Total Meetings Held in 2017 | | 7 | | 3 | | 4 | | 4 | | 1 | | | J. G. Stratton | | | | | | | ||||||||
| | | | | | | | | | | | | | | | G. F. Tilton | | | | | | | | | | | ||
| M. D. White | | | | | | | |||||||||||||||||||||
| | Total Meetings Held in 2019 | | 7 | | 4 | | 4 | | 4 | | 0 | | | ||||||||||||||
| | | | | | | | | | | | | | |
The Audit Committee assists the Board of Directors in fulfilling its oversight responsibility with respect to to:
24
In performing these functions, the Audit Committee is governed by a written charter. meets regularly with the independent auditor, Abbott's management, and Abbott's internal auditors to review the adequacy, effectiveness and quality of Abbott's accounting and financial reporting principles, policies, procedures and controls, as well as Abbott's enterprise risk management, including Abbott's risk assessment and risk management policies.
A copy of the report of the Audit Committee is on page 63.69.
The Compensation Committee assists the Board of Directors in carrying out the Board's responsibilities relating to the compensation of Abbott's executive officers and directors. The Committee is governed by a written charter. The Compensation CommitteeIts primary responsibilities include:
This Committee also reviews, approves,
Abbott Laboratories 21
procedures used for the consideration and determination of executive compensation are described in the section of the proxy captioned, "Compensation Discussion and Analysis."
The Compensation Committee has the sole authority, under its charter, to select, retain, and/or terminate independent compensation advisors. The Committee engaged Meridian Compensation Partners, LLC as its compensation consultant for 2017. Meridian performs no other work for Abbott. The Committee engages
The Committee determines what variables it will instruct the consultant to consider, and they include:including peer groups against which performance and pay should be examined, financial metrics to be used to assess Abbott's relative performance, competitive long-term incentive practices in the marketplace, and compensation levels relative to market practice. The Committee negotiates and approves any fees paid to the consultant for these services.
The Compensation Committee engaged Meridian Compensation Partners, LLC as its compensation consultant for 2019. Meridian performs no other work for Abbott. Based on its evaluation of Meridian's independence in accordance with the New York Stock Exchange listing standards and information provided by Meridian, the Committee determined that the work performed by Meridian does not present any conflicts of interest.
A copy of the Compensation Committee report is on page 41.50.
Nominations and Governance Committee
The Nominations and Governance Committee assists the Board of Directorsin fulfilling its oversight responsibility with respect to governance matters. Its primary responsibilities include:
The process used by this Committee to identify a nominee to serve as a member of the Board of Directors depends on the qualities being sought. From time to time, Abbott engages an executive search firm to assist the Committee in identifying individuals qualified to be Board members. The process used by the Committee to identify nominees is described on page 1921 in the section captioned, "Director Selection."
25
The Public Policy Committee assists the Board of Directors in fulfilling its oversight responsibility with respect to Abbott's public policy, certainto:
The Executive Committee may exercise all the authority of the Board in the management of Abbott, except for matters expressly reserved by law for Board action.
Interested parties may communicate with the Board of Directors by writing a letter to the Chairman of the Board, to the ChairmanChair of the Nominations and Governance Committee, who acts as the lead director at the meetings of the independent directors,director, or to the independent directors c/o Abbott Laboratories, 100 Abbott Park Road, D-364, AP6D, Abbott Park, Illinois 60064-6400,60064, Attention: Corporate Secretary. The General Counsel and Corporate Secretary regularly forwards to the addressee all letters other than mass mailings, advertisements, and other materials not relevant to Abbott's business. In addition, directors regularly receive a log of all correspondence received by the CompanyAbbott that is addressed to a member of the Board and may request any correspondence on that log.
Abbott's corporate governance guidelines, outline of directorship qualifications, director independence standards, code of business conduct, and the charters of Abbott's Audit Committee, Compensation Committee, Nominations and Governance Committee, and Public Policy Committee are all available in the corporate governance section of Abbott's investor relations website (www.abbottinvestor.com)(www.abbottinvestor.com).
22 Abbott Laboratories26
Our CEO isMessrs. White and Ford are not compensated for serving on the Board or Board committees. Abbott's remaining directors, who are all non-employee directors, are compensated for their service under the Abbott Laboratories Non-Employee Directors' Fee Plan and the Abbott Laboratories 2017 Incentive Stock Program.
The following table sets forth a summary of the non-employee directors' 20172019 compensation.
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | | | Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | | |||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||
| R. J. Alpern | | | $ | 126,000 | | | $ | 149,939 | | | $ | 0 | | | $ | 30,527 | | | $ | 25,000 | (5) | | $ | 331,466 | | | R. J. Alpern | | | $ | 126,000 | | | $ | 174,910 | | | $ | 0 | | | $ | 64,323 | | | $ | 25,000 | | | $ | 390,233 | | |||
| R. S. Austin | | | 151,667 | | | 149,939 | | | 0 | | | 0 | | | 0 | | | 301,606 | | | | R. S. Austin | | | 152,000 | | | 174,910 | | | 0 | | | 0 | | | 0 | | | 326,910 | | | |||||||||||||
| S. E. Blount | | | 126,000 | | | 149,939 | | | 0 | | | 5,797 | | | 25,000 | (5) | | 306,736 | | | S. E. Blount | | | 126,000 | | | 174,910 | | | 0 | | | 10,355 | | | 25,000 | | | 336,265 | | |||||||||||||||
| | W. J. Farrell | | | 48,667 | | | 0 | | | 0 | | | 52,303 | | | 0 | | | 100,970 | | | | M. A. Kumbier | | | 132,000 | | | 174,910 | | | 0 | | | 0 | | | 0 | | | 306,910 | | | ||||||||||||
| E. M. Liddy | | | 144,667 | | | 149,939 | | | 0 | | | 0 | | | 0 | | | 294,606 | | | E. M. Liddy | | | 151,000 | | | 174,910 | | | 0 | | | 0 | | | 0 | | | 325,910 | | |||||||||||||||
| | N. McKinstry | | | 132,000 | | | 149,939 | | | 0 | | | 0 | | | 5,000 | (5) | | 286,939 | | | | D. W. McDew | | | 31,500 | | | 0 | | | 0 | | | 0 | | | 0 | | | 31,500 | | | ||||||||||||
| P. N. Novakovic | | | 141,000 | | | 149,939 | | | 0 | | | 0 | | | 0 | | | 290,939 | | | N. McKinstry | | | 132,000 | | | 174,910 | | | 0 | | | 0 | | | 0 | | | 306,910 | | |||||||||||||||
| | W. A. Osborn | | | 156,000 | | | 149,939 | | | 0 | | | 0 | | | 0 | | | 305,939 | | | | P. N. Novakovic | | | 141,000 | | | 174,910 | | | 0 | | | 0 | | | 0 | | | 315,910 | | | ||||||||||||
| S. C. Scott III | | | 132,000 | | | 149,939 | | | 0 | | | 0 | | | 25,000 | (5) | | 306,939 | | | W. A. Osborn | | | 156,000 | | | 174,910 | | | 0 | | | 0 | | | 0 | | | 330,910 | | |||||||||||||||
| | D. J. Starks | | | 105,000 | | | 149,939 | | | 0 | | | 0 | | | 0 | | | 254,939 | | | | S. C. Scott III | | | 132,000 | | | 174,910 | | | 0 | | | 0 | | | 25,000 | | | 331,910 | | | ||||||||||||
| J. G. Stratton | | | 63,000 | | | 0 | | | 0 | | | 0 | | | 0 | | | 63,000 | | | D. J. Starks | | | 126,000 | | | 174,910 | | | 0 | | | 0 | | | 0 | | | 300,910 | | |||||||||||||||
| | G. F. Tilton | | | 132,000 | | | 149,939 | | | 0 | | | 0 | | | 25,000 | (5) | | 306,939 | | | | J. G. Stratton | | | 126,000 | | | 174,910 | | | 0 | | | 0 | | | 0 | | | 300,910 | | | ||||||||||||
| G. F. Tilton | | | 132,000 | | | 174,910 | | | 0 | | | 0 | | | 25,000 | | | 331,910 | | ||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
27
share of common stock for each restricted stock unit outstanding under the Incentive Stock Program. Each director is required to own, within five years of becoming a director, the number of shares of Abbott stock having a fair market value equal to four times the annual director fees earned or paid in cash. All directors with five years tenure meet or exceed the guidelines. The following Abbott restricted stock units were outstanding as of December 31, 2017:2019: R. J. Alpern, 25,220;30,406; R. S. Austin, 32,883;38,069; S. E. Blount, 18,480;
Abbott Laboratories 23
23,666; M. A. Kumbier, 2,241; E. M. Liddy, 20,647;25,833; N. McKinstry, 18,480;23,666; P. N. Novakovic, 20,647;25,833; W. A. Osborn, 27,137;32,323; S. C. Scott III, 28,867;34,053; D. J. Starks, 3,437;8,623; J. G. Stratton, 5,186; and G. F. Tilton, 28,867.34,053.
24 Abbott Laboratories28
SECURITY OWNERSHIP OF EXECUTIVE OFFICERS AND DIRECTORS
The table below reflects the number of Abbott common shares beneficially owned as of January 31, 20182020 by (i) each director, and (ii) the Chief Executive Officer, the Chief Financial Officer, and the three other current and formermost highly paid executive officers listed in the Summary Compensation Table (collectively, the2019 (the "named officers"), and (iii)by all directors named officers, and executive officers of Abbott as a group. It also reflects the number of stock equivalent units held by non-employee directors under the Abbott Laboratories Non-Employee Directors' Fee Plan and restricted stock units held by non-employee directors, named officers, and executive officers.
Name | Shares Beneficially Owned(1)(2) | Stock Options Exercisable Within 60 Days of January 31, 2018(3) | Stock Equivalent Units | Name | Shares Beneficially Owned(1)(2) | Stock Options Exercisable Within 60 Days of January 31, 2020(3) | Stock Equivalent Units | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
H. L. Allen | 100,879 | 676,159 | 0 | R. J. Alpern | 30,406 | 0 | 7,766 | |||||||||||||
| R. J. Alpern | 25,220 | 0 | 6,671 | | R. S. Austin | 44,913 | 47,883 | 0 | | ||||||||||
R. S. Austin | 39,727 | 20,852 | 0 | S. E. Blount | 26,266 | 0 | 0 | |||||||||||||
| S. E. Blount | 23,580 | 0 | 0 | | L. D. Earnhardt | 56,946 | 0 | 0 | |||||||||||
E. S. Fain | 445,218 | 0 | 0 | R. B. Ford | 197,382 | 926,022 | 0 | |||||||||||||
| R. B. Ford | 132,378 | 480,238 | 0 | | M. A. Kumbier | 3,258 | 0 | 0 | | ||||||||||
E. M. Liddy | 22,967 | 19,890 | 20,565 | E. M. Liddy | 28,153 | 46,743 | 21,268 | |||||||||||||
| N. McKinstry | 18,480 | 24,428 | 0 | | D. W. McDew | 0 | 0 | 0 | | ||||||||||
P. N. Novakovic | 21,147 | 77,869 | 0 | N. McKinstry | 23,666 | 47,902 | 0 | |||||||||||||
| W. A. Osborn | 51,137 | 21,448 | 27,570 | | P. N. Novakovic | 26,333 | 102,943 | 0 | | ||||||||||
M. T. Rousseau | 629,294 | 774,049 | 0 | W. A. Osborn | 56,323 | 49,190 | 28,512 | |||||||||||||
| D. G. Salvadori | 73,798 | 159,652 | 0 | | D. G. Salvadori | 95,088 | 461,015 | 0 | |||||||||||
S. C. Scott III | 34,867 | 18,148 | 6,902 | S. C. Scott III | 40,053 | 41,622 | 7,138 | |||||||||||||
| D. J. Starks | 6,943,506 | 0 | 0 | | D. J. Starks | 7,018,683 | 0 | 0 | | ||||||||||
J. G. Stratton | 0 | 0 | 1,145 | J. G. Stratton | 8,641 | 0 | 4,651 | |||||||||||||
| G. F. Tilton | 36,217 | 0 | 31,629 | | G. F. Tilton | 41,403 | 0 | 32,710 | | ||||||||||
M. D. White | 3,138,480 | 4,873,894 | 0 | M. D. White | 3,194,710 | 5,417,294 | 0 | |||||||||||||
| B. B. Yoor | 63,823 | 327,339 | 0 | | B. B. Yoor | 116,620 | 184,281 | 0 | | ||||||||||
All directors, named officers, and executive officers as a group(4)(5) | 12,849,731 | 11,397,036 | 94,482 | All directors and executive officers as a group(4)(5) | 12,502,322 | 12,334,341 | 102,045 | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
None of the directors, named officers, or executive officers has pledged shares.
Abbott Laboratories 25 29
COMPENSATION DISCUSSION AND ANALYSIS |
This Compensation Discussion and Analysis (CD&A) describes Abbott's executive compensation program in 2017. While the Summary Compensation Table on page 44 provides the required disclosures for this proxy statement, we will also discuss the LTI grant made in February 2018, since that grant was based on 2017 performance. The LTI grant disclosed in the Summary Compensation Table was made in February 2017 and was based on 2016 performance.
2019. In particular, this CD&A explains how the Compensation Committee (the Committee) and Board of Directors made compensation decisions for the Company's executives, including the sevenfive named officers: Miles D. White, Chairman of the Board and Chief Executive Officer; Robert B. Ford, President and Chief Operating Officer; Brian B. Yoor, Executive Vice President, Finance and Chief Financial Officer; Hubert L. Allen, Executive Vice President, General Counsel and Secretary; Robert B. Ford,Lisa Earnhardt, Executive Vice President, Medical Devices; and Daniel G. Salvadori, Executive Vice President, Nutritional Products; Michael T. Rousseau, President, Cardiovascular and Neuromodulation; and Eric S. Fain, Senior Vice President, Group President, Cardiovascular and Neuromodulation. Mr. Rousseau and Mr. Fain left during 2017.Products.
The CD&A also describes the pay philosophy the Committee has established for the Company's executive officers, the process the Committee utilizes to examine performance in the context of executive pay decisions, the performance goals and results for each named officer, and recent updates to our compensation program. This year's CD&A reflects the feedback from our shareholders gathered during our 2019 shareholder outreach described on page 31.
In 2017, Abbott's three-year total shareholder return (TSR) of 139.5% is more than twice that of the peer group median and the broader Standard & Poor's 500 (S&P 500) and Dow Jones Industrial Average (DJIA) market indices. These consistent above-market returns are driven by the strength of our leadership positions in some of the largest and fastest growing markets in healthcare and innovative product portfolios across our businesses.
Abbott delivered strong returns for shareholders in 2019 and achieved outstandingor exceeded the financial targets set at the beginning of last year. Abbott's one-year TSR was 22.1%, delivering significant shareholder returns to shareholders, rankingon top of the one-year TSR of 29% in 2018, which ranked #1 in our peer group.
Primary performance metric for long-term incentive program | ||||
30
In addition Abbott:
At a corporate level, all financial goalsMitraClip®, the market-leading device for officers were overachieved. This includes:
As a result of the significant overachievement of these key financial and strategic goals, Abbott's market capitalization nearly doubled during 2017.
For reconciliation to GAAP, see Annex I.
26 Abbott Laboratories
VARIABLE PAY DECISIONS BASED ON 2017 PERFORMANCE
In February 2018, our Compensation Committee made pay decisions for our executive officers based on the design of our programs and our extremely strong performance in 2017. The results of those pay decisions were as follows:
It is important to understand the effect of the "lag" in the Summary Compensation Table, resulting from SEC proxy disclosure rules. Specifically, the amounts shown on page 44 reflect the annual bonus for 2017 performance. However, the LTI awards shown in the table are for 2016 performance and were granted in February 2017. During 2016, despite strong operational results and the initiation of important strategic actions, Abbott's returns to shareholders on a 1-, 3- and 5-year basis were in the lower quartile relative to our peers. Consistent with Abbott's philosophy to align LTI compensation with TSR performance, these relatively lower total shareholder returns resulted in significantly below market long-term incentive grants for 2017.
Due to the significantly different LTI amounts granted in 2017 (using the 25th percentile guidelines) vs. 2018 (using the 75th percentile guidelines), we have disclosed the 2018 grant in this proxy to aid shareholders in their understanding of our approach to compensation, which definitively aligns our LTI grant guidelines with relative TSR performance as illustrated below.
Relative TSR Percentile vs. Peers | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| 1-Year | | 26th | | 89th | | 61st | | 0th | | 100th | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
3-Year | 84th | 53rd | 44th | 17th | 63rd | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| 5-Year | | 11th | | 47th | | 83rd | | 28th | | 50th | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Average | | 40th | | 63rd | | 63rd | | 15th | | 71st | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
LTI Award Guideline Percentile | 37th | 50th | 50th | 25th | 75th | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Abbott Laboratories 27
|
Abbott and its Compensation Committee have designed a compensation program to attract and retain executives whose talent and contributions support and advance the profitable growth of the Company and growth in shareholder value. The program is designed to be:
28 Abbott Laboratories
CHANGES BASED ON SHAREHOLDER FEEDBACK AND MARKET PRACTICES |
Last year, shareholders owning 95% of our shares approved the compensation of our named executive officers. During 2017,2019, we conducted extensive shareholder outreach with a cross-section ofto discuss our compensation program.
In the spring, we engaged shareholders representing more than 60%over 65% of our outstanding shares. shares in an open dialogue to discuss various topics, including the enhanced disclosures in our 2019 proxy that furthered shareholder understanding of how pay decisions are made and how the metrics we use are linked to our business strategy and goals. Their feedback was overwhelmingly positive which was also reflected in the 94% support for the Say-on-Pay Vote.
In those meetings,the fall, we discussedcontinued our pay programs broadly, including aspects thatdialogue with shareholders and shared the process we used to review and update our peer group in 2019 to better reflect Abbott's size and complexity. Shareholders were previously subjectvery supportive of our approach and agreed with the changes approved by the Compensation Committee. Additional information regarding the changes to shareholder resolutions. BasedAbbott's peer group can be found on shareholder discussions and recommendations,page 32 of this proxy statement.
As illustrated in the Committee, during its annual evaluation oftable below, over the Company's compensation programs and evolving market practices,past several years we have made severalnumerous changes to our programs.program and our proxy statement based on feedback from our shareholders as well as a review of market practices.
RECENT EXECUTIVE COMPENSATION CHANGES | ||||||
• Significantly • Revised annual cash incentive plan goals and weighting • Changed performance-based restricted stock awards to vest only over a 3-year term with no more than one-third of the award vesting in any one year •
| • Introduced new long-term incentive measures to reflect sustained performance over a three-year period •
Increased director share ownership guidelines •
• Updated peer group to reflect increased size and complexity of business |
|
These recent changes continue our practice of evolving our program based upon shareholder feedback as well as a review of market practices. Over the past several years, we have made numerous other changes to our program, including:
Abbott Laboratories 29 31
|
The Committee makes compensation decisions in the context of the objectives of our program. The Committee ensures the compensation delivered to our executives is competitive, based on performance, balanced between the short- and long-term, aligned with shareholder interests, and does not encourage excessive risk-taking.
To determine the competitiveness of our compensation and benefit programs, the Committee, in consultation with its independent consultant, annually compares the level of compensation, market pay practices, and our relative performance to those of peer companies.
Our shareholders compare us to other global multinational companies, only some of which are As we previewed in healthcare. These companies share similar characteristics aligned withlast year's proxy, our investment identity of diversified growth, returns to shareholders, and capital structure.
TheCompensation Committee reviewed our peer group used for performancein 2019 to determine whether any changes were necessary to better reflect the increased size (sales and compensation benchmarking prior to 2017 was established atmarket capitalization) and complexity of Abbott's business.
Based on this review, the time of the AbbVie separation in 2013. That group has been used without change from 2013 through 2016. Due to the acquisitions of St. Jude Medical and Alere Inc. and significant changes in several peers due to corporate transactions, theCompensation Committee and its consultant reviewedrevised the peer group to be used for 2017 benchmarking. Based on that review,reflect the Committee approved an update to thebreadth of our business, reflecting our diverse and balanced portfolio. This new peer group to better align to our current size, scope, and global footprint.
Consistent with our prior approach, our peer group was selected to strikestrikes the appropriate balance between size (both revenues(revenue and market capitalization)capitalization between approximately one-third and three times Abbott's), return profiles, geographic breadth, and management and operating structure andstructure. This approach has been overwhelmingly supported by our investors during shareholder outreach. The peer group purposely includes companies that are outside the healthcare industry.
In selecting our peer group for 2017 performance and compensation benchmarking, we considered:
The resulting peer group:
30 Abbott Laboratories
Thisupdated peer group is summarized below, showing the primary characteristics for which each company was selected.selected, including the Abbott business segment(s) represented by the peer company.
| Company Name | | Sales/ Rev.(1) (billions) | | Market Cap(1) (billions) | | % Rev. Outside U.S. | | Similar # Employees | | Mfg. Driven/ Consumer- Facing | | Abbott Business Segment(s) Represented | | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | |||||||||||||||||||||||
| 3M Company | | | $ | 32.1 | | $ | 101.5 | | ü | | ü | | ü | | Diagnostics | | ||||||||||||||||||||||
| Becton Dickinson | | | $ | 17.3 | | $ | 73.6 | | ü | | ü | | ü | | Diagnostics, Medical Devices | | ||||||||||||||||||||||
Company Name | | Sales/Rev.1 (billions) | | Market Cap1 (billions) | % Rev. Outside U.S. | Similar # Employees | Health Care- Related | Mfg. Driven/ Consumer- Facing | Similar Operating Characteristics | | Boston Scientific | | | $ | 10.4 | | $ | 63.0 | | ü | | | ü | | Medical Devices | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | Bristol-Myers Squibb | | | $ | 24.2 | | $ | 150.5 | | ü | | | | ü | | Established Pharmaceuticals | | |
3M Company | $ | 31.7 | $ | 140.2 | ü | ü | ü | ü | ü | | The Coca-Cola Company | | | $ | 37.3 | | $ | 237.1 | | ü | | ü | | ü | | Nutrition | | ||||||||||||
| Becton, Dickinson & Co. | $ | 12.3 | $ | 57.0 | | ü | ü | ü | ü | | Danaher Corporation | | | $ | 19.9 | | $ | 110.2 | | ü | | ü | | ü | | Diagnostics | | |||||||||||
Bristol-Myers Squibb | $ | 20.8 | $ | 100.3 | ü | ü | ü | | Honeywell International | | | $ | 36.7 | | $ | 126.5 | | ü | | ü | | ü | | Diagnostics, Medical Devices | | ||||||||||||||
| The Coca-Cola Company | $ | 37.3 | $ | 195.5 | ü | ü | | ü | ü | | Johnson & Johnson | | | $ | 82.1 | | $ | 383.9 | | ü | | ü | | ü | | Diagnostics, Established Pharmaceuticals, Medical Devices | | |||||||||||
Danaher Corporation | $ | 18.3 | $ | 64.6 | ü | ü | ü | ü | ü | | Medtronic | | | $ | 30.9 | | $ | 152.1 | | ü | | ü | | ü | | Medical Devices | | ||||||||||||
| Eaton Corporation plc | $ | 20.4 | $ | 34.8 | | ü | | ü | ü | | Merck | | | $ | 46.0 | | $ | 231.6 | | ü | | ü | | ü | | Established Pharmaceuticals | | |||||||||||
Emerson Electric Co. | $ | 15.9 | $ | 44.5 | ü | ü | ü | ü | | Mondelez International | | | $ | 25.9 | | $ | 79.3 | | ü | | ü | | ü | | Nutrition | | |||||||||||||
| Honeywell International Inc. | $ | 40.5 | $ | 116.1 | ü | ü | | ü | ü | | Procter & Gamble | | | $ | 69.6 | | $ | 311.5 | | ü | | ü | | ü | | Nutrition | | |||||||||||
Johnson & Johnson | $ | 76.5 | $ | 375.4 | ü | ü | ü | ü | | Reckitt Benckiser(2) | | | $ | 16.2 | | $ | 57.6 | | ü | | ü | | ü | | Nutrition | | |||||||||||||
| Johnson Controls | $ | 30.5 | $ | 35.3 | ü | ü | | ü | ü | | Stryker Corporation | | | $ | 14.9 | | $ | 78.6 | | | | | | ü | | Medical Devices | | |||||||||||
Kimberly-Clark Corporation | $ | 18.3 | $ | 42.4 | ü | ü | ü | ü | ü | | Thermo Fisher Scientific | | | $ | 25.5 | | $ | 130.3 | | ü | | ü | | ü | | Diagnostics | | ||||||||||||
| Medtronic plc | $ | 29.6 | $ | 109.3 | ü | ü | ü | ü | ü | | United Technologies | | | $ | 77.0 | | $ | 129.3 | | ü | | | | ü | | Diagnostics | | |||||||||||
Mondelēz Inernational, Inc. | $ | 25.9 | $ | 64.0 | ü | ü | ü | ü | | Peer Group Median | | | $ | 28.3 | | $ | 127.9 | | | | | | |||||||||||||||||
| Procter & Gamble Co. | $ | 65.7 | $ | 233.1 | ü | ü | ü | ü | ü | | Abbott | | | $ | 31.9 | | $ | 153.5 | | ü | | ü | | ü | | | | |||||||||||
Thermo Fisher Scientific, Inc. | $ | 20.9 | $ | 76.1 | ü | ü | ü | ü | | Abbott Percentile Rank | | | 59th | | 73rd | | | | | | |||||||||||||||||||
| United Technologies | $ | 59.8 | $ | 101.9 | ü | | | ü | ü | | | | | | | | | | | | | | | | | |||||||||||||
Peer Group Median | $ | 27.8 | $ | 88.2 | Peer group approximates Abbott in market cap and sales | ||||||||||||||||||||||||||||||||||
| Abbott 12/31/17 | $ | 27.4 | $ | 99.3 | ü | ü | ü | ü | ü | |||||||||||||||||||||||||||||
Abbott + Alere Full Year 2017 | $ | 28.9 | 2 | ü | ü | ü | ü | ü | |||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
32
BASIS FOR COMPENSATION DECISIONS |
Abbott and its Compensation Committee have designed a compensation program that balances short- and long-term objectives to focus our executives on actions that create value today, while building for sustainable future success. Approximately two-thirds of our pay is equity-based, directly tying a significant portion of executive compensation to shareholder returns.
