SCHEDULE 14A INFORMATION
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Bristol-Myers Squibb Company
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March 23, 200522, 2006
NOTICEOF
MEETINGAND
PROXY STATEMENT
TUESDAY, MAY
AT
HOTELDU PONT
11THAND MARKET
STREETS
WILMINGTON
DELAWARE | DEAR FELLOW STOCKHOLDER:
You are cordially invited to attend the Annual Meeting of Stockholders of Bristol-Myers Squibb Company at the Hotel duPont, 11th and Market Streets, Wilmington, Delaware, on Tuesday, May
This booklet includes the Notice of Annual Meeting and the Proxy Statement. The Proxy Statement describes the business to be transacted at the meeting and provides other information about the company that you should know when you vote your shares.
The principal business of the Annual Meeting will be the election of directors, the ratification of the appointment of an independent registered public accounting firm
Both Louis V. Gerstner, Jr. and Louis W. Sullivan, M.D. will retire from the Board of Directors at this Annual Meeting and Ellen Futter retired from the Board at the end of 2005. We thank them for their dedicated service to Bristol-Myers Squibb and our stockholders and wish them well. We also welcome Louis J. Freeh to the Board. Last year, over
Admission to the Annual Meeting will be by ticket only.Please bring photo identification. If you are a registered stockholder planning to attend the meeting, please check the appropriate box on the proxy card and retain the top portion of the card as your admission ticket. If your shares are held through an intermediary such as a bank or broker, follow the instructions in the Proxy Statement to obtain a ticket.
We have provided space on the proxy card for comments from our registered stockholders. We urge you to use it to let us know your feelings about the company or to bring a particular matter to our attention. If you hold your shares through an intermediary, please feel free to write directly to us.
| |||||
JAMES D. ROBINSON III Chairman of the Board | PETER R. DOLAN
|
345 Park Avenue
New York, New York 10154-0037
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders will be held at the Hotel duPont, 11th and Market Streets, Wilmington, Delaware, on Tuesday, May 3, 20052, 2006 at 9:4510:00 a.m. for the following purposes as set forth in the accompanying Proxy Statement:
to approve the company’s Restated Certificate of Incorporation effecting an amendment to eliminate certain supermajority vote requirements;
Holders of record of our company’s common and preferred stock at the close of business on March 7, 2005,6, 2006, will be entitled to vote at the meeting.
By Order of the Board of Directors
SANDRA LEUNG
Secretary
Dated: March 23, 200522, 2006
YOUR VOTE IS IMPORTANT
Regardless of the number of shares you own, your vote is important.
If you do not attend the Annual Meeting to vote in person, your vote will not be counted unless a proxy representing your shares is presented at the meeting.
To ensure that your shares will be voted at the meeting, please vote in one of these ways:
(1) | GO TO THE WEBSITE shown on your proxy card and vote via the Internet; |
OR
(2) | USE THE TOLL-FREE TELEPHONE NUMBER shown on your proxy card (this call is toll-free in the United States); |
OR
(3) | MARK, SIGN, DATE AND PROMPTLY RETURN the enclosed proxy card in the postage-paid envelope. |
If you do attend the Annual Meeting, you may revoke your proxy and vote by ballot.
ELECTRONIC DELIVERY OF PROXY STATEMENT AND ANNUAL REPORT
This Proxy Statement and the 20042005 Annual Report are available on Bristol-Myers Squibb’s Internet site at www.bms.com. Most stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail.
If you are a stockholder of record, you can choose this option and save Bristol-Myers Squibb the cost of production and mailing these documents by following the instructions provided when you vote over the Internet. If you hold your Bristol-Myers Squibb stock through a bank, broker or other holder of record, please refer to the information provided by that entity for instructions on how to elect to view future proxy statements and annual reports over the Internet.
If you choose to view future proxy statements and annual reports over the Internet, you will receive an e-mail message next year containing the Internet address to access Bristol-Myers Squibb’s proxy statement and annual report. Your choice will remain in effect until you tell us otherwise. You do not have to elect Internet access each year. To view, cancel or change your enrollment profile, please go to www.InvestorDelivery.com.
PROXY STATEMENT
Inside Back Cover |
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why am I receiving these materials?
This Proxy Statement is being sent to all stockholders of record as of the close of business on March 7, 20056, 2006 for delivery beginning March 23, 200522, 2006 in connection with the solicitation of proxies on behalf of the Board of Directors for use at the Annual Meeting of Stockholders on May 3, 2005.2, 2006. Although the Annual Report and Proxy Statement are being mailed together, the Annual Report should not be deemed to be part of the Proxy Statement.
Who can attend the Annual Meeting?
Only stockholders of Bristol-Myers Squibb as of the record date, March 7, 2005,6, 2006, their authorized representatives and guests of Bristol-Myers Squibb may attend the Annual Meeting. Admission will be by ticket only. In addition, please be sure to bring photo identification. The Hotel duPont is accessible to disabled persons and, upon request, wireless headsets for hearing amplification will be provided.
How do I receive an admission ticket?
If you are a registered stockholder (your shares are held in your name) and plan to attend the meeting, your Annual Meeting admission ticket can be detached from the top portion of the proxy card.
If you are a beneficial owner (your shares are held in the name of a bank, broker or other holder of record) and plan to attend the meeting, you can obtain an admission ticket in advance by writing to Stockholder Services, Bristol-Myers Squibb Company, 345 Park Avenue, New York, New York 10154. Please be sure to enclose proof of ownership, such as a bank or brokerage account statement. Stockholders who do not obtain tickets in advance may obtain them upon verification of ownership at the Registration Desk on the day of the Annual Meeting.
Tickets may be issued to others at the discretion of the company.
Who is entitled to vote?
All holders of record of our company’s $0.10 par value common stock and $2.00 convertible preferred stock at the close of business on March 7, 20056, 2006 will be entitled to vote at the 20052006 Annual Meeting. Each share is entitled to one vote on each matter properly brought before the meeting.
How do I vote if I am a registered stockholder?
Proxies are solicited to give all stockholders who are entitled to vote on the matters that come before the meeting the opportunity to do so whether or not they attend the meeting in person. If you are a registered holder, you can vote your proxy in one of the following manners:
(i) | via Internet; |
(ii) | by telephone; |
(iii) | by mail; or |
(iv) | in person at the Annual Meeting. |
Choosing to vote via the Internet or calling the toll-free number listed on the proxy card will save the company expense. In order to vote online or via telephone, have the voting form in hand and either call the number or go to the website indicated on the enclosed form and follow the instructions. If you vote via the Internet or by telephone, please do not return a signed proxy card.
If you choose to vote by mail, mark your proxy card enclosed with the Proxy Statement, date and sign it, and mail it in the postage-paid envelope.
If you wish to vote in person, you can vote the proxy in person at the Annual Meeting.
How do I specify how I want my shares voted?
If you are a registered stockholder, you can specify how you want your shares voted on each proposal by marking the appropriate boxes on the proxy card. Please review the voting instructions on the proxy card and read the entire text of the proposals and the positions of the Board of Directors in the Proxy Statement prior to marking your vote.
If your proxy card is signed and returned without specifying a vote or an abstention on a proposal, it will be voted according to the recommendation of the Board of Directors on that proposal. That recommendation is shown for each proposal on the proxy card.
How do I vote if I am a beneficial stockholder?
If you are a beneficial stockholder, you have the right to direct your broker or nominee on how to vote the shares. You should complete a voting instruction card which your broker or nominee is obligated to provide you. If you wish to vote in person at the meeting, you must first obtain from the record holder a proxy issued in your name.
What items will be voted upon at the Annual Meeting?
At the Annual Meeting, the following items will be voted upon:
(i) | the election of |
(ii) | ratification of the appointment of the company’s independent registered public accounting firm; and |
(iii) |
Our Board of Directors knows of no other matters that may be brought before the meeting. However, if any other matters are properly presented for action, it is the intention of the named proxies to vote on them according to their best judgment.
What are the Board of Directors’ voting recommendations?
For the reasons set forth in more detail later in the Proxy Statement, our Board of Directors recommends a vote FOR the election of directors, FOR the ratification of the appointment of PricewaterhouseCoopersDeloitte & Touche LLP as our independent registered public accounting firm for 2005, FOR approval of our Restated Certificate of Incorporation effecting an amendment to eliminate certain supermajority provisions2006 and AGAINST each of the sevenfive stockholder proposals.
How many votes are needed to have the proposals pass?
A plurality of the votes cast at the meeting is required to elect directors. Our Board of Directors adopted a corporate governance policy regarding director elections that is contained in our Corporate Governance Guidelines, which are attached to this Proxy Statement as Annex A. The affirmative votepolicy provides that in any uncontested election, any nominee for director who receives a greater number of at least 75%votes “withheld” for his or her election than votes “for” such election (a “majority withheld vote”) will tender his or her resignation as a director within 10 business days after the certification of the outstanding sharesstockholder vote. The Committee on Directors and Corporate Governance, without participation by any director so tendering his or her resignation, will consider the resignation offer and recommend to the Board whether to accept it. The Board, without participation by any director so tendering his or her resignation, will act on the Committee’s recommendation at its next regularly scheduled meeting to be held within 60 days after the certification of the company is requiredstockholder vote. We will promptly disclose the Board’s decision and the reasons for the decision in a broadly disseminated press release that will also be furnished to approve the proposal to amend our
Restated Certificate of Incorporation to eliminate certain supermajority vote requirements. The affirmative vote of a majority of the shares present in person or by proxy is required for ratification of the appointment of an independent registered public accounting firm and for the adoption of each of the sevenfive stockholder proposals.
How are the votes counted?
In accordance with the laws of the state of Delaware and our Restated Certificate of Incorporation and Bylaws,
(i) | for the election of directors, which requires a plurality of the votes cast in person or by proxy, only proxies and ballots indicating votes “FOR all nominees,” “WITHHELD for all nominees” or specifying that votes be withheld for one or more designated nominees are counted to determine the total number of votes cast; |
(ii) | for the adoption of all management proposals and all stockholder proposals, which require the majority of the votes cast in person or by proxy, only proxies and ballots indicating votes “FOR,” “AGAINST” or “ABSTAIN” on the proposals or providing the designated proxies with the right to vote in their judgment and discretion on the proposals are counted to determine the number of shares present and entitled to vote; broker non-votes are not counted. |
How canCan I revokechange my Proxy?vote after I return the proxy card, or after voting by telephone or electronically?
You mayIf you are a shareholder of record, you can revoke your proxy at any time before it is voted at the meeting by taking one of the following three actions:
(i) | by giving timely written notice of the revocation to the Secretary of Bristol-Myers Squibb; |
(ii) | casting a new vote by telephone or by the Internet; or |
(iii) | by voting in person at the Annual Meeting. |
If you are a beneficial owner of shares, you may submit new voting instructions by giving timely written noticecontacting your bank, broker or other holder of the revocation to the Secretary of Bristol-Myers Squibb; (ii) by executing and delivering a proxy with a later date; or (iii) by votingrecord. You may also vote in person at the meeting.Annual Meeting if you obtain a legal proxy.
All shares that have been properly voted and not revoked will be voted at the Annual Meeting.
How do I designate my proxy?
If you wish to give your proxy to someone other than the Directors’ Proxy Committee, you may do so by crossing out the names of all three Proxy Committee members appearing on the proxy card and inserting the name of another person. The signed card must be presented at the meeting by the person you have designated on the proxy card.
Who counts the votes?
Tabulation of proxies and the votes cast at the meeting is conducted by an independent agent and certified to by independent inspectors of election.
Is my vote confidential?
Yes, any information that identifies a stockholder or the particular vote of a stockholder is kept confidential.
Who will pay for the costs involved in the solicitation of proxies?
Bristol-Myers Squibb will pay all costs of preparing, assembling, printing and distributing the proxy materials. Management has retained Georgeson Shareholder Communications Inc. to assist in soliciting proxies for a fee of $25,000, plus reasonable out-of-pocket expenses. Our employees may solicit proxies on behalf of our Board of Directors through the mail, in person, and by telecommunications. We will, upon request, reimburse brokerage firms and others for their reasonable expenses incurred for forwarding solicitation material to beneficial owners of stock.
VOTING SECURITIES AND PRINCIPAL HOLDERS
At the close of business on March 7, 2005,6, 2006, there were 1,954,089,7341,963,662,514 shares of $0.10 par value common stock and 7,1896,419 shares of $2.00 convertible preferred stock outstanding and entitled to vote.
Common Stock Ownership by Directors and Executive Officers
The following table sets forth, as of February 15, 2005,2006, beneficial ownership of shares of our common stock by each director, each of the named executive officers and all directors and officers as a group. None of our directors and executive officers, individually or as a group, beneficially owns greater than 1% of the outstanding shares of common stock.
Unless otherwise noted, such shares are owned directly or indirectly with sole voting and investment power.
Name | Total Shares Owned(a) | Common Shares Underlying Options(b) | Deferred Common Share Units(c) | Total Shares Owned(a) | Common Shares Underlying Options(b) | Deferred Common Share Units(c) | ||||||||||
R. E. Allen | 139,111 | 23,264 | 89,151 | 153,606 | 26,560 | 100,350 | ||||||||||
L. Andreotti | 408,384 | 341,068 | — | |||||||||||||
A. R. J. Bonfield | 368,753 | 203,333 | 10,848 | 517,413 | 347,499 | 11,371 | ||||||||||
L. B. Campbell | 35,652 | 10,643 | 22,899 | 42,045 | 13,939 | 25,996 | ||||||||||
V. D. Coffman | 46,479 | (d) | 14,850 | 31,557 | 58,393 | (d) | 18,146 | 40,175 | ||||||||
J. M. Cornelius | 22,000 | 0 | 2,000 | 24,096 | — | 4,096 | ||||||||||
P. R. Dolan | 1,783,613 | (e) | 1,365,625 | 0 | 2,405,017 | (e) | 1,900,285 | — | ||||||||
E. V. Futter | 45,734 | 27,471 | 14,208 | |||||||||||||
L. J. Freeh | 2,000 | — | 2,000 | |||||||||||||
L. V. Gerstner, Jr. | 89,654 | 27,471 | 35,619 | (f) | 100,324 | 26,560 | 42,992 | (f) | ||||||||
L. H. Glimcher, M.D. | 31,797 | 14,850 | 16,947 | 39,809 | 18,146 | 21,663 | ||||||||||
D. J. Hayden, Jr. | 879,678 | 683,826 | 0 | 1,432,467 | 1,219,328 | — | ||||||||||
L. Johansson | 22,721 | 10,643 | 10,078 | 28,500 | 13,939 | 12,561 | ||||||||||
J. L. McGoldrick | 1,249,209 | 1,084,513 | 0 | 1,252,888 | 1,043,815 | — | ||||||||||
J. B. D. Palmer, M.D. | 484,294 | 385,000 | 0 | |||||||||||||
J. D. Robinson III | 80,354 | 27,471 | 20,062 | 126,816 | (g) | 26,560 | 24,833 | |||||||||
E. Sigal, M.D., Ph.D. | 331,384 | 206,740 | 16,922 | 463,073 | 277,948 | 17,738 | ||||||||||
L. W. Sullivan, M.D. | 53,096 | (g) | 27,471 | 18,914 | 57,697 | (h) | 26,560 | 22,722 | ||||||||
All Directors and Executive Officers as a Group | 7,972,306 | 5,711,190 | 289,205 | 10,577,550 | 7,622,224 | 326,497 |
(a) | Consists of direct and indirect ownership of shares, including unvested restricted stock grants, shares credited to the accounts of the executive officers under the Bristol-Myers Squibb Company Savings and Investment Program, stock options that are currently exercisable or exercisable within 60 days and deferred common share units. |
(b) | Consists of stock options that are currently exercisable and stock options that will be exercisable within 60 days. |
(c) | For non-employee directors, represents amounts credited to their accounts under the 1987 Deferred Compensation Plan for Non-Employee Directors as deferred common share units which are valued according to the market value and shareholder return on equivalent shares of common stock. For named executive officers, represents amounts credited to their accounts under the Performance Incentive Plan as deferred common share units which are valued according to the market value and stockholder return on equivalent shares of common stock. |
(d) | Includes 72 shares held by a family living trust over which neither Dr. Coffman nor his wife exercise voting nor investment power. |
(e) | Includes |
(f) | Includes |
(g) | Includes |
(h) | Includes 543 shares owned jointly by Dr. Sullivan and his wife over which he exercises shared voting and investment power. |
Principal Holders of Common Stock
The following table sets forth information regarding beneficial owners of more than 5 percent of the outstanding shares of our common stock.