Our compensation program ismarket-based (to ensure our ability to attract and retain talented executives) and produces compensation outcomes that areperformance-based (to incent the achievement of profitable growth that increases shareholder value).
FIXED PAY—BASE SALARYCOMPENSATION PROGRAM IS MARKET-BASED
All components of total direct compensation are market-based. Each year, the Compensation Committee reviews market data with the independent compensation consultant to ensure our programs are aligned and our officers are positioned appropriately relative to the market.
Base salary targets are initially set using the median of the peer group as an initiala benchmark. Specific pay rates are based on an executive's performance, experience, contribution, unique skills, and internal equity with others at Abbott. Base salaries range from the 10th to the 90th percentile of the peer group,then vary depending on the officer's experience, expertise, unique role requirements, and tenure.performance. The average base salary of our executive officers wasis approximately at the market median. Once the rate of pay is set at the time of hire or upon promotion, subsequent changes in pay, including salary increases, are based on the executive's performance, the job he or she is performing, internal equity, and the Company's operating budget.
Abbott's primary performance-based compensation programs for executive officers are the annual cash incentive plan and the long-term incentive plan. These plans are described in more detail on the following pages. While both plans are formula-driven based on specific operating, strategic, and leadership results, the performance criteria differs in terms of the measures and the performance period. It is important to note that officer financial goals are based on adjusted measures that reflect the true results of our ongoing operations, which is what our investors focus on and invest in.
Abbott Laboratories 31
ANNUAL CASH INCENTIVE PLAN (PERFORMANCE INCENTIVE PLAN)
Our annual cash incentive plan is a key part of our officers' total compensation. It rewards executives for achieving specific annual goals at the corporate and divisional levels. It also rewards executives for achieving operational and strategic goals.
During 2017, Abbott's seven named officers participated in the 1998 Abbott Laboratories Performance Incentive Plan (PIP), which was designed to comply with the requirements of Section 162(m) of the Internal Revenue Code of 1986 for performance-based compensation.
Annual Cash Incentives Are CappedIncentive Plan
Each year,Annual incentive targets are initially set using the Committee setsmedian of the maximum award allocations under the PIP for each named officerpeer group as a percentage of consolidated net earnings. For 2017,benchmark. The targets may vary based on other factors, including internal pay comparisons. Further linkage to the maximum award formarket is achieved by setting targets that require our officers to exceed the Chief Executive Officer was 0.15% of adjusted consolidated net earnings for the fiscal year-end and, for allanticipated growth of the other named officers, 0.075%market in which they compete in order to achieve a target payout of adjusted consolidated net earnings. Historically and in 2017, the Committee exercised its discretion to deliver PIP awards that were substantially below the maximum awards that are authorized by these formulas based on achieved performance againsttheir annual goals and other factors described below.incentives.
Process to Determine AwardsLong-Term Incentive Plan (LTI)
Under the PIP, the Committee sets a target payout (expressed as a percentage of base salary) for each officer based upon market benchmarks and internal equity. The final payout is determined based upon operating performance relative toTo set annual goals. This process is described below. In 2017, annual incentive payouts for Abbott's executive officers ranged from 18% to 163% of target, with an average of 105% of target, reflecting strong performance on an operational and strategic basis during the year.
Step One: Fund Annual Incentive Pool Based on EPS Achievement
In order for the PIP to pay out, the EPS goal (see 2017 Performance Goals for Performance Incentive Plan on page 38) must be achieved. If the EPS goal is not achieved, then the PIP is not funded and there are no payouts.
Step Two: Assess Individual Performance vs. Goals
Individual goals are finalized at the beginning of each year based upon each executive officer's responsibilities. The weighting of goals depends upon whether the executive is a Business Unit leader or a Corporate leader, as follows:
Goal Category | | Business Unit Leader | | Corporate Leader | | |||||||
| | | | | | | | | | | | |
Sales Growth vs Peers and Plan | | 30% | | 10% | | |||||||
| | | | | | | | | | | | |
Financial Return | 40% | 40% | ||||||||||
| | | | | | | | | | | | |
| Strategic Initiatives | | 20% | | 40% | | ||||||
| | | | | | | | | | | | |
Leadership | 10% | 10% | ||||||||||
| | | | | | | | | | | | |
| Total | | 100% | | 100% | | ||||||
| | | | | | | | | | | | |
Sales Growth Goals—To stress the importance of top-line growth, each officer is measured against Abbott's internal targets, which are established to exceed peer group growth rates.
| ||||||||
| ||||||||
| ||||||||
|
| |||||||
| ||||||||
Sales growth performance required to earn payouts above 100% varies by business to reflect each business's market.To exceed a target payout in Sales Growth, the business must grow market share, exceeding both peer sales growth rates and Abbott's internal targets.This approach sets a very high bar and is more rigorous than market practice.
32 Abbott Laboratories
Financial Return Goals—While top-line growth is important, that growth must be profitable in order to drive value for our shareholders. To stress the importance of profitability, each officer is assessed on relevant return goals, primarily earnings, margin contribution, and cash flow.
| ||||||||
| ||||||||
| ||||||||
|
| |||||||
Financial return performance required to earn payouts above 100% of target varies by business to reflect each business's market and operating environment.
Strategic Initiative Goals—Strategic initiative goals are primarily related to key planned strategic actions, such as portfolio expansion, key R&D milestones, gross margin expansion, and entry into new markets. Strategic goals are set such that fully successful achievement of the goals results in a 100% payout with no additional upside. Lower levels of achievement result in payouts of 75%, 50%, or 0% of target.
Leadership Goals—Leadership goals are primarily related to talent and succession planning initiatives. These goals are focused on stabilizing business leadership gaps, ensuring businesses have the talent they need to perform in the current period, and building our leadership bench to sustain our performance. Leadership goals are set such that fully successful achievement of the goals results in a 100% payout with no additional upside. Lower levels of achievement result in payouts of 75%, 50%, or 0% of target.
The following formula summarizes the PIP payout process for a Business Unit leader, assuming the EPS goal is achieved (the process is identical for a Corporate leader).
For example:
Base Salary | Bonus Target % | Individual Goal Score | Final Award Payout | |||||||||||||||
| Goal Category | Goal Weighting | Payout | Goal Score | | |||||||||||||
| | Sales Growth | 30% | 100% | 30% | |||||||||||||
$525,000 | x | 90% | x | Financial Return | 40% | 100% | 40% | = | $448,875 | |||||||||
| | Strategic Initiatives | 20% | 75% | 15% | | ||||||||||||
| | Leadership | 10% | 100% | 10% | | ||||||||||||
| | | | | | | | | | | | | | | | | | |
| | Total | 95% | |
Based on performance against goals, 2017 cash incentive payouts ranged from the 10th percentile to the 90th percentile of our peer group. The average 2017 cash incentive payout for our executive officers was at the 56th percentile of our peer group, consistent with strong performance in 2017.
LONG-TERM INCENTIVE PLAN (LTI)
Our long-term incentive plan is the largest component of our executive officers' total compensation. As such, we believe it is critical that LTI performance goals reflect Company and individual performance, on both an absolute and relative basis. The LTI process used in February 2017 (described below) resulted in annual grants to executive officers ranging from the 5th percentile to the 51st percentile of our peer group, with an average of the 27th percentile. A preview of the February 2018 grant (which will be disclosed in our 2019 Summary Compensation table) is also described below.
Our process for determining guidelines, individual awards, and vesting of those awards incorporates:
Abbott Laboratories 33
This process is far more rigorous than automatically granting LTI at the median of the market and adjusting the awards only for relative TSR at the end of the performance cycle to determine the extent to which awards vest.
We followed a rigorous two-stage process to determine the size of LTI awards ultimately granted to our executive officers:
Stage One: Determine LTI AwardsStage Two: Determine if Options and Shares Vest
Stage One: Determine LTI Awards
In order to determine LTI awards, Abbott follows three steps.
Step A—Determine Company LTI Award Guidelines—Abbott obtains survey data annually to assess the competitive LTI market for our peer group companies for each executive position. Each year, we position our LTI award guidelines, relativethe Committee first reviews LTI grants made by peer companies to identify the competitive LTI market by comparing Abbott's TSR performance to our peers.While most of our peer companies simply set their annual LTI level atrange. Each year the 50th percentile of market, the following chart shows definitively how we adjust our LTI grant guidelines to align with our relative TSR performance. For example, guidelines for grants made in February 2017 wereare set at the 25th percentile of our peer group as illustrated inappropriate level within the 2016 Performance Year consistent with our relatively lower TSR vs. peers. Conversely, guidelines for grants made in February 2018 were set at the 75th percentile of our peer group, reflecting very strong TSR vs. our peers. The variability produced by this process illustrates the direct alignment of our officers' pay with our shareholders' returns.
Step B—Determine Individual Officer Awards—The recommendation for each officer starts with the Company LTI award guideline (basedcompetitive market range based on Abbott's relative TSR performance, as described above) foron the officer's position, as established in Step A. Individual officer awards are then furtheradjusted up or down based upon assessment of their achievement of individual goals related to
Each officer is assigned an overall score based on whether they missed, achieved, or exceeded the specific targets in all three measures for all three years. That resulting assessment score determines the LTI performance adjustment.
Awards granted in 2017, based on individual officer performance in 2016, resulted in awards ranging from 26% to 135% of guideline award levels, with an average of 98% of the 25th percentile guideline. These awards resulted in annual grants to Abbott executive officers ranging from the 5th percentile to the 51st percentile of our peer group, with an average of the 27th percentile.
Awards granted in 2018, based on individual officer performance in 2017, resulted in awards ranging from 50% to 135% of guideline award levels, with an average of 104% of the 75th percentile guideline. These awards resulted in annual grants to Abbott executive officers ranging from the 24th percentile to the 90th percentile of our peer group, with an average of the 77th percentile.
34 Abbott Laboratories
Step C—Convert Individual LTI Award Values to Equity Grants—In 2017, tofollowing page. To recognize the continued growth focus of Abbott and to directly align the interests of executive officers with the interests of our shareholders, the Compensation Committee granted thegrants long-term incentive awards in the form of 50% stock options and 50% performance-restrictedperformance restricted shares. This mix of incentive awards is consistent with our peers.
COMPENSATION OUTCOMES ARE PERFORMANCE-BASED
Other than base salary, which is the practicessmallest component of our executives' compensation, all remaining components of Total Direct Compensation (i.e., annual incentive, performance-based restricted stock awards, and stock options) are aligned with individual, business segment and Company performance.
In order for the annual incentive plan to pay out, the EPS goal must be achieved. If the EPS goal is not achieved, then the annual incentive plan is not funded. Final payouts are determined based upon performance relative to annual goals and are capped as a percentage of consolidated net earnings (CEO cap is 0.15%; COO cap is 0.10%; other NEO cap is 0.075%). The following formula summarizes the annual incentive payout process for officers, assuming the EPS goal is achieved.
For example:
BASE SALARY | BONUS TARGET % | TOTAL GOAL SCORE | AWARD PAYOUT | |||||||||
$525,000 | x | 90% | x | 95% | = | $448,875 | ||||||
| | | | | | | | | | | | |
33
For 2019 performance, annual incentive payouts for Abbott executive officers averaged 96% of target. For individual calculations for each named officer, see pages 38 to 47. The annual incentive plan is formula driven based on financial, strategic, and talent and succession results. Officer financial goals are based on adjusted measures that reflect the true results of our ongoing operations and are set based on the expected market growth of the businesses in the markets in which we compete.
Throughout the process, Abbott's awards are based on Company and individual performance, from guideline positioning all the way through vesting. Conversely, most other companies reflect performance only at the company level, through relative TSR at vesting. Thus, Abbott's process is much more rigorous and performance-based than other companies' programs.
The Committee positions LTI award guidelines relative to the market by comparing Abbott's 3-year TSR performance against our peers. 5- and 1-year TSR performance are also referenced to ensure long-term performance is sustained, and current performance is on track with shareholder expectations.
For example, guidelines for grants made in February 2019 were set at the 75th percentile of our peer group, reflecting 100th percentile relative 3-year TSR performance for the period ending in 2018. The 5-year TSR ranked at the 100th percentile of our peer group for the period ending in 2018, while the 1-year TSR was at the 94th percentile of our peer group.
The recommendation for each officer starts with the Company LTI award guideline (based on relative TSR performance and market data as described above) for the officer's position and is adjusted based upon assessment of their sustained contributions over the last three years. Contribution scores are totaled and used to adjust each officer's award guideline. Final awards may be increased or decreased based on the long-term impact each individual officer had on the organization. For example:
SAMPLE INDIVIDUAL LTI PERFORMANCE ASSESSMENT | ||||||||||||||||||||
| METRIC | | 2016 | | 2017 | | 2018 | | OVERALL | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
Sales and Market Growth Contribution | | Met (0) | | Did not meet (-1) | | Exceeded (+1) | | 0 | | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Margin Contribution | Met (0) | Met (0) | Exceeded (+1) | +1 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Strategic Financial Contribution | | Met (0) | | Met (0) | | Met (0) | | 0 | | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | +1 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | LTI Adjustment | | 110% | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
LTI ADJUSTMENT LEGEND | ||
TOTAL | RESULT | |
| | |
+3 or More | 125% | |
| | |
+1 or +2 | 110% | |
| | |
0 | 100% | |
| | |
-1 or -2 | 90% | |
| | |
-3 or Less | 75% | |
| | |
Awards granted in 2019, based on individual officer performance for the three-year period ending in 2018, resulted in awards ranging from the 54th percentile to the 90th percentile of our peer group, with respectan average of the 78th percentile. For individual calculations for each named officer, see pages 38 to performance-based equity grants and was continued for our grants in 2018.47.
Stage Two: Determine if Options and Shares Vest
Stock options vest over three years. Since stock options realize value only accrue value through share price appreciation, the value realized upon the exercise of vested stock options directly aligns the compensation earned with the value shareholders received over the same period of time.period. Options are also aligned with shareholder value through the impact of relative TSR in determining the size of awards granted (Stage One).LTI award guidelines.
34
Performance restricted shares vest1/3 one-third each year thatonly if the Adjusted Return on Equity (ROE) performance target is achieved. Vesting is absolute—either 100% or 0%.There is no partial vesting if the target is missed orand no additional vesting upside if the Company over-performs.over-performs. The Committee believes adjusted return on equity (ROE)Adjusted ROE is the appropriate performance measure for vesting because ROE measures how much profit the Company generates over the long-term with the capital that shareholders have invested and is a measure reflecting deployment of capital or capital allocation. Adjusted ROE reflects earnings from continuing operations excluding specified items, such as intangible amortization expense and various other costs including expenses related to restructuring actions or business acquisitions. Adjusted ROE also excludes the impact of foreign exchange on equity.
Although Company TSR performance and individual officer performance are used in Stage One to grant the appropriate award level, the focus on ROE for vesting provides a second shareholder protection to ensure our growth and investment return objectives are sustained after the initial grant is made. ROE is only used for vesting; it is not used in the determination of LTI award guidelines or individual officer performance.
In 2016, the ROE vesting target to determine future vesting was increased from 11% to 12%. This increase is after a similar increase from 10% to 11% for grants made in 2015. This is consistent with our stated intent to increase our ROE and ROE targets over time.
Prior to the separation of Abbott and AbbVie, the AbbVie business accounted for the majority (65%) of Abbott's adjusted net income. However, at the separation of AbbVie, Abbott retained the majority (90%) of the equity, which has resulted in lower than average ROE for Abbott since that time.While Abbott's ROE was disproportionally lower following the AbbVie separation, shareholders of Abbott at that time have seen a 135% appreciation in their holdings during the five years since separation.
(There was a similar impact on other rate of return measures, including Return on Assets.)
In 2019, the Adjusted ROE vesting target to determine future vesting was increased from 12% to 13%. This increase follows similar increases in prior years, which have increased this target 30% since 2014. This is consistent with our stated intent to increase our Adjusted ROE targets over time following the separation of AbbVie, which had a significant impact on our ROE and other return measures, including Return on Assets (ROA). Prior to the separation of Abbott and AbbVie, the AbbVie business accounted for the majority (65%) of Abbott's adjusted net income.However, at the separation of AbbVie, Abbott retained the majority (90%) of the equity. While Abbott's ROE was disproportionally lower following the AbbVie separation, shareholders that retained their Abbott and AbbVie shares the past six years since the AbbVie separation would have seen a 168% appreciation in their holdings. | IMPACT OF ABBOTT/ABBVIE SEPARATION |
The graphic below summarizes the LTI process and its direct linkage to the market and company and individual performance.
35
COMPENSATION PROGRAM IS DIRECTLY LINKED TO BUSINESS STRATEGY
Our compensation program is also linked directly to our business strategy, to ensure that officers are focused on those activities that drive our business strategy and create value for shareholders.
The table below explains the strategic link of the key metrics used in our annual and long-term incentive plans.
EVALUATION OF PERFORMANCE | ||||||||
| METRIC | | STRATEGIC LINK | | ||||
| | | | | | | | |
Our annual incentive plan is aligned to the following drivers of shareholder value: | ||||||||
| | | | | | | | |
Sales | | Measures Abbott's ability to compete effectively in the markets in which we participate and focuses management on achieving strong top-line growth, consistent with our business strategy. | | |||||
| | | | | | | | |
Diluted EPS | Basis on which Abbott sets annual performance expectations and consistent with how we report operating results to the financial community. | |||||||
| | | | | | | | |
| Return on Assets | | Measures profitability and how effectively Company assets are used to generate profit. | | ||||
| | | | | | | | |
Free Cash Flow | Recognizes the importance of generating cash to fund ongoing investments in our business and to pay down debt, pay dividends, and fund investments outside of capital expenditures. | |||||||
| | | | | | | | |
Our long-term incentive plan relies on the following Company metrics, and 3-year sustained individual performance metrics, to determine award value: | ||||||||
| | | | | | | | |
Total Shareholder Return | | Measures Abbott's stock and dividend performance against our peer group. Used to position LTI award guidelines relative to the market. | | |||||
| | | | | | | | |
3-year LTI Contribution Metrics | Measures how each officer has performed relative to their sales, margin, and strategic financial contribution goals. Used to adjust LTI award guidelines to reflect individual performance. | |||||||
| | | | | | | | |
| Return on Equity | | Measures how much profit Abbott generates over the long-term with the capital that shareholders have invested. Used to determine if performance-restricted awards vest. | | ||||
| | | | | | | | |
Officer financial goals are set and assessed based on adjusted measures that the Committee believes more accurately reflect the results of our ongoing operations. We make certain adjustments for specified items, whether favorable or unfavorable, that are unusual or unpredictable, such as cost reduction initiatives, restructuring programs, integration activities and other business acquisition-related costs, and the impact of significant tax changes. We also exclude intangible amortization expense to provide greater visibility on the results of operations excluding these costs, similar to how Abbott's management internally assesses performance.
The Committee believes these adjusted measures provide a more stable assessment of Abbott's core business and encourage decision-making that considers long-term value. They also align compensation goals with the financial guidance we communicate to investors, which is also based on adjusted measures.
COMPENSATION LINK TO SUSTAINABILITY
Our leadership covenant includes commitments to multiple environmental, social and governance efforts. Examples include:
36
Since this covenant is considered the minimum requirement of being an officer at Abbott, any officer that does not fulfill the covenant can receive a reduction of up to 100% of their annual incentive and/or long-term incentive awards.
In addition, we maintain several sustainability commitments, which are further described in our Proxy Summary on page 8, and include:
PAY DECISIONS FOR NAMED EXECUTIVE OFFICERS
The following pages highlightdetail the rationale for the pay decisions forgoals and metrics used to determine each named officer. Itofficer's payout under our annual and long-term incentive plans. For some goals, the target is important to note that annualnot disclosed for competitive reasons. The long-term incentive pay decisions were made in early 2018 based on 2017 results. Long-term incentive decisions (options and performance shares) shown in the Summary Compensation Table of this proxy statement were made in early 2017 based on 2016 results (see prior year proxy statement for discussion of 2016 results). We have also included information about our February 2018 LTI grants since theyand detailed here were based on 2017 TSR performance. Specific 2017 financial goalsupon performance through 2018, whereas the annual incentive plan payouts are detailed on page 38.based upon performance during 2019.
37
Miles D. White NAMED EXECUTIVE OFFICER COMPENSATION DECISIONS
| MILES D. WHITE Chairman of the Board, Chief Executive Officer and Director Since 1999 | |
| ||
| | |
Base Salary—No increase. Mr. White last received aWhite's annual base salary increase inof $1,900,000 has not changed since 2010.