Name | Number of Shares Beneficially Owned | Percent of Class | ||||
Capital Research and Management Company | 171,875,500 | (a) | 8.8 | %(a) | ||
333 South Hope Street | ||||||
Los Angeles, California 90071 |
Name | Number of Shares Beneficially Owned | Percent of Class | ||||
Capital Research and Management Company 333 South Hope Street Los Angeles, California 90071 | 173,076,200 | (a) | 8.8 | %(a) |
(a) | This information is based on the Schedule 13G/A dated February |
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Securities Exchange Act of 1934, our directors, executive officers and the beneficial holders of more than 10% of our Common Stockcommon stock are required to file reports of ownership and changes in ownership with the U.S. Securities and Exchange Commission. To the best of our knowledge, during 20042005 all applicable Section 16(a) filingsfiling requirements were met except that due to an administrative error, late Forms 4 were filed on July 6, 2004 for each of Robert E. Allen, Vance D. Coffman, Lewis B. Campbell, Laurie H. Glimcher, Louis V. Gerstner, Jr., James D. Robinson, III and Louis W. Sullivan disclosing that on June 30, 2004, each such director accrued deferred share units under the 1987 Deferred Compensation Plan for Non-Employee Directors.met.
CORPORATE GOVERNANCE AND BOARD MATTERS
Our business is managed under the direction of our Board of Directors pursuant to the Delaware General Corporation Law and our Bylaws. Our Board has responsibility for establishing broad corporate policies and for the overall performance of our company. It is not, however, involved in operating details on a day-to-day basis. Our Board is kept advised of the company’s business through regular written reports and analyses and discussions with the Chief Executive Officer and other officers of Bristol-Myers Squibb, by reviewing materials provided to them and by participating in Board and Board Committee meetings.
We maintain a corporate governance webpage at http://www.bms.com/aboutbms/corporategovernance/corporate_governance/data/.
Our Board of Directors adopted Corporate Governance Guidelines in 2002. From time to time, our Board revises the Corporate Governance Guidelines in response to changing regulatory requirements, evolving best practices, and the concerns of our stockholders and other constituents. The Corporate Governance Guidelines are attached to this Proxy Statement as Annex A and may be viewed on the company’s website at www.bms.com.
Consistent with these goals, the Committee on Directors and Corporate Governance and the Compensation and Management Development Committee have reviewed various corporate governance and executive compensation issues during the past year and made recommendations to our Board. Based on these recommendations, our Board of Directors adopted the following corporate governance initiatives.
These changes supplement the corporate governance initiatives previously approved by our Board of Directors which include:
These changes supplementIt is the corporate governance initiatives previously approved bypolicy of our Board that a substantial majority of Directors which include:
director independence. Our Board hasconsidered, any and all commercial and charitable relationships of directors, including transactions and relationships between each director or any member of his or her immediate family and Bristol-Myers Squibb and its subsidiaries. Following the review, our Board determined, by applying the categorical director independence standards contained in the Corporate Governance Guidelines which are attached to this Proxy Statement as Annex A, that each of our directors nominated for election at this Annual Meeting is independent of Bristol-Myers Squibb and director nominees, except Peter R. Dolan,its management in that none has noa direct or indirect material relationship with our company, (other thanexcept for Peter R. Dolan. Mr. Dolan is not considered an independent director because of his employment as a directorChief Executive Officer of our company) and is therefore independent. the company.
The independent directors are Robert E. Allen, Lewis B. Campbell, Vance D. Coffman, James M. Cornelius, Ellen V. Futter,Louis J. Freeh, Louis V. Gerstner, Jr., Laurie H. Glimcher, M.D., Leif Johansson, James D. Robinson III and Louis W. Sullivan, M.D. In addition, all members of the Audit Committee, the Compensation and Management Development Committee and the Committee on Directors and Corporate Governance satisfy the standards of independence applicable to members of such committees established under applicable law and the listing requirements of the New York Stock Exchange.
Our Board meets on a regularly scheduled basis during the year to review significant developments affecting Bristol-Myers Squibb and to act on matters requiring Board approval. It also holds special meetings when an important matter requires Board action between scheduled meetings. Members of senior management regularly attend Board meetings to report on and discuss their areas of responsibility. In 2004,2005, the Board of Directors met thirteeneight times. The average aggregate attendance of directors at Board and Committee meetings was over 96%. No director attended fewer than 88% of the aggregate number of Board and Committee meetings during the periods he or she served.
Annual Meeting of Stockholders
Directors are not required, but are strongly encouraged to attend the Annual Meeting of Stockholders. In 2004, nine2005, all of tenthe Directors attended the Annual Meeting of Stockholders.
Our Bylaws specifically provide for an Audit Committee and an Executive Committee. Our Bylaws also authorize the establishment of additional committees of the Board and, under this authorization, our Board of Directors has established the Committee on Directors and Corporate Governance and the Compensation and Management Development Committee. Our Board has appointed individuals from among its members to serve on these four committees. With the exception of the Executive Committee, each Committee is composed entirely of independent directors and operates under a written charter adopted by the Board, as amended from time to time. These charters are published on the company’s website at www.bms.com and are attached to this Proxy Statement.
www.bms.com.
In 2004,2005, the committees of the Board held a total of 2019 meetings: the Audit Committee met twelveten times, the Compensation and Management Development Committee met five times, and the Committee on Directors and Corporate Governance met three times. Thetimes and the Executive Committee did not meet in 2004.
TheAs of the date of the Proxy Statement, the table below provides membership information forindicates the members of each Board committee.
Name | Audit | Directors and Corporate Governance | Compensation & Management Development | Executive | ||||||
R. E. Allen | X | X* | X | |||||||
L. B. Campbell | X | X | ||||||||
V. D. Coffman | X* | X | ||||||||
J. M. Cornelius | X | X | ||||||||
P. R. Dolan | X* | |||||||||
| X | X | ||||||||
L. V. Gerstner, Jr. | X | X | ||||||||
L. H. Glimcher, M.D. | X | X | ||||||||
L. Johansson | X | X | ||||||||
J. D. Robinson III | X | |||||||||
L. W. Sullivan, M.D. | X | X |
* | Chair |
In addition, James D. Robinson III serves as a member,ex-officio, of all Board committees, except the Executive Committee of which he is a member.
Audit Committee
The Audit Committee is appointed by and generally acts on behalf of our Board of Directors. The Audit Committee works closely with management as well as our independent registered public accounting firm. The Audit Committee is responsible primarily for overseeing and monitoring the quality of our accounting and auditing practices and is directly responsible for the appointment, compensation and oversight of our independent registered public accounting firm for the purpose of preparing or issuing audit reports and related work regarding our financial statements. The Audit Committee also assists our Board in fulfilling its responsibilities for general oversight of compliance with legal and regulatory requirements, the performance of our internal audit function and independent registered public accounting firm, and business risk assessment and business risk management. Other specific duties and responsibilities include: (i) meeting to review our disclosure controls and procedures, internal controls, periodic filings with the U.S. Securities and Exchange Commission (SEC), earnings releases and earnings guidance; (ii) producing the required audit committee annual report for inclusion in our proxy statement; and (iii) overseeing investigations into complaints concerning financial or accounting matters.
The Audit Committee has the resources and authority appropriate to discharge its responsibilities, including the authority to retain independent legal counsel, accounting or other consultants or experts to advise the Committee. The Committee may also use the services of the company’s legal counsel and other advisors to the company.
The report of the Audit Committee Report is contained on page 32.The charter of the Audit Committee is attached to this Proxy Statement as Annex B.
35.
Our Board of Directors has determined that James M. Cornelius qualifies as an “audit committee financial expert” based on the Board’s understanding of the applicable SEC rules. In addition, our Board of Directors has determined that each current and former chief executive officer presently serving on the Audit Committee may also qualify as audit committee financial experts. Our Board has also determined that each member of the Audit Committee is independent as defined by the applicable New York Stock Exchange rules.
rules and is financially literate.
Including service on our company’s Audit Committee, Mr. CorneliusDr. Sullivan currently serves on the audit committees of four publicly traded companies. Our Board of Directors has determined that
Mr. Cornelius’s Dr. Sullivan’s simultaneous service on these audit committees does not impair his ability to serve effectively on our company’s Audit Committee. In making this determination, our Board of Directors has considered that Mr. Cornelius will step downDr. Sullivan is retiring from one company’s audit committee within one year.
the Board of Directors at this Annual Meeting in accord with mandatory retirement provisions in our Corporate Governance Guidelines.
Compensation and Management Development Committee
The Compensation and Management Development Committee is responsible primarily for reviewing, approving and reporting to our Board on major compensation and benefits plans, policies and programs of the company; reviewing and evaluating the performance and approving the compensation of executive officers and certain senior management; and overseeing our management development programs, performance assessment of senior executives and succession planning. Other specific duties and responsibilities include: annually reviewing and approving corporate goals and objectives relevant to CEO compensation; evaluating the CEO’s performance in light of those goals and objectives, and recommending to our Board the CEO’s compensation levels based on this evaluation; and producing the required annual report on executive compensation for inclusion in our proxy statement.
The Compensation and Management Development Committee has the resources and authority appropriate to discharge its responsibilities, including the authority to retain consultants or experts to advise the Committee.
The report of the Compensation and Management Development Committee Report on Executive Compensation is contained on page 21.The charter of the Compensation and Management Development Committee is attached to this Proxy Statement as Annex C.
23.
Committee on Directors and Corporate Governance
The Committee on Directors and Corporate Governance is responsible primarily for identifying individuals qualified to become Board members; recommending that our Board select the director nominees for the next annual meeting of stockholders; and overseeing our Board’s annual evaluation of its performance. The Committee on Directors and Corporate Governance is also responsible for identifying best practices and developing and recommending to our Board a set of corporate governance guidelines applicable to the company and for periodically reviewing such guidelines. Other specific duties and responsibilities include: reviewing and recommending annually to our Board of Directors the compensation of non-employee directors; considering questions of potential conflicts of
interest of directors and senior management; defining specific categorical standards for director independence, considering matters of corporate social responsibility and matters of significance in areas related to corporate public affairs and our employees and stockholders.
The Committee on Directors and Corporate Governance has the resources and authority appropriate to discharge its responsibilities, including the sole authority to retain, set compensation for, and terminate a search firm to be used to identify director candidates. In addition, the Committee has authority to obtainseek advice and assistance from other experts or consultants to advise the Committee. The charter of the Committee on Directors and Corporate Governance is attached to this Proxy Statement as Annex D.
consultants.
Executive Committee
The Executive Committee is appointed by our Board of Directors and generally acts during the intervals between the meetings of the entire Board. The Executive Committee may exercise all of the
powers of the entire Board in the management of the business and affairs of Bristol-Myers Squibb, except for specific powers that are reserved for the entire Board as set forth in our Bylaws.
Director QualificationsCriteria for Board Membership
Our corporate governance guidelines contain Board membership criteria that apply to nominees for a position on our Board of Directors. Under these criteria, members of our Board should be persons of diverse backgrounds with broad experience in areas important to the operation of the company such as business, science, medicine, finance/accounting, law, education or government and should possess qualities reflecting integrity, independence, wisdom, an inquiring mind, vision, a proven record of accomplishment and ability to work with others. Each director must represent the interests of our stockholders.
Identification and Selection of Nominees for our Board
The Committee on Directors and Corporate Governance periodically assesses the appropriate size of our Board, and whether any vacancies on our Board are expected due to retirement or otherwise. In the event that vacancies are anticipated or otherwise arise, the Committee on Directors and Corporate Governance considers candidates for director. Candidates may come to the attention of the Committee on Directors and Corporate Governance through current Board members, professional search firms, management, stockholders or others. The Chair of the Committee on Directors and Corporate Governance, in consultation with the Chairman of the Board and Chief Executive Officer, conducts an initial evaluation of the prospective nominees against the established Board membership criteria discussed above. Additional information relevant to the qualifications of prospective nominees may be requested from third-party search firms, other directors, management or other sources. After this initial evaluation, prospective nominees may be interviewed by telephone or in person by the Chair of the Committee on Directors and Corporate Governance, the Chairman of the Board, Chief Executive Officer and other directors. After completing this evaluation and interview, the Committee on Directors and Corporate Governance makes a recommendation to the full Board as to the persons who should be nominated by our Board, and the full Board determines the nominees after considering the recommendation and any additional information it may deem appropriate.
In 2004, the Committee on Directors and Corporate Governance retained a third-party search firm to identify candidates for director. The third-party search firm2005, one of our outside counsel identified Mr. James M. Cornelius,Louis J. Freeh as a potential candidate for election to our Board of Directors, among other potential candidates. Mr. Allen, Mr. Dolan and Mr. DolanRobinson interviewed Mr. CorneliusFreeh and reported back to the Committee on Directors and Corporate Governance. The Committee on Directors and Corporate Governance then recommended Mr. CorneliusFreeh as a nominee for director to the full Board.
Stockholder Nominations for Director
The Committee on Directors and Corporate Governance considers stockholder recommendations of nominees for election to our Board of Directors if they are accompanied by a comprehensive written resume of the recommended nominee’s business experience and background and a consent in writing signed by the recommended nominee that he or she is willing to be considered as a nominee and, if nominated and elected, he or she will serve as a director. Stockholders should send their written recommendations of nominees accompanied by the aforesaid documents to the principal executive offices of the company addressed to: Bristol-Myers Squibb Company, 345 Park Avenue, New York, New York 10154, attention: Secretary.
Executive Sessions and Presiding Director
In 2004,2005, our independentnon-management directors met in Executive Session fournine times to discuss such topics as our independentnon-management directors determined, including the evaluation of the performance of the Chief
Executive Officer. Mr. Allen, as Chair of the Committee on Directors and Corporate Governance and Mr. James D. Robinson, as Chairman of the Board, presided over these sessions.
Communications with our Board of Directors
The Committee on Directors and Corporate Governance has created a process by which stockholdersan interested party may communicate directly with our independentnon-management directors. Any stockholderinterested party wishing to contact an independenta non-management director may do so in writing by sending a letter to:
[Name of Director]
c/o Secretary
Bristol-Myers Squibb Company
345 Park Avenue
New York, NY 10154
Any matter relating to our financial statements, accounting practices or internal controls should be addressed to the Chair of the Audit Committee. All other matters should be addressed to the Chair of the Committee on Directors and Corporate Governance. Our Corporate Secretary reviews all correspondence and regularly forwards to our Board a summary of all such correspondence and copies of all correspondence that, in the opinion of our Corporate Secretary, deals with the functions of our Board or its committees, or that our Corporate Secretary otherwise determines requires Board attention. Directors may at any time review a log of the correspondence we receive that is addressed to members of the Board and request copies of any such correspondence.
Our Board of Directors has adopted the Standards of Business Conduct and Ethics that sets forth important company policies and procedures in conducting our business in a legal, ethical and responsible manner. These standards are applicable to all of our employees, including the chief executive officer, chief financial officerChief Executive Officer, the Chief Financial Officer and controller.the Controller. In addition, the Audit Committee has adopted the Code of Ethics for Senior Financial Officers that supplements the Standards of Business Conduct and Ethics by providing more specific requirements and guidance on certain topics. The Code of Ethics for Senior Financial Officers applies to the chief executive officer,Chief Executive Officer, the chief financial officer,Chief Financial Officer, the controller,Controller, the treasurerTreasurer and the headsHeads of major businessoperating units. Our Board has also adopted the Code of Business Conduct and Ethics for Directors that applies to all directors and sets forth guidance with respect to recognizing and handling areas of ethical issues. The Standards of Business Conduct
and Ethics, the Code of Ethics for Senior Financial Officers and the Code of Business Conduct and Ethics for Directors are available on our website at www.bms.com. We intend towill post any material amendments to, or waivers from, our Code of Ethics for Senior Financial Officers and Code of Business Conduct and Ethics for Directors on our website.website within two days following the date of such amendment or waiver.
Employees are required to report any conduct they believe in good faith to be an actual or apparent violation of our Codes of Conduct. In addition, as required under the Sarbanes-Oxley Act of 2002, the Audit Committee has established procedures to receive, retain and treat complaints received regarding accounting, internal accounting controls, or auditing matters and the confidential, anonymous submission by company employees of concerns regarding questionable accounting or auditing matters.
Availability of Corporate Governance Documents
Our Corporate Governance Guidelines (including the categorical standards of director independence), Board committee charters, Standards of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers and Code of Business Conduct and Ethics for Directors are available on our corporate governance webpage at www.bms.com and are available to any stockholderinterested party who requests them by writing to: Secretary, Bristol-Myers Squibb Company, 345 Park Avenue, New York, New York 10154.
In 2004,2005, our independentnon-management directors received an annual retainer of $45,000. We require that 25% of the retainer be deferred and credited to a deferred compensation account, the value of which is
determined by the value of our common stock, until certain ownership guidelines are attained. IndependentNon-management directors received an additional fee of $2,000 for attending each Board meeting, Board Committee meeting, and the Annual Meeting of Stockholders. In addition, the Chairs of the Audit Committee, the Compensation and Management Development Committee and the Committee on Directors and Corporate Governance received an annual fee of $10,000. The following table sets forth information regarding the cash retainer and meeting fees earned by our non-management directors in 2005.
Director | Annual Board Retainer | Annual Committee Chair Retainer | Meeting Fees(1) | Total | ||||||||||
R. E. Allen | $ | 45,000 | $ | 10,000 | $ | 62,000 | $ | 117,000 | ||||||
L. B. Campbell | 45,000 | 5,417 | (2) | 70,000 | 120,417 | |||||||||
V. D. Coffman | 45,000 | 10,000 | 66,000 | 121,000 | ||||||||||
J. M. Cornelius | 45,000 | — | 56,000 | 101,000 | ||||||||||
L. J. Freeh | 13,500 | — | 6,000 | 19,500 | ||||||||||
E. V. Futter | 45,000 | — | 40,000 | 85,000 | ||||||||||
L. V. Gerstner, Jr. | 45,000 | — | 42,000 | 87,000 | ||||||||||
L. H. Glimcher, M.D. | 45,000 | — | 62,000 | 107,000 | ||||||||||
L. Johansson | 45,000 | — | 58,000 | 103,000 | ||||||||||
J. D. Robinson III | 45,000 | 4,583 | (2) | 42,000 | 286,583 | (3) | ||||||||
L. W. Sullivan, M.D. | 45,000 | — | 64,000 | 109,000 |
(1) | Includes fee paid for attendance at annual meeting. |
An independent
(2) | Prorated Chair retainers. |
(3) | Includes $195,000 paid as a prorated non-executive Chairman retainer. |
James D. Robinson III was appointed as the non-executive Chairman of the Board effective June 12, 2005. In 2005, Mr. Robinson received $195,000 in retainer fees in addition to the regular director retainer of $45,000. We require that 25% of the retainer be deferred and credited to a deferred compensation account, the value of which is determined by the value of our common stock, until certain ownership guidelines are attained. Mr. Robinson also received a one-time award of 40,000 restricted stock units, settleable in cash in a lump sum or in a maximum of ten annual installments. The restricted stock units will vest in two equal installments on the date of the 2007 Annual Meeting and the date of the 2008 Annual Meeting.
A non-management director may elect to defer payment of all or part of the compensation received as a director under our company’s 1987 Deferred Compensation Plan for Non-Employee Directors. Deferred funds may be credited to a 3-month6-month United States Treasury bill equivalent fund, a fund based on the return on the company’s invested cash or a fund based on the return on our common stock or to two or three of the funds. Deferred portions are payable in a lump sum or in a maximum of ten annual installments. Payments under the Plan begin when a participant ceases to be a director or at a future date previously specified by the director.
All independentnon-management directors received an annual award of 2,000 deferred common share units, the value of which is determined by the value of our common stock. Our Retirement Plan for Non-Employee Directors was terminated in 1996. Benefits existing under the Plan were vested as of that time for all directors who had served on the Board as of that date. Under our 2000 Non-Employee Directors’ Stock Option Plan, each independentnon-management director received on the date of the 20042005 Annual Meeting, an option to purchase 2,500 shares of our common stock, provided the director was elected to the Board of Directors on the date of the Annual Meeting or had previously been elected to the Board of Directors for a term extending beyond such Annual Meeting. The price of the option was the fair market price of our common stock on the date the option was granted. Each option becomes exercisable in four equal installments commencing on the earlier of the first anniversary of the date of the grant or the date of the next Annual Meeting and continuing similarly for the three years thereafter. The options also become fully exercisable upon retirement from the Board after one year of service following the grant date. In 2004,2005, options for a total of 22,50025,000 shares were granted under the plan, consisting of options for 2,500 shares granted to each of the nine independent directors.
ten non-management directors serving at the time of the 2005 Annual Meeting.
The Directors’ Charitable Contribution Program is part of our overall program of charitable contributions in which all current directors participate. The Program is partially funded by life insurance policies purchased by our company on individual members and retired members of the Board of Directors. In 2004,2005, we paid a total of $61,454$17,670 in premiums on policies covering fivetwo current directors and certain retired directors. The policies provide for a $1 million death benefit for each director covered. Upon the death of a director, Bristol-Myers Squibb donates one-half of the $1 million benefit to one or more qualifying charitable organizations designated by the director. The remaining one-half of the benefit is contributed to the Bristol-Myers Squibb Foundation, Inc. for distribution according to the Foundation’s program for charitable contributions to medical research, health-related and community service organizations, educational institutions and education-related programs and cultural and civic activities. Individual directors derive no financial benefit from this program since the tax benefit of all charitable deductions relating to the contributions accrue solely to Bristol-Myers Squibb.
Each year the Committee on Directors and Corporate Governance reviews our directors’ compensation practices and compares them against the practices of our peer group companies and the largest U.S. companies in market capitalization. The Committee believes the total director compensation package we offer continues to be competitive with the compensation offered by other companies, and appropriately aligns the interests of directors to stockholders by ensuring directors have a proprietary stake in our company.
Our Board of Directors is currently divided into two classes. At the 2003 Annual Meeting, our stockholders voted to gradually declassify our Board of Directors, such that at the 2006 Annual Meeting all elected directors will serve for a one-year term. Our Board of Directors has nominated sevennine current directors, Robert E. Allen, Lewis B. Campbell, Vance D. Coffman, James M. Cornelius, Peter R. Dolan, Ellen V. Futter, Louis V. Gerstner, Jr.J. Freeh, Laurie H. Glimcher, M.D., Leif Johansson and Louis W. Sullivan, M.D.James D. Robinson III to serve as directors of Bristol-Myers Squibb for a one-year term expiring atSquibb. The directors will hold office from election until the 2006 Annual Meeting. After the election of seven directors at the Annual Meeting, the Board of Directors will be composed of eleven directors, including four continuing directors whose terms extend beyond the2007 Annual Meeting. If any nominee is unable to serve, proxies will be voted in favor of the remainder of those nominated and may be voted for substitute nominees, unless our Board of Directors provides for a lesser number of directors.
A plurality of the votes cast is required to elect directors. Our Board of Directors, however, adopted a corporate governance policy providing that in any uncontested election, any nominee for director who receives a majority withheld vote will tender his or her resignation as a director within 10 business days after the certification of the stockholder vote. The Committee on Directors and Corporate Governance, without participation by any director so tendering his or her resignation, will consider the resignation offer and recommend to the Board whether to accept it. The Board, without participation by any director so tendering his or her resignation, will act on the Committee’s recommendation at its next regularly scheduled meeting to be held within 60 days after the certification of the stockholder vote. We will promptly disclose the Board’s decision and the reasons for that decision in a broadly disseminated press release that will also be furnished to the Securities and Exchange Commission on Form 8-K.
Listed below is certain biographical information of each of the nominees for election followed by information for directors whose terms extend beyond this Annual Meeting, including his or her principal occupation and other business affiliations.
Nominees for Directors for a Term Expiring in 2006
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Directors whose terms expire in 2006
Director since 1986 | ROBERT E. ALLEN
Chairman and Chief Executive Officer from 1988 to 1997 of AT&T, a communications and information services company. Mr. Allen is a | |
Director since 1998 | LEWIS B. CAMPBELL
Chairman, President and Chief Executive Officer since February 1999 of Textron Inc., a multi-industry company serving the aircraft, fastening systems, industrial products and components and financial industries. Mr. Campbell is a Director of Dow Jones & Company. Mr. Campbell is a member of the G 100 Group, The Business Council, The Business Roundtable and the Defense Industry Initiative Steering |
Director since 1998 | VANCE D. COFFMAN Retired Chairman and Chief Executive Officer of Lockheed Martin Corporation, a high technology aerospace and defense company. He is a Director of the 3M Company and Deere & Company. He is a Member of the President’s National Security Telecommunications Advisory Committee, the National Academy of Engineering and the Security Affairs Support Association as well as a Fellow in the American Institute of Aeronautics and Astronautics and the American Astronautical Society. Board Committees: Audit Committee (Chair) and Compensation and Management Development Committee. Age 61. | |
Director since 2005 | JAMES M. CORNELIUS Effective November 15, 2005, James M. Cornelius became Chairman of the Board and Chief Executive Officer (interim) of Guidant Corporation, a U.S. cardiac and vascular medical device company, as the company is being acquired. Previously, Mr. Cornelius served as Chairman of the Board (Non-Executive) since 2000. From 1995 until 2000, Mr. Cornelius served as the Senior Executive and Chairman of Guidant Corporation. From 1983 to 1994, Mr. Cornelius was a Director, a member of the Executive Committee and Chief Financial Officer of Eli Lilly and Company. Mr. Cornelius is a Director of The Chubb Corporation, The DirecTV Group, Inc. and Given Imaging, Ltd. He is a Managing Partner at Twilight Ventures Partners and a Board member of Leerink Swann & Company and a member of The National Bank of Indianapolis. He serves as Board Trustee and Treasurer of the Indianapolis Museum of Art. Board Committees: Audit Committee and Compensation and Management Development Committee. Age 62. | |
Director since 2000 | PETER R. DOLAN Chief Executive Officer of our company. Mr. Dolan also served as Chairman of the Board of the company from September 2001 to June 2005. Mr. Dolan was elected President of the company in 2000 and Chief Executive Officer in May 2001. He was Senior Vice President for Strategy and Organizational Effectiveness from 1998 to his election as President. Mr. Dolan is a Director of the American Express Company, and is the 2006 Chairman of the Pharmaceutical Research and Manufacturers Association (PhRMA). He is a member of the Board of the National Center on Addiction and Substance Abuse, the Steering Committee for C-Change, Board of Overseers for the Amos Tuck School of Business at Dartmouth, and the Board of Trustees at Tufts University. He is a member of The Business Council and The Business Roundtable. Board Committee: Executive Committee (Chair). Age 50. | |
Director since 2005 | LOUIS J. FREEH Mr. Freeh served as Vice Chairman, General Counsel, Corporate Secretary and Ethics Officer to MBNA Corporation from 2001 until its acquisition by Bank of America in January 2006. He served as FBI Director from 1993 to 2001 and previously as a U.S. District Judge, Assistant U.S. Attorney and FBI Special Agent. Board Committees: Audit Committee and Committee on Directors and Corporate Governance. Age 56. |
Director since 1997 | LAURIE H. GLIMCHER, M.D.
Irene Heinz Given Professor of Immunology at the Harvard School of Public Health and Professor of Medicine at Harvard Medical School since 1991. Dr. Glimcher is a Director of Waters |
Director since 1998 | LEIF JOHANSSON President of AB Volvo, an automotive company and Chief Executive Officer of The Volvo Group since 1997. He is Chairman of the Board of ACEA, Commercial Vehicles as well as Director of The Confederation of Swedish Enterprise, Royal Swedish Academy of Engineering Sciences, the Association of Swedish Engineering Industries and the Association des Constructeurs Europeens d’ Automobiles. He is also a member of the European Business Roundtable of Industrialists. Board Committees: Audit Committee and Committee on Directors and Corporate Governance. Age 54. | |
Director since 1976 | JAMES D. ROBINSON III
Chairman of the Board of our company since June 2005. Co-founder and General Partner of RRE Ventures, a private information technology venture investment firm, since 1994. |
Our compensation and benefits programs are designed to enable us to attract, retain and motivate the best possible employees to operate and manage our company at all levels.
We seek an executive compensation policy that is appropriately transparent to our stockholders and in alignment with our stockholders’ best interests.
In general, all U.S.-based employees receive a base salary, participate in an annual incentive plan, a company-supported savings plan and a company-funded pension plan and are provided with medical and other welfare benefits coverage. Employees outside of the U.S. are similarly covered by comprehensive compensation and benefits programs that are consistent with applicable local laws and regulations.
In addition, we maintain specific executive compensation programs designed to provide incentives to reward and retain outstanding executives who bear the responsibility for achieving the challenging business objectives necessary to assure our growth position in the highly complex and competitive pharmaceutical and healthcare industries in which we operate. Our executive compensation programs are based upon a pay-for-performance philosophy to provide incentives to achieve both short-term and long-term objectives and to reward exceptional performance, gains in productivity and contributions to our growth and success.
In addition to performance against financial operational and strategicoperational objectives and total stockholder return, which are the key determinants of incentive payments under our executive compensation programs, the successful Bristol-Myers Squibb (BMS) executive must also perform effectively in many areas that are not measured specifically by financial or operational results. Performance is also assessed against our Standards of Business Conduct and Ethics reflecting social values, environmental stewardship and the expectations of our key constituencies, including our employees and stockholders, the consumers of our products, suppliers and customers, the communities in which we operate and the countries where we do business. Executives must fully meet our Standards of Business Conduct and Ethics as a prerequisite to receiving any incentive payments. The Bristol-Myers Squibb Pledge (Pledge) and Core BMS Behaviors clearly definesdefine the values and behaviors that are expected of each of our employees, and the performance of our executives is appraised in this regard. Executives are evaluated pursuant to the company’s performance management system whereby executives are given two ratings, one for results and one for behaviors. The results rating represents the executive’s performance against specific financial and operational goals that are established at the beginning of the year and are consistent with our strategy. The behaviors rating measures how well the executive demonstrates the coreCore BMS behaviorsBehaviors consistent with our company’s Mission and Pledge. These ratings are key factors in determining the size of an executive’s merit increase, bonus and equity awards.
Executive Officer Compensation
The following tables and notes present the compensation provided to Mr. Peter R. Dolan, Chairman and Chief Executive Officer, as well as the fivefour other most highly compensated executive officers and an additional highly compensated executive who was not an executive officer as of December 31, 2005, for services rendered to our company in 2002, 2003, 2004 and 2004.
2005. Mr. Hayden’s employment with the company terminated on March 2, 2006 and Mr. McGoldrick will retire from the company on April 1, 2006.