Performance Incentive Plan—Mr. White's target bonus isof 175% of base salary.was not changed during 2019. Based on performance in 2017,2019, Mr. White received a bonus in February 2018 of $4,500,000,2020 which was equalcalculated as follows:
| | | | | 2018 | | | | | | | 2019 GOAL MEASUREMENT | | | 2019 | | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GOAL | | RESULTS ACHIEVED | | GOAL WEIGHT | | THRESHOLD | | TARGET | | MAXIMUM | | RESULTS ACHIEVED | | GOAL SCORE | |||||||||||||||||
| FINANCIAL METRICS(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Sales(2) | | | | $31.2B | | | | 25% | | | | $31.65B | | | | $31.80B | | | | $31.95B | | | | $31.96B | | | | 37.5% | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Diluted EPS | | | $2.88 | | | 25% | | | $3.15 | | | $3.20 | | | $3.25 | | | $3.24 | | | 35.0% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Adjusted ROA | | | | 9.2% | | | | 10% | | | | 10.5% | | | | 10.6% | | | | 10.7% | | | | 10.9% | | | | 15.0% | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Free Cash Flow(3) | | | $4.9B | | | 10% | | | $4.1B | | | $4.3B | | | $4.5B | | | $4.5B | | | 15.0% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| STRATEGIC METRICS | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Diabetes Care Sales Growth | | | | 10% | | | | 92.6% of Target | | | | Target | | | | 106.8% of Target | | | | >Maximum | | | | 15.0% | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Structural Heart Sales Growth | | | 10% | | | 76.2% of Target | | | Target | | | 109.5% of Target | | | >Maximum | | | 15.0% | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Alinity C/I Instrument Placements | | | | 10% | | | | 85.5% of Target | | | | Target | | | | 103.2% of Target | | | | <Threshold | | | | 0.0% | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Total | | | 132.5% | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BASE SALARY | BONUS TARGET % | TOTAL GOAL SCORE | AWARD PAYOUT | |||||||||
$1,900,000 | x | 175% | x | 132.5% | = | $4,405,625 | ||||||
| | | | | | | | | | | | |
38
| | |
Based on the successful reshapingCommittee's review of Abbott and individual performancethrough the AMO divestiture and the acquisitions of St. Jude Medical and Alere Inc.2018
Abbott Laboratories 35
Long-Term Incentives—Based on performance in 2016,, Mr. White received an LTI award inFebruary 20172019 with a value of $8,199,521,$15,125,000, which was equal to approximately 100%125% of his 25th percentile LTI award guideline. This award reflects a significant reductionAdditional calculation details are as follows:
LTI AWARD GUIDELINE | LTI ADJUSTMENT | AWARD ALLOCATION | AWARD VALUE | |||||||||
$12,100,000 | x | 125% | x | 50% Stock Options(1) | = | $7,562,500 | ||||||
| | | | | | | | | | | | |
| | 50% Performance Restricted Shares(2) | $7,562,500 | |||||||||
| | | | | | | | | | | | |
Total | $15,125,000 | |||||||||||
| | | | | | | | | | | | |
INDIVIDUAL LTI PERFORMANCE ASSESSMENT | | |||||||||||||||||||
METRIC | | 2016 | | 2017 | | 2018 | | OVERALL | | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Sales and Market Growth Contribution | | Did not meet (-1) | | Met (0) | | Exceeded (+1) | | 0 | | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Margin Contribution | Exceeded (+1) | Exceeded (+1) | Exceeded (+1) | +3 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| Strategic Financial Contribution | | Exceeded (+1) | | Exceeded (+1) | | Exceeded (+1) | | +3 | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | +6 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | LTI Adjustment | | 125% | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
LTI ADJUSTMENT LEGEND | ||
TOTAL | RESULT | |
| | |
+3 or More | 125% | |
| | |
+1 or +2 | 110% | |
| | |
0 | 100% | |
| | |
-1 or -2 | 90% | |
| | |
-3 or Less | 75% | |
| | |
39
| ROBERT B. FORD President and Chief Operating Officer, and Director | |
| ||
| | |
Mr. Ford's annual base salary of $1,000,000 did not change in his award vs. the prior year and reflects Abbott's 2016 TSR performance which2019.
Mr. Ford's target bonus of 125% of base salary was below our peers.
not changed during 2019. Based on performance in 2017,2019, Mr. WhiteFord received a bonus in February 2020 which was calculated as follows:
| | | | | 2018 | | | | | | | 2019 GOAL MEASUREMENT | | | 2019 | | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GOAL | | RESULTS ACHIEVED | | GOAL WEIGHT | | THRESHOLD | | TARGET | | MAXIMUM | | RESULTS ACHIEVED | | GOAL SCORE | |||||||||||||||||
| FINANCIAL METRICS(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Sales(2) | | | | $31.2B | | | | 25% | | | | $31.65B | | | | $31.80B | | | | $31.95B | | | | $31.96B | | | | 37.5% | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Diluted EPS | | | $2.88 | | | 25% | | | $3.15 | | | $3.20 | | | $3.25 | | | $3.24 | | | 35.0% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Adjusted ROA | | | | 9.2% | | | | 10% | | | | 10.5% | | | | 10.6% | | | | 10.7% | | | | 10.9% | | | | 15.0% | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Free Cash Flow(3) | | | $4.9B | | | 10% | | | $4.1B | | | $4.3B | | | $4.5B | | | $4.5B | | | 15.0% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| STRATEGIC METRICS | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Diabetes Care Sales Growth | | | | 15% | | | | 92.6% of Target | | | | Target | | | | 106.8% of Target | | | | >Maximum | | | | 22.5% | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cardiovascular and Neuromodulation Sales Growth | | | 15% | | | 86.8% of Target | | | Target | | | 109.2% of Target | | | <Threshold | | | 0.0% | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Total | | | 125.0% | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BASE SALARY | BONUS TARGET % | TOTAL GOAL SCORE | AWARD PAYOUT | |||||||||
$1,000,000 | x | 125% | x | 125.0% | = | $1,562,500 | ||||||
| | | | | | | | | | | | |
40
| | |
Based on the Committee's review of Abbott and individual performancethrough 2018, Mr. Ford received an LTI award inFebruary 20182019 with a value of $15,000,000,$6,952,132, which was equal to approximately 137%115% of his LTI award guideline. Additional calculation details are as follows:
LTI AWARD GUIDELINE | LTI ADJUSTMENT | AWARD ALLOCATION | AWARD VALUE | |||||||||
$6,045,332 | x | 115% | x | 50% Stock Options(1) | = | $3,476,066 | ||||||
| | | | | | | | | | | | |
| | 50% Performance Restricted Shares(2) | $3,476,066 | |||||||||
| | | | | | | | | | | | |
Total | $6,952,132 | |||||||||||
| | | | | | | | | | | | |
INDIVIDUAL LTI PERFORMANCE ASSESSMENT | | |||||||||||||||||||
METRIC | | 2016 | | 2017 | | 2018 | | OVERALL | | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Sales and Market Growth Contribution | | Did not meet (-1) | | Exceeded (+1) | | Exceeded (+1) | | +1 | | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Margin Contribution | Met (0) | Met (0) | Exceeded (+1) | +1 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| Strategic Financial Contribution | | Did not meet (-1) | | Exceeded (+1) | | Met (0) | | 0 | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | +2 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| Preliminary Adjustment | | 110% | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Mr. Ford's contributions to the completion of the St. Jude and Alere acquisitions and other initiatives to drive future profitable growth for Abbott represented significant impact | + | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| LTI Adjustment | | 115% | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
LTI ADJUSTMENT LEGEND | | |||||||||||||||||||
| PRELIMINARY ADJUSTMENT | | IMPACT | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| TOTAL | | RESULT | | IMPACT ON BUSINESS PRIORITIES | | SCORE | | RESULT | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
+3 or More | | 125% | | High Impact | | ++ | | +25% or More | | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
+1 or +2 | 110% | Medium/High Impact | + | +5% or More | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| 0 | | 100% | | Medium Impact | | = | | 0% | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
-1 or -2 | 90% | Medium/Low Impact | - | -5% or More | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| -3 or Less | | 75% | | Low Impact | | -- | | -25% or More | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
41
| BRIAN B. YOOR Executive Vice President, Finance and Chief Financial Officer | |
| ||
| | |
Base Salary—Mr. Yoor's annual base salary was increased from $600,000 to $650,000of $825,000 did not change in February 2017 in connection with his transition to Executive Vice President, Finance and Chief Financial Officer.2019.
Performance Incentive Plan—Mr. Yoor's target bonus was increased to 115% of base salary in 2017 from 100% to 105% of his base salary.2019. Based on performance in 2017,2019, Mr. Yoor received a bonus in February 2020 which was calculated as follows:
| | | | | 2018 | | | | | | | 2019 GOAL MEASUREMENT | | | 2019 | | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GOAL | | RESULTS ACHIEVED | | GOAL WEIGHT | | THRESHOLD | | TARGET | | MAXIMUM | | RESULTS ACHIEVED | | GOAL SCORE | |||||||||||||||||
| FINANCIAL METRICS(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Sales(2) | | | | $31.2B | | | | 10% | | | | $31.65B | | | | $31.80B | | | | $31.95B | | | | $31.96B | | | | 15.0% | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Diluted EPS | | | $2.88 | | | 20% | | | $3.15 | | | $3.20 | | | $3.25 | | | $3.24 | | | 28.0% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Free Cash Flow(3) | | | | $4.9B | | | | 10% | | | | $4.1B | | | | $4.3B | | | | $4.5B | | | | $4.5B | | | | 15.0% | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Debt to Adjusted EBITDA Ratio | | | 3.0 | | | 5% | | | < 3.0 | | | < 3.0 | | | < 3.0 | | | 2.5 | | | 5.0% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Improve Credit Ratings | | | | — | | | | 5% | | | | — | | | | — | | | | — | | | | Achieved | | | | 5.0% | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| STRATEGIC METRICS | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goal (10% weight): Execute integration milestones related to Cardiovascular entities, legacy St. Jude Medical expense reporting, and facility management services in North America. | | | |||||||||||||||||||||||||||||
| Result: All achieved. | | | 10.0% | | |||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Goal (15% weight): Develop methodology and evaluate individual country's attractiveness to guide future investments. | | | | | ||||||||||||||||||||||||||
| | Result: All achieved. | | | | 15.0% | | | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goal (15% weight): Develop and execute plans to increase corporate cost savings and efficiencies and improve data analytics to measure ongoing results. Address specified technology challenges. | | | |||||||||||||||||||||||||||||
| Result: All achieved. | | | 15.0% | | |||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TALENT AND SUCCESSION METRICS | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goal (10% weight): Meet talent and succession planning targets. | | | |||||||||||||||||||||||||||||
| Result: Mostly achieved. | | | 9.4% | | |||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Total | | | 117.4% | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BASE SALARY | BONUS TARGET % | TOTAL GOAL SCORE | AWARD PAYOUT | |||||||||
$825,000 | x | 115% | x | 117.4% | = | $1,113,800 | ||||||
| | | | | | | | | | | | |
42
| | |
Based on the Committee's review of Abbott and individual performancethrough 2018, Mr. Yoor received an LTI award inFebruary 2019 with a value of $4,900,000, which was equal to 156%125% of his LTI award guideline. Additional calculation details are as follows:
LTI AWARD GUIDELINE | LTI ADJUSTMENT | AWARD ALLOCATION | AWARD VALUE | |||||||||
$3,920,000 | x | 125% | x | 50% Stock Options(1) | = | $2,450,000 | ||||||
| | | | | | | | | | | | |
| | 50% Performance Restricted Shares(2) | $2,450,000 | |||||||||
| | | | | | | | | | | | |
Total | $4,900,000 | |||||||||||
| | | | | | | | | | | | |
INDIVIDUAL LTI PERFORMANCE ASSESSMENT | | |||||||||||||||||||
| METRIC | | 2016 | | 2017 | | 2018 | | OVERALL | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
Sales and Market Growth Contribution | | Did not meet (-1) | | Met (0) | | Exceeded (+1) | | 0 | | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Margin Contribution | Exceeded (+1) | Exceeded (+1) | Exceeded (+1) | +3 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| Strategic Financial Contribution | | Met (0) | | Met (0) | | Met (0) | | 0 | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | +3 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | LTI Adjustment | | 125% | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
LTI ADJUSTMENT LEGEND | ||
TOTAL | RESULT | |
| | |
+3 or More | 125% | |
| | |
+1 or +2 | 110% | |
| | |
0 | 100% | |
| | |
-1 or -2 | 90% | |
| | |
-3 or Less | 75% | |
| | |
43
| LISA D. EARNHARDT Executive Vice President, Medical Devices | |
| ||
| | |
Ms. Earnhardt has an annual base salary of $710,000.
Ms. Earnhardt's target bonus was set at 115% of base salary for 2019. Based on performance in 2019, Ms. Earnhardt received a bonus in February 2020 which was calculated as follows:
| | | | | 2018 | | | | | | | 2019 GOAL MEASUREMENT | | | 2019 | | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GOAL | | RESULTS ACHIEVED | | GOAL WEIGHT | | THRESHOLD | | TARGET | | MAXIMUM | | RESULTS ACHIEVED | | GOAL SCORE | |||||||||||||||||
| FINANCIAL METRICS(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Division Net Sales(2) | | | | $10.5B | | | | 20% | | | | $11.5B | | | | $11.6B | | | | $11.8B | | | | $11.8B | | | | 30.0% | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Division Margin | | | — | | | 20% | | | Target | | | Target | | | 103.6% of Target | | | 105.0% of Target | | | 30.0% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Adjusted Division Gross Margin | | | | — | | | | 10% | | | | 99.7% of Target | | | | Target | | | | 102.9% of Target | | | | 100.9% of Target | | | | 11.5% | | |
| | | | | | | | | | | | | | | | | | | | ��� | | | | | | | | | | | | |
| Market Share | | | — | | | 10% | | | — | | | — | | | — | | | — | | | 8.5% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Adjusted Division Free Cash Flow | | | | — | | | | 5% | | | | Target | | | | Target | | | | 105.8% of Target | | | | 106.6% of Target | | | | 7.5% | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash Conversion Cycle | | | — | | | 5% | | | — | | | Target | | | — | | | 2 days over target | | | 4.0% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| STRATEGIC METRICS | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Goal (20% weight): Execute specified product approvals, capacity increases, regulatory submissions and salesforce expansions. | | | | | ||||||||||||||||||||||||||
| | Result: Partially achieved. | | 10.0% | | | ||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TALENT AND SUCCESSION METRICS | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goal (10% weight): Meet talent and succession planning targets. | | ||||||||||||||||||||||||||||||
| Result: Achieved. | | 10.0% | | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Total | | | 111.5% | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BASE SALARY | BONUS TARGET % | TOTAL GOAL SCORE | AWARD PAYOUT | |||||||||
$710,000 | x | 115% | x | 111.5% | = | $910,400 | ||||||
| | | | | | | | | | | | |
44
| | |
As part of Ms. Earnhardt's employment offer, she received a grant of 91,367 stock options and return goals. 17,431 performance restricted shares (valued at $2,764,707 in total) which reflected a prorated grant for 2019. She also received a grant of 39,515 restricted shares (valued at $3,200,000) with 3-year cliff vesting to offset unvested long-term incentives at her previous employer.
45
| DANIEL G. SALVADORI Executive Vice President, Nutritional Products | |
| ||
| | |
Mr. Yoor's strategic and leadership goals for 2017 included M&A activity support, transformationSalvadori's annual base salary was increased from $680,000 to $710,000 in March 2019.
Mr. Salvadori's target bonus was increased to 115% of the finance organization, and implementation of key financing and cash flow improvement initiativesbase salary in 2019. Based on performance in 2019, Mr. Salvadori received a bonus in February 2020 which significantly overachieved their targets. was calculated as follows:
| | | | | 2018 | | | | | | | 2019 GOAL MEASUREMENT | | | 2019 | | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GOAL | | RESULTS ACHIEVED | | GOAL WEIGHT | | THRESHOLD | | TARGET | | MAXIMUM | | RESULTS ACHIEVED | | GOAL SCORE | |||||||||||||||||
| FINANCIAL METRICS(1) | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Division Net Sales(2) | | | | $7.2B | | | | 20% | | | | $7.3B | | | | $7.4B | | | | $7.5B | | | | $7.5B | | | | 27.6% | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Division Margin | | | — | | | 20% | | | Target | | | Target | | | 103.6% of Target | | | 100.4% of Target | | | 21.2% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Adjusted Division Gross Margin | | | | — | | | | 5% | | | | 99.8% of Target | | | | Target | | | | 103.7% of Target | | | | 99.3% of Target | | | | 0.0% | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Incremental Plan Savings | | | — | | | 5% | | | Target | | | Target | | | Target | | | 109.7% of Target | | | 5.0% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Market Share | | | | — | | | | 10% | | | | — | | | | — | | | | — | | | | — | | | | 10.0% | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted Division Free Cash Flow | | | — | | | 5% | | | Target | | | Target | | | 105.6% of Target | | | 99.0% of Target | | | 0.0% | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Cash Conversion Cycle | | | | — | | | | 5% | | | | 5 days over Target | | | | Target | | | | — | | | | 5 days over Target | | | | 2.5% | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| STRATEGIC METRICS | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goal (20% weight): Execute specified product launches, e-commerce expansion, innovation sales, and key country initiatives. Result: Overachieved. | | | 21.6% | | |||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TALENT AND SUCCESSION METRICS | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Goal (10% weight): Meet talent and succession planning targets. Result: Achieved. | | | | 10.0% | | | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Total | | | 97.9% | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
BASE SALARY | BONUS TARGET % | TOTAL GOAL SCORE | PRELIMINARY AWARD PAYOUT | |||||||||
$710,000 | x | 115% | x | 97.9% | = | $799,400 | ||||||
| | | | | | | | | | | | |
In addition to the calculations derived from the scoring of financial and strategic goals, the plan allows further adjustments up or down by the Compensation Committee to reflect achievements not anticipated when goals were set. For 2017,2019, the Committee adjusted Mr. Yoor'sSalvadori's bonus (by $300,000)$104,000) to reflect the unanticipated achievements.achievement.
46
| | |
Long-Term Incentives—Based on performance in 2016, Mr. Yoor received an LTI award in February 2017 with a value of $1,754,876, which was equal to 90% of his 25th percentile LTI award guideline.
Based on performance in 2017, Mr. Yoor received an LTI award in February 2018 with a valuethe Committee's review of $5,383,800, which was equal to approximately 135% of his 75th percentile LTI award guideline. This award reflects Abbott'sAbbott and Mr. Yoor's strongindividual performance during 2017. Additional details regarding that award will be included in Abbott's 2019 proxy statement.
Hubert L. Allenthrough 2018
Base Salary—No change in 2017.
Performance Incentive Plan—Mr. Allen's target bonus is 105% of his base salary. Based on performance in 2017, Mr. Allen received a bonus in February 2018 of $1,015,200, which was equal to 140% of his target bonus. This payout reflects significant overachievement of both financial and strategic goals, including 163% achievement of his free cash flow goal, and overachievement of his sales and return goals. Mr. Allen's strategic and leadership goals for 2017 included achieving key litigation and compliance initiatives, licensing and acquisition objectives, and successful integration activities. In addition to the calculations derived from the scoring of financial and strategic goals, the plan allows further adjustments up or down by the Compensation Committee to reflect achievements not anticipated when goals were set. For 2017, the Committee adjusted Mr. Allen's bonus (by $200,000) to reflect the unanticipated achievements.
Long-Term Incentives—Based on performance in 2016, Mr. Allen received an LTI award in February 2017 with a value of $2,144,861, which was equal to 110% of his 25th percentile LTI award guideline.
Based on performance in 2017, Mr. Allen received an LTI award in February 2018 with a value of $5,383,800, which was equal to approximately 135% of his 75th percentile LTI award guideline. This award reflects Abbott's and Mr. Allen's strong performance during 2017. Additional details regarding that award will be included in Abbott's 2019 proxy statement.
36 Abbott Laboratories
Robert B. Ford
Base Salary—No change in 2017.
Performance Incentive Plan—Mr. Ford's target bonus is 105% of his base salary. Based on performance in 2017, Mr. Ford received a bonus in February 2018 of $1,066,400, which was equal to 150% of his target bonus. This payout reflects significant overachievement of financial and strategic goals. Mr. Ford's strategic and leadership goals for 2017 included achieving key product approvals, successful integration of St. Jude Medical, and market share growth objectives. In addition to the calculations derived from the scoring of financial and strategic goals, the plan allows further adjustments up or down by the Compensation Committee to reflect achievements not anticipated when goals were set. For 2017, the Committee adjusted Mr. Ford's bonus (by $425,000) to reflect the unanticipated achievements.
Long-Term Incentives—Based on performance in 2016, Mr. Ford received an LTI award in February 2017 with a value of $1,949,869, which was equal to 90% of his 25th percentile LTI award guideline.
Based on performance in 2017, Mr. Ford received an LTI award in February 2018 with a value of $5,383,800, which was equal to approximately 135% of his 75th percentile LTI award guideline. This award reflects Abbott's and Mr. Ford's strong performance during 2017. Additional details regarding that award will be included in Abbott's 2019 proxy statement.
Daniel G. Salvadori
Base Salary—Mr. Salvadori's annual base salary was increased from $575,000 to $650,000 in July 2017 in connection with his promotion from Senior Vice President, Established Pharmaceuticals, Latin America to Executive Vice President, Nutritional Products.
Performance Incentive Plan—Mr. Salvadori's target bonus is 105% of his base salary. Based on performance in 2017, Mr. Salvadori received a bonus in February 2018 of $733,700, which was equal to 108% of his target bonus. This payout reflects 102.9% achievement of his regional sales goal, 109.4% achievement of his regional margin goal, and achievement of his other financial and strategic goals. Mr. Salvadori's strategic and leadership goals for 2017 included achieving new product development, market share growth, and talent related goals.
Long-Term Incentives—Based on performance in 2016,, Mr. Salvadori received an LTI award inFebruary 20172019 with a value of $1,772,444,$4,704,000, which was equal to 135%120% of his 25th percentile LTI award guideline. Mr. Salvadori received an additional award in July 2017 with aAdditional calculation details are as follows:
LTI AWARD GUIDELINE | LTI ADJUSTMENT | AWARD ALLOCATION | AWARD VALUE | |||||||||
$3,920,000 | x | 120% | x | 50% Stock Options(1) | = | $2,352,000 | ||||||
| | | | | | | | | | | | |
| | 50% Performance Restricted Shares(2) | $2,352,000 | |||||||||
| | | | | | | | | | | | |
Total | $4,704,000 | |||||||||||
| | | | | | | | | | | | |
INDIVIDUAL LTI PERFORMANCE ASSESSMENT | | |||||||||||||||||||
| METRIC | | 2016 | | 2017 | | 2018 | | OVERALL | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
Sales and Market Growth Contribution | | Exceeded (+1) | | Met (0) | | Exceeded (+1) | | +2 | | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
Margin Contribution | Exceeded (+1) | Met (0) | Met (0) | +1 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| Strategic Financial Contribution | | Did not meet (-1) | | Met (0) | | Met (0) | | -1 | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | +2 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| Preliminary Adjustment | | 110% | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Mr. Salvadori contributions to the accelerated profitable growth in the Nutrition business represented significant impact | + | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| LTI Adjustment | | 120% | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
LTI ADJUSTMENT LEGEND | | |||||||||||||||||||
| PRELIMINARY ADJUSTMENT | | IMPACT | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| TOTAL | | RESULT | | IMPACT ON BUSINESS PRIORITIES | | SCORE | | RESULT | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
+3 or More | | 125% | | High Impact | | ++ | | +25% or More | | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
+1 or +2 | 110% | Medium/High Impact | + | +5% or More | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| 0 | | 100% | | Medium Impact | | = | | 0% | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
-1 or -2 | 90% | Medium/Low Impact | - | -5% or More | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| -3 or Less | | 75% | | Low Impact | | -- | | -25% or More | | ||||||||||
| | | | | | | | | | | | | | | | | | | | |
Based
Michael T. Rousseau
Base Salary—No increase.