Long Term Compensation | Annual Compensation | Long Term Compensation | |||||||||||||||||||||||||||||||||||||||
Annual Compensation | Awards | Payouts | Awards | Payouts | |||||||||||||||||||||||||||||||||||||
Name/Title Year | Salary $(1) | Bonus $ | Other Annual $ | Restricted $ | Securities Underlying Options/SARs # | Long Term Incentive Payouts $ | All Other Compen- sation(4) $ | Salary(1) $ | Bonus $ | Other Annual $ | Restricted Stock Awards(3) $ | Securities Underlying Options/SARs # | Long Term Incentive Payouts $ | All Other Compen- sation(4) $ | |||||||||||||||||||||||||||
P.R. Dolan | |||||||||||||||||||||||||||||||||||||||||
Chairman and CEO | |||||||||||||||||||||||||||||||||||||||||
Chief Executive Officer | |||||||||||||||||||||||||||||||||||||||||
2005 | $ | 1,250,000 | $ | 2,224,875 | $ | 191,706 | $ | 2,529,000 | 500,500 | $ | 1,095,904 | (5) | $ | 56,250 | |||||||||||||||||||||||||||
2004 | $ | 1,255,961 | $ | 2,125,000 | $ | 99,999 | $ | 2,491,432 | 500,500 | — | (8) | $ | 56,518 | $ | 1,255,961 | $ | 2,125,000 | $ | 99,999 | $ | 2,491,432 | 500,500 | $ | 0 | (6) | $ | 56,518 | ||||||||||||||
2003 | $ | 1,100,000 | $ | 2,125,000 | — | $ | 2,644,000 | 550,000 | — | (9) | $ | 49,500 | $ | 1,100,000 | $ | 2,125,000 | $ | 49,999 | $ | 2,644,000 | 550,000 | $ | 0 | (7) | $ | 49,500 | |||||||||||||||
2002 | $ | 1,100,000 | — | — | — | 500,000 | — | (10) | $ | 49,500 | |||||||||||||||||||||||||||||||
A.R.J. Bonfield(5) | |||||||||||||||||||||||||||||||||||||||||
SVP and Chief Financial Officer | |||||||||||||||||||||||||||||||||||||||||
L. Andreotti(8) | |||||||||||||||||||||||||||||||||||||||||
Executive Vice President and President Worldwide Pharmaceuticals | |||||||||||||||||||||||||||||||||||||||||
2005 | $ | 829,806 | $ | 723,701 | $ | 580,417 | $ | 3,542,938 | 112,500 | $ | 269,714 | (5) | $ | 100,096 | |||||||||||||||||||||||||||
2004 | $ | 774,858 | $ | 673,264 | $ | 56,220 | $ | 531,159 | 113,333 | — | (8) | $ | 34,869 | $ | 735,625 | $ | 701,239 | $ | 429,952 | $ | 506,160 | 108,000 | $ | 0 | (6) | $ | 105,239 | ||||||||||||||
2003 | $ | 725,000 | $ | 554,495 | $ | 1,573,980 | $ | 925,400 | 150,000 | — | (9) | $ | 25,096 | $ | 556,963 | $ | 556,964 | $ | 530,010 | $ | 1,322,000 | 135,000 | $ | 0 | (7) | $ | 57,967 | ||||||||||||||
2002 | $ | 181,250 | $ | 507,500 | — | $ | 2,445,000 | 200,000 | — | (10) | — | ||||||||||||||||||||||||||||||
D.J. Hayden, Jr. | |||||||||||||||||||||||||||||||||||||||||
EVP and President Americas | |||||||||||||||||||||||||||||||||||||||||
A.R.J. Bonfield | |||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||||||||||||||||||
2005 | $ | 771,052 | $ | 740,358 | $ | 97,607 | $ | 477,703 | 113,333 | $ | 269,714 | (5) | $ | 34,697 | |||||||||||||||||||||||||||
2004 | $ | 705,817 | $ | 718,757 | — | $ | 515,524 | 110,000 | — | (8) | $ | 31,762 | $ | 774,858 | $ | 673,264 | $ | 56,220 | $ | 531,159 | 113,333 | $ | 0 | (6) | $ | 34,869 | |||||||||||||||
2003 | $ | 660,875 | $ | 648,801 | — | $ | 1,322,000 | 165,000 | — | (9) | $ | 29,739 | $ | 725,000 | $ | 554,495 | $ | 1,573,980 | $ | 925,400 | 150,000 | $ | 0 | (7) | $ | 25,096 | |||||||||||||||
2002 | $ | 653,535 | — | — | — | 125,000 | — | (10) | $ | 29,409 | |||||||||||||||||||||||||||||||
J.L. McGoldrick | |||||||||||||||||||||||||||||||||||||||||
EVP and General Counsel | |||||||||||||||||||||||||||||||||||||||||
Executive Vice President | |||||||||||||||||||||||||||||||||||||||||
2005 | $ | 751,645 | $ | 524,533 | $ | 88,490 | $ | 360,383 | 85,500 | $ | 269,714 | (5) | $ | 33,824 | |||||||||||||||||||||||||||
2004 | $ | 768,960 | $ | 609,045 | $ | 74,413 | $ | 400,710 | 85,500 | — | (8) | $ | 34,603 | $ | 768,960 | $ | 609,045 | $ | 74,413 | $ | 400,710 | 85,500 | $ | 0 | (6) | $ | 34,603 | ||||||||||||||
2003 | $ | 719,996 | $ | 505,045 | — | $ | 661,000 | 135,000 | — | (9) | $ | 32,400 | $ | 719,996 | $ | 505,045 | $ | 49,999 | $ | 661,000 | 135,000 | $ | 0 | (7) | $ | 32,400 | |||||||||||||||
2002 | $ | 712,000 | — | — | — | 90,000 | — | (10) | $ | 32,040 | |||||||||||||||||||||||||||||||
E. Sigal, M.D., Ph.D. | |||||||||||||||||||||||||||||||||||||||||
President, Pharmaceutical Research Institute and CSO | |||||||||||||||||||||||||||||||||||||||||
Chief Scientific Officer and President PRI | |||||||||||||||||||||||||||||||||||||||||
2005 | $ | 690,265 | $ | 554,366 | $ | 80,477 | $ | 1,663,753 | 103,500 | $ | 116,082 | (5) | $ | 31,062 | |||||||||||||||||||||||||||
2004 | $ | 558,426 | $ | 393,844 | $ | 51,419 | $ | 226,535 | 48,333 | — | (8) | $ | 25,129 | $ | 558,426 | $ | 393,844 | $ | 51,419 | $ | 226,535 | 48,333 | $ | 0 | (6) | $ | 25,129 | ||||||||||||||
2003 | $ | 481,668 | $ | 289,220 | — | $ | 661,000 | 68,000 | — | (9) | $ | 21,675 | $ | 481,668 | $ | 289,220 | $ | 18,807 | $ | 661,000 | 68,000 | $ | 0 | (7) | $ | 21,675 | |||||||||||||||
2002 | $ | 435,181 | $ | 63,540 | — | $ | 630,250 | 65,000 | — | (10) | $ | 19,583 | |||||||||||||||||||||||||||||
J.B.D. Palmer, M.D.(7) | |||||||||||||||||||||||||||||||||||||||||
Former President, Pharmaceutical Research Institute and CSO | |||||||||||||||||||||||||||||||||||||||||
D.J. Hayden, Jr.(10) | |||||||||||||||||||||||||||||||||||||||||
Executive Vice President | |||||||||||||||||||||||||||||||||||||||||
2005 | $ | 689,924 | $ | 619,023 | $ | 95,193 | $ | 421,508 | 100,000 | $ | 298,740 | (7) | $ | 31,047 | |||||||||||||||||||||||||||
2004 | $ | 613,738 | $ | 705,372 | $ | 107,582 | $ | 531,159 | 113,333 | — | (8) | — | $ | 705,817 | $ | 718,757 | $ | 35,621 | $ | 515,524 | 110,000 | $ | 0 | (8) | $ | 31,762 | |||||||||||||||
2003 | $ | 700,000 | $ | 616,322 | $ | 348,657 | $ | 925,400 | 135,000 | — | (9) | — | $ | 660,875 | $ | 648,801 | $ | 49,999 | $ | 1,322,000 | 165,000 | $ | 0 | (9) | $ | 29,739 | |||||||||||||||
2002 | $ | 26,923 | $ | 490,000 | — | $ | 3,303,750 | 250,000 | — | (10) | — |
(1) |
(2) | For |
(3) | On March |
(4) | Consists of matching contributions to the Savings and Investment Program (SIP) and the Benefits Equalization Plan (BEP) for the SIP for |
(5) |
(6) | A Long-Term Performance Award was granted in 2002 which covered the three-year performance period from 2002 through 2004. The award was based on cumulative earnings per share, cumulative sales and a total stockholder return ranking versus peer companies. The threshold targets were not met resulting in no payout. |
(7) | A Long-Term Performance Award was granted in 2001 which covered the three-year performance period from 2001 through 2003. The award was based on cumulative earnings per share, cumulative sales and a total stockholder return ranking versus peer companies. The threshold targets were not met resulting in no payout. |
(8) | Mr. Andreotti was appointed Executive Vice President and President Worldwide Pharmaceuticals on September 20, 2005. |
(9) | Dr. Sigal was appointed Chief Scientific Officer and President, Pharmaceutical Research Institute on October 28, 2004. |
Option/SAR Grants in the Last Fiscal Year
Individual Grants | Individual Grants | |||||||||||||||||||||||||
Name | Number of # | % of Total Options/SARs Granted to Employees In Fiscal Year | Exercise Or Base Price(2) ($/Sh) | Expiration Date | Grant Date $ | Number of Securities Underlying Options/SARs Granted(1) # | % of Total Options/SARs Granted to Employees In Fiscal Year | Exercise Or Base Price(2) ($/Sh) | Expiration Date | Grant Date Present Value(3) $ | ||||||||||||||||
P.R. Dolan | 500,500 | 2.5 | % | $ | 28.11 | March 1, 2014 | $ | 2,767,769 | 500,500 | 2.5 | % | $ | 25.45 | March 1, 2015 | $ | 2,564,282 | ||||||||||
L. Andreotti | 112,500 | 0.6 | % | $ | 25.45 | March 1, 2015 | $ | 576,387 | ||||||||||||||||||
A.R.J. Bonfield | 113,333 | 0.6 | % | $ | 28.11 | March 1, 2014 | $ | 626,732 | 113,333 | 0.6 | % | $ | 25.45 | March 1, 2015 | $ | 580,655 | ||||||||||
D.J. Hayden, Jr. | 110,000 | 0.6 | % | $ | 28.11 | March 1, 2014 | $ | 608,301 | ||||||||||||||||||
J.L. McGoldrick | 85,500 | 0.4 | % | $ | 28.11 | March 1, 2014 | $ | 472,816 | 85,500 | 0.4 | % | $ | 25.45 | March 1, 2015 | $ | 438,054 | ||||||||||
E. Sigal, M.D., Ph.D. | 48,333 | 0.2 | % | $ | 28.11 | March 1, 2014 | $ | 267,282 | 103,500 | 0.5 | % | $ | 25.45 | March 1, 2015 | $ | 530,276 | ||||||||||
J.B.D. Palmer, M.D.(4) | 113,333 | 0.6 | % | $ | 28.11 | March 1, 2014 | $ | 626,732 | ||||||||||||||||||
D. J. Hayden, Jr. | 100,000 | 0.5 | % | $ | 25.45 | March 1, 2015 | $ | 512,344 | ||||||||||||||||||
All Optionees | 19,968,769 | $ | 27.88 | Various Dates, 2014 | $ | 118,414,800 | 20,169,736 | $ | 25.37 | Various Dates, 2015 | $ | 103,013,615 |
(1) | Individual grants become |
(2) | All options were granted at 100% of Fair Market Value as of the date of the grant. |
(3) | In accordance with Securities and Exchange Commission rules, the Black-Scholes option pricing model was chosen to estimate the grant date present value of the options set forth in this table. There is no assurance that the value realized by an executive, if any, will be at or near the value estimated by the Black-Scholes model. Future compensation resulting from option grants is based solely on the performance of our company’s stock price. The Black-Scholes Ratio of |
(4) |
Information includes TeamShare grants. Exercise price shown is the weighted average of all grants. Actual exercise prices ranged from |
Aggregated Option/SAR Exercises in the Last Fiscal Year
and Fiscal Year-End Option/SAR Values(1)Values(1)
Name | Shares Acquired On Exercise (#) | Value Realized ($) | Annualized Value Realized(2) ($) | Number of Securities Underlying Unexercised Options/SARs at Fiscal Year-End (#) | Value of Unexercised “In The Money” Options/SARs At Fiscal Year-End ($)(3) | Shares Acquired On Exercise (#) | Value ($) | Annualized Value Realized ($) | Number of Securities Fiscal Year-End (#) | Value of Unexercised “In The Money” Options/SARs At Fiscal Year-End ($)(2) | ||||||||||||||||||||||||||
Exercisable | Unexercisable | Exercisable | Unexercisable | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||||||||||||
P.R. Dolan | 0 | $ | 0 | $ | 0 | 978,000 | 1,644,130 | $ | 452,270 | $ | 1,018,875 | 0 | $ | 0 | $ | 0 | 1,387,535 | 1,735,095 | $ | 52,722 | $ | 0 | ||||||||||||||
L. Andreotti | 0 | $ | 0 | $ | 0 | 242,193 | 308,005 | $ | 0 | $ | 0 | |||||||||||||||||||||||||
A.R.J. Bonfield | 0 | $ | 0 | $ | 0 | 137,500 | 325,833 | $ | 235,125 | $ | 420,375 | 0 | $ | 0 | $ | 0 | 253,333 | 323,333 | $ | 0 | $ | 0 | ||||||||||||||
D.J. Hayden, Jr. | 0 | $ | 0 | $ | 0 | 583,826 | 535,502 | $ | 368,143 | $ | 305,663 | |||||||||||||||||||||||||
J.L. McGoldrick | 63,099 | $ | 878,445 | $ | 91,048 | 999,013 | 301,089 | $ | 2,319,807 | $ | 0 | 126,198 | $ | 1,351,732 | $ | 135,377 | 958,315 | 301,089 | $ | 287,580 | $ | 0 | ||||||||||||||
E. Sigal, M.D., Ph.D. | 0 | $ | 0 | $ | 0 | 156,888 | 169,834 | $ | 41,990 | $ | 125,970 | 0 | $ | 0 | $ | 0 | 206,740 | 223,482 | $ | 0 | $ | 0 | ||||||||||||||
J.B.D. Palmer, M.D.(4) | 0 | $ | 0 | $ | 0 | 385,000 | 0 | $ | 333,450 | $ | 0 | |||||||||||||||||||||||||
D.J. Hayden, Jr. | 0 | $ | 0 | $ | 0 | 683,826 | 535,502 | $ | 124,618 | $ | 0 |
(1) | All options were granted at 100% of Fair Market Value. Optionees may satisfy the exercise price by submitting currently owned shares and/or cash. Income tax withholding obligations may be satisfied by electing to have our company withhold shares otherwise issuable under the option with a Fair Market Value equal to such obligations subject to statutory and regulatory requirements. |
(2) |
Calculated based upon the December |
Long-Term Incentive PlanPerformance Awards in the Last Fiscal Year
Name | Number of (1) | Other Period Until Maturation or Payout | Estimated Future Payouts Under Long-Term Incentive Plan(2) | Number of Shares Awarded(1) | Other Period Until Maturation or Payout | Estimated Future Payouts Under Long-Term Incentive Plan(2) | ||||||||||||||
Threshold | Target | Maximum | Threshold | Target | Maximum | |||||||||||||||
P.R. Dolan | 124,000 | Three-Year Period Ending in 2006 | 47,430 | 124,000 | 313,720 | 150,000 | Three-Year Period Ending in 2007 | 57,375 | 150,000 | 379,500 | ||||||||||
L. Andreotti | 17,400 | Three-Year Period Ending in 2007 | 6,656 | 17,400 | 44,022 | |||||||||||||||
A.R.J. Bonfield | 15,800 | Three-Year Period Ending in 2006 | 6,044 | 15,800 | 39,974 | 19,300 | Three-Year Period Ending in 2007 | 7,382 | 19,300 | 48,829 | ||||||||||
D.J. Hayden, Jr. | 17,500 | Three-Year Period Ending in 2006 | 6,694 | 17,500 | 44,275 | |||||||||||||||
J.L. McGoldrick | 15,800 | Three-Year Period Ending in 2006 | 6,044 | 15,800 | 39,974 | 17,400 | Three-Year Period Ending in 2007 | 6,656 | 17,400 | 44,022 | ||||||||||
E. Sigal, M.D., Ph.D. | 6,800 | Three-Year Period Ending in 2006 | 2,601 | 6,800 | 17,204 | 17,400 | Three-Year Period Ending in 2007 | 6,656 | 17,400 | 44,022 | ||||||||||
J.B.D. Palmer, M.D. | 15,800 | Three-Year Period Ending in 2006 | 6,044 | 15,800 | 39,974 | |||||||||||||||
D.J. Hayden, Jr. | 19,300 | Three-Year Period Ending in 2007 | 7,382 | 19,300 | 48,829 |
(1) | The number of shares represents the award amounts payable in the beginning of |
(2) | Target payouts under the Long-Term |
Compensation and Management Development Committee Report on Executive Compensation
We, the Compensation and Management Development Committee, are responsible for administering the compensation program for executive officers and certain other senior management of the company. The Board of Directors has determined that each of us meets the definition of independence under the company’s corporate governance guidelines. We are neither current employees nor former employees of the company nor are we eligible to participate in any of the company’s executive compensation programs. Additionally, we qualify as outside directors for purposes of administering compensation programs to meet the tax deductibility criteria included in Section 162(m) of the Internal Revenue Code and further qualify as non-employee directors for purposes of Rule16b-3 under the Securities Exchange Act of 1934.
Bristol-Myers Squibb’s executive compensation program is based upon a pay-for-performance philosophy. In implementing this philosophy, we consider performance against financial objectives, total stockholder return, and operational objectives consistent with the company’s strategy. We also consider the executive’s demonstration of the values and behaviors defined in the Bristol-Myers Squibb Pledge. We seek an executive compensation policy that is transparent to our stockholdersPledge and in alignment with our stockholders’ best interests.Core BMS Behaviors. We review all elements of compensation both separately and in the aggregateaggregate. We have tallied up all components of the CEO and other named executive officers’ compensation to ensure that the amount of compensation is within appropriate competitive parameters and the program design encourages the creation of long-term stockholder value.
Under our company’s program, an executive’s direct compensation consists of three primary components: base salary, annual incentive (bonus) payment and long-term incentives (which may include cash-based awards, stock-based awards and/or stock options), with the greatest emphasis being placed on long-term incentives to align with long-term stockholder value. In addition, each executive participates in a company fundedcompany-funded pension plan, a company supportedcompany-supported savings plan, and is provided with health and welfare coverage and certain perquisites as disclosed in the Summary Compensation Table.
A goal of our company’s executive compensation program is to provide overall compensation, when targeted levels of performance are achieved, which is at the median of pay practices of a peer group of eleven large industry competitors. The corporations that comprisedwhich includes the peer group for 2004 were Abbott Laboratories, AstraZeneca, Aventis, Eli Lilly and Company, Glaxo SmithKline, Johnson & Johnson, Merck & Co., Inc., Novartis AG, Pfizer, Inc., Schering-Plough Corporation and Wyeth.companies named in the proxy graph. Our executive compensation program is designed to provide value to the executive based on the extent to which individual performance, company performance versus budgeted financial targets, company longer-term financial performance and total return to stockholders (including share price appreciation and reinvested dividends) meet, exceed or fall short of expectations. Under this program design, incentive payments can exceed target levels only if expectations are exceeded.exceeded and will fall below target if goals fall below expectations. We believe that the program we have adopted, with its emphasis on long-term compensation, serves to focus the efforts of the company’s executives on the attainment of sustained long-term growth and profitability for the benefit of the company and its long-term stockholders.
At the time we make executive compensation decisions, we review individual performance and company performance versus that of theother pharmaceutical companies in our peer companies.group. In March of last year, when 20042005 compensation decisions were made regarding merit increases, target annual incentives, stock option and restricted stock grants and target long-term plan awards, we also reviewed detailed data concerning the levels of executive pay among the peer group of companies as well as against certain large general industry companies. This data included analyses provided by our independent compensation consultant, Mercer Human Resource Consulting.
We also believe that the performance management system (newly instituted(instituted in 2003) assists in ensuring that each executive’s financial and operational objectives are aligned with our company’s strategy and that each executive’s compensation awards are appropriately linked to the impact that executive has on driving our strategy forward. Bristol-Myers Squibb employs a performance management system
whereby each executive is rated on their performance against financial and operational objectives consistent with our strategy as well as whether the executive demonstrates behaviors consistent with our Pledge.Pledge and Core BMS Behaviors. These ratings are key determinants of the amount of an individual executive’s merit increase, annual incentive, and stock option and restricted stock awards.
The following explains our considerations in setting the individual components of direct compensation for 2004.
2005.
Base Salary—An executive’s base salary is determined by an assessment of her/his sustained performance against her/his individual job responsibilities including, where appropriate, the impact of such performance on the business results of the company, current salary in relation to the salary range designated for the job, experience and mastery, potential for advancement and the executive’s demonstration of the values and behaviors outlined in the Bristol-Myers Squibb Pledge. In addition, the results and behaviors ratings under the performance management system are key determinants of the size of the executive’s merit increase, if any.
Annual Incentives—Payments under our company’s annual incentive plan, the Performance Incentive Plan, are tied to our company’s level of achievement of annual operating pretax earnings targets, thereby establishing a direct link between executive pay and company financial performance. Annual operating pretax earnings goals for the overall company and each operating group are based upon the budgets for our company as reviewed by the Board of Directors. An individual executive’s annual incentive opportunity is a percentage of her/his salary determined by the executive’s job level. If annual pretax earnings targets fall below a preset minimum threshold, no payments will be made. We also consider each executive’s performance against her/his financial and operational objectives established at the beginning of the year as well as demonstration of behaviors consistent with the Core BMS Behaviors and our Pledge in determining each executive’s individual bonus.
For 20042005 awards, operating pretax earnings targets were established at levels that the Board believed reflected the reasonable expectations management had for the performance of the business. As a whole, our company exceededcompany’s achievement was in line with its pretax earnings goal, resulting in overall incentive payments to executivesproxy named officers which were aboveat or around target. We also reviewed each executive’s individual performance ratings on both results and behaviors to ensure that individual bonuses paid were in alignment with each executive’s performance in carrying out our company’s strategy.
strategy, resulting in some payments slightly above target and some slightly below target.
Long-Term Incentives—In consultation with Mercer Human Resource Consulting, we revised theThe senior executive long-term incentive program for 2004.is made up of the following components.
2004 DesignLong-Term Performance Award
In 2004, we reduced: The Long-Term Performance Award represents approximately 30%-35% of the 2005 long-term program design (with the exception of Mr. Dolan for whom this plan represents 43% of his 2005 long-term incentive). This award, which is delivered in the form of a target number of stock options awarded to executives, while still maintaining them as an important component ofperformance shares, has a three-year cycle. For 2005-2007, the long-term incentive program, and introduced restricted stock,awards are based 50% on cumulative earnings per share, 50% on cumulative sales, with back-weighted vesting (i.e., vesting 1/3 per yearthe ultimate payout modified by the company’s total stockholder return versus the companies in years 3, 4 and 5), as part of our annual program while continuingproxy peer group. If preset threshold targets are not met for the moveperformance period, no payment will be made in 2003 to place greater emphasis onunder the Long-Term Performance Award Plan.
as was the case for the 2002-2004 and 2001-2003 performance periods.
Stock Options: Stock option value represents approximately 35%-45% of the 2004 long-term program design compared to 75% of the 2003 design. The options will vest 25% per year over four years.
Restricted Stock: Restricted stock value represents approximately 30% of the long-term program design for 2004.2005 (with the exception of Mr. Dolan for whom restricted stock represents 28% of his 2005 long-term incentive). Restricted stock vests 1/3 per year in years 3, 4, and 5.
Stock Options: Stock option value represents approximately 35%-40% of the 2005 program (with the exception of Mr. Dolan for whom stock options represent 29% of his 2005 long-term incentive).
Beginning with the 2005 option grants, we approved the use of performance-based exercise thresholds on annual option grants to named executive officers and other senior executives. To satisfy the exercise threshold, Bristol-Myers Squibb stock will need to close at a price of at least 15% above the option grant price for seven consecutive trading days. Although the options will vest according to the normal vesting schedule (currently 25% a year for four years), the executive may not exercise the options unless and until the exercise threshold is satisfied. For 2005 grants, to preserve favorable accounting, the exercise thresholds will lapse beginning in the ninth year. Pursuant to the expensing of options, beginning with the 2006 grants, the exercise thresholds will remain in place the entire term.
The use of these performance-based exercise thresholds, combined with the increased emphasis placed on the Long-Term Performance Award in recent years, assures that approximately 70% of senior executive long-term incentives are tied to specific performance criteria.
To further enhance the link between executive pay and the company’s performance against its business strategy, the size of each executive’s stock option and restricted stock award is determined in large part based on our assessment of the executive’s performance against objectives that drive our company’s business strategy and demonstration of behaviors consistent with our Pledge and the Core BMS Behaviors under the performance management system.
2003—2005 Long-Term Performance Award Plan: The Long-Term Performance Award Plan represents approximately 25%-40% of the 2004 long-term program design. This plan, which is delivered in the form of a target number of performance shares, has a three-year cycle. For 2004-2006, the awards are based 50% on EPS, 50% on sales, with the ultimate payout modified by the company’s total stockholder return versus the eleven companies in its proxy peer group. The targets established under this plan are stretch targets. If threshold targets are not met for the performance period, no payment will be made under the long-term performance award plan as was the case for the 2002-2004 and 2001-2003 performance periods.
We believe this shift to a more balanced mix of long-term incentives, with a greater emphasis on performance shares and other full-share awards, will better align the compensation of senior executives with the creation of long-term stockholder value.
2005 Design
The 2005 design for long-term incentives will be similar to the 2004 design with one important change. Beginning with the 2005 option grants, we have approved the use of performance-based exercise thresholds on annual option grants to proxy named officers and other senior executives. To satisfy the exercise threshold, Bristol-Myers Squibb stock would need to close at a price of at least 15% above the option grant price for seven (7) consecutive trading days. Although the options would vest according to the normal vesting schedule (currently 25% a year for four years), the executive may not exercise the options unless and until the exercise threshold is satisfied. For 2005 grants, to preserve favorable accounting, the exercise thresholds will lapse in years 9 and 10. Pursuant to the expensing of options, this would not be required in future years.
The use of these performance-based exercise thresholds, combined with the increased emphasis placed on the Long-Term Performance Award Plan in recent years, will assure that approximately 70% of senior executive long-term incentives are tied to specific performance criteria.
2002—2004 Long-Term Performance Award Plan Payout—20042005 was the final year in a three-year performance cycle under the Long-Term Performance Award, Plan, which began in 2002.2003. The performance goals for the 2002-20042003-2005 performance cycle were equally weighted 50% on cumulative earnings per share growth,and 50% on cumulative sales growth, andwith a modifier based on relative total stockholder return compared to our company’s proxy peer group. The threshold level of performance required for a payout for the 2002-2004 performance cycle2003-2005 awards was not achieved, so no amounts were earned bymade at 75.1% of target.
Proposed Changes for 2007
Beginning with the 2007 long-term incentive grants, we will reduce the portion of long-term incentives provided in the form of restricted stock for named executive officers for thisfrom approximately 30% to approximately 15%. The value from the decreased restricted stock grants will be allocated across the long-term performance cycle.award plan and stock options with exercise thresholds, thus tying approximately 85% of long-term incentives to specific performance criteria.
Executive Compensation Policies
ClawbackShare Retention Guidelines—In order to preserve the linkage between the interests of executives and those of stockholders, executives are expected to use the shares obtained on the exercise of their stock options, after satisfying the cost of exercise and taxes, to establish a significant level of direct ownership. Our company continues to maintain long-standing share ownership expectations for its executives to meet through the exercise of stock option awards. These share ownership guidelines were revised slightly in 2006 for named executive officers to be consistent with competitive practice while ensuring good corporate governance. Under these guidelines, the Chief Executive Officer must retain shares with a value of eight times his base salary prior to selling any of the net shares obtained upon exercise. The other named executive officers must retain shares with a value of five times their base salary prior to selling any of the net shares obtained upon exercise. Even after these ownership thresholds are satisfied, executives must retain 75% of all net shares obtained as a result of subsequent option exercises for at least two years. These same share retention guidelines apply to restricted stock awards. The Chief Executive Officer and other named executive officers may not sell any of the net shares of stock obtained upon vesting until the ownership thresholds above are satisfied. Thereafter, the executive must still retain 75% of the net shares obtained when a restricted stock award vests for at least two years. We believe these retention requirements are an important tool in aligning the interests of our company’s executives with the long-term interests of our company’s stockholders.
Securities Trading Policy—Executives and other employees may not engage in any transaction in which they may profit from short-term speculative swings in the value of the company’s securities. This includes “short sales” (selling borrowed securities which the seller hopes can be purchased at a lower price in the future) or “short sales against the box” (selling owned, but not delivered securities), “put” and “call” options (publicly available rights to sell or buy securities within a certain period of time at a specified price or the like) and hedging transactions, such as zero-cost collars and forward sale contracts. In addition, this policy is designed to ensure compliance with all insider trading rules.
Recoupment of Equity Awards—Our company maintains clawback provisions relating to stock option, restricted stock and long-term performance awards. Under these clawback provisions, executives that violate non-competition or non-solicitation agreements, or otherwise act in a manner detrimental to our company’s interests will forfeit any outstanding awards as of the date such violation is discovered and will have to return any gains realized in the twelve months prior to the violation. These provisions serve to protect the company’s intellectual property and human capital, and help ensure that executives act in the best interest of our company and its stockholders.
ClawbackRecoupment of Annual Incentive—IncentiveUpon our recommendation,—In 2005, the Board adopted a policy effective March 1, 2005, wherein the Board will seek reimbursement of bonuses paid to an executive if such executive engaged in misconduct that caused or partially caused a restatement of financial results. In such an event, our company will seek to claw back the executive’s entire annual bonus for the relevant period, plus a reasonable rate of interest. This policy may be viewed on our company’s website at www.bms.com.
Share Retention Guidelines—In order to preserve the linkage between the interests of executives and those of stockholders, executives are expected to use the shares obtained on the exercise of their stock options, after satisfying the cost of exercise and taxes, to establish a significant level of direct ownership. Our company continues to maintain long-standing share ownership expectations for its executives to meet through the exercise of stock option awards. These share ownership guidelines are more stringent than most of our company’s peers. Under these guidelines, the Chief Executive Officer must retain shares with a value of 8 times his base salary prior to selling any of the net shares obtained upon exercise. The other named executive officers must retain shares with a value of 5 times their base salary prior to selling any of the net shares obtained upon exercise. Even after these ownership thresholds are satisfied, executives must retain 25% of all net shares obtained as a result of subsequent option exercises. These same share retention guidelines apply to restricted stock awards. The Chief Executive Officer and other named executive officers may not sell any of the net shares of stock obtained upon vesting until the ownership thresholds above are satisfied. Thereafter, the executive must still retain 25% of the net shares obtained when a restricted stock award vests. We believe these retention requirements are an important tool in aligning the interests of our company’s executives with the long-term interests of our company’s stockholders.
Policy Against Repricing Stock Options—We have always maintained a consistent policy against repricing stock options. We believe this is a critical element in maintaining the integrity of our equity compensation program and ensuring alignment of senior executives’ interests with the interests of our stockholders. Based on our recommendation, the Board of Directors adopted a formal policy prohibiting the repricing of stock options. This policy may be viewed on our company’s website at www.bms.com.
Policy regardingRegarding Stockholder Approval of Severance—Upon our recommendation, theThe Board has approved effective March 1, 2005, a policy requiring stockholder approval for any future agreements that provide for cash severance payments in excess of 2.99 times the sum of an executive’s base salary plus bonus. “Cash severance payments” exclude accrued incentive payments, the value of equity acceleration, benefits continuation or the increase in retirement benefits triggered by severance provisions or tax gross-up payments. This policy may be viewed on our company’s website at www.bms.com.
Deductibility of Compensation Over $1 Million—Section 162 (m) of the Internal Revenue Code includes potential limitations on the deductibility of compensation in excess of $1 million paid to the company’s CEO and four other most highly compensated executive officers serving on the last day of the year. Based on the regulations issued by the Internal Revenue Service, we have taken the necessary actions to ensure the deductibility of payments under the annual incentive plan and with respect to stock options and performance shares granted under our plans, whenever possible. We intend to continue to take the necessary actions to maintain the deductibility of compensation resulting from these types of awards. However, the payment of salary in excess of $1 million to Mr. Dolan, and certain taxable benefits and perquisites provided to him, resulted in non-deductible compensation for 2005. In addition, restricted stock granted under our plans generally does not qualify as “performance-based compensation” excluded from the deductibility cap under Section 162(m). Therefore, the vesting of restricted stock in some cases will result in a loss of tax deductibility of compensation, including in the case of the CEO. We view preserving tax deductibility as an important objective, but not the sole objective, in establishing executive compensation. In specific instances we have and in the future will authorize compensation arrangements that are not fully tax deductible but which promote other important objectives of the company.
The compensation for Mr. Dolan results from his participation in the same compensation programs as the other executives of Bristol-Myers Squibb. We applied the principles outlined above in establishing Mr. Dolan’s compensation in the same manner as they were applied to the other executives. Mr. Dolan’s compensation is designed to provide direct compensation which approximates the median compensation for chief executive officers in the U.S. proxypharmaceutical peer group when targeted levels of performance are achieved.
We have also ensured Mr. Dolan’s compensation is heavily weighted towards long-term incentives which are directly linked to the creation of long-term stockholder value. In 2004,2005, 10% of Mr. Dolan’s compensation was in the form of base salary, 18% was in the form of annual incentive bonus and 72% was in the form of equity based incentives (comprised of stock options, restricted stock and target long-term performance awards).
AfterMr. Dolan did not receivingreceive a base salary increase for three years, Mr. Dolan received an increase to base salary in 2004 from $1,100,000 to $1,250,000. We made this adjustment in light of the fact that Mr. Dolan’s salary was well below competitive levels. Even with this adjustment, Mr. Dolan’s current salary is positioned in the bottom quartile of the chief executive officers in our company’s U.S. proxy peer group.