Performance Incentive Plan—Mr. Rousseau's target bonus was 125% of base salary per the St. Jude Medical merger agreement. Based on the terms of his retention agreement, Mr. Rousseau received a prorated bonus in February 2018 of $643,800.
Long-Term Incentives—Mr. Rousseau did not receive an LTI award in 2017.
Eric S. Fain
Base Salary—No increase.
Performance Incentive Plan—Mr. Fain's target bonus was 100% of base salary per the St. Jude Medical merger agreement. Based on the terms of his retention agreement, Mr. Fain received a prorated bonus in February 2018 of $174,700.
Long-Term Incentives—Based on the terms of his retention agreement, Mr. Fain received an LTI award in February 2017 with a value of $2,049,857 which was equal to the value of his previous LTI grant at St. Jude Medical.
Abbott Laboratories 37 47
2017 PERFORMANCE GOALS FOR PERFORMANCE INCENTIVE PLAN
DISCUSSION OF NAMED OFFICERS' ACHIEVEMENT OF GOALS DURING 2017
The results shown below reflect the 2017 financial goals and results for the Named Officers.
Executive | Metric | 2016 Results Achieved | 2017 Expected Results | 2017 Results Achieved | Percentage Achieved | Percentage Increase(1) 2017 vs. 2016 | ||||||||||
| | | | | | | | | | | | | | | | |
Miles D. White | Adjusted Sales(2) | $20.5 Billion | $26.4 Billion | $26.7 Billion | 101% | 31% | ||||||||||
Adjusted Diluted EPS(3) | $2.20 | $2.45 | $2.50 | 102% | 14% | |||||||||||
Adjusted Net Income(3) | $3.28 Billion | $4.3 Billion | $4.4 Billion | 102% | 34% | |||||||||||
Adjusted Return on Assets(3),(4) | 9.8% | 7.5% | 7.5% | 100% | (4) | |||||||||||
Adjusted Free Cash Flow(3) | $2.1 Billion | $2.7 Billion | $4.4 Billion | 163% | 113% | |||||||||||
Brian B. Yoor | Adjusted Sales(2) | $20.5 Billion | $26.4 Billion | $26.7 Billion | 101% | 31% | ||||||||||
| | Adjusted Diluted EPS(3) | $2.20 | $2.45 | $2.50 | 102% | 14% | |||||||||
| | Adjusted Free Cash Flow(3) | $2.1 Billion | $2.7 Billion | $4.4 Billion | 163% | 113% | |||||||||
Hubert L. Allen | Adjusted Sales(2) | $20.5 Billion | $26.4 Billion | $26.7 Billion | 101% | 31% | ||||||||||
Adjusted Diluted EPS(3) | $2.20 | $2.45 | $2.50 | 102% | 14% | |||||||||||
Adjusted Free Cash Flow(3) | $2.1 Billion | $2.7 Billion | $4.4 Billion | 163% | 113% | |||||||||||
Robert B. Ford | Adjusted Division Net Sales(2) | $5.2 Billion | $10.4 Billion | $10.4 Billion | 100% | 100% | ||||||||||
| | Adjusted Division Margin(3) | $1,335 Million | $2,992 Million | $3,018 Million | 101% | 126% | |||||||||
| | | | | | | | | | | | | | | | |
Adjusted Sales exclude the impact of foreign exchange on actual sales relative to the goal target. Adjusted Diluted EPS is diluted earnings per common share from continuing operations excluding specified items. Adjusted Net Income is earnings from continuing operations excluding specified items. The calculations of Adjusted Return on Assets and Adjusted Return on Equity reflect adjusted net earnings from continuing operations. The calculation of Adjusted Return on Equity also excludes the impact of foreign exchange on equity relative to the goal target. Adjusted Free Cash Flow is operating cash flow less capital expenditures.
38 Abbott Laboratories
Each of the benefits described below was designed to support the Company's objective of providing a competitive total pay program. Individual benefits do not directly affect decisions regarding other benefits or pay components, except to the extent that benefits and pay components must, in aggregate, be competitive, as previously discussed.competitive.
| | |||||
Retirement Benefits | The named officers participate in two Abbott-sponsored defined benefit plans: the Abbott Laboratories Annuity Retirement Plan and the Abbott Laboratories Supplemental Pension | |||||
Since officers' Supplemental Pension Plan benefits cannot be secured in a manner similar to qualified plans, which are held in trust, officers receive an annual cash payment equal to the increase in present value of their Supplemental Pension Plan benefit. Officers have the option of depositing these annual payments to an individually established grantor trust, net of tax withholdings. Deposited amounts may be credited with the difference between the officers' actual annual trust earnings and the rate used to calculate trust funding (currently 8%) while they are employed. Amounts deposited in the individual trusts are not tax deferred. | ||||||
Officers do not receive tax gross-ups on their grantor trusts. The manner in which the grantor trust will be distributed to an officer upon retirement from the Company generally follows the manner elected by the officer under the Annuity Retirement Plan. Should an officer (or the officer's spouse, depending upon the pension distribution method elected by the officer under the Annuity Retirement Plan) live beyond the actuarial life expectancy age used to determine the Supplemental Pension Plan benefit and, therefore, exhaust the trust balance, the Supplemental Pension Plan benefit will be paid by the Company. | ||||||
| | | | | | |
Deferred Compensation | Officers of the Company, like all U.S. employees, are eligible to defer a portion of annual base salary and bonus (in certain cases), on a pre-tax basis, to the Company's qualified 401(k) plan, up to the IRS contribution limits. Officers are also eligible to defer up to 18% of their base salary, less contributions to the 401(k) plan, to a non-qualified | |||||
| | | | | | |
Abbott Laboratories 3948
| | |||||
Change in Control Arrangements | Mr. White | |||||
| | | | | | |
Financial Planning | Named officers are eligible to receive up to $10,000 of fees annually associated with estate planning advice, tax preparation, and general financial planning. If an officer chooses to utilize this benefit, fees for services received up to the annual allocation are paid by the Company and are treated as imputed income to the officer, who then is responsible for payment of all taxes due on the fees paid by the Company. | |||||
| | | | | | |
Company Automobile | Named officers are eligible for use of a Company-leased vehicle, with a lease term of 50 months. Seventy-five percent (75%) of the cost of the vehicle is imputed to the officer as income for federal income tax purposes. | |||||
| | | | | | |
Company Aircraft | Non-business-related flights on corporate aircraft by Mr. White are covered by a time-sharing lease agreement, pursuant to which incremental costs associated with those flights are reimbursed by the executive to the Company in accordance with Federal Aviation Administration regulations. | |||||
| | | | | | |
Disability Benefit | In addition to Abbott's standard disability benefits, the named officers are eligible for a monthly long-term disability benefit, which is described in greater detail in the "Potential Payments Upon Termination or Change in Control" section of this proxy. | |||||
| | | | | | |
SHARE OWNERSHIP AND RETENTION GUIDELINES
To further promote sustained shareholder returnreturns and to ensure the Company's executives remain focused on both short- and long-term objectives, the Company has established share ownership guidelines. Each officer has five years from the date appointed/elected to his/her position to achieve the ownership level associated with the position.
|
| | | |||||
| Chief Executive Officer | | 6 times base salary | | ||||
| | | | | | | | |
|
| |||||||
| | | | | | | | |
| Executive Vice Presidents and Senior Vice Presidents | | 3 times base salary | | ||||
| | | | | | | | |
All other officers | 2 times base salary | |||||||
| | | | | | | | |
Any officer who has not achieved at least 50% of the stockshare ownership guideline after three years in their current position will be required to hold 50% of future equity awards until they meet the ownership guideline.
All named officers with 5 years'years tenure in their current position meet or exceed the guidelines.
Directors and officers are prohibited from entering into or engaging in any financial transaction that is designed to reduce the financial risk associated with owning Abbott stock.shares. These financial transactions include, but are not limited to, engaging in short sales, derivative transactions (such as equity swaps, straddles, puts, or calls), and hedging or monetizing transactions (such as collars, exchange funds, or prepaid forward variable contracts) that are linked directly to Abbott stock.
40 Abbott Laboratories 49
Directors and officers are prohibited from holding Abbott stock in a margin account, pledging Abbott stock, or otherwise securing any of their obligations by assigning Abbott stock as collateral. The Compensation Committee, or its delegate, may grant an exception provided that:
In 2015, following discussions by management with shareholders, the Compensation Committee implemented a recoupment policy. The Compensation Committee has broad discretion to administer and implement the Company's policy and seek recoupment of equity or cash incentive awards if it determines that a senior executive engaged in misconduct or failed in a supervisory capacity, resulting in a material violation of law or Abbott policy that causes significant financial harm to Abbott. The Compensation Committee may recover incentive compensation awarded to a senior executive in the prior three years or reduce future awards. The policy will not affect awards made prior to its effective date or following a change in control.
The Committee considers the deductibility of executive compensation under Internal Revenue Code Section 162(m) and reserves the flexibility to take actions that may be based on considerations in addition to tax deductibility. The Committee believes that shareholder interests are best served by not restricting the Committee's discretion and flexibility in crafting compensation programs, even if such programs may result in certain non-deductible compensation expenses. Accordingly, Abbott may provide compensation that is not deductible. Section 162(m) (as amended in 2017 by the Tax Cuts and Jobs Act) generally disallows, subject to certain exceptions, a federal income tax deduction to public companies for compensation in excess of $1 million per year paid to an individual who was the company's chief executive officer or chief financial officer, or among the company's three most highly compensated executive officers, at any time during the year, or an individual whose compensation was onesubject to the $1 million cap on deductible compensation in 2017 or later years (under the once a covered employee always a covered employee rule), or beneficiary of the company's three other most highly compensated executive officers as listed in the proxy.
COMPENSATION COMMITTEE REPORT |
The Compensation Committee of the Board is primarily responsible for reviewing, approving, and overseeing Abbott's compensation plans and practices, and works with management and the Committee's independent consultant to establish Abbott's executive compensation philosophy and programs. The Committee has reviewed and discussed the Compensation Discussion and Analysis with management and has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee
R. S. Austin, Chair
M. A. Kumbier
E. M. Liddy
P. N. Novakovic
W. A. Osborn
S. C. Scott III
Abbott Laboratories 4150
COMPENSATION RISK ASSESSMENT |
During 2017,2019, Abbott conducted its annual risk assessment of its compensation policies and practices for employees and executives. Abbott's risk assessment is reinforced by Abbott's adherence to a number of industry-leading best practices, including:
Based on this assessment, Abbott determined its compensation and benefit programs appropriately align employees' compensation and performance without incentivizing risky behaviors. Any risk arising from its compensation policies and practices is not reasonably likely to have a material adverse effect on Abbott or its shareholders.
The following factors were among those considered:
42 Abbott Laboratories 51
This assessment was discussed with the Compensation Committee and its independent compensation consultant. The Committee and the consultant both agreed with the assessment.
Abbott Laboratories 4352
SUMMARY COMPENSATION TABLE |
The following table summarizes compensation awarded to, earned by, or paid to the named officers. The section of the proxy statement captioned, "Compensation Discussion and Analysis—How Executive Pay Decisions Are Made"Basis for Compensation Decisions" describes in greater detail the information reported in this table.
Name and Principal Position | Year | Salary ($) | | Bonus ($) | Stock Awards ($)(4) | Option Awards ($)(5) | Non-Equity Incentive Plan Compensation ($)(6) | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($)(7) | All Other Compensation ($)(8) | Total ($) | Total Without Change in Pension Value ($)(9) | | Name and Principal Position | Year | | Salary | | Stock Awards(2) | | Option Awards(3) | | Non-Equity Incentive Plan Compensation(4) | | Change in Pension Value and Non-qualified Deferred Compensation Earnings(5) | | All Other Compensation(6) | | SEC Total | | Total Without Change in Pension Value ($)(7) | | |||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||
Miles D. White, | 2017 | $1,900,000 | $ | 0 | $4,099,523 | $4,099,998 | $4,500,000 | $3,350,902 | $ 1,020,596 | $18,971,019 | $16,772,295 | | Miles D. White, | | 2019 | | $ | 1,900,000 | | $ | 7,562,448 | | $ | 7,562,499 | | | $ | 4,405,625 | | | $ | 5,707,836 | | | $ | 664,409 | | $ | 27,802,817 | | $ | 24,675,423 | | |||||||||||||||
Chairman of the | 2016 | 1,900,000 | 0 | 5,249,288 | 5,249,999 | 3,200,000 | 3,860,715 | 825,589 | 20,285,591 | 17,362,394 | ||||||||||||||||||||||||||||||||||||||||||||||||
Board, Chief | 2015 | 1,900,000 | 0 | 6,247,971 | 6,249,997 | 3,300,000 | 612,230 | 1,091,506 | 19,401,704 | 19,401,704 | ||||||||||||||||||||||||||||||||||||||||||||||||
Executive Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
and Director | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Brian B. Yoor, | 2017 | 643,269 | | 0 | 877,378 | 877,498 | 1,062,400 | 1,013,539 | 62,990 | 4,537,074 | 3,553,412 | | |||||||||||||||||||||||||||||||||||||||||||||
| Executive Vice President, | 2016 | 584,231 | | 0 | 934,841 | 934,999 | 622,800 | 453,273 | 60,223 | 3,590,367 | 3,142,977 | | |||||||||||||||||||||||||||||||||||||||||||||
| Finance and Chief | 2015 | 437,884 | | 0 | 841,779 | 833,069 | 427,500 | 131,926 | 40,493 | 2,712,651 | 2,583,215 | | |||||||||||||||||||||||||||||||||||||||||||||
| Financial Officer | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Hubert L. Allen, | 2017 | 690,100 | 0 | 1,072,361 | 1,072,500 | 1,015,200 | 947,237 | 71,146 | 4,868,544 | 4,043,026 | | Chairman of the Board, Chief | | 2018 | | 1,900,000 | | 7,499,367 | | 7,499,996 | | | 4,779,688 | | | 1,381,845 | | | 1,193,342 | | 24,254,238 | | 24,254,238 | | ||||||||||||||||||||||||
Executive Vice President, | | Executive Officer, and Director | | 2017 | | 1,900,000 | | 4,099,523 | | 4,099,998 | | | 4,500,000 | | | 3,350,902 | | | 1,020,596 | | 18,971,019 | | 16,772,295 | | ||||||||||||||||||||||||||||||||||
General Counsel and Secretary | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
| Robert B. Ford, | 2017 | 675,000 | | 0 | 974,870 | 974,999 | 1,066,400 | 949,748 | 60,891 | 4,701,908 | 3,797,358 | | | Robert B. Ford, | | 2019 | | 1,000,000 | | 3,475,992 | | 3,476,054 | | | 1,562,500 | | | 2,311,499 | | | 71,841 | | 11,897,886 | | 9,777,514 | | |||||||||||||||||||||
| Executive Vice President, | | | | | | | | | | | | | | President and Chief Operating | | 2018 | | 784,250 | | 2,691,621 | | 2,691,897 | | | 1,297,500 | | | 382,771 | | | 279,213 | | 8,127,252 | | 7,821,493 | | |||||||||||||||||||||
| Medical Devices | | | | | | | | | | | | | | Officer, and Director | | 2017 | | 675,000 | | 974,870 | | 974,999 | | | 1,066,400 | | | 949,748 | | | 60,891 | | 4,701,908 | | 3,797,358 | | |||||||||||||||||||||
Daniel G. Salvadori, | 2017 | 608,461 | 0 | 1,249,912 | 1,262,326 | 733,700 | 179,461 | 54,628 | 4,088,488 | 3,913,693 | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||
Executive Vice President, | | Brian B. Yoor,(1) | | 2019 | | 825,000 | | 2,449,976 | | 2,449,987 | | | 1,113,800 | | | 2,105,604 | | | 71,331 | | 9,015,698 | | 7,031,097 | | ||||||||||||||||||||||||||||||||||
Nutritional Products | | Executive Vice President, Finance | | 2018 | | 796,057 | | 2,691,621 | | 2,691,897 | | | 974,600 | | | 385,178 | | | 73,483 | | 7,612,836 | | 7,280,548 | | ||||||||||||||||||||||||||||||||||
| Michael T. Rousseau(1), | 2017 | 644,231 | | 5,000,000 | (3) | 0 | 0 | 643,800 | 0 | 12,520,569 | 18,808,600 | 18,808,600 | | ||||||||||||||||||||||||||||||||||||||||||||
| and Chief Financial Officer | | 2017 | | 643,269 | | 877,378 | | 877,498 | | | 1,062,400 | | | 1,013,539 | | | 62,990 | | 4,537,074 | | 3,553,412 | | |||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||
| President, Cardiovascular | | | | | | | | | | | | | | Lisa D. Earnhardt, | | 2019 | | 400,058 | | 4,610,918 | | 1,353,145 | | | 910,400 | | | 184,522 | | | 19,798 | | 7,478,841 | | 7,295,162 | | |||||||||||||||||||||
| and Neuromodulation | | | | | | | | | | | | | | Executive Vice President, Medical Devices | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||
Eric S. Fain(2), | 2017 | 556,971 | 0 | 3,024,589 | 1,024,998 | 174,700 | 0 | 8,549,565 | 13,330,823 | 13,330,823 | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||
Senior Vice President, Group President, Cardiovascular and Neuromodulation | | Daniel G. Salvadori, | | 2019 | | 704,923 | | 2,351,989 | | 2,351,986 | | | 903,400 | | | 395,710 | | | 59,806 | | 6,767,814 | | 6,388,821 | | ||||||||||||||||||||||||||||||||||
| Executive Vice President, | | 2018 | | 675,038 | | 1,993,798 | | 1,993,992 | | | 803,200 | | | 53,668 | | | 434,514 | | 5,954,210 | | 5,907,979 | | |||||||||||||||||||||||||||||||||||
| Nutritional Products | | 2017 | | 608,461 | | 1,249,912 | | 1,262,326 | | | 733,700 | | | 179,461 | | | 54,628 | | 4,088,488 | | 3,913,693 | | |||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
44 Abbott Laboratories
For Messrs. White, Ford, Yoor, and Yoor,Salvadori, the amounts shown alongside the officer's name are for 2017, 2016,2019, 2018, and 2015,2017, respectively. For the other named officers,Ms. Earnhardt, the amounts shown are for 2017.2019.
Abbott Laboratories Annuity Retirement Plan
M. D. White: $153,425$180,690 / $146,866($87,156) / $44,424;$153,425; R. B. Ford: $176,268 / ($37,501) / $106,226; B. B. Yoor: $109,749$188,095 / $51,896($30,841) / ($2,330); H.$109,749; L. Allen: $73,724; R. B. Ford: $106,226;D. Earnhardt: $25,037; and D. G. Salvadori: $41,282 / $3,413 / $24,698.
53
Abbott Laboratories Supplemental Pension Plan
M. D. White: $2,045,299$2,946,704 / $2,776,331($3,700,892) / ($332,475);$2,045,299; R. B. Ford: $1,944,104 / $343,260 / $798,324; B. B. Yoor: $879,913$1,796,506 / $395,494$363,129 / $131,766; H.$879,913; L. Allen: $751,794; R. B. Ford: $798,324;D. Earnhardt: $158,642; and D. G. Salvadori: $337,711 / $42,818 / $150,097.
Non-Qualified Defined Contribution Plan Earnings
The totals in this column include reportable interest credited under the 1998 Abbott Laboratories Performance Incentive Plan, the Abbott Laboratories 401(k) Supplemental Plan, and the 1986 Abbott Laboratories Management Incentive Plan (although none of the named officers currently receives awards under this plan).
M. D. White: $1,152,178$2,580,442 / $937,518$1,381,845 / $612,230;$1,152,178; R. B. Ford: $191,127 / $77,012 / $45,198; B. B. Yoor: $29,877$121,003 / $5,883$52,890 / $2,490; H.$29,877; L. Allen: $121,719; R. B. Ford: $45,198;D. Earnhardt: $843; and D. G. Salvadori: $16,717 / $7,437 / $4,666.
For Messrs. White, Ford, Yoor, and Yoor,Salvadori, the amounts shown alongside the officer's name are for 2017, 2016,2019, 2018, and 2015,2017, respectively. For the other named officers,Ms. Earnhardt, the amounts shown are for 2017.2019.
Earnings on Non-Qualified Defined Contribution Plans (net of the reportable interest included in footnote 7)5).
M. D. White: $423,890$105,715 / $306,382$638,710 / $567,345;$423,890; R. B. Ford: $0 / $6,125 / $8,600; B. B. Yoor: $268 / $0 / $304; H. L. Allen: $18,083;$3,237 / $268; and R. B. Ford: $8,600.D. G. Salvadori: $0 / $1,004 / $0.
Each of the named officers' awards under the 1998 Abbott Laboratories Performance Incentive Plan is paid in cash to the officer on a current basis. Each of the named officers other than Messrs. Salvadori and Rousseau, have grantor trusts into which the awards may be deposited, net of maximum tax withholdings. Certain of theThe named officers also have grantor trusts in connection with the Abbott Laboratories 401(k) Supplemental Plan and the 1986 Abbott Laboratories Management Incentive Plan (although none of the named officers currently receives awards under the Management Incentive Plan). These amounts include the trusts' earnings (net of the reportable interest included in footnote 7)5).
Employer Contributions to Defined Contribution Plans
M. D. White: $95,000 / $95,000 / $95,000; R. B. Ford: $50,000 / $39,213 / $33,750; B. B. Yoor: $32,163$41,250 / $29,212$39,803 / $21,894; H.$32,163; L. Allen: $34,505; R. B. Ford: $33,750;D. Earnhardt: $19,798; and D. G. Salvadori: $30,423; M. T. Rousseau: $11,100; and E. S. Fain: $11,100.$35,247 / $33,752 / $30,423.
These amounts include employer contributions to both Abbott's tax-qualified defined contribution plans, for Messrs. White, Yoor, Allen, Ford,plan and Salvadori, the Abbott Laboratories 401(k) Supplemental Plan, and for Messrs. Rousseau and Fain, the Management Savings Plan (formerly known as the St. Jude Medical, Inc. Management Savings Plan).Plan. The Abbott Laboratories 401(k) Supplemental Plan permits eligible Abbott officers to contribute amounts in excess of the limit set by the Internal Revenue Code for employee contributions to 401(k) plans up to the excess of (i) 18% of their base salary over (ii) the amount contributed to Abbott's tax-qualified 401(k) plan. Abbott matches participant contributions at the rate of 250% of the first 2% of compensation contributed to the plan. The named officers have these amounts paid to them in cash on a current basis and deposited into a grantor trust established by the officer, net of maximum tax withholdings. Employer contributions to the Management Savings Plan are described in footnote 1 of the 2017 Nonqualified Deferred Compensation Table on page 58.
Other Compensation
Mr. White's non-business-related flights on corporate aircraft are covered by a time-sharing lease agreement, pursuant to which he reimburses Abbott for certain costs associated with those flights in accordance with Federal Aviation Administration regulations. The following amounts are included in the totals in this column, which reflect Abbott's incremental cost less reimbursements for non-business-related flights: $292,292$226,633 / $204,527$229,599 / $216,811.$292,292.