2005.
Mr. Dolan’s annual bonus payment for 20042005 was $2,125,000$2,224,875 which is the same amount as his 2003 bonus payment. Mr. Dolan’s 2004 bonus represents 103%104.7% of target. The annual bonus is based on financial performance of the company and on the accomplishments of key objectives in positioning the company for the future. We considered a number of factors to determine Mr. Dolan’s bonus payment, which are summarized below:
Business and Financial Performance
Pipeline Achievements
Execution of our Company Strategy
As a result of new product launches, in-line product growth, pipeline achievements and licensing efforts, Bristol-Myers Squibbour company now has an established and growing—growing, or potentially significant—significant, presence in
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Corporate Citizenship
Effective March 2, 2004,2005, Mr. Dolan received an option award of 500,500 shares and a restricted stock award of 88,600100,000 shares. The option award has an exercise price of $28.11$25.45 and a Black-Scholes value at grant of $2,767,769.$2,564,282. As with the other named executive officers, all options received by Mr. Dolan in 2005 have a 15% exercise threshold. Although the options vest 25% a year over four years, they may not be exercised until the stock price closes at least 15% above the exercise price for seven consecutive trading days. In order to preserve favorable accounting, the exercise thresholds lapse beginning in the ninth year. Pursuant to option expensing, beginning with the 2006 grants, the
exercise thresholds will remain in place for the entire term. The value of this grant represents approximately 29% of Mr. Dolan’s long-term incentive award mix. The restricted stock award had a value at grant of $2,491,432.$2,529,000. The value of this award represents approximately 28% of Mr. Dolan’s long-term incentive award mix. Overall the value of these awards was consistent with the value of his 20032004 option and restricted stock awards, with the option value as slightly higherlower and the restricted stock value as slightly lower.higher. It was our desire to maintain the approximate value of Mr. Dolan’s 20042005 option and restricted stock awards at 20032004 levels while increasing the long-term performance shares as described below.
Mr. Dolan participates in our company’s long-term incentive plan.program. As with other executives, Mr. Dolan did not receivereceived a payout on the 2002-2004 plan, as the goals necessary for payment were not met.2003-2005 Long-Term Performance Award of 75.1% of target ($1,095,904). The measures for the 2002-2004 plan2003-2005 award were equally weighted as follows: one-third50% cumulative earnings per share, growth, one-third50% cumulative sales, growth,with the final payout modified between 85% and one-third115% based on the company’s relative total stockholder return compared to the company’sits proxy peer group. For the 2004-2006 plan,2005-2007 award, we set a target of 124,000150,000 performance shares, which is an increase over the 20032004 target. We determined this increase was appropriate based on our review of a report of Mr. Dolan’s total direct compensation prepared by Mercer Human Resource Consulting that showed his compensation was significantly below the median of the peer group companies.
It was also our desire to place a greater portion of total long-term compensation in the form of performance shares. This award, which represents 40%43% of Mr. Dolan’s long-term incentive opportunity for 2004,2005, is completely performance based. If performance targets are not achieved, the 2004-20062005-2007 award will not pay out. The goals for this plan are equally weighted 50% on cumulative EPSearnings per share targets
and 50% on cumulative sales targets, with the final payout modified between 85% and 115% based on the company’s relative total stockholder return compared to its proxy peer group. Mr. Dolan will only receive the targeted number of shares if the company meets the cumulative earnings per share and sales targets approved by us and the company achieves total stockholder returns which place it at the median of its peer group for the three-year period. If, as was the case with the 2002-2004 plan, performance against objectives is below threshold, no performance shares will be distributed to Mr. Dolan.
We retained an independent compensation consultant, Mercer Human Resource Consulting, beginning in October 2002. Mercer reports directly to us and has provided us with important assistance in evaluating our executive compensation policy and program and redesigning and enhancing elements of the program where appropriate. We continue to work with Mercer in carrying out our responsibilities of ensuring an executive compensation policy and program which is transparent to, and in the interests of, the company’s long-term stockholders.
Deductibility of Compensation over $1 Million
Section 162 (m) of the Internal Revenue Code includes potential limitations on the deductibility of compensation in excess of $1 million paid to the company’s CEO and four other most highly compensated executive officers serving on the last day of the year. Based on the regulations issued by the Internal Revenue Service, we have taken the necessary actions to ensure the deductibility of payments under the annual incentive plan and with respect to stock options and performance shares granted under our plans, whenever possible. We intend to continue to take the necessary actions to maintain the deductibility of compensation resulting from these types of awards. However, the payment of salary in excess of $1 million to Mr. Dolan, and certain taxable benefits and perquisites provided to him, resulted in non-deductible compensation for 2004. In addition, restricted stock granted under our plans generally does not qualify as “performance-based compensation” excluded from the deductibility cap under Section 162(m). Therefore, the vesting of restricted stock in some cases will result in a loss of tax deductibility of compensation, including in the case of the CEO. We view preserving tax deductibility as an important objective, but not the sole objective, in establishing executive compensation. In specific instances we have and in the future will authorize compensation arrangements that are not fully tax deductible but which promote other important objectives of the company.
Compensation and Management Development Committee
James D. Robinson III, Chair
Lewis B. Campbell, Chair
Vance D. Coffman
James M. Cornelius
Louis W. Sullivan, M.D.
The following graph compares the performance of Bristol-Myers Squibb for the periods indicated with the performance of the Standard & Poor’s 500 Stock Index (S&P 500) and the average performance of a group consisting of our peer corporations on a line-of-business basis. As previously noted, theThe corporations making up our peer companies group are Abbott Laboratories, AstraZeneca, Aventis, Eli Lilly and Company, Glaxo SmithKline, Johnson & Johnson, Merck & Co., Inc., Novartis AG, Pfizer, Inc., Sanofi-Aventis (including the performance of Aventis prior to its merger with Sanofi), Schering-Plough Corporation and Wyeth.
Total return indices reflect reinvested dividends and are weighted using beginning-period market capitalization for each of the reported time periods. We measure our performance for compensation purposes against the performance of this peer companies group. We measured our performance against this same group in the 20042005 Proxy Statement.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
Assumes $100 invested on 12/31/9900 in Bristol-Myers Squibb Common Stock, S&P 500 Index and Peer Companies Group Index. Values are as of December 31 of specified year assuming dividends are reinvested.
Ending of Year | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | ||||||
Bristol-Myers Squibb | 100 | 117.20 | 86.47 | 41.31 | 53.24 | 49.37 | ||||||
S&P 500 Index | 100 | 90.90 | 80.09 | 62.39 | 80.29 | 89.03 | ||||||
Peer Group | 100 | 132.80 | 116.09 | 95.62 | 108.42 | 106.32 |
Ending of Year | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | ||||||
Bristol-Myers Squibb | 100 | 73.78 | 35.25 | 45.42 | 42.12 | 39.60 | ||||||
S&P 500 Index | 100 | 88.11 | 68.64 | 88.33 | 97.94 | 102.75 | ||||||
Peer Group | 100 | 87.41 | 72.00 | 81.64 | 79.91 | 81.98 |
The following table sets forth the aggregate annual benefit payable upon retirement at normal retirement age for each level of remuneration specified at the listed years of service.
PENSION PLAN TABLE
Years of Service | |||||||||||||
Remuneration | 15 | 20 | 25 | 30 | 35 | 40 | |||||||
$ 500,000 | $ | 150,000 | 200,000 | 250,000 | 300,000 | 350,000 | 400,000 | ||||||
1,000,000 | 300,000 | 400,000 | 500,000 | 600,000 | 700,000 | 800,000 | |||||||
1,500,000 | 450,000 | 600,000 | 750,000 | 900,000 | 1,050,000 | 1,200,000 | |||||||
2,000,000 | 600,000 | 800,000 | 1,000,000 | 1,200,000 | 1,400,000 | 1,600,000 | |||||||
2,500,000 | 750,000 | 1,000,000 | 1,250,000 | 1,500,000 | 1,750,000 | 2,000,000 | |||||||
3,000,000 | 900,000 | 1,200,000 | 1,500,000 | 1,800,000 | 2,100,000 | 2,400,000 | |||||||
3,500,000 | 1,050,000 | 1,400,000 | 1,750,000 | 2,100,000 | 2,450,000 | 2,800,000 | |||||||
4,000,000 | 1,200,000 | 1,600,000 | 2,000,000 | 2,400,000 | 2,800,000 | 3,200,000 | |||||||
4,500,000 | 1,350,000 | 1,800,000 | 2,250,000 | 2,700,000 | 3,150,000 | 3,600,000 | |||||||
5,000,000 | 1,500,000 | 2,000,000 | 2,500,000 | 3,000,000 | 3,500,000 | 4,000,000 |
Pension benefits are determined by final average annual compensation (defined as the average of the highest consecutive 5 years in the last 10 years) where annual compensation is the sum of the amounts shown in the columns labeled Salary and Bonus in the Summary Compensation Table. The pension formula for executives is the same formula used for all employees. The Compensation and Management Development Committee reviews retirement benefits regularly to ensure they are in alignment with the Company’s needs and consistent with competitive standards. Benefit amounts shown are straight-life annuities before the deduction for Social Security benefits. The executive officers named in the Summary Compensation Table have the following years of credited service for pension plan purposes: P.R. Dolan—1718 years; L. Andreotti—0 years (from March of 1998 through September of 2005, Mr. Andreotti was a participant in the Italian pension plan); A.R.J. Bonfield—23 years; J.L. McGoldrick—16 years (inclusive of 5 years of supplemental service provided due to a late career hire); E. Sigal—8 years; D.J. Hayden, Jr.—24 years; J.L. McGoldrick—10 years; E. Sigal—725 years.
Change in Control Arrangements
We have entered into change-in-control agreements with certain executives, including the Chief Executive Officer and the other named executive officers. These agreements are intended to provide for continuity of management in the event of a change in control of our company. The original agreements were entered into in 1999 and were in effect through December 31, 2002, and had been automatically extended, with modifications as necessary, beginning on January 1, 2003, in one-year increments. Effective January 1, 2005,2006, we revised the agreements to ensure compliance with recent changes in the tax laws while maintainingand the same benefits as provided under prior agreements.Board policy limiting cash severance to 2.99 times base and bonus. Prior to revising the agreements, the Compensation and Management Development Committee reviewed in 2004, the benefits provided under these agreements to ensure they met our needs and were within competitive parameters with the assistance of its outside compensation consultant. The Committee will continue to conduct such reviews on a regular basis to ensure the agreements generally conform with applicable company policies and competitive practices. The current agreements will expire on December 31, 20052006 and may be extended with revisions, as appropriate, beginning on January 1, 2006,2007, in one-year increments
unless either wethe company or the executive gives prior notice of termination of the
agreement or a change-in-control shall have occurred prior to January 1 of such year. If a change in control occurs during the term of the agreement, the agreement shall continue in effect for a period of not less than 36 months beyond the month in which such change in control occurred.
The agreements provide that executive officers could be entitled to certain severance benefits following a change in control of our company and termination of employment. Under each agreement, a change in control would include any of the following events: (i) any person, as defined in the Securities and Exchange Act of 1934, as amended, acquires ownership of 20% or more of our then outstanding common stock; (ii) a majority of our directors are replaced during a two-year period; or (iii) the stockholders approve a merger or consolidation of our company or approve a plan of complete liquidation of our company.
Upon the executive’s termination following a change in control, unless such termination is: (1) by the company for cause (as defined in the agreement); (2) by reason of death; or (3) by the executive without good reason (as defined in the agreement), the covered executive would be entitled to a lump sum severance payment equal to three2.99 times the sum of the executive’s base salary and target bonus under the Performance Incentive Plan. In addition, the executive would receive a payout of any unpaid incentive compensation which has been allocated or awarded to the executive for the completed calendar year preceding the date of termination and a pro rata portion to the date of termination of the aggregate value of all contingent incentive compensation awards to the executive for the current calendar year.
Further, all outstanding stock options granted to the executive officer would become immediately vested and exercisable and all restrictions on restricted stock awards would lapse, unless otherwise provided for under a written stock award agreement. All unvested matching contributions in the company Savings Plan would also vest. The executive officer would receive a cash amount for the additional benefit to which the executive officer would have been entitled had he or she been fully vested and credited three additional years of service and age for the purpose of calculating his or her tax-qualified and nonqualified pension benefits. Additionally, if the executive officer is under 55 years of age and/or has fewer than 10 years of service at the time of termination, he or she would receive payment of pension benefits in such form of distribution available under the pension plan, and otherwise would be treated under such pension plan as if the executive were 55 with at least ten years of service. For a three-year period after the date of termination, the executive officer would receive life and health insurance benefits and perquisites substantially similar to those that the executive is receiving immediately prior to the notice of termination. Thereafter, the executive officer will be eligible to participate in the company’s retiree medical plan. All payments will be made in compliance with Section 409A of the Internal Revenue Code and dental plans.
per the terms of the agreement, the timing and form of the payouts will be modified as necessary to ensure compliance.
In the event that any payments made to an executive officer in connection with a change in control and termination of employment would be subject to excise tax as excess parachute payments by the Internal Revenue Code, Bristol-Myers Squibb will gross up the executive officer’s compensation to fully offset such excise taxes provided the payments exceed 110% of the maximum total payment which could be made without triggering the excise taxes. If the aggregate parachute payments exceed such maximum amount but do not exceed 110% of such maximum amount, then the parachute payments would be automatically reduced so that no portion of the parachute payments is subject to excise tax and no gross-up payment would be made.
In consideration for receiving one of these agreements, each executive officer signed a non-compete/non-solicitation and general release agreement.
Certain Relationships and Related Transactions
Our Bylaws provide that, to the extent permitted by law, our company shall indemnify current and former directors and officers for expenses incurred or paid as a result of certain claims brought against them, or to which they are a party or otherwise, by reason of their current or prior services for the company and its subsidiaries. Our Bylaws further allow the company to advance payment of such expenses prior to final disposition of a claim upon the condition that the director or officer undertake to repay any such advanced amounts to the company should it be ultimately determined that the director or officer was not entitled to indemnification by the company.
Accordingly, pursuant to our Bylaws described above, we entered into agreements with each of Peter R. Dolan, Donald J. Hayden, Jr.Sandra Leung and John L. McGoldrick, under the terms and conditions described above, in connection with the previously disclosed private lawsuits and government investigations relating to U.S. wholesaler inventory and accounting matters. The lawsuits and investigations are further described in the company’s 20042005 Annual Report on Form 10-K. Pursuant to these agreements, the company paid the legal fees incurred from FebruaryJanuary 1, 20042005 until December 31, 20042005 for each of Mr. Dolan, Mr. HaydenMs. Leung and Mr. McGoldrick in the amount of $465,645, $487,303$292,813, $41,819 and $84,265$877, respectively. Amounts paid during January 2004 were previously reported
The Officers and Directors Indemnification Trust One was formed on October 20, 2005 pursuant to the settlement agreement among Bristol-Myers Squibb Company, our directors and officers, and our D&O insurers. The trust was formed to fund, under certain conditions, the payment of any settlement or judgment costs, including any award of attorneys’ fees to counsel for plaintiffs, incurred by or on behalf of certain of our current and former directors and officers in our company’s 2004 Proxy Statement. We expectany derivative lawsuit brought on behalf of Bristol-Myers Squibb for which a claim for coverage under the policies released in the settlement could have been made. $37.25 million in insurance proceeds received in the settlement has been deposited into this trust. If the Trust has not already been terminated pursuant to make additional advancesthe Trust Agreement, it will terminate five years from the effective date of the Agreement. BMS is the residual beneficiary of the Trust and will therefore receive any trust property that remains in connection with the matters noted above.
Trust upon its termination.
ITEM 2—RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
As part of our continuing efforts to enhance our good corporate governance practices, under the direction of the Audit Committee, we undertook a thorough and robust process to review the selection of the company’s independent registered public accounting firm. Based on the results of that process, the Audit Committee appointed Deloitte & Touche LLP as our independent registered public accounting firm for 2006 and dismissed PricewaterhouseCoopers LLP.
The reports of PricewaterhouseCoopers LLP on the company’s consolidated financial statements for the fiscal years ended December 31, 2005 and 2004 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. In connection with the audits of the company’s financial statements for each of the two fiscal years ended December 31, 2005 and 2004 and through the date hereof, there were no disagreements between the company and PricewaterhouseCoopers on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to the satisfaction of PricewaterhouseCoopers, would have caused PricewaterhouseCoopers to make reference to the matter in their report. During the two most recent fiscal years and through the date hereof, there have been no “reportable events,” as such term is defined in Item 304(a)(1)(v) of Regulation S-K.
Our Board of Directors, upon the recommendation of its Audit Committee, has ratified the selectionappointment of PricewaterhouseCoopersDeloitte & Touche LLP as our independent registered public accounting firm for the
year 2005, subject2006. We are asking stockholders to ratification by our stockholders.
Representatives from PricewaterhouseCoopers LLP will be present at the Annual Meeting to respond to appropriate questions and to make any statements as they may desire.
ratify such appointment. In the event our stockholders fail to ratify the appointment, it will be considered as a direction to our Board of Directors and the Audit Committee to selectappoint another independent registered public accounting firm. It is understood that even if the selectionappointment is ratified, our Board of Directors and the Audit Committee at their discretion, may direct the appointment of a new independent registered public accounting firm at any time during the year if our Board of Directors feels that such a change would be in the best interests of our company and our stockholders.
Representatives from PricewaterhouseCoopers LLP and Deloitte & Touche LLP will be present at the Annual Meeting to respond to appropriate questions and to make any statements as they may desire.
The Board of Directors recommends a vote “FOR” the ratification of the appointment of PricewaterhouseCoopersDeloitte & Touche LLP as Bristol-Myers Squibb’s independent registered public accounting firm for 2005.2006.
The following table presents aggregate fees for professional audit services rendered by PricewaterhouseCoopers LLP (PwC) for the audityears ended December 31, 2004 and 2005 for the audits of our annual financial statements, for the years ended December 31, 2003, and December 31, 2004,internal controls over financial reporting, and fees billed for other services rendered by PwC during those periods.
2003 | 2004 | |||||
(in millions) | ||||||
Audit | $ | 8.16 | $ | 19.95 | ||
Audit Related | 4.18 | 7.49 | ||||
Tax | 5.14 | 6.10 | ||||
All Other | 0.04 | 0.01 | ||||
Total | $ | 17.52 | $ | 33.55 | ||
Audit Audit Related Tax All Other Total 2004 2005 (in millions) $ 19.95 $ 17.32 7.49 4.89 6.10 8.39 0.01 0.02 $ 33.55 $ 30.62
Audit fees for 2004 and 20032005 were for professional services rendered for the audits of our consolidated financial statements, including the restatement of previously issued financial statements, attestation services relating to the report on our internal controls in accordance with Section 404 of the Sarbanes-Oxley Act (Section 404), statutory and subsidiary audits, timely reviews of quarterly financial statements, divestiture audits, consents, income tax provision procedures, issuance of comfort letters, and assistance with review of documents filed with the SEC, including the amendment to previously issued filings.SEC.
Audit Relatedfees for 2004 and 20032005 were primarily for assurance services including Section 404 internal control reporting readiness services, employee benefit plan audits, due diligence related to acquisitions and divestitures, accounting consultations in connection with acquisitions,divestiture audits, income tax provision procedures, attest services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.
Taxfees for 2004 and 20032005 were for services related to tax compliance, including the preparation of tax returns and claims for refund, tax planning (excluding planning related to transactions or proposals for which the sole purpose may be tax avoidance or for which tax treatment may not be supported by the Internal Revenue Code.)Code) and tax advice, including assistance with and representation in tax audits and appeals, advice related to divestitures and acquisitions, preparation of individual income tax returns (excluding executive officers) and consultations relating to expatriate program and international compensation matters, and requests for rulings or technical advice from tax authorities.
All Other fees for 20032004 and 20042005 related primarily to immigration services provided to company expatriateslicense fees for accounting and translation/translator services for internal auditors traveling overseas.reporting research library.
Pre-Approval Policy for Services Provided by our Independent Registered Public Accounting Firm
The Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm consistent with applicable SEC rules. Our independent registered public accounting firm is prohibited from performing any management consulting projects. Our independent registered public accounting firm is also prohibited from providing tax consulting services relating to transactions or proposals in which the sole purpose may be tax avoidance or for which the tax treatment may not be supported in the Internal Revenue Code. Prior to the engagement of our independent registered public accounting firm for the next year’s audit, management submits an aggregate of services expected to be rendered during that year for each of the four categories of services described above to the Audit Committee for approval. Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted by category of services and the Audit Committee receives periodic reports from management and our independent registered public accounting firm on actual fees versus the budget by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging our independent registered public accounting firm.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated is required to report, for informational purposes, any pre-approval decisions to the Audit Committee at its next regularly scheduled meeting.
As the Audit Committee of the Board of the Directors, we are composed of independent directors as required by and in compliance with the listing standards of the New York Stock Exchange. We operate pursuant to a written charter adopted by the Board of Directors.Directors that is published on the company’s website.
Management has primary responsibility for our company’s financial reporting process, principles and internal controls as well as preparation of its consolidated financial statements. PwCOur independent registered public accounting firm is responsible for performing an audit of Bristol-Myers Squibb’s financial statements and expressing an opinion as to the conformity of such financial statements with accounting principles generally accepted in the United States. We are responsible for overseeing and monitoring PwC’s accounting and auditing process on behalf of the Board of Directors.
As part of itsour oversight of our company’sBristol-Myers Squibb’s financial statements, we review and discuss with both management and PwC all annual and quarterly financial statements prior to their issuance. Management advised us that each set of financial statements reviewed had beenwas prepared in accordance with accounting principles generally accepted in the United States, andStates. We have reviewed with management significant accounting and disclosure issues with us. These reviews included discussionand reviewed with PwC of matters required to be discussed pursuant to Statement on Auditing Standards No. 61, “Communications with Audit Committees” in the case of annual statements and Statement of Auditing Standards No. 100, “Interim Financial Information” in the case of quarterly statements, as currently in effect.
In addition, we have received the letter from PwC required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as currently in effect, and have discussed with PwC their independence from Bristol-Myers Squibb and its management. We have also determined that PwC’s provision of non-audit services in 20042005 was compatible with, and did not impair, its independence.
We have discussed with our company’s internal auditors and PwC the overall scope and plans for their respective audits. We meethave met with the internal auditors and PwC, with and without management present to discuss the results of their examinations, the evaluations of our company’s internal controls, and the overall quality of our company’s financial reporting.
Based on the reviews and discussions described above, we recommended to the Board of Directors, and the Board has approved that, the audited consolidated financial statements for the year ended December 31, 20042005 be included in Bristol-Myers Squibb’s Annual Report on Form 10-K for the year ended December 31, 20042005 for filing with the Securities and Exchange Commission. We and the full Board also
In addition, we have recommended, subject to stockholder ratification, the selection of PwC as our company’s independent registered public accounting firm for 2005.
We have also confirmed there have been no new circumstances or developments since our respective appointments to the Committee that would impair any of our member’s ability to act independently.
The Audit Committee
Vance D. Coffman, Chair
Robert E. Allen
Lewis B. Campbell
James M. Cornelius
Louis J. Freeh
Laurie H. Glimcher, M.D.
Leif Johansson
Louis W. Sullivan, M.D.
ITEM 3—APPROVAL OF RESTATED CERTIFICATE OF INCORPORATION EFFECTING AMENDMENT TO ELIMINATE CERTAIN SUPERMAJORITY VOTE REQUIREMENTS
At the 2003 Annual Meeting of Stockholders, upon recommendation of our Board of Directors, stockholders approved amendments to our Certificate of Incorporation to gradually declassify our Board of Directors such that all directors will be elected for one-year terms beginning at the 2006 Annual Meeting of Stockholders. An affirmative vote of more than 75% of the required then current outstanding shares approved the amendments. Our Board of Directors, in its continuing review of corporate governance matters, and after careful consideration and upon recommendation of the Committee on Directors and Corporate Governance, has concluded that it is in the best interests of the company’s stockholders to remove all the remaining supermajority voting requirements in our company’s Restated Certificate of Incorporation, except for the supermajority voting requirement to return to a classified board structure. To effect these changes, our Board of Directors has approved and recommends for approval by the company’s stockholders a Restated Certificate of Incorporation effecting amendments to Articles EIGHTH and NINTH, and the removal of Article TWELFTH of the company’s Restated Certificate of Incorporation. The current provisions and the proposed amendments are described below:
Board of Directors
Article EIGHTH(a) provides that: (i) the number of, the retirement age of and other restrictions and qualifications of the company’s directors of the company will be fixed by the Bylaws, and such provisions of the Bylaws may be altered only by a majority vote of the entire Board or the affirmative vote of the holders of at least 75% of the outstanding shares of company stock entitled to vote generally in the election of directors (the “voting stock”); (ii) the Board will be elected annually; and (iii) any director or the entire Board may be removed from office, with or without cause only by the affirmative vote of holders of at least 75% of the voting stock. Each of these provisions can be amended or repealed only by the affirmative vote of holders of at least 75% of the voting stock. The proposed Restated Certificate of Incorporation would remove the supermajority voting requirements described in clauses (i) and (iii) of this paragraph.
Amendment of Bylaws
Article EIGHTH(b) expressly authorizes the Board to make, alter, amend and repeal the Bylaws. This provision can be amended or repealed only by the affirmative vote of holders of at least 75% of the voting stock. The proposed Restated Certificate of Incorporation would eliminate the supermajority vote requirement.
Stockholder Action
Article NINTH requires that: (i) any action required or permitted to be taken by the company’s stockholders must be effected at a duly called annual or special meeting and may not be effected by written consent and (ii) special meetings of stockholders may only be called by the Chairman of the Board or by majority vote of the entire Board. Each of these provisions can be amended or repealed only by the affirmative vote of holders of at least 75% of the voting stock. The proposed Restated Certificate of Incorporation would eliminate the supermajority vote requirement.
Fair Price Provision
Article TWELFTH requires the affirmative vote of the holders of least 75% of the voting stock for approval of any “Business Combination” with an “Interested Stockholder” unless (i) a majority of the
“Continuing Directors” approves the Business Combination or (ii) certain “fair price” and procedural requirements are met. These provisions can be amended or repealed only by an affirmative supermajority vote.
A Business Combination includes, (i) any merger or consolidation, (ii) any sale, lease, exchange, mortgage, pledge, transfer or disposition of any assets having an aggregate fair market value of $25 million or more, (iii) the issuance or transfer of securities in exchange for cash securities or other property having an aggregate fair market value of $25 million or more, (iv) the adoption of any plan or proposal for liquidation and (v) any reclassification of securities, or recapitalization of the company, or any merger or consolidation of the company with any of its subsidiaries or any other transaction that has the effect, directly or indirectly of increasing the proportionate share of the outstanding shares of any class equity or convertible securities of the company that is directly or indirectly owned by an Interested Stockholder.
An Interested Stockholder means any person (other than the company) who (i) beneficially owns, directly or indirectly, 10% or more of the voting stock of the company; (ii) is an affiliate of the company and at any time within the two-year period immediately prior to the date in question beneficially owned, either directly or indirectly, 10% or more of the voting stock; or (iii) is an assignee of or has otherwise succeeded to any shares of voting stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Stockholder, if such assignment or succession occurred in the course of a transaction or series of transaction not involving a public offering within the meaning of the Securities Act of 1933.
A Continuing Director means any member of the Board who is unaffiliated with the Interested Stockholder and was a member of the Board prior to time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director who is unaffiliated with the Interested Stockholder and is recommended to succeed a Continuing Director by a majority of Continuing Directors then on Board.
To meet the “fair price” requirement, the consideration offered in a Business Combination must be (i) at least equal to the highest of the following: (A) the highest per share price paid by the Interested Stockholder for any shares of common stocked acquired by it (x) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the “Announcement Date”) or (y) in the transaction in which it became an Interested Stockholder, whichever is higher, and (B) the highest per share price paid or offered by the Interested Stockholder for any shares of common stock on or after the Announcement Date and (ii) in cash or in the same form as the Interested Stockholder has previously paid for common stock.
If Article TWELFTH is eliminated, then under General Corporation Law of the State of Delaware the holders of only a majority of outstanding voting stock generally would be required to approve the Business Combinations described above, subject to the following exception. If the transaction constitutes a “business combination” within the meaning of Section 203 of the General Corporation Law of the State of Delaware involving a person owning 15% or more of the company’s voting stock (referred to as an “interested stockholder”), then the transaction could not be completed for a period of three years after the time the person became an interested stockholder unless (i) the Board of Directors approved either the business combination or the transaction that resulted in the person becoming an interested stockholder prior to such business combination or transaction, (2) upon consummation of the transaction that resulted in the person becoming an interested shareholder, that person owned at least 85% of the company’s outstanding voting stock (excluding shares owned by persons who are directors and officers of the company and shares owned by certain employee benefit plans of the company), or (3) the business combination was approved by the Board and by the affirmative vote of at least 66 2/3% of the company’s outstanding voting stock not owned by the interested stockholder.
The sections of the Restated Certificate of Incorporation that reflect the proposed amendments to be effected by the proposed Restated Certificate of Incorporation are attached to this Proxy Statement as Annex E and are marked to show changes from our current Restated Certificate of Incorporation.
Approval of this Proposal requires the affirmative vote of holders of record of a majority of the outstanding shares of the company entitled to vote for the election of directors.
If the proposal is approved by our stockholders, it will be effected by the filing of a Restated Certificate of Incorporation with the State of Delaware promptly after this Annual Meeting.
The Board of Directors unanimously recommends that the stockholders vote “FOR” this proposal.
STOCKHOLDER PROPOSALS
We expect the following stockholder proposals (Proposals 43 through 107 on the proxy card) to be presented by stockholders at the Annual Meeting. The proposals are printed in the order in which they were received. Some of the proposals contained assertions about our company that we believe are inaccurate. We have not attempted to correct or refute all the inaccuracies. The Board of Directors, however, has recommended a vote against these proposals for broader policy reasons as set forth following each proposal. The names, addresses and share holdings of each of the stockholder proponents and, where applicable, of co-filers will be provided upon request to the Secretary of Bristol-Myers Squibb.
ITEM 4—3—STOCKHOLDER PROPOSAL ON POLITICAL CONTRIBUTIONSEXECUTIVE COMPENSATION DISCLOSURE
RESOLVED: “That the stockholdersshareholders recommend that the Board direct managementtake the necessary steps that within five days after approvalBristol-Myers Squibb specifically identify by the shareholdersname and corporate title in all future proxy statements those executive officers, not otherwise so identified, who are contractually entitled to receive in excess of this proposal, the management shall publish in newspapers of general circulation in the cities of New York, Washington, D.C., Detroit, Chicago, San Francisco, Los Angeles, Dallas, Houston$500,000 annually as a base salary, together with whatever other additional compensation bonuses and Miami, and in the Wall Street Journal and U.S.A. Today, a detailed statement of each contribution made by the Company, either directly or indirectly, within the immediately preceding fiscal year, in respect of a political campaign, political party, referendum or citizens’ initiative, or attempts to influence legislation, specifying the date and amount of each such contribution, and the person or organization to whom the contribution was made. Subsequent to this initial disclosure, the management shall cause like data to be included in each succeeding report to shareholders.” “And if no such disbursementsother cash payments were made, to have that fact publicized in the same manner.due them.”
REASONS: “This proposal, if adopted, would require the management to advise the shareholders how many corporate dollars are being spent for political purposes and to specify what political causes the management seeks to promote with those funds. It“In support of such proposed Resolution it is therefore no more than a requirementclear that the shareholders be givenhave a more detailed accountingright to comprehensively evaluate the management in the manner in which the Corporation is being operated and its resources utilized.” “At present only a few of these special purpose expenditures that they now receive. These political contributionsthe most senior executive officers are made with dollars that belongso identified, and not the many other senior executive officers who should contribute to the ultimate success of the Corporation.” “Through such additional identification the shareholders as a groupwill then be provided an opportunity to better evaluate the soundness and they are entitled to know how they are being spent.”
“Last yearefficacy of the ownersoverall management.” “The proponent of 92,488,660 shares, representing approximately 6.9%this resolution Mrs. Evelyn Y. Davis of shares voting, voted FOR2600 Virginia Avenue NW, Suite 215, Washington, DC 20037, believes that this proposal.proposal is especially desirable at Bristol-Myers Squibb, because of the many problems the Company is facing.”
“If you AGREE, please mark your proxy FOR this resolution.proposal.”