Abbott determines the incremental cost for flights based on the direct cost to Abbott, including fuel costs, parking, handling and landing fees, catering, travel fees, and other miscellaneous direct costs.
For Mr. White, the following costs associated with security are included: $209,414$237,061 / $219,680$230,033 / $212,350.$209,414. Abbott determines the cost for these expenses based on its actual costs. The security is provided on the recommendation of an independent security study.
Abbott Laboratories 45
Also included in the totals shown in the table is the cost of providing a corporate automobile less the amount reimbursed by the officer: R. B. Ford: $21,841 / $19,516 / $18,541; B. B. Yoor: $20,559$20,081 / $20,178$20,443 / $18,295; H. L. Allen: $9,158; R. B. Ford: $18,541;$20,559; and D. G. Salvadori: $18,360; and E. S. Fain: $31,384.$24,559 / $27,727 / $18,360.
For Messrs.Mr. Yoor Allen, and Mr. Salvadori, the following costs associated with financial planning are included: B. B. Yoor: $10,000 / $10,833$10,000 / $0; H. L. Allen: $9,400;$10,000; and D. G. Salvadori: $0 / $0 / $5,845.
For Messrs. Rousseau and Fain, the following amounts are included: (i) pursuant to, or in place of payments due under, their respective previous St. Jude Medical change in control agreements: (A) cash payments upon termination of employment: M. T. Rousseau: $12,488,519; E. S. Fain: $7,004,577; (B) health and welfare premiums: M. T. Rousseau: $16,180; and E. S. Fain: $13,882; and (C) life insurance premiums: M. T. Rousseau: $4,770; and E. S. Fain: $3,362; and (ii) a cash payment under the terms of a retention agreement entered into in connection with Abbott's acquisition of St. Jude Medical: E. S. Fain: $1,485,260.
The named officers other than Messrs. Rousseau and Fain, are also eligible to participate in an executive disability benefit described on page 59.65.
46 Abbott Laboratories54
|
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock | All Other Option Awards: Numbers of Securities Underlying | Exercise or Base Price of Options | Closing Market Price on | Grant Date Fair Value of Stock and | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock | All Other Option Awards: Numbers of Securities Underlying | Exercise or Base Price of Options | Closing Market Price on | Grant Date Fair Value of Stock and | ||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
Name | Grant Date | Approval Date | | Target ($) | | Maximum ($) | Target (#)(2)(3) | of Units (#) | Options (#)(4) | Awards ($/Sh.) | Grant Date | Option Awards | | Name | Grant Date | Approval Date | Target ($) | Maximum ($) | Target (#)(2)(3) | of Units (#)(3) | Options (#)(4) | Awards ($/Sh.) | Grant Date | Option Awards | ||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||
M. D. White | 2/17/17 | 2/17/17 | 92,342 | $4,099,523(5) | | M. D. White | | 2/22/19 | | 2/22/19 | | | | | | | 99,637 | | | | | | | | $ | 7,562,448 | (5) | |||||||||||||||||||||||||||||||||||||
2/17/17 | 2/17/17 | 638,629 | $44.40 | $44.69 | 4,099,998(6) | | | 2/22/19 | | 2/22/19 | | | | | | | | | 522,272 | | | $ | 75.90 | | | $ | 76.13 | | 7,562,499 | (6) | ||||||||||||||||||||||||||||||||||
| B. B. Yoor | 2/17/17 | 2/17/17 | | | | | 19,763 | | | | | 877,378(5) | | | R. B. Ford | | 2/22/19 | | 2/22/19 | | | | | | | | | 45,797 | | | | | | | | | | | | 3,475,992 | (5) | ||||||||||||||||||||||
| | 2/17/17 | 2/17/17 | | | | | | | 136,682 | 44.40 | 44.69 | 877,498(6) | | | | | 2/22/19 | | 2/22/19 | | | | | | | | | | | | | 240,059 | | | 75.90 | | | 76.13 | | 3,476,054 | (6) | ||||||||||||||||||||||
H. L. Allen | 2/17/17 | 2/17/17 | 24,155 | 1,072,361(5) | | B. B. Yoor | | 2/22/19 | | 2/22/19 | | | | | | | 32,279 | | | | | | | | 2,449,976 | (5) | ||||||||||||||||||||||||||||||||||||||
2/17/17 | 2/17/17 | 167,056 | 44.40 | 44.69 | 1,072,500(6) | | | 2/22/19 | | 2/22/19 | | | | | | | | | 169,198 | | | 75.90 | | | 76.13 | | 2,449,987 | (6) | ||||||||||||||||||||||||||||||||||||
| R. B. Ford | 2/17/17 | 2/17/17 | | | | | 21,959 | | | | | 974,870(5) | | | L. D. Earnhardt | | 6/10/19 | | 4/25/19 | | | | | | | | | 17,431 | | | | | | | | | | | | 1,411,388 | (5) | ||||||||||||||||||||||
| | 2/17/17 | 2/17/17 | | | | | | | 151,869 | 44.40 | 44.69 | 974,999(6) | | | | | 6/10/19 | | 4/25/19 | | | | | | | | | | | 39,515 | (7) | | | | | | | | | 3,199,530 | (5) | ||||||||||||||||||||||
D. G. Salvadori | 2/17/17 | 2/17/17 | 19,961 | 886,169(5) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7/21/17 | 6/29/17 | 7,173 | 363,743(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | 6/10/19 | | 4/25/19 | | | | | | | | | | | | | 91,367 | | | 80.98 | | | 81.27 | | 1,353,145 | (6) | ||||||||||||||||||||||||||||||||||||
2/17/17 | 2/17/17 | 138,049 | 44.40 | 44.69 | 886,275(6) | | D. G. Salvadori | | 2/22/19 | | 2/22/19 | | | | | | | 30,988 | | | | | | | | 2,351,989 | (5) | |||||||||||||||||||||||||||||||||||||
7/21/17 | 6/29/17 | 49,611 | 50.72 | 50.84 | 376,051(6) | | | 2/22/19 | | 2/22/19 | | | | | | | | | 162,430 | | | 75.90 | | | 76.13 | | 2,351,986 | (6) | ||||||||||||||||||||||||||||||||||||
| E. S. Fain | 2/17/17 | 2/17/17 | | | | | 23,085(7) | | | | | 1,024,859(5) | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||
| | 1/4/17 | 6/10/16 | | | | | | 50,761(8) | | | | 1,999,730(5) | | ||||||||||||||||||||||||||||||||||||||||||||||||||
| | 2/17/17 | 2/17/17 | | | | | | | 159,657(7) | 44.40 | 44.69 | 1,024,998(6) | | ||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Abbott Laboratories 47 55
|
The following table summarizes the outstanding equity awards held by the named officers at year-end.
Option Awards(1)(2) | | Stock Awards(2) | | Option Awards(1)(2) | | Stock Awards(2) | | |||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
M. D. White | 44,326 | $2,529,685 | M. D. White | 30,781 | $2,673,638 | |||||||||||||||||||||||||||||||||||||||||||
91,146 | 5,201,702 | 83,417 | 7,245,601 | |||||||||||||||||||||||||||||||||||||||||||||
92,342 | 5,269,958 | 99,637 | 8,654,470 | |||||||||||||||||||||||||||||||||||||||||||||
325,000 | $26.0150 | 02/19/19 | 302,500 | $27.0336 | 2/16/22 | |||||||||||||||||||||||||||||||||||||||||||
295,000 | 26.1879 | 02/18/20 | 980,000 | 34.9400 | 2/14/23 | |||||||||||||||||||||||||||||||||||||||||||
294,700 | 22.3919 | 02/17/21 | 727,699 | 39.1200 | 2/20/24 | |||||||||||||||||||||||||||||||||||||||||||
302,500 | 27.0336 | 02/16/22 | 937,031 | 47.0000 | 2/19/25 | |||||||||||||||||||||||||||||||||||||||||||
980,000 | 34.9400 | 02/14/23 | 1,198,630 | 38.4000 | 2/18/26 | |||||||||||||||||||||||||||||||||||||||||||
727,699 | 39.1200 | 02/20/24 | 425,753 | 212,876 | 44.4000 | 2/16/27 | ||||||||||||||||||||||||||||||||||||||||||
624,687 | 312,344 | 47.0000 | 02/19/25 | 229,358 | 458,715 | 59.9400 | 2/15/28 | |||||||||||||||||||||||||||||||||||||||||
399,544 | 799,086 638,629 | 38.4000 44.4000 | 02/18/26 02/16/27 | 522,272 | 75.9000 | 2/21/29 | ||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See footnotes on page 54.61.
48 Abbott Laboratories56
2019 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (CONTINUED) |
Option Awards(1)(2) | | Stock Awards(2) | | ||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
R. B. Ford | 7,320 | $ | 635,815 | ||||||||||||||||||||||
29,940 | 2,600,588 | ||||||||||||||||||||||||
45,797 | 3,977,927 | ||||||||||||||||||||||||
45,492 | $39.1200 | 2/20/24 | |||||||||||||||||||||||
56,933 | 41.1400 | 6/30/24 | |||||||||||||||||||||||
127,436 | 47.0000 | 2/19/25 | |||||||||||||||||||||||
14,243 | 48.9000 | 5/31/25 | |||||||||||||||||||||||
285,388 | 38.4000 | 2/18/26 | |||||||||||||||||||||||
101,246 | 50,623 | 44.4000 | 2/16/27 | ||||||||||||||||||||||
82,321 | 164,642 | 59.9400 | 2/15/28 | ||||||||||||||||||||||
240,059 | 75.9000 | 2/21/29 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
See footnotes on page 61.
57
|
Option Awards(1)(2) | | Stock Awards(2) | | ||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
B. B. Yoor | 6,588 | $ | 572,234 | ||||||||||||||||||||||
29,940 | 2,600,588 | ||||||||||||||||||||||||
32,279 | 2,803,754 | ||||||||||||||||||||||||
41,229 | $47.0000 | 2/19/25 | |||||||||||||||||||||||
81,709 | 48.9000 | 5/31/25 | |||||||||||||||||||||||
213,470 | 38.4000 | 2/18/26 | |||||||||||||||||||||||
91,121 | 45,561 | 44.4000 | 2/16/27 | ||||||||||||||||||||||
82,321 | 164,642 | 59.9400 | 2/15/28 | ||||||||||||||||||||||
169,198 | 75.9000 | 2/21/29 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
See footnotes on page 61.
58
2019 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (CONTINUED) |
Option Awards(1)(2) | | Stock Awards(2) | | Option Awards(1)(2) | | Stock Awards(2) | | |||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
B. B. Yoor | 1,950 | $111,287 | L. D. Earnhardt | 17,431 | $1,514,057 | |||||||||||||||||||||||||||||||||||||||||||
3,865 | 220,576 | 39,515 | $3,432,273 | |||||||||||||||||||||||||||||||||||||||||||||
16,232 | 926,360 | 91,367 | $80.9800 | 6/09/29 | ||||||||||||||||||||||||||||||||||||||||||||
19,763 | 1,127,874 | |||||||||||||||||||||||||||||||||||||||||||||||
11,400 | $34.9400 | 02/14/23 | ||||||||||||||||||||||||||||||||||||||||||||||
32,363 | 39.1200 | 02/20/24 | ||||||||||||||||||||||||||||||||||||||||||||||
27,486 | 13,743 | 47.0000 | 02/19/25 | |||||||||||||||||||||||||||||||||||||||||||||
54,473 | 27,236 | 48.9000 | 05/31/25 | |||||||||||||||||||||||||||||||||||||||||||||
71,157 | 142,313 136,682 | 38.4000 44.4000 | 02/18/26 02/16/27 | |||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See footnotes on page 54.61.
Abbott Laboratories 49 59
|
Option Awards(1)(2) | | Stock Awards(2) | | Option Awards(1)(2) | | Stock Awards(2) | | |||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
H. L. Allen | 7,447 | $ | 425,000 | D. G. Salvadori | 6,654 | $ | 577,966 | |||||||||||||||||||||||||||||||||||||||||||
21,702 | 1,238,533 | 2,391 | 207,682 | |||||||||||||||||||||||||||||||||||||||||||||||
24,155 | 1,378,526 | 22,178 | 1,926,381 | |||||||||||||||||||||||||||||||||||||||||||||||
165,000 | $34.9400 | 02/14/23 | 30,988 | 2,691,618 | ||||||||||||||||||||||||||||||||||||||||||||||
107,793 | 39.1200 | 02/20/24 | 42,479 | $47.0000 | 02/19/25 | |||||||||||||||||||||||||||||||||||||||||||||
104,947 | 52,474 | 47.0000 | 02/19/25 | 71,313 | 38.4000 | 02/18/26 | ||||||||||||||||||||||||||||||||||||||||||||
95,130 | 190,258 167,056 | 38.4000 44.4000 | 02/18/26 02/16/27 | 92,033 | 46,016 | 44.4000 | 02/16/27 | |||||||||||||||||||||||||||||||||||||||||||
33,074 | 16,537 | 50.7200 | 07/20/27 | |||||||||||||||||||||||||||||||||||||||||||||||
60,979 | 121,956 | 59.9400 | 02/15/28 | |||||||||||||||||||||||||||||||||||||||||||||||
162,430 | 75.9000 | 02/21/29 | ||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See footnotes on page 54.61.
50 Abbott Laboratories60
|
Option Awards(1)(2) | | Stock Awards(2) | | ||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
R. B. Ford | 6,028 | $ | 344,018 | ||||||||||||||||||||||
674 | 38,465 | ||||||||||||||||||||||||
21,702 | 1,238,533 | ||||||||||||||||||||||||
21,959 | 1,253,200 | ||||||||||||||||||||||||
4,467 | $26.1879 | 02/18/20 | |||||||||||||||||||||||
10,400 | 22.3919 | 02/17/21 | |||||||||||||||||||||||
19,600 | 27.0336 | 02/16/22 | |||||||||||||||||||||||
49,000 | 34.9400 | 02/14/23 | |||||||||||||||||||||||
45,492 | 39.1200 | 02/20/24 | |||||||||||||||||||||||
56,933 | 41.1400 | 06/30/24 | |||||||||||||||||||||||
84,957 | 42,479 | 47.0000 | 02/19/25 | ||||||||||||||||||||||
9,495 | 4,748 | 48.9000 | 05/31/25 | ||||||||||||||||||||||
95,130 | 190,258 151,869 | 38.4000 44.4000 | 02/18/26 02/16/27 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
See footnotes on page 54.
Abbott Laboratories 51
|
Option Awards(1)(2) | | Stock Awards(2) | | ||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
D. G. Salvadori | 6,028 | $ | 344,018 | ||||||||||||||||||||||
16,232 | 926,360 | ||||||||||||||||||||||||
19,961 | 1,139,174 | ||||||||||||||||||||||||
7,173 | 409,363 | ||||||||||||||||||||||||
42,479 | 47.0000 | 02/19/25 | |||||||||||||||||||||||
142,313 | 38.4000 | 02/18/26 | |||||||||||||||||||||||
138,049 49,611 | 44.4000 50.7200 | 02/16/27 07/20/27 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
See footnotes on page 54.
52 Abbott Laboratories
|
Option Awards(1) | | Stock Awards | | |||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable(i) | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
M. T. Rousseau | 77,739 | $28.5000 | 07/06/18 | |||||||||||||||||||||
150,737 545,573 | 33.1400 29.5600 | 07/06/18 07/06/18 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
See also footnotes on page 54.
Abbott Laboratories 53
Footnotes to 20172019 Outstanding Equity Awards At Fiscal Year-End table:
Option Awards | | Stock Awards(a) | | Option Awards | | Stock Awards(a) | | |||||||||||||||||||||||||||||||
Name | Number of Unexercised Shares Remaining from Original Grant | Number of Option Shares Vesting—Date Vested 2018 | Number of Option Shares Vesting—Date Vested 2019 | Number of Option Shares Vesting—Date Vested 2020 | | Number of Restricted Shares or Units | Number of Restricted Shares or Units Vesting— Date Vested 2018 | Name | Number of Unexercised Shares Remaining from Original Grant | Number of Option Shares Vesting—Date Vested 2020 | Number of Option Shares Vesting—Date Vesting 2021 | Number of Option Shares Vesting—Date Vesting 2022 | | Number of Restricted Shares or Units | Number of Restricted Shares or Units Vesting— Date Vested 2020 | Number of Restricted Shares or Units Vesting— Date Vesting 2022 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
M. D. White | 312,344 | 312,344 - 2/20 | 44,326 | (b) | M. D. White | 212,876 | 212,876 - 2/17 | 30,781 | (b) | |||||||||||||||||||||||||||||
799,086 | 399,543 - 2/19 | 399,543 - 2/19 | 91,146 | (c) | 458,715 | 229,357 - 2/16 | 229,358 - 2/16 | 83,417 | (c) | |||||||||||||||||||||||||||||
638,629 | 212,877 - 2/17 | 212,876 - 2/17 | 212,876 - 2/17 | 92,342 | (d) | 522,272 | 174,090 - 2/22 | 174,091 - 2/22 | 174,091 - 2/22 | 99,637 | (d) | |||||||||||||||||||||||||||
B. B. Yoor | 13,743 | 13,743 - 2/20 | | | | 1,950 | (b) | | R. B. Ford | 50,623 | 50,623 - 2/17 | | | | 7,320 | (b) | | | ||||||||||||||||||||
| | 27,236 | 27,236 - 6/01 | | | | 3,865 | (e) | | | 164,642 | 82,321 - 2/16 | 82,321 - 2/16 | | | 29,940 | (c) | | | |||||||||||||||||||
| | 142,313 | 71,156 - 2/19 | 71,157 - 2/19 | | | 16,232 | (c) | | | 240,059 | 80,019 - 2/22 | 80,020 - 2/22 | 80,020 - 2/22 | | 45,797 | (d) | | | |||||||||||||||||||
B. B. Yoor | 45,561 | 45,561 - 2/17 | 6,588 | (b) | ||||||||||||||||||||||||||||||||||
164,642 | 82,321 - 2/16 | 82,321 - 2/16 | 29,940 | (c) | ||||||||||||||||||||||||||||||||||
169,198 | 56,399 - 2/22 | 56,399 - 2/22 | 56,400 - 2/22 | 32,279 | (d) | |||||||||||||||||||||||||||||||||
L. D. Earnhardt | 91,367 | 30,455 - 6/10 | 30,456 - 6/10 | 30,456 - 6/10 | | 17,431 | (e) | | | |||||||||||||||||||||||||||||
| | 136,682 | 45,561 - 2/17 | 45,560 - 2/17 | 45,561 - 2/17 | | 19,763 | (d) | | | | | | | | 39,515 | | 39,515 - 6/10 | | |||||||||||||||||||
H. L. Allen | 52,474 | 52,474 - 2/20 | 7,447 | (b) | D. G. Salvadori | 46,016 | 46,016 - 2/17 | 6,654 | (b) | |||||||||||||||||||||||||||||
190,258 | 95,129 - 2/19 | 95,129 - 2/19 | 21,702 | (c) | 16,537 | 16,537 - 7/21 | 2,391 | (f) | ||||||||||||||||||||||||||||||
167,056 | 55,686 - 2/17 | 55,685 - 2/17 | 55,685 - 2/17 | 24,155 | (d) | 121,956 | 60,978 - 2/16 | 60,978 - 2/16 | 22,178 | (c) | ||||||||||||||||||||||||||||
R. B. Ford | 42,479 | 42,479 - 2/20 | | | | 6,028 | (b) | | 162,430 | 54,143 - 2/22 | 54,143 - 2/22 | 54,144 - 2/22 | 30,988 | (d) | ||||||||||||||||||||||||
| | 4,748 | 4,748 - 6/01 | | | | 674 | (e) | | | | | | | | | | | | | | | | | | | | | | |||||||||
| | 190,258 | 95,129 - 2/19 | 95,129 - 2/19 | | | 21,702 | (c) | | |||||||||||||||||||||||||||||
| | 151,869 | 50,623 - 2/17 | 50,623 - 2/17 | 50,623 - 2/17 | | 21,959 | (d) | | |||||||||||||||||||||||||||||
D. G. Salvadori | 42,479 | 42,479 - 2/20 | 6,028 | (b) | ||||||||||||||||||||||||||||||||||
142,313 | 71,156 - 2/19 | 71,157 - 2/19 | 16,232 | (c) | ||||||||||||||||||||||||||||||||||
138,049 49,611 | 46,017 - 2/17 16,537 - 7/21 | 46,016 - 2/17 16,537 - 7/21 | 46,016 - 2/17 16,537 - 7/21 | 19,961 7,173 | (d) (f) | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | |
54 Abbott Laboratories 61
|
The following table summarizes for each named officer the number of shares the officer acquired on the exercise of stock options and the number of shares the officer acquired on the vesting of stock awards in 2017:2019:
Option Awards | | Stock Awards | | Option Awards | | Stock Awards | | |||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
M. D. White | 530,000 | $14,748,045 | 129,520 | $5,887,979 | M. D. White | 589,700 | $32,016,664 | 118,062 | $9,117,928 | |||||||||||||||||||
| B. B. Yoor | — | — | | 15,693 | 714,177 | | R. B. Ford | 0 | 0 | | 33,140 | 2,559,402 | | ||||||||||||||
H. L. Allen | 8,000 | 171,203 | 24,165 | 1,098,541 | B. B. Yoor | 43,763 | 2,089,351 | 29,673 | 2,291,646 | |||||||||||||||||||
| R. B. Ford | — | — | | 23,128 | 1,061,298 | | L. D. Earnhardt | 0 | 0 | | 0 | 0 | | ||||||||||||||
D. G. Salvadori | 258,539 | 3,170,754 | 27,221 | 1,330,967 | D. G. Salvadori | 71,000 | 3,237,607 | 28,249 | 2,206,202 | |||||||||||||||||||
| M. T. Rousseau | — | — | | 84,394 | 4,088,046 | | | | | | | | | | | | | | |||||||||
E. S. Fain | 293,519 | 5,463,589 | 83,179 | 4,229,328 | ||||||||||||||||||||||||
| | | | | | | | | | | | |
PENSION BENEFITS |
During 2017, Messrs. White, Yoor, Allen, Ford, and Salvadori2019, the named officers participated in two Abbott-sponsored defined benefit pension plans: the Abbott Laboratories Annuity Retirement Plan, a tax-qualified pension plan; and the Abbott Laboratories Supplemental Pension Plan, a non-qualified supplemental pension plan. The Supplemental Pension Plan also includes a benefit feature Abbott uses to attract officers who are at the mid-point of their careers. This feature provides an additional benefit to officers who are mid-career hires that is less valuable to officers who have spent most of their careers at Abbott. Except as provided in Abbott's change in control agreements, Abbott does not have a policy granting extra years of credited service under the plans. These change in control agreements are described on pages 5965 and 60.66.
The compensation considered in determining the pension payable to the named officers is the compensation shown in the "Salary" and "Non-Equity Incentive Plan Compensation" columns of the Summary Compensation Table on page 44.53.
The Annuity Retirement Plan covers eligible employees in the United States who are age 21 or older, and provides participants with a life annuity benefit at normal retirement equal to A plus the greater of B or C below.
The benefit for service prior to 2004 (B or C above) is reduced for the cost of preretirement surviving spouse benefit protection. The reduction is calculated using formulas based on age and employment status during the period in which coverage was in effect.
Final average earnings are the average of the employee's 60 highest-paid consecutive calendar months of compensation (salary and non-equity incentive plan compensation). The Annuity Retirement Plan covers earnings up to the limit imposed by Internal Revenue Code Section 401(a)(17) and provides for a maximum of 35 years of benefit service.
Participants become fully vested in their pension benefit upon the completion of five years of service. The benefit is payable on an unreduced basis at age 65. Participants hired after 2003 who terminate prior to age 55 with at least 10 years of service may choose to commence their benefits on an actuarially reduced basis as early as age 55. Participants hired prior to 2004 who terminate prior to age age��50 with at least 10 years of service may choose to commence their benefits on an actuarially reduced basis as early as age 50. Participants hired prior to 2004 who
Abbott Laboratories 55
terminate prior to age 50 with less than 10 years of service may choose to commence their benefits on an actuarially reduced basis as early as age 55.
62
The Annuity Retirement Plan offers several optional forms of payment, including certain and life annuities, joint and survivor annuities, and level income annuities. The benefit paid under any of these options is actuarially equivalent to the life annuity benefit produced by the formula described above.
Participants who retire from Abbott prior to their normal retirement age may receive subsidized early retirement benefits. Participants hired after 2003 are eligible for early retirement at age 55 with 10 years of service. Participants hired prior to 2004 are eligible for early retirement at age 50 with 10 years of service or age 55 if the employee's age plus years of benefit service total 70 or more. As of December 31, 2017, Mr.2019, Messrs. White wasand Yoor were eligible for early retirement benefits under the plan.
The subsidized early retirement reductions applied to the benefit payable for service after 2003 (A above) depend upon the participant's age at retirement. If the participant retires after reaching age 55, the benefit is reduced 5 percent per year for each year that payments are made before age 62. If the participant retires after reaching age 50 but prior to reaching age 55, the benefit is actuarially reduced from age 65.
The early retirement reductions applied to the benefit payable for service prior to 2004 (B and C above) depend upon age and service at retirement:
With the following exceptions, the provisions of the Supplemental Pension Plan are substantially the same as those of the Annuity Retirement Plan:
56 Abbott Laboratories 63
from the plan's unreduced retirement age, unless the benefit is being actuarially reduced from age 65. As of December 31, 2017, Mr.2019, Messrs. White wasand Yoor were eligible for early retirement benefits under the plan.
Benefits payable under the Supplemental Pension Plan are offset by the benefits payable from the Annuity Retirement Plan, calculated as if benefits under the plans commenced at the same time. The amounts paid to an officer's Supplemental Pension Plan grantor trust to fund plan benefits are actuarially determined. The plan is designed to result in Abbott paying the officer's Supplemental Pension Plan benefits to the extent assets held in the officer's trust are insufficient.
Name | Plan Name | Number Of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | | Payments During Last Fiscal Year ($) | | | Name | Plan Name | Number Of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |||||
M. D. White | Abbott Laboratories Annuity Retirement Plan | 33 | $ 1,589,767 | $ 0 | | M. D. White | | Abbott Laboratories Annuity Retirement Plan | | 35 | | | $ | 1,683,301 | | $ | 0 | | ||||||||||
Abbott Laboratories Supplemental Pension Plan | 33 | 39,531,717 | 2,212,762 | (2) | | | Abbott Laboratories Supplemental Pension Plan | | 35 | | | 38,777,529 | | 2,416,939 | (2) | |||||||||||||
| B. B. Yoor | Abbott Laboratories Annuity Retirement Plan | 20 | 439,903 | | 0 | | | R. B. Ford | | Abbott Laboratories Annuity Retirement Plan | | 23 | | | 539,603 | | 0 | | | ||||||||
| | Abbott Laboratories Supplemental Pension Plan | 20 | 1,888,580 | | 92,691 | (2) | | | | | Abbott Laboratories Supplemental Pension Plan | | 23 | | | 4,125,253 | | 212,001 | (2) | | |||||||
H. L. Allen | Abbott Laboratories Annuity Retirement Plan | 12 | 286,941 | 0 | | B. B. Yoor | | Abbott Laboratories Annuity Retirement Plan | | 22 | | | 597,157 | | 0 | | ||||||||||||
Abbott Laboratories Supplemental Pension Plan | 12 | 2,226,201 | 193,264 | (2) | | | Abbott Laboratories Supplemental Pension Plan | | 22 | | | 4,048,215 | | 233,883 | (2) | |||||||||||||
| R. B. Ford | Abbott Laboratories Annuity Retirement Plan | 21 | 400,836 | | 0 | | | L. D. Earnhardt | | Abbott Laboratories Annuity Retirement Plan | | 1 | | | 25,037 | | 0 | | | ||||||||
| | Abbott Laboratories Supplemental Pension Plan | 21 | 1,837,889 | | 66,435 | (2) | | | | | Abbott Laboratories Supplemental Pension Plan | | 1 | | | 158,642 | | 0 | (2) | | |||||||
D. G. Salvadori | Abbott Laboratories Annuity Retirement Plan | 3 | 53,596 | 0 | | D. G. Salvadori | | Abbott Laboratories Annuity Retirement Plan | | 5 | | | 98,291 | | 0 | | ||||||||||||
Abbott Laboratories Supplemental Pension Plan | 3 | 301,984 | 0 | | | Abbott Laboratories Supplemental Pension Plan | | 5 | | | 682,513 | | 0 | (2) | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Abbott Laboratories 5764
|
The following table summarizes non-qualified deferred compensation of Messrs. Rousseau and Fain under the Management Savings Plan (formerly known as the St. Jude Medical, Inc. Management Savings Plan). None of Abbott's other named officers have any non-qualified deferred compensation.
| Name | Plan Name | Executive contributions in last FY ($)(3) | Registrant contributions in last FY ($)(4) | Aggregate earnings in last FY ($)(5) | Aggregate withdrawals/ distributions ($) | Aggregate balance at last FYE ($) | | ||||||||
| | | | | | | | | | | | | | | | |
| M. T. Rousseau | | Management Savings Plan(1)(2) | | $415,384 | | $3,000 | | $2,290,439 | | $0 | | $24,263,579 | | ||
| | E. S. Fain | | Management Savings Plan(1)(2) | | 41,415 | | 3,000 | | 530,745 | | 0 | | 3,363,541 | | |
| | | | | | | | | | | | | | | | |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL |
POTENTIAL PAYMENTS UPON TERMINATION—GENERALLY
Abbott does not have employment agreements with its named officers.
Messrs. Rousseau and Fain had change in control agreements with St. Jude Medical, Inc. prior to its acquisition by Abbott and entered into retention agreements with Abbott in connection with the acquisition. Payments made under their respective agreements are described in footnotes 3, 6, and 8 of the Summary Compensation Table on pages 44 through 46 and in the section of the proxy statement captioned "Potential Payments Upon Termination or Change in Control—Equity Awards" on pages 60 and 61.
The following summarizes the payments that the named officers other than Messrs. Rousseau and Fain, would have received if their employment had terminated on December 31, 2017.2019. Earnings would have continued to be paid to the named officer's Performance Incentive Plan, Management Incentive Plan, and Supplemental 401(k) Plan grantor trusts, until the trust assets were fully distributed. The amount of these payments would depend on the period over which the trusts' assets were distributed and the trusts' earnings. If the trusts' assets were distributed over a ten-year period and based on current earnings, the named officers would receive the following average annual payments over such ten-year period:
58 Abbott Laboratories
In addition, the following one-time deposits would have been made under the Abbott Laboratories Supplemental Pension Plan for the following named officers:
If the termination of employment was due to disability, then the following named officers also would have received, in addition to Abbott's standard disability benefits, a monthly long-term disability benefit in the amount of:
This long-term disability benefit would continue for up to 24 months following termination of employment. It ends if the officer retires, recovers, dies, or ceases to meet eligibility criteria.
In addition, if the employment of these named officers had terminated due to death or disability, the officer's unvested stock options and restricted shares would have vested on December 31, 20172019 with values as set forth below in the section captioned, "Equity Awards."
POTENTIAL PAYMENTS UPON CHANGE IN CONTROL
Mr. White does not have a change in control agreement with Abbott.
Abbott has change in control arrangements with other key members of its management team, in the form of change in control agreements for Abbott officers and a change in control plan for certain other management personnel. The agreements with Mr. Ford, Mr. Yoor, Allen, Ford,Ms. Earnhardt, and Mr. Salvadori are described below. Messrs. Rousseau and Fain did not have change in control agreements with Abbott.
Each change in control agreement continues in effect until December 31, 2018,2020, and can be renewed for successive two-year terms upon notice prior to the expiration date. If notice of non-renewal is given, the agreement will expire on the later of the scheduled expiration date and the one-year anniversary of the date of such notice. If no notice is given, the agreement will expire on the one-year anniversary of the scheduled expiration date. Each agreement also automatically extends for two years following any change in control (see below) that occurs while the agreement is in effect.
65
The agreements provide that if the officer is terminated other than for cause or permanent disability or if the officer elects to terminate employment for good reason (see below) within two years following a change in control of Abbott, the officer is entitled to receive a lump sum payment equal to three times the officer's annual salary and annual incentive ("bonus") award (assuming for this purpose that all target performance goals have been achieved or, if higher, based on the average bonus for the last three years), plus any unpaid bonus owing for any completed performance period and the pro rata bonus for any current bonus period (based on the highest of the bonus assuming achievement of target performance, the average bonus for the past three years, or in the case of the unpaid bonus for any completed performance period, the actual bonus earned). If the officer is terminated other than for cause or permanent disability or if the officer elects to terminate employment for good reason during a potential change in control (see below), the officer is entitled to receive a lump sum payment of the annual salary and bonus payments described above, except that the amount of the bonus to which the officer is entitled will be based on the actual achievement of the applicable performance goals. If the potential change in control becomes a "change in control event" (within the meaning of Section 409A of the Internal Revenue Code), the officer will be entitled to receive the difference between the bonus amounts the officer received upon termination during the potential change in control and the bonus amounts that would have been received had such amounts instead been based on the higher of the officer's target bonus or the average bonus paid to the officer in the preceding three years. Bonus payments include payments made under the Performance Incentive Plan. The officer will also receive up to three years of additional employee benefits (including welfare benefits, outplacement services and tax and financial counseling, and the value of three more years of pension accruals).
Abbott Laboratories 59
If change in control-related payments and benefits become subject to the excise tax imposed under Section 4999 of the Internal Revenue Code, payments under the agreement will be reduced to prevent application of the excise tax if such a reduction would leave the executive in a better after-tax position than if the payments were not reduced and the tax applied. The agreements also limit the conduct for which awards under Abbott's incentive stock programs can be terminated and generally permit options to remain exercisable for the remainder of their term.
For purposes of the agreements, the term "change in control" includes the following events: any person becoming the beneficial owner of Abbott securities representing twenty percent or morea specified percentage of the outstanding voting power (not including an acquisition directly from Abbott and its affiliates); a change in the majority of the members of the Board of Directors whose appointment was approved by a vote of at least two-thirds of the incumbent directors; and the consummation of certain mergers or similar corporate transactions involving Abbott. A "potential change in control" under the agreements includes, among other things, Abbott's entry into an agreement that would result in a change in control. Finally, the term "good reason" includes: a significant adverse change in the executive's position, duties, or authority; Abbott's failure to pay the executive's compensation or a reduction in the executive's base pay or benefits; or the relocation of Abbott's principal executive offices to a location that is more than thirty-five miles from the location of the offices at the time of the change in control.
If a change in control had occurred on December 31, 20172019 immediately followed by one of the covered circumstances described above, Mr. Ford, Mr. Yoor, Allen, Ford,Ms. Earnhardt, and Mr. Salvadori would have been entitled to receive the following payments and benefits under the change in control agreements:
| Name | Cash termination payments | Additional Supplemental Pension Plan benefits | Welfare and fringe benefits | | | Name | Cash termination payments | Additional Supplemental Pension Plan benefits | Welfare and fringe benefits | | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | |||||||||||
| B. B. Yoor | | | $ | 5,059,900 | | | $ | 692,859 | | | $ | 68,222 | | | R. B. Ford | | $ | 8,312,500 | | | $ | 818,330 | | | $ | 70,570 | | |||
| H. L. Allen | | | 4,009,762 | | | 306,097 | | | 44,071 | | | | B. B. Yoor | | 6,435,050 | | | 1,742,950 | | | 70,181 | | | |||||||
| R. B. Ford | | | 3,656,407 | | | 461,602 | | | 68,122 | | | L. D. Earnhardt | | 5,489,900 | | | 237,835 | | | 69,916 | | |||||||||
| | D. G. Salvadori | | | 4,731,200 | | | 95,205 | | | 68,079 | | | | D. G. Salvadori | | 5,482,900 | | | 149,410 | | | 69,916 | | | ||||||
| | | | | | | | | | | | | | | | | | | | |
Under Abbott Laboratories' Incentive Stock Programs, upon a change in control, the surviving company may assume, convert, or replace awards to executive officers on an equivalent basis. If the surviving company does not do so, then the awards vest. If the surviving company does assume, convert, or replace the awards on an equivalent basis, then the awards vest if the officer's employment is terminated without cause or the officer resigns for good reason during the period six months prior to and through two years after a change in control. The term "good reason" has the same definition as in the change of control agreements.
66
If a change in control had occurred on December 31, 2017,2019, and the surviving company did not assume, convert, or replace the awards, then Messrs. White,Mr. Ford, Mr. Yoor, Allen, Ford,Ms. Earnhardt, and Mr. Salvadori would have vested in the following options, restricted shares, and restricted stock units:
Unvested Stock Options | | Restricted Shares/Units | | | | Unvested Stock Options | | | Restricted Shares/Units | | ||||||||||||||||||
Name | Number of Option Shares | Value of Option Shares | Number of Restricted Shares/Units | Value of Restricted Shares/Units | | Name | Number of Option Shares | Value of Option Shares | | Number of Restricted Shares/Units | Value of Restricted Shares/Units | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
M. D. White | 1,750,059 | $26,155,669 | 227,814 | $13,001,345 | | M. D. White | | 1,193,863 | | $27,111,424 | | | 213,835 | | $18,573,709 | | ||||||||||||
| B. B. Yoor | 319,974 | 4,749,655 | | 41,810 | 2,386,097 | | | R. B. Ford | | 455,324 | | 9,212,663 | | | | 83,057 | | 7,214,330 | | | |||||||
H. L. Allen | 409,788 | 6,197,130 | 53,304 | 3,042,059 | | B. B. Yoor | | 379,401 | | 8,221,093 | | | 68,807 | | 5,976,576 | | ||||||||||||
| R. B. Ford | 389,354 | 5,942,852 | | 50,363 | 2,874,216 | | | L. D. Earnhardt | | 91,367 | | 537,238 | | | | 56,946 | | 4,946,330 | | | |||||||
D. G. Salvadori | 372,452 | 5,148,859 | 49,394 | 2,818,915 | | D. G. Salvadori | | 346,939 | | 7,614,775 | | | 62,211 | | 5,403,647 | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The value of stock options shown is based on the excess of the closing price of a common share on December 31, 20172019 over the exercise price of such options, multiplied by the number of unvested stock options held by the named officer. The value of restricted shares shown is determined by multiplying the number of restricted shares that would vest as of December 31, 20172019 and the closing price of a common share on December 31, 2017.
60 Abbott Laboratories
In addition, prior to its acquisition by Abbott, St. Jude Medical, Inc. had granted to Messrs. Rousseau and Fain restricted stock unit and stock option awards. In connection with the acquisition, rather than settling in cash as permitted under the St. Jude equity plans, Abbott assumed all of St. Jude Medical's outstanding and unvested restricted stock units and stock options and converted them into Abbott restricted stock units and options to purchase Abbott common shares, respectively, with substantially the same terms and conditions as were applicable to such St. Jude Medical award. In accordance with the terms of the St. Jude Medical award agreements assumed by Abbott, Messrs. Rousseau's and Fain's outstanding converted St. Jude Medical awards vested when they left Abbott on July 7, 2017 and July 21, 2017, respectively. A restricted stock award held by Mr. Fain also vested on July 21, 2017. Consistent with Internal Revenue Code Section 409A and its regulations, Messrs. Rousseau and Fain received portions of their converted St. Jude Medical restricted stock units on their respective vesting dates for payment of withholding taxes and the remainder were settled on January 7, 2018 and January 21, 2018, respectively. The values of the converted St. Jude Medical restricted stock unit awards received on their respective vesting and settlement dates were as follows: M. T. Rousseau: Vesting date: $159,271; Settlement date: $4,784,443; and E. S. Fain: Vesting date: $77,480; Settlement date: $1,832,323. The values of the converted St. Jude Medical stock options on their respective vesting dates were as follows: M. T. Rousseau: $14,156,810; E. S. Fain: $5,985,741. The value of Mr. Fain's restricted stock award on its vesting date was $2,581,197. The values of the converted St. Jude Medical restricted stock unit awards and Mr. Fain's restricted stock award are determined by multiplying the number of shares vested and the closing price of a common share on the applicable settlement date and July 21, 2017, respectively. The values of the converted St. Jude Medical stock options are based on the excess of the closing price of a common share on the applicable vesting date over the exercise price of such options, multiplied by the number of stock options held.2019.
CEO PAY RATIO |
In 2017,2019, we compared CEO pay to that of our median employee. To identify our median employee, we first excluded all 3,653 employees who are employed in Bolivia (213), Egypt (332), Indonesia (633), Mexico (1,122), Peru (1,329), and Venezuela (24), representing less than 5% of our global workforce of 89,647 employees as of October 1, 20171. We then examined the 2017 base salary of all remaining employees globally, excluding our CEO, who were employed by us on October 1, 2017. We annualized the base salary of all permanent employees who were hired in 2017 but did not work for the entire year. The base salary for employees outside of the U.S. was converted to U.S. dollars.
After identifying the median employee wepreviously identified in 2017 using the methodology described in our 2018 proxy statement. Abbott does not believe there have been changes in Abbott's employee population or employee compensation arrangements in 2019 that would significantly impact our median employee.
We collected the 2019 annual total compensation for thisthe median employee using the same methodology we use for our named executive officers as disclosed in the Summary Compensation Table on page 4453 and then added the cost of medical and dental benefits ($12,597)12,674) in the calculation of annual total compensation for the median employee and CEO.
The annual total compensation of our median employee was $75,679,$84,434, resulting in a ratio of 251:329:1.
The above ratio and annual total compensation amount are reasonable estimates that have been calculated using methodologies and assumptions permitted by SECSecurities and Exchange Commission rules.
Abbott Laboratories 61 67
RATIFICATION OF ERNST & YOUNG LLP AS AUDITORS
(ITEM 2 ON PROXY CARD)
Abbott's By-Laws provide that the Audit Committee shall appoint annually a firm of independent registered public accountants to serve as auditors. In October 2017,2019, the Audit Committee appointed Ernst & Young LLP to act as auditors for 2018.2020. Ernst & Young LLP has served as Abbott's auditors since 2014.
Although the Audit Committee has sole authority to appoint auditors, it would like to know the opinion of the shareholders regarding its appointment of Ernst & Young LLP as auditors for 2018.2020. For this reason, shareholders are being asked to ratify this appointment. If the shareholders do not ratify the appointment of Ernst & Young LLP as auditors for 2018,2020, the Audit Committee will take that fact into consideration, but may, nevertheless, continue to retain Ernst & Young LLP.
The Board of Directors recommends a vote FOR ratification of the appointment of Ernst & Young LLP as auditors for 2018.2020.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will be given the opportunity to make a statement if they desire to do so. They will also be available to respond to appropriate questions.
The following table presents fees for professional audit services by Ernst & Young LLP for the audit of Abbott's annual financial statements for the years ended December 31, 20172019 and December 31, 20162018 and fees billed for other services rendered by Ernst & Young during these periods.
| | | 2017 | | 2016 | | | | 2019 | | 2018 | | ||||||||
| | | | | | | | | | | | | | | | | | | | |
Audit fees:(1) | $ | 26,863,000 | $ | 14,545,000 | Audit fees:(1) | $ | 23,960,000 | $ | 25,381,000 | |||||||||||
| Audit related fees:(2) | | 624,000 | | 404,000 | | Audit related fees:(2) | | 1,029,000 | | 770,000 | |||||||||
Tax fees:(3) | 5,732,000 | 2,389,000 | Tax fees:(3) | 6,668,000 | 8,905,000 | |||||||||||||||
| All other fees:(4) | | — | | 853,000 | | All other fees:(4) | | 149,000 | | 8,000 | | ||||||||
| | | | | | | | | | | | | | | | | | | | |
Total | $ | 33,219,000 | $ | 18,191,000 | Total | $ | 31,806,000 | $ | 35,064,000 | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
62 Abbott Laboratories68
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF THE INDEPENDENT AUDITOR
The Audit Committee has established policies and procedures to pre-approve all audit and permissible non-audit services performed by the independent auditor and its related affiliates.
Prior to engagement of the independent registered public accounting firm for the next year's audit, management will submit a schedule of all proposed services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.
Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
REPORT OF THE AUDIT COMMITTEE |
Management is responsible for Abbott's internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States of America, as well as expressing an opinion on the effectiveness of internal control over financial reporting. The Audit Committee reviews these processes on behalf of the Board of Directors. In this context, the Audit Committee has reviewed and discussed the audited financial statements contained in the 20172019 Annual Report on Form 10-K with Abbott's management and its independent registered public accounting firm.
The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed pursuant to Auditing Standard No. 16(Communications with Audit Committees), as adopted by the applicable requirements of the Public Company Accounting Oversight Board.Board and the Securities and Exchange Commission.
The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm's communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the firm's independence. The Audit Committee has also considered whether the provision of the services described on page 6268 under the caption "Audit Fees and Non-Audit Fees" is compatible with maintaining the independence of the independent registered public accounting firm.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Abbott's Annual Report on Form 10-K for the year ended December 31, 20172019 filed with the Securities and Exchange Commission.
E. M. Liddy,Chair
R. S. Austin
M. A. Kumbier
N. McKinstry
S. C. Scott III
G. F. Tilton
Abbott Laboratories 63 69
SAY ON PAY—AN ADVISORY VOTE ON THE APPROVAL OF EXECUTIVE COMPENSATION (ITEM 3 ON PROXY CARD)
Shareholders are being asked to approve the compensation of Abbott's named officers, as disclosed under Securities and Exchange Commission rules, including the Compensation Discussion and Analysis, the compensation tables, and related material included in this proxy statement.
In 2017, Abbott's three-year total shareholder return (TSR) of 139.5% is more than twice that of the peer group median and the broader Standard & Poor's 500 (S&P 500) and Dow Jones Industrial Average (DJIA) market indices. These consistent above-market returns are driven by the strength of our leadership positions in some of the largest and fastest growing markets in healthcare and innovative product portfolios across our businesses.
Abbott delivered strong returns for shareholders in 2019 and achieved outstandingor exceeded the financial targets set at the beginning of last year. Abbott's one-year TSR was 22.1%, delivering significant shareholder returns to shareholders, rankingon top of the strong one-year TSR of 29% in 2018, which ranked #1 in our peer group. Abbott's one-year total shareholder return (TSR) was 52.0%, which was 30.2
Primary performance metric for long-term incentive program | ||||
Our compensation program is market-based and 23.9 percentage points above the robust growth ofproduces outcomes that directly link to both the Standard & Poor's 500 Index (S&P 500)Company and the Dow Jones Industrial Average (DJIA), respectively. Abbott continues to be recognized as a member of the S&P 500 Dividend Aristocrat Index, having increased the dividend payout for 46 consecutive years.
In 2017, Abbott continued to strategically shape its business through the additions of St. Jude Medical and Alere Inc. The St. Jude Medical business expands Abbott's presence into multiple new areas of cardiovascular care, as well as neuromodulation, transforming Abbott into a broad-based leader in medical devices. Alere Inc. extends Abbott's long-established presence and leadership in diagnostics into rapid testing, an attractive and high growth area of testing in both developed and emerging markets. In addition, Abbott continues to have a strong organic pipeline of innovative new products across each of our major businesses, including novel technologies for glucose-monitoring, neuromodulation, cardiovascular care and fully-integrated diagnostic testing solutions. Together, this high level of R&D productivity and strategic shaping gives Abbott an exciting portfolio of businesses with the presence and capabilities in both developed and emerging markets to create new market opportunities for long-term growth.
officer performance. The vast majority of compensation for our executive officers is performance-based and objectively determined. Long Term Incentives (LTI), which comprise the largest percentage of compensation for our executive officers, are directly linked to shareholder returns. Each year, LTI award guidelines are determined based on relative TSR performance compared to our peer group. The Compensation Committee looks at 1-, 3-, and 5-year TSR in making these determinations. The table below illustrates the relative TSR and award guidelines since 2013 for executive officers at Abbott.
Relative TSR Percentile vs. Peers | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| 1-Year | | 26th | | 89th | | 61st | | 0th | | 100th | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
3-Year | 84th | 53rd | 44th | 17th | 63rd | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| 5-Year | | 11th | | 47th | | 83rd | | 28th | | 50th | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Average | | 40th | | 63rd | | 63rd | | 15th | | 71st | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
LTI Award Guideline Percentile | 37th | 50th | 50th | 25th | 75th | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Not only is a direct link evident in these results; it can reasonably be concluded that Abbott has been conservative in setting target payout levels. This linkage translates into significant differentiation of pay for our executives, aligned
64 Abbott Laboratories
with returns to our shareholders. The table below illustrates the pay outcomes for our CEO based on results each year since the separation of AbbVie. Again, a direct pay for performance link is very evident.
Pay Linked to Performance | | | 2013 | | | 2014 | | | 2015 | | | 2016 | | | 2017 | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CEO Pay Decisions* | | $ | 15,766,044 | | $ | 19,905,536 | | $ | 17,403,023 | | $ | 15,062,628 | | $ | 23,572,774 | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
% Change in Pay vs. Prior Year | –30% | +26% | –13% | –13% | +56% | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1-Year TSR | | | +24% | | | +20% | | | +2% | | | –12% | | | +52% | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
We continually evolve our compensation program based on feedback from shareholders, as well as changes in our business. Some of the recent changes made include the following:
We received positive feedback on these changes from our shareholders during our extensive shareholder outreach.future as well.
The Compensation Committee, with the counsel of its independent consultant, concluded that the compensation reported herein was earned and appropriate. The specific details of the executive compensation program and compensation paid to the named executive officers are described on pages 2630 through 4150 of this proxy statement. Consistent with the preference expressed by shareholders as part of the 2017 advisory vote, the Board adopted an annual advisory vote of shareholders on executive compensation.
While this vote is advisory and non-binding, the Board of Directors and Compensation Committee value the opinion of the shareholders and will review the voting results and take into account the results and our ongoing dialogue with shareholders when future compensation decisions are made.
Accordingly, the Board of Directors recommends that you vote FOR the approval of the named officers' compensation.
Abbott Laboratories 6570
INTRODUCTION |
OneFour shareholder proposal hasproposals have been received and will be voted upon at the annual meeting only if properly presented by or on behalf of the proponent. Abbott is advised that the proposalproposals will be presented for action at the Annual Meeting. The proposed resolutionresolutions and the statementstatements made in support thereof, as well as the Board of Directors' statementstatements in opposition to this proposal,the proposals, are presented on the following pages.
The Board of Directors recommends that you vote AGAINST the proposal.proposals.
66 Abbott Laboratories 71
THE |
The Unitarian Universalist Association, 24 Farnsworth Street, Boston, Massachusetts 02210-1409, has informed Abbott that it intends to present the following proposal at the Annual Meeting and that it owns 3,083 Abbott common shares.
PROPONENT'S STATEMENT IN SUPPORT OF SHAREHOLDER PROPOSAL
Whereas, we believe in full disclosure of Abbott Laboratories' ("Abbott") direct and indirect lobbying activities and expenditures to assess whether Abbott's lobbying is consistent with its expressed goals and in the best interests of stockholders.
Resolved, the stockholders of Abbott request the preparation of a report, updated annually, disclosing:
For purposes of this proposal, a "grassroots lobbying communication" is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. "Indirect lobbying" is lobbying engaged in by trade association or other organization of which Abbott is a member.
Both "direct and indirect lobbying" and "grassroots lobbying communications" include efforts at the local, state and federal levels.
The report shall be presented to the Public Policy Committee and posted on Abbott's website.
We encourage transparency in Abbott's use of funds to lobby. Abbott spent $32,730,000 from 2010 – 2018 on federal lobbying. This figure does not include lobbying expenditures to influence legislation in states, where Abbott also lobbies in 37 states1 but disclosure is uneven or absent. For example, Abbott spent $822,611 on lobbying in California from 2010 – 2018. Abbott was one of the top three lobbying medical device companies for the previous five years,2 and Abbott's lobbying on infant formula has attracted media scrutiny.3
Abbott sits on the board of the Chamber of Commerce, which has spent over $1.5 billion on lobbying since 1998, and also belongs to the Business Roundtable (BRT) and National Association of Manufacturers (NAM), which together spent over $68 million on lobbying for 2017 and 2018. Both the BRT and NAM are lobbying restrict the ability of shareholders to file resolutions. Abbott does not disclose its payments to trade associations or the amounts used for lobbying.
We are concerned that Abbott's lack of lobbying disclosure presents significant reputational risk when its lobbying contradicts company public positions. For example, Abbott believes in addressing climate change, yet the Chamber undermined the Paris climate accord. And Abbott supports good health, yet the Chamber has worked to block global antismoking laws. We believe the reputational damage stemming from this misalignment between general policy positions and actual direct and indirect lobbying efforts harms long-term value creation by Abbott. Thus, we urge Abbott to expand its lobbying disclosure.
72
Board of Directors' Statement in Opposition to the Shareholder Proposal on Lobbying Disclosure
The Board of Directors recommends that you voteAGAINST the proposal.
In 2012, 2013, and 2014, a shareholder submitted this same proposal, which calls for various disclosures in an annual report in connection with Abbott's lobbying activities. Abbott was then and still is transparent about its lobbying activities, disclosing its policies and procedures, lobbying activity, and trade-association memberships on Abbott's website or through other public means. Preparing and maintaining the report the shareholder called for then would have added cost and effort but not increased shareholder value. Thus, each year, Abbott's shareholders overwhelmingly rejected this proposal. In fact, the last time this proposal was included in the annual meeting agenda, in 2014, only about 6% of Abbott's outstanding shares supported it.
Abbott has been no less transparent since 2014. Indeed, recently, Abbott's political disclosure and accountability policies and practices have been recognized as top tier among S&P 500 companies.1 The Board believes Abbott's disclosures about its lobbying activities are transparent and informative, and responsive to the proposal. Consider the categories of disclosure called for by this proposal:
Abbott already discloses the information the shareholder seeks. Rehashing existing disclosures would needlessly waste corporate resources and would not be in the best interests of Abbott or its shareholders.
The Board of Directors recommends that you vote AGAINST the proposal.
73
The Vermont Pension Investment Committee, 109 State Street, Montpelier, Vermont 05609-6200, has informed Abbott that it intends to present the following proposal at the Annual Meeting and that it owns 4,480 Abbott common shares.
PROPONENT'S STATEMENT IN SUPPORT OF SHAREHOLDER PROPOSAL
RESOLVED, that shareholders of Abbott Laboratories (the "Company") urge the Board of Directors (the "Board") to adopt a policy that when the Company adjusts or modifies any generally accepted accounting principles ("GAAP") financial performance metric for determining senior executive compensation, the Compensation Committee's Compensation Discussion and Analysis shall include a specific explanation of the Compensation Committee's rationale for each adjustment and a reconciliation of the adjusted metrics to GAAP.
Our Company selects several metrics to assess senior executive performance for purposes of determining incentive compensation. On page 33 of the 2019 Proxy Statement, the Company detailed the metrics used for the annual incentive plan that are intended align the incentives of executives with shareholders: Sales; diluted EPS; Return on Assets; and Operating Cash Flow. However, three-fourths of these metrics used an adjusted version of GAAP metrics.
The Company's 2018 diluted EPS calculated under GAAP yielded a result of $1.31, as reported on page 22 of the Company's 2019 Form 10-K. However, the 2019 Proxy Statement presents an adjusted diluted EPS metric that yielded a result of $2.88. The target goal was $2.85 and since theadjusted result exceeded the goal, the CEO received an above target payout.
Similarly, on the Sales metric, the GAAP calculation yielded a result of $30.6 billion according to page 22 of 2019 Form 10-K. However, the 2019 Proxy Statement presents an Adjusted Sales result of $31.2 billion. The target goal for this metric was $30.97 billion and since theadjusted result exceeded the goal, the chief executive received above target payout.
These two metrics account for 50% of the Company's weighting for the annual incentive plan that provided the CEO with an award of $4,779,688 in 2018. We are concerned that the use of GAAP-adjusted metrics may inflate senior executive compensation by overstating the Company's financial performance as measured by GAAP. In our view, the Compensation Committee should provide a specific explanation for why these adjustments were made.
We believe that the Company's explanation on page 33 of 2019 Proxy Statement for using GAAP-adjusted metrics for executive pay was vague and unsatisfactory. The Company stated that "Officer financial goals are based on adjusted measures that the Committee believes more accurately reflect the results of our ongoing operations and are determined based on the expected market growth of the businesses and markets in which we compete."
Many investors believe that companies should do a better job disclosing the purpose of using adjusted-GAAP metrics for executive compensation. For example, the Council of Institutional Investors has petitioned the SEC to address this lack of transparency. The petition seeks "...a requirement for clear explanations and GAAP reconciliations that would permit a shareholder to understand the company's approach and factor that into its say-on-pay vote and/or buy/sell decision" (https://www.sec.gov/rules/petitions/2019/petn4-745.pdf).
For these reasons, we urge a vote FOR this resolution.
74
Board of Directors' Statement in Opposition to the Shareholder Proposal on
Non-GAAP Financial Performance Metrics Disclosure
The Board of Directors recommends that you voteAGAINST the proposal.
Abbott's executive compensation program is designed to evaluate and reward management performance. Abbott's compensation program is intended to focus executives on actions that create value today while building for sustainable future success. To that end, the program has both a long- and short-term component. The long-term component includes an award of stock options and performance restricted shares tied to several metrics designed to capture more durable results: 3-year performance relative to sales, margin, and strategic contribution; total shareholder return; and return on equity. The short-term component is an annual payout based on metrics designed to capture performance for that year: sales, diluted earnings per share (EPS), return on assets, and free cash flow. As explained in this and prior proxy statements, in setting targets and evaluating short-term performance, the Compensation Committee excludes categories of gains or losses that would distort the picture of management's performance. That is, the Committee excludes both positive and negative unusual or unpredictable events and circumstances, as well as those largely not within management's control (e.g., the impact of foreign exchange rate changes on sales, U.S. tax reform). These exclusions result in some short-term performance metrics being non-GAAP financial metrics. This approach is consistent with what Abbott uses when announcing its quarterly financial results as well as what is used by other publicly traded companies. Non-GAAP measures are used to assist investors in understanding the companies' underlying performance.
Abbott is and has been transparent about the way in which it sets its targets and measures executives' short-term performance. The use of non-GAAP financial metrics when evaluating performance is consistent with the way many S&P 500 companies' report on management's performance for purposes of determining compensation. Non-GAAP financial metrics are intended to eliminate "noise" that would distort an annual or short-term picture, ultimately providingmore transparency into core performance for each year. Every quarter when Abbott releases its earnings, Abbott provides investors with what Abbott believes more accurately captures performance for that quarter—e.g., adjusted sales and adjusted diluted EPS—alongside with a reconciliation to the corresponding GAAP financial metrics. Thus, contrary to the proponent's claim, investors are already aware of the manner in which adjusted EPS relates to GAAP EPS. Inclusion of additional reconciliations in the proxy statement is unnecessary.
Moreover, Abbott's proxy disclosure around executive compensation is robust. Each year, Abbott specifically describes its executive compensation program in detail—including the short-term and long-term components. And the proxy statement (pg. 36) describes why the Compensation Committee has chosen to use adjusted metrics rather than GAAP metrics as part of Abbott's compensation philosophy. Abbott is likewise transparent with adjustments to any metrics and the reasons for those adjustments when assessing performance. Preparing a reconciliation that neither increases shareholder value nor adds to shareholder understanding wastes corporate time and resources. In particular, for some officers, creating a reconciliation for adjusted divisional metrics would require significant time and effort while potentially compromising sensitive information regarding Abbott's operations, strategies, or initiatives.
Abbott's shareholders overwhelmingly approve of Abbott's compensation structure, including the way in which performance targets are set and measured. In past years, Abbott enhanced its disclosures around management compensation to address specific shareholder feedback. We consistently engage with shareholders representing approximately 65% of Abbott's outstanding shares. Feedback received in those discussions, some of which included the Chair of the Compensation Committee, indicated that overall, shareholders viewed Abbott's compensation program favorably. In fact, last year, approximately 94% of Abbott's shares voted were in favor of Abbott's executive compensation program.
The Board of Directors recommends that you vote AGAINST the proposal.
75
Mr. Kenneth Steiner, 14 Stoner Avenue, 2M, Great Neck, New York 11021, has informed Abbott that he intends to present the following proposal at the Annual Meeting and that he owns no fewerless than 500 Abbott common shares.
PROPONENT'S STATEMENT IN SUPPORT OF SHAREHOLDER PROPOSAL
Proposal 4—Independent Board Chairman6—Let Shareholders Vote on Bylaw Amendments
Shareholders request our Board of Directors to adopt as policy, and amend our governing documents as necessary, to require henceforth that the Chair of the Board of Directors whenever possible,amend the bylaws to require that any amendment to bylaws that is approved by the board shall be subject to a non-binding shareholder vote as soon as practical unless such amendment is already subject to a binding shareholder vote.
It is important that bylaw amendments take into consideration the impact that such amendments can have on limiting the rights of shareholders and/or on reducing the accountability of directors and managers. For example, Directors could adopt a narrowly crafted exclusive forum bylaw to suit the unique circumstances facing our directors.
A proxy advisor recently adopted a policy to vote against directors who unilaterally adopt bylaw provisions or amendments to the articles of incorporation that materially diminish shareholder rights.
Our directors could be neutral on this proposal to obtain feedback from shareholders without interference. If our directors are opposed to this form of shareholder engagement then it would be useful for our directors to give recent examples of companies whose directors took the initiative and adopted bylaws that primarily benefitted shareholders. A shareholder vote is the best form of shareholder engagement because every shareholder has an opportunity to be an independent member of the Board. The Board would have the discretion to phase in this policy for the next CEO transition, implemented so it does not violate any existing agreement.
If the Board determines that a Chair ,who was independent when selected, is no longer independent, the Board shall select a new Chair who satisfies the requirements of the policy within a reasonable amount of time. Compliance with this policy is waived if no independent director is available and willing to serve as Chairman. This proposal requests that all the necessary steps be taken to accomplish the above.
Caterpillar is an example of a company recently changing course and naming an independent board chairman. Caterpillar had strongly opposed a shareholder proposal for an independent board chairman as recently as its 2016 annual meeting. Wells Fargo also changed course and named an independent board chairman in 2016.
It was reported in 2015 that 53% of the Standard & Poors 1,500 firms separate these 2 positions. This proposal topic won 50%-plus support at 5 major U.S. companies in 2013 including 73% support at Netflix.
At Abbott Laboratories this proposals topic climbed from 30%-support in 2015 to 37%-support in 2017. This 37%-support would have been higher (possibility 42%) if small shareholders had the same access to corporate governance information as large shareholders.
Meanwhile our Chairman /CEO received the highest negative votes of any director. This was 10-times the negative votes received by Daniel Starks who is relatively new to our board. The management response to the 2017 proposal on this topic did not say that our Lead Director was important enough to call a special shareholder meeting.
In its response to this proposal our company could possibly name one step it has taken in 2017 to advance management accountability to shareholders.heard.
Please vote to enhance CEO accountability to shareholders:yes:Independent Board Chairman—Let Shareholders Vote on Bylaw Amendments—Proposal 46
Abbott Laboratories 6776
Board of Directors' Statement in Opposition to the Shareholder Proposal on Independent Board Chairman
Shareholder Voting on By-law Amendments
The Board of Directors recommends that shareholdersyou voteAGAINST thisthe proposal.
Abbott has received this shareholder proposal seven times since 2005 (many of which were submitted by this very shareholder). And seven times, Abbott's shareholders have rejected it. Each time this proposal returns, the Board reminds shareholders why they have rejected this cookie-cutter proposal so many times already: (a) there is no proved improvement to governance or performance in separating the CEO role from the chairman role; (b) Abbott's existing governance structure ensures appropriate oversightefficient use of management;corporate time and (c) the Board is entrusted to act in shareholders' best interests already, and as such should be free to exercise its judgment to select the best person for the chairman role. Last year, the majority of Abbott's shareholders overwhelmingly rejected the proposal again. Given the considerable success Abbott has had with its leadership structure to date, Abbott recommends that shareholders vote AGAINST this proposal for an eighth time.
When it comes to corporate governance, no single leadership structure is appropriate for every company. Empirical studies have found that mandating a board chairman separate from the company CEO does not guarantee any better operating performance or improved corporate governance.(1) This is why, for the last two years, not a single proposal advocating this change has garnered enough shareholder support to passat any company. In fact, more large-cap companiescombinedresources. the chairman and CEO roles in 2017 than in the previous year.
Rather than preclude certain candidates from the chairmanship, Abbott ensures oversight ofAbbott's governing documents empower its management through other means—means the Board believes are more suitable to Abbott. For instance,every Abbott Board member (other than the Chairman) satisfies the New York Stock Exchange's criteria for being independent. This year, Abbott added two new independent directors. This full Board of independent directors evaluates the CEO's performance annually and regularly reviews leadership structure. And these independent directors sit on all key committees that oversee the integrity of Abbott's financial statements, executive compensation, and the nomination of new directors, among other functions. Further still, Abbott also has a lead independent director who can preside over meetings of the independent directors and meet with the Chairman to discuss any matter arising from these meetings. This lead director can also call additional meetings of the independent directors (which is, Abbott's entire Board minus the Chairman) as deemed necessary and perform any other function as the Board may direct.
This structure provides Abbott's Board with appropriate and desired flexibility. The Board is not unnecessarily precluded from considering certain candidates from serving as Chairman. Rather, after considering all the relevant factors, the candidate's experience, and the Board's own strategic vision for the company, the Board selects who is best suited to serve as Chairman. And when the time comes for Abbott to transition to new leadership, the Board is not arbitrarily prohibited from considering any of its options to lead Abbott's Board—be it the outgoing CEO, the new CEO, or an independent director.
Contrary to the suggestion in the shareholder's proposal, the Board believes that Abbott's existing leadership structure has served shareholders well. Under the current joint CEO and Chairman structure, Abbott has continuously transformed through several strategic actions. In just the past year, Abbott acquired St. Jude Medical, Inc., and Alere Inc., creating a medical devices and diagnostics leader, positioning the company for continued profitable growth. Abbott continues to develop one of the leading pipelines of innovative and promising new healthcare products. All of this activity has inured to the benefit of Abbott's shareholders. In fact, in just 2017, Abbott's one-year total shareholder return was 52%, which was 30.2 percentage points above the Standard & Poor's 500 Index. If a shareholder had invested in Abbott in 1999, and held those shares until about the end of January, that shareholder would have enjoyed an approximate gain of 299%.
The Board continues to believe that providing it with the ability to chooseamend Abbott's By-Laws. Nearlyall large publicly traded companies empower their boards in this way for good reason. By-laws typically govern the appropriate candidatecompany's operating rules for Chairman and/more administrative actions—e.g., the time and place for Abbott's Annual Meeting, the number and tenure of Board members, as just a few examples. Indeed, the last few times the Board did amend Abbott's By-Laws, it did so for purposes of board refreshment. Other key matters, such as a merger or CEO servesamending Abbott's Articles of Incorporation, are reserved for shareholder vote. Developing, filing, and mailing proxy materials and devoting management and Board time to arrange shareholder vote—even the interestnon-binding, advisory vote the proposal calls for here—on every By-Law amendment is an ineffective use of time and resources.
Abbott's governance structure and shareholder engagement already enable shareholders to voice their view on any amendment to Abbott's By-Laws. If Abbott shareholders are displeased withany change to the Company's By-Laws, then shareholders can undo that change by repealing that By-Law or adopting one of their own. And shareholders can hold the Board accountable through the annual director-election process. Indeed, the last few times the Board amended Abbott's By-Laws to add new directors, shareholders voted on those very directors at the subsequent Annual Meeting. As the proponent has done here, shareholders can also file an annual shareholder proposal to recommend governance changes to the Board and obtain the view of fellow shareholders.
Additionally, throughout the year, Abbott management, Abbott's Lead Independent Director, and other members of Abbott's Board are available to hear from Abbott's major shareholders on their concerns. As mentioned earlier in this proxy, Abbott routinely seeks investor input on corporate governance and other matters and this year engaged with shareholders representing 65% of Abbott's outstanding shares.
Ultimately, the shareholder's generic proposal provides no benefit to Abbott's shareholders and, if implemented, would create unnecessary administrative waste and expense. This proposal fails to identify any problem with Abbott's governance or shareholder engagement, apart from imagining a future scenario in which Abbott's Board might amend a By-Law that might operate in some unspecified manner to the detriment of a shareholder who chooses to sue the company. This hypothetical is offset by the very real time and cost this proposal would impose on Abbott and its shareholders if implemented. The proposal would require a non-binding vote on any By-Law amendment "as soon as practical," which could entail organizing and soliciting proxies for aspecial meeting for anadvisory vote. A shareholder meeting for a non-binding vote any time a By-Law is amended transforms the otherwise nimble By-Law-amendment process into an expensive, time-consuming affair.
The Board of Directors recommends that you vote AGAINST the proposal.
68 Abbott Laboratories 77
TableShareholder Proposal on Simple Majority Vote
(Item 7 on Proxy Card)
John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, has informed Abbott that he intends to present the following proposal at the Annual Meeting and that he owns no fewer than 50 Abbott common shares.
PROPONENT'S STATEMENT IN SUPPORT OF SHAREHOLDER PROPOSAL
Proposal 7—Simple Majority Vote
RESOLVED, Shareholders request that our board take each step necessary so that each provision in the governing documents of Contentsthe company requiring a two-thirds vote of outstanding shares under Illinois Business Corporation Act is replaced by a majority vote of outstanding shares. This proposal shall apply only to the two-thirds vote provisions under Illinois Business Corporation Act that can be replaced by a majority vote of outstanding shares.
Shareholders are willing to pay a premium for shares of companies that have excellent corporate governance. Supermajority voting requirements have been found to be one of 6 entrenching mechanisms that are negatively related to company performance according to "What Matters in Corporate Governance" by Lucien Bebchuk, Alma Cohen and Allen Ferrell of the Harvard Law School. Supermajority requirements are used to block initiatives supported by most shareowners but opposed by a status quo management.
This proposal topic won from 74% to 88% support at Weyerhaeuser, Alcoa, Waste Management, Goldman Sachs, FirstEnergy, McGaw-Hill and Macy's. These votes would have been higher than 74% to 88% if more shareholders had access to independent proxy voting advice. The proponents of these proposals included Ray T. Chevedden and William Steiner. This proposal topic also received overwhelming 99%-support at the 2019 Fortive annual meeting.
Currently a 1%-minority can frustrate the will of our 66%-shareholder majority in an election with 67% of shares casting ballots. In other words a 1%-minority could have the power to prevent shareholders from improving the governance of our company. This can be particularly important during periods of management underperformance and/or an economic downturn. Currently the role of shareholders is downsized because management can simply say out-to-lunch in response to an overwhelming 66%-vote of shareholders.
Please vote yes:
Simple Majority Vote—Proposal 7
78
Board of Directors' Statement in Opposition to the Shareholder Proposal on Simple Majority Vote
The Board of Directors recommends that you voteAGAINST the proposal.
The shareholder proposal is not designed to address any issue specific to Abbott, nor does it identify any concrete benefit that Abbott's shareholders could derive if the Board were to implement it. Rather, this proponent has recycled this proposal from company to company over the years, changing only the company name. Abbott's Restated Articles of Incorporation and its By-Laws do not even contain any supermajority voting provisions to be "replaced."
Supermajority voting is imposed by default under the Illinois Business Corporation Act of 1983 to a narrow set of key matters (e.g., a merger, a sale of substantially all of Abbott's assets, a voluntary dissolution, and amendment to Abbott's Articles of Incorporation). Although these matters were never included in Abbott's governing documents, the Board believes this limited set of matters should depend on a broad consensus of Abbott's shareholders, and thus, a supermajority vote in these few settings is appropriate. All other matters put to shareholders, including ratification of compensation programs, are decided through a simple majority vote.
In the limited set of matters where supermajority voting does apply, it properly balances the need to afford Abbott shareholders a voice in corporate matters while protecting Abbott shareholders as a whole. Abbott's Board—whose directors are elected annually by a simple majority vote and 12 out of 14 of whom are independent under the New York Stock Exchange listing standards—has fiduciary duties to act in the best interests of all shareholders as a whole. But a group of activist shareholders has no such fiduciary duties and may act in their own short-term self-interests. The statutory supermajority voting standards are critical to safeguarding the long-term interests of Abbott and its shareholders.
The Illinois legislature recognized that requiring supermajority voting for a narrow set of extraordinary matters ensures that small shareholders have a voice in decisions that fundamentally affect their investment. Abbott's Board believes the same.
The Board of Directors recommends that you vote AGAINST the proposal.
79
APPROVAL PROCESS FOR RELATED PERSON TRANSACTIONS
It is Abbott's policy that the Nominations and Governance Committee review, approve, or ratify any transaction in which Abbott participates and in which any related person has a direct or indirect material interest if such transaction involves or is expected to involve payments of $120,000 or more in the aggregate per fiscal year. Related person transactions requiring review by the Nominations and Governance Committee pursuant to this policy are identified in:
In determining whether to approve or ratify a related person transaction, the Nominations and Governance Committee will consider the following items, among others:
This process is included in the Nominations and Governance Committee's written charter, which is available in the corporate governance section of Abbott's investor relations website (www.abbottinvestor.com). The spouse of one of our executive officers, Jaime Contreras, isand the son of one of our executive officers, Roger Bird, are employed by Abbott. During 2017, her2019, their respective total compensation exceeded the foregoing threshold.
Abbott Laboratories 6980
INFORMATION CONCERNING SECURITY OWNERSHIP |
The table below reports the number of common shares beneficially owned as of December 31, 20172019 by BlackRock, Inc., Capital Research Global Investors, and The Vanguard Group (directly or through their subsidiaries), the only persons known to Abbott to beneficially own beneficially more than 5% of Abbott's outstanding common shares.
Name and Address of Beneficial Owner | Shares Beneficially Owned | Percent of Class | | Name and Address of Beneficial Owner | Shares Beneficially Owned | Percent of Class | ||||||||||||
| | | | | | | | | | | | | | | | | | |
BlackRock, Inc.(1) 55 East 52nd Street New York, NY 10055 | 110,201,384 | 6.3% | BlackRock, Inc.(1) 55 East 52nd Street New York, NY 10055 | 124,728,602 | 7.1% | |||||||||||||
| | | | | | | | | | |||||||||
| The Vanguard Group(2) 100 Vanguard Blvd. Malvern, PA 19355 | 133,768,355 | 7.68% | | Capital Research Global Investors(2) 333 South Hope Street Los Angeles, CA 90071 | 113,689,293 | 6.5% | |||||||||||
| | | | | | | | | | | | | | | | | | |
The Vanguard Group(3) 100 Vanguard Blvd. Malvern, PA 19355 | 151,783,436 | 8.6% | ||||||||||||||||
| | | | | | | | |
|
One report for Edward M. Liddy, reporting a purchase of shares, was filed late due to an administrative error by Mr. Liddy's financial advisor.
|
In accordance with Abbott's articles of incorporation, Abbott has advanced defense costs on behalf of a former officer in connection with the 2009 AMO acquisition transaction.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR THE |
Shareholder proposals for presentation at the 20192021 Annual Meeting must be received by Abbott no later than November 16, 201813, 2020 and must otherwise comply with the applicable requirements of the Securities and Exchange Commission to be considered for inclusion in the proxy statement and proxy for the 20192021 meeting.
70 Abbott Laboratories 81
PROCEDURE FOR RECOMMENDATION AND NOMINATION OF DIRECTORS AND TRANSACTION OF BUSINESS AT ANNUAL MEETING |
Proxy Access: A shareholder, or a group of up to 20 shareholders, owning continuously for at least three years Abbott common shares representing an aggregate of at least 3% of the voting power entitled to vote in the election of directors, may nominate and have included in Abbott's proxy materials director nominees constituting up to 20% of the Board, provided that the shareholder(s) and the nominee(s) satisfy the requirements in Abbott's By-Laws.
Nominating shareholders are permitted to include in Abbott's proxy statement a 500-word statement in support of their nominee(s). Abbott may omit any information or statement that it, in good faith, believes is materially false or misleading, omits to state a material fact, or would violate any applicable law or regulation.
Other Nominations of Directors or Proposals to Transact Business: A shareholder may also recommend persons as potential nominees for director by submitting the names of such persons in writing to the ChairmanChair of the Nominations and Governance Committee or the Secretary of Abbott. Recommendations should be accompanied by a statement of qualifications and confirmation of the person's willingness to serve. A nominee who is recommended by a shareholder following these procedures will receive the same consideration as other comparably qualified nominees.
A shareholder entitled to vote for the election of directors at an Annual Meeting and who is a shareholder of record on:
may directly nominate persons for director, or make proposals of other business to be brought before the Annual Meeting, by providing proper timely written notice to the Secretary of Abbott.
Other Nominations of Directors or Proposals to Transact Business:Notice Requirements: The notice submitted by a shareholder must include certain information required by Article II of Abbott's By-Laws, including information about the shareholder, any beneficial owner on whose behalf the nomination or proposal is being made, their respective affiliates or associates or others acting in concert with them, and any proposed director nominee.
For each matter the shareholder proposes to bring before the Annual Meeting, the notice must also include a brief description of the business to be discussed, the reasons for conducting such business at the Annual Meeting, any material interest of the shareholder in such business and certain other information specified in the By-Laws. In addition, in the case of a director nomination, including through proxy access, the notice must include a completed and signed questionnaire, representation and agreement of the nominee addressing matters specified in the By-Laws.
To be timely, written notice either to directly nominate persons for director, including through proxy access, or to bring business properly before the Annual Meeting must be received at Abbott's principal executive offices not less than ninety days and not more than one hundred twenty days prior to the anniversary date of the preceding Annual Meeting. If the Annual Meeting is called for a date that is not within twenty-five days before or after such anniversary date, notice by the shareholder must be received not later than the close of business on the tenth day following the day on which such notice of the date of the Annual Meeting was mailed or made public in a press release or in a filing with the Securities and Exchange Commission, whichever occurs first. To be timely for the 20192021 Annual Meeting, this written notice must be received by Abbott no later than January 25, 2019.24, 2021.
In addition, the notice must be updated and supplemented, if necessary, so that the information provided or required to be provided is true and correct as of the record date for the Annual Meeting and as of the date that is ten business days prior to the meeting. Any such update or supplement must be delivered to the Secretary of Abbott at Abbott's principal executive offices not more than five business days after the record date for the Annual Meeting, and not less than eight business days before the date of the Annual Meeting in the case of any update or supplement required to be made as of ten business days prior to the Annual Meeting.
Abbott Laboratories 7182
GENERAL |
It is important that proxies be returned promptly. Shareholders are urged, regardless of the number of shares owned, to vote their shares. Most of Abbott's shareholders may vote their shares by telephone or the Internet. Shareholders who wish to vote by mail should sign and return their proxy card in the enclosed business reply envelope. Shareholders who vote by telephone or the Internet do not need to return their proxy card.
The Annual Meeting will be held at Abbott's headquarters, 100 Abbott Park Road, located at the intersection of Route 137 and Waukegan Road, Lake County, Illinois. Admission to the meeting will be by admission card only. A shareholder planning to attend the meeting should promptly complete and return the reservation form. Reservation forms must be received before April 20, 2018.17, 2020. An admission card admits only one person. A shareholder may request two admission cards, but a guest must be accompanied by a shareholder.
By order of the Board of Directors.
HUBERT L. ALLEN
Secretary
72 Abbott Laboratories 83
DIRECTOR INDEPENDENCE STANDARD
No director qualifies as "independent" unless the board affirmatively determines that the director has no material relationship with Abbott or its subsidiaries (either directly or as a partner, shareholder or officer of an organization that has a relationship with Abbott or any of its subsidiaries). In making this determination, the board shall consider all relevant facts and circumstances, including the following standards:
Abbott Laboratories Exhibit A-1
NON-GAAP RECONCILIATION OF FINANCIAL INFORMATION
Abbott uses various non-GAAP financial measures to adjust for specified items that are unusual or unpredictable, such as cost reduction initiatives, restructuring programs, integration activities and other business acquisition-related costs, the estimated 2017 impact of U.S. tax reform, and the recognition of a gain and deferred taxes associated with the sale of the Medical Optics business. These non-GAAP financial measures also exclude intangible amortization expense to provide greater visibility on the results of operations excluding these costs, similar to how Abbott's management internally assesses performance.
Abbott's management believes the presentation of these non-GAAP financial measures provides useful information to investors regarding Abbott's results of operations as these non-GAAP financial measures allow investors to better evaluate ongoing business performance. Abbott's management also uses these non-GAAP financial measures internally to monitor performance. Abbott, however, cautions investors to consider these non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.
The reconciliation of Adjusted EBITDA to Earnings from Continuing Operations is as follows:
(in millions) | | 2017 | | 2016 | | % Change | | ||||||
| | | | | | | | | | | | | |
Earnings from Continuing Operations | $ | 353 | $ | 1,063 | –67 | % | |||||||
Less Tax Expense on Earnings from Continuing Operations | | 1,878 | | 350 | | | | ||||||
Earnings from Continuing Operations before taxes | 2,231 | 1,413 | |||||||||||
| Specified Items Including Intangible Amortization | | 3,038 | | 2,617 | | | | |||||
Interest Expense | 879 | 186 | |||||||||||
| Depreciation | | 1,046 | | 803 | | | | |||||
Adjusted EBITDA | $ | 7,194 | $ | 5,019 | 43 | % | |||||||
| | | | | | | | | | | | | |
Abbott Laboratories and SubsidiariesDetails of Specified ItemsYear Ended December 31, 2017(in millions, except per share data)(unaudited)
| | Acquisition or Divestiture- related(a) | | Restructuring and Cost Reduction Initiatives(b) | | Intangible Amortization | | Other(c) | | Total Specifieds | | ||||||||
| | | | | | | | | | | | | | | | | | | |
Gross Margin | $ | 983 | $ | 195 | $ | 1,975 | $ | — | $ | 3,153 | |||||||||
R&D | | (72) | | (105) | | — | | (59) | | (236) | | ||||||||
SG&A | (812) | (50) | — | 1 | (861) | ||||||||||||||
| Interest expense, net | | (24) | | — | | — | | — | | (24) | | |||||||
Other (income) expense, net | 1,285 | (34) | — | (15) | 1,236 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | |
| Earnings from Continuing Operations before taxes | $ | 606 | $ | 384 | $ | 1,975 | $ | 73 | | 3,038 | | |||||||
| | | | | | | | | | | | | | | | | | | |
Annex I-1 Abbott Laboratories
Abbott Laboratories and SubsidiariesDetails of Specified ItemsYear Ended December 31, 2016(in millions, except per share data)(unaudited)
| | Acquisition or Divestiture- related(a) | | Restructuring and Cost Reduction Initiatives(b) | | Mylan Equity Investment Adjustment(c) | | Venezuela Devaluation(d) | | Intangible Amortization | | Other(e) | | Total Specifieds | | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Gross Margin | $ | 24 | $ | 72 | $ | — | $ | 15 | $ | 550 | $ | — | $ | 661 | |||||||||||
R&D | | (9) | | (6) | | — | | — | | — | | (62) | | (77) | | ||||||||||
SG&A | (133) | (89) | — | (10) | — | (17) | (249) | ||||||||||||||||||
| Interest expense, net | | (240) | | — | | — | | — | | — | | — | | (240) | | |||||||||
Net foreign exchange (gain) loss | — | — | — | (480) | — | — | (480) | ||||||||||||||||||
| Other (income) expense, net | | 38 | | — | | (947) | | (1) | | — | | — | | (910) | | |||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Earnings from Continuing Operations before taxes | $ | 368 | $ | 167 | $ | 947 | $ | 506 | $ | 550 | $ | 79 | 2,617 | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Abbott Laboratories Annex I-2
Abbott Laboratories
100 Abbott Park Road
Abbott Park, Illinois 60064-6400 U.S.A.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
MEETING DATE
APRIL 27, 201824, 2020
| | | | | | |
YOUR VOTE IS IMPORTANT Please sign and promptly return your proxy in the enclosed envelope or vote your shares by telephone or using the Internet. | ||||||
| | | | | | |
| | | | |
To avoid a delay in the receipt of your admission card, do not return this form with your proxy card or mail it in the enclosed business envelope. | ||||
| | | | |
NNNNNNNNNNNN . + NNNNNN C 1234567890MMMMMMMMMMMM MMMMMMMMMMMMMMM C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 ENDORSEMENT_LINE______________ SACKPACK_____________ Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Important Notice Regardingreceived by April 24, 2020, at 1:00 A.M., Central Time. Online GIof ntoo welwewct.rinovneicstvoortviontge,.com/abt delete QR code and control # oΔr scan the Availability of Proxy Materials for the Abbott Laboratories Annual Meeting of Shareholders to be Held on April 27, 2018 Under Securities and Exchange Commission rules, youQR code — login details are receiving this notice that the proxy materials for the Annual Meeting of Shareholders are available on the Internet. Follow the instructions below to view the materials and vote online or request a paper copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important! This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting. The proxy statement and annual report to shareholders are available at: www.investorvote.com/abt Easy Online Access — A Convenient Way to View Proxy Materials and Vote When you go online to view materials, you can also vote your shares. Step 1: Go to www.investorvote.com/abt. Step 2: Click the icon on the right to view the current meeting materials. Step 3: Return to the investorvote.com window and follow the instructions on the screen to log in. Step 4: Make your selection as instructed on each screen to select delivery preferences and vote. g, When you go online, you can also help the environment by consenting to receive electronic delivery of future materials. Obtaining a Paper Copy of the Proxy Materials – If you want to receive a paper copy of these documents, you must request one. There is no charge to you for this request. Please make your request as instructed on the reverse side of this Notice on or before April 13, 2018 to facilitate timely delivery. + 2 N O T C O Y 02QREC NNNNNNNNN Annual Meeting Notice1234 5678 9012 345 IMPORTANT ANNUAL MEETING INFORMATION
. Abbott Laboratories Annual Meeting of Shareholders will be held at 9:00 a.m. Central Time on April 27, 2018 at the corporation’s headquarters, 100 Abbott Park Road, at the intersection of Route 137 and Waukegan Road, Lake County, Illinois. Items to be voted on at the meeting are listed below along with the Board of Directors’ recommendations. The Board of Directors recommends a vote FOR Items 1, 2 and 3. 1. Election of 12 Directors: (01) R.J. Alpern, (02) R.S. Austin, (03) S.E. Blount, (04) E.M. Liddy, (05) N. McKinstry, (06) P.N. Novakovic, (07) W.A. Osborn, (08) S.C. Scott III, (09) D.J. Starks, (10) J.G. Stratton, (11) G.F. Tilton, and (12) M.D. White. Ratification of Ernst & Young LLP as auditors Say on Pay – An Advisory Vote to Approve Executive Compensation 2. 3. The Board of Directors recommends a vote AGAINST Item 4. 4.Shareholder Proposal – Independent Board Chairman PLEASE NOTE – YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must vote online or request a paper copy of the proxy materials to receive a proxy card. If you plan to attend the Annual Meeting of Shareholders, please complete and return the reservation form on the back cover of the proxy statement, which can be found online at www.investorvote.com/abt. Directions to the Abbott Laboratories 2018 Annual Meeting of Shareholders are available in the proxy statement, which can be viewed at www.investorvote.com/abt. Here’s how to order a copy of the proxy materials and select a future delivery preference: Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or email options below. Email copies: Current and future email delivery requests must be submitted via the Internet following the instructions below. If you request an email copy of the current meeting materials, you will receive an email with a link to the materials. PLEASE NOTE: You must use the number in the shaded bar on the reverse side of this notice when requesting a set of proxy materials. g Internet – Go to www.investorvote.com/abt. Follow the instructions to log in and order a copy of the current meeting materials and submit your preference for email or paper delivery of future meeting materials. Telephone – Call us free of charge at 1-866-641-4276 and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings. Email – Send an email to investorvote@computershare.com with “Proxy Materials Abbott Laboratories” in the subject line. Include in the message your full name and address, plus the number located in the shaded bar onbelow. Phone Call toll free 1-800-652-VOTE (8683) within the reverse side of this notice,USA, US territories and state in the email that you want aCanada Save paper, copy of current meeting materials. You can also state your preference to receive a paper copy of future meeting materials. To facilitate timelytime and money! Sign up for electronic delivery all requests for a paper copy of the proxy materials must be received by April 13, 2018. g g 02QREC Annual Meeting Notice
MMMMMMMMMMMM . MMMMMMMMMMMMMMM C123456789 000004 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6at www.investorvote.com/abt Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Telephone5, 6 and Internet Voting Instructions - You can vote by telephone OR Internet! Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.7. + To vote using the Telephone (within the USA, US territories & Canada) To vote using the Internet • Go to the following web site: www.investorvote.com/abt • Enter the information requested on your computer screen and follow the simple instructions. • Call toll free 1-800-652-VOTE (8683) in the USA, US territories & Canada any time on a touch tone telephone. There is NO CHARGE to you for the call. • Follow the simple instructions provided by the recorded message.Abstain 1. Election of 12 Directors Nominees: (01)14 Directors: 01 - R.J. Alpern (05)05 - M.A. Kumbier 09 - P.N. Novakovic 13 - G.F. Tilton 02 - R.S. Austin 03 - S.E. Blount 07 - D.W. McDew 11 - D.J. Starks 04 - R.B. Ford 08 - N. McKinstry (09) D.J. Starks, ForAgainst Abstain (02) R.S. Austin, (06) P.N. Novakovic, (10)12 - J.G. Stratton (03) S.E. Blount, (07)For Against 06 - E.M. Liddy 10 - W.A. Osborn (11) G.F. Tilton, and (04) E.M. Liddy, (08) S.C. Scott III, (12)14 - M.D. White 4. Shareholder Proposal - Independent Board Chairman To VoteLobbying Disclosure Mark here to vote FOR All Nominees Toall nominees Mark here to WITHHOLD Vote From All Nominees To Vote FOR All Nominees, except withhold vote from all nominees 5. Shareholder Proposal - Non-GAAP Financial Performance Metrics Disclosure For All EXCEPT - To withhold authority to vote for any nominee(s), write the name(s) of such nominee(s) listed below ForAgainstbelow. 6. Shareholder Proposal - Shareholder Voting on By-Law Amendments _____________________________________________________________________ 7. Shareholder Proposal - Simple Majority Vote For Against Abstain 2. Ratification of Ernst & Young LLP as Auditors For address changes and/or comments please check this box and write them on the back where indicated. 3. Say on Pay – An Advisory Vote to Approve Executive Compensation MMMMIMF VOTIMNG BYMAIL, YOU MUST COMPLETE BOTH SIDES OF THIS CARD.Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title and, where more than one is named, a majority should sign. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MMMMMMM C 1234567890 J N T 4 6 4 1 9 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND + MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND 1 P C F 3 6 1 8 7 8 1 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND 02QRCD+ 1 P C F 4 036EDD MMMMMMMMM B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. The Board of Directors recommends that youa vote AGAINST Item 4.Items 4, A Proposals — The Board of Directors recommends that yourecommend a vote FOR all the nominees listed in Item 1 and FOR Items 1, 2 and 3. 2020 Annual Meeting Proxy Card1234 5678 9012 345 X IMPORTANT ANNUAL MEETING INFORMATION
. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + Proxy — Abbott Laboratories + SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSSolicited on Behalf of the Board of Directors for Annual Meeting - April 24, 2020 The undersigned, revoking all previous proxies, acknowledges receipt of the Notice and Proxy Statement dated March 16, 2018,13, 2020, in connection with the Annual Meeting of Shareholders of Abbott Laboratories to be held at 9:00 a.m. on April 27, 2018,24, 2020, at the corporation’s headquarters, and hereby appoints MILESMiles D. WHITEWhite and HUBERTHubert L. ALLEN,Allen, or either of them, proxy for the undersigned, with full power of substitution, to represent and vote all shares of the undersigned upon all matters properly coming before the Annual Meeting or any adjournments thereof. If the undersigned is a participant in the Abbott Laboratories Stock Retirement Plan, then this card also instructs the plan’s Investment Committee to vote as specified at the 20182020 Annual Meeting of Shareholders, and any adjournments thereof, all shares of Abbott Laboratories held in the undersigned’s plan account upon the matters indicated and in their discretion upon such other matters as may properly come before the meeting. INSTRUCTIONS: This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted FOR Items 1 and 2 and 3, AGAINST Item 4, and in accordance with the judgment of the proxy holders on any other matters that are properly brought before the meeting. Abbott’s proxy holders reserve the right to vote shares cumulatively in their sole discretion so that one or more of the nominees may receive fewer votes than other nominees (or no votes at all). This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder. If no such directions are indicated, this proxy will be voted FOR the election of the nominees listed in Item 1, FOR Items 2 and 3, and AGAINST Items 4, 5, 6 and 7. In their discretion, the proxy holders are authorized to vote upon any other matters as may properly come before the meeting. (Items to be voted appear on reverse side) Change of Address — Please print your new address below. Comments — Please print your comments below. (Important - Please+ C Non-Voting Items Proxy — Abbott Laboratories Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign and date below.) Authorized Signatures - Sign Here - This section must be completed for your instructions to be executed. Each joint tenant should sign; executors, administrators, trustees, etc. should give full title and, where more than one is named, a majority should sign. Please read other side before signing. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. + IF VOTING BY MAIL, YOU MUST COMPLETE BOTH SIDES OF THIS CARD.up at www.investorvote.com/abt