Board of Directors’ Position
The Board of Directors recommends a vote “AGAINST” this proposal for the following reasons:
The company’s disclosures regarding the compensation of its executives meet, and in some cases exceed, current regulatory disclosure requirements. The Compensation and Management Development Committee Report on Executive Compensation, beginning on page 23 of this Proxy Statement, details the company’s philosophy and objectives in determining executive compensation and the various compensation methods and analyses used to accomplish those objectives. This Proxy Statement also discloses in great detail the compensation of several of the company’s most highly compensated employees.
We must continue to attract and retain the best talent in our executive ranks. Competition for talented individuals is fierce. The proposal, if implemented, could provide our competitors with detailed compensation information not otherwise available. Our competitors do not make this information available and the risk associated with disclosing this information is great and would place the company at a competitive disadvantage.
The Board of Directors believes that the proposal is unnecessary because we already publishwould impose unwarranted costs and administrative burdens on our website at www.bms.com on an annual basis, all political contributions made by Bristol-Myers Squibb and by the company sponsored employee political action committee (EPAC) to political committees, partieswith little or candidates on both state and federal levels. The report is also availableno associated benefit to stockholders upon written request. The information in the report includes the names of recipients and, the specific amounts contributed.
We comply with all applicable federal, state and local laws concerning political contributions. Federal law prohibits us from making direct or indirect contributions to candidates or political parties at the federal level, and many states’ laws regulate and limit such activities at the state level. The EPAC, supported solely by voluntary contributions from our employees, makes political contributions to federal, state and local candidates and committees. We are also fully committed to complying with campaign finance and lobbying laws that may be enacted.
The Board believes ittherefore, is not in the best interest of our company’s stockholders to support the legislative process by contributing prudently to state and local candidates and political organizations when such contributions are permitted by federal, state and local laws. Generally, contributions are made to office holders and candidates whose views on industry specific issues are consistent with our company’s long-term legislative and regulatory goalscompany or to those who represent the communities served by our company and its subsidiaries.
stockholders.
Accordingly, the Board of Directors unanimously recommends a vote “AGAINST” this proposal.
ITEM 5—4—STOCKHOLDER PROPOSAL ON HIV/AIDS-TB-MALARIACUMULATIVE VOTING
Resolved:
RESOLVED: Cumulative Voting. Shareholders requestrecommend that our Board reviewadopt cumulative voting as a bylaw or long-term policy. Cumulative voting means that each shareholder may cast as many votes as equal to number of shares held, multiplied by the economic effectsnumber of directors to be elected. A shareholder may cast all such cumulated votes for a single candidate or split votes between multiple candidates, as that shareholder sees fit. Under cumulative voting shareholders can withhold votes from certain nominees in order to cast multiple votes for others.
William Steiner, 112 Abbottsford Gate, Piermont, NY 10968 submitted this proposal.
Cumulative voting won impressive yes-votes of 54% at Aetna and 56% at Alaska Air in 2005. Cumulative voting also won an all-time record support for any GM shareholder proposal topic at the 2005 GM annual meeting. Thus, I believe this proposal could be a contender to obtain at least a 51% vote at our company’s meeting today.
Progress Begins with One Step
It is important to take one step forward in our corporate governance and adopt the above RESOLVED statement since our 2005 governance standards were not impeccable. For instance in 2005 it was reported (and certain concerns are noted):
“F” in Overall Board Effectiveness
“D” in Board Composition
“D” in Shareholder Responsiveness
“F” in Litigation & Regulatory Problems
“F” in Accounting
“D” in Strategic Decision-making
Overall Governance Risk Assessment = High
Supporting Statement:
We believe that HIV/AIDS, tuberculosis (TB) and Malaria pose major risks to the long-term financial health of firms, like Bristol-Myers Squibb Company that operate in emerging markets.
The crisis of HIV/AIDS in Africa, with half of all global HIV/AIDS cases is well known. UNAIDS—the joint United Nations AIDS program—reports life expectancy in much of southern Africa has declined by over half, to barely thirty years.
New research also shows disturbing trends in Asian markets. New infection rates in Asia are at all-time highs. 7.4 million people there are living with HIV. India alone has more citizens living with HIV than any country, except South Africa. (“Report on the Global AIDS Pandemic,” UNAIDS 2004).
Foreign Affairs reported in December 2002 that even moderate HIV pandemics in India and China may reduce per capita GNP by 2005 to virtually 2000 levels—wiping out a generations’ worth of economic growth.
In China, UNAIDS projects 10 million infections by 2010. Stephan Roach, Morgan Stanley’s Chief Economist, wrote in June 2004 that “all the economic growth in the world cannot possibly compensate for the devastation China would face if [UNAIDS] projections were to come to pass.”
Standard Chartered Bank Group Chief Executive Mervyn Davies, in a 2004 world Economic Forum report, cautioned that “AIDS imposes a day-to-day economic ‘tax’ that compromises business productivity.” Firms pay in increased health and benefit costs, decreased productivity, higher turnover, and other ways.
Despite these warnings, the same report concluded “firms are not particularly active in combating HIV/AIDS” and “businesses appear to be making decisions based on a patchy assessment of the risks they face.”
Unfortunately, “most companies do not yet report appropriate data for investors to make informed decisions about the impact of HIV/AIDS,” says a 2003 survey of corporations by UNAIDS. We believe, to date, our company’s reporting has also been inadequate.
In contrastrelated to our company’s performance, several large-cap firms make reportingaccounting.
Additionally:
1) Mr. Coffman—due to his service on infectious diseases best practice. The Bill & Melinda Gates Foundation has funded an HIV/AIDS Resource Documentour Board. In 2004, Bristol-Myers settled a SEC suit alleging substantial accounting fraud. Mr. Coffman chaired Bristol-Myers’ audit committee at the Global Reporting Initiative.time.
2) Mr. Robinson, compound by his service as our Chairman—because he chaired the director nominations committee at Coca-Cola, which received a Board Composition grade of “F” by TCL.
In 2004, Coca-Cola shareholders approved a resolution seeking such a report with 98% support. Coca-Cola’s subsequent report notes “the moral and business imperatives are of equal importance” in responding to HIV/AIDS.
Our experience with Coca-Cola and other leading companies demonstrates that these reports need not be onerous. In our opinion, shareholders must fully understand the threats posed by these diseases in order to make informed assessments
We urgeI believe Cumulative voting will improve our corporate governance and increase the possibility of electing at least one director with a specialized expertise needed to turnaround the above practices.
Cumulative voting allows a significant group of shareholders to vote FOR this resolution.elect a director or directors of its choice—safeguarding minority shareholder interests and bringing independent perspectives to Board decisions.
Cumulative Voting—Yes on 4
Board of Directors’ Position
The Board of Directors recommends a vote “AGAINST” the proposal for the following reasons:
The Board of Directors believes that our present method for electing directors is working well and should not be changed. We, like most other major corporations, elect directors by providing that each share of common stock has one vote. The Revised Model Business Corporations Act, a model statute prepared by a committee of the proposal is unnecessary because we already report extensivelyAmerican Bar Association, recommends that state laws not mandate cumulative voting and the great majority of states do not have mandatory cumulative voting.
Cumulative voting creates the possibility of partisanship among Board members by allowing narrow constituencies of stockholders to elect “special interest” directors. Directors elected by such a “special interest” constituency may have difficulty fulfilling their fiduciary duty of loyalty to the company and its stockholders due to inherent conflicts between the company and its stockholders on the devastating effects of the HIV/AIDS pandemicone hand and the initiatives we have taken to address this pandemic. We do not make, and have no plans to make, tuberculosis or malaria drugs.
We have been and remain a leader among global pharmaceutical companies and other global corporations in addressing the HIV/AIDS pandemic. Our company is well aware of the human and economic impacts of HIV/AIDS, as demonstrated by our many leading edge programs and initiatives to address the pandemic. In 1999, we launched SECURE THE FUTURE®, an unprecedented, multi-year public-private initiative to help alleviate the HIV/AIDS crisis among women and children affected and infected by HIV/AIDS in sub-Saharan Africa, a region hit hard by the pandemic. We have committed $120 million to this initiative, the first and largest corporate commitment of its kind to fight HIV/AIDS in Africa. In all, more than 170 individual grants for community outreach and education, medical research
and care and capacity building have been awarded in nine countries in southern and West Africa. Through these grants, the initiative is funding a range of sustainable and replicable programs in some of the hardest hit and most resource-constrained areas of the world. The countries are: South Africa, Swaziland, Botswana, Namibia, Lesotho, Senegal, Burkina Faso, Mali and Cote d’Ivoire. As recently as October 2004, we committed to fund medical centers focused on caring for children with HIV/AIDS in Lesotho and Swaziland. The centers will be modeled on a Children’s Clinical Center of Excellence in Botswana, also funded by a SECURE THE FUTURE® grant.
We are a founding partner of the Accelerating Access Initiative (AAI), an unprecedented public-private collaboration established in May 2000 to help increase access to HIV/AIDS care and treatment in the developing world. Under the initiative, we have worked closely with United Nations agencies and with governments and other partners, in developing and implementing national plans to expand access to sustainable prevention, care and treatment of HIV/AIDS.
Despite the successes to date achieved by these and other best collective efforts, we recognize that more needs to be done to solve the AIDS crisis. Consistent with our company’s Pledge to extend and enhance human life, we will continue to explore opportunities to make a meaningful difference.
We have clearly reviewed and are aware of the economic effects of HIV/AIDS on our strategy. We already report extensively to employees, major stakeholders and other constituents, as well as the trade and mainstream media,director’s constituency on the devastating impact of HIV/AIDS, as well as initiatives our company has taken, such as the Global Access and SECURE THE FUTURE® programs. Information on initiatives our company has taken to address the HIV/AIDS pandemic is available at www.bms.com/sr/data.other. The Board believes that adoptionthese potential conflicts create factionalism and discord within the Board, which may undermine its ability to work effectively as a governing body on behalf of the proposal wouldcommon interests of all stockholders. The present system of voting used by us and by most leading corporations prevents the stacking of votes behind potentially partisan directors. The present system thus promotes the election of a more effective Board in which each director represents stockholders as a whole.
The directors are elected annually and eight of the nine Board members nominated for election in 2006 are independent non-management directors. The Board’s Committee on Directors and Corporate Governance, which consists solely of non-management directors who qualify as independent under the New York Stock Exchange rules, recommends to the Board nominees for election as directors. This
process helps ensure that the Board will continue to act independently and in the best interests of stockholders. The Committee on Directors and Corporate Governance will consider director candidates suggested by stockholders. The process by which stockholders may recommend director candidates is described on page 12 of this Proxy Statement.
For the foregoing reasons, the Board believes that cumulative voting is not serve stockholder interests and would be an ineffective usein the best interest of stockholder funds.
the company or its stockholders.
Accordingly, the Board of Directors unanimously recommends a vote “AGAINST” thisthe proposal.
ITEM 6—5—STOCKHOLDER PROPOSAL ON ANIMAL TESTINGRECOUPMENT
This Proposal is submitted by concerned shareholders1.
WHEREAS
A. We as shareholders wishRESOLVED: Recoup Unearned Management Bonuses. Shareholders request our Board to minimize animal testing;
B. statistics showadopt a policy in our bylaws if practicable whereby, in the event of a significant restatement of financial results or significant extraordinary write-off, our Board will review all bonuses and any other awards that a majority of painful and distressing animal experiments are conductedwere made to satisfy outdated, government-mandated testing requirements2 and that such testing issenior executives on the rise;3
C.basis of having met or exceeded specific performance targets during the majority of animals used in regulatory testing experience pain without any pain relief;4
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D. non-animal test methods are generally cheaper, fasterrestatement period and more humane, than animal-based tests;
E. unlike animal tests, non-animal methods have been scientifically validated and/or accepted as total replacementswill recoup, to the fullest extent practicable, for the following five toxicity endpoints: skin corrosion (irreversible tissue damage), skin irritation (milder and reversible damage), skin absorption (the ratebenefit of chemical penetration), phototoxicity (an inflammatory reaction caused byour Company all such bonuses or awards to the interaction of a chemical with sunlight), and pyrogencity (a fever-like reaction that can occur when certain intravenous drugs interact with the immune system);
RESOLVED,extent that the shareholders requestspecified performance targets were not achieved.
This would include that all applicable employment agreements and compensation plans adopt enabling or consistent text in an expedited manner as soon as feasibly possible. This proposal is not intended to unnecessarily limit our Board’s judgment in crafting the Board:
1. Commit specifically to using only non-animal methods for assessing skin corrosion, irritation, absorption, phototoxicity and pyrogenicity.
2. Confirm that it is in the Company’s best interest to commit replacing animal-based tests with non-animal methods.
3. Petition the relevant regulatory agencies requiring safety testing for the Company’s products to accept as total replacements for animal-based methods, those approved non-animal methods described above, along with any others currently used and accepted by the Organization for Economic Cooperation and Development (OECD) and other developed countries.
Supporting Statement: This Resolution is designed to harmonize the interests of sound science with the elimination of animal-based test methods where non-animal methodologies exist. It seeks to encourage the relevant regulatory agencies to join their peers in accepting validatedin vitro and other non-animal test methods. It will not compromise consumer safety or violate applicable statutes and regulations.
Further, this Resolution commits the Company to end animal testing for five specific endpoints in favor of valid non-animal methods. These include the 3T3 Neutral Red Uptake Phototoxicity Test, human skin equivalent tests for corrosivity, and a human blood-based test for pyrogenicity, all of which have been successfully validated through the European Centre for the Validation of Alternative Methods.5 Several non-animal methods have also been adopted as Test Guidelines by the OECD6 (an alliance of 30 member countries including the US, EU, Japan, Canada and Australia). Regulatory agencies in OECD member countries are not at liberty to reject data from non-animal tests for skin corrosion, skin absorption and phototoxicity where such data have been generatedrequested change in accordance with applicable laws and existing contracts and pay plans.
The need for this proposal is highlighted by our company announcing in June 2005 that it settled the U.S. Attorney’s investigation regarding questionable wholesaler inventory and accounting, in a Deferred Prosecution Agreement. The government will not pursue its criminal complaint if it is satisfied after two years that our company has complied with the terms of the Agreement. Under the Agreement, our company will make an OECD Test Guideline.additional $300 million payment to the shareholder fund previously established in connection with the company’s settlement with the Securities and Exchange Commission (SEC) announced in August 2004. As a result, our company will record an additional $249 million reserve.
To our Board’s credit, our Board has shown that it can act to improve our corporate governance. For instance, our Board filed our company’s revised Charter with the SEC on August 3, 2005. This reflected the declassification of our Board and removed several supermajority provisions as approved by stockholders on May 3, 2005. I believe that this proposal, Recoup Unearned Management Bonuses, is a further step in improving our corporate governance.
Similar to Proposal Voted at Computer Associates
This proposal is similar to the proposal voted at the Computer Associates (CA) August 2004 annual meeting. In October 2003 Computer Associates announced that it had inflated revenues in the fiscal year ending March 31, 2000 by reporting revenue from contracts before they had been signed.
We urgeBonuses for senior executives that year were based on income exceeding goals. Sanjay Kumar, then CEO, received a $3.2 million bonus based on Computer Associates’ supposedly superior performance. Mr. Kumar did not offer to return his bonuses based on discredited earnings.
There is no excuse for over-compensation based on discredited earnings at any company. This proposal will give shareholders more options if we find ourselves in a situation similar to supportthe Computer Associates scenario. If it appears that our Company reported erroneous results that must be negatively restated, then our Board should be enabled by adoption of this Resolution.proposal to recoup executive pay that was not earned or deserved.
Recoup Unearned Management Bonuses
Yes on 5
Board of Directors’ Position
The Board of Directors recommends a vote “AGAINST” the proposal for the following reasons:
The Board of Directors strongly believes that as a research-based pharmaceutical company seeking to discover and develop products to extend and enhance human life, we have both legal and ethical obligations to ensure the safety and efficacy of our products. At times, to ensure fulfillment of
40
these obligations, research or testing methods that include the use of animals is required. All pharmaceutical and healthcare companies are required by law to demonstrate the safety and efficacy of their products in animals.
We have maintained a long-standing, highly regarded program that is committed to reducing reliance on animal testing methods; that promotes the development, validation and use of non-animal tests; and that provides the highest level of care when use of laboratory animals is required. All company laboratory animal facilities in the United States are accredited by the Association of Assessment and Accreditation of Laboratory Animal Care International, an unaffiliated review organization. We continue to meet or exceed the high standards of care and humaneness set by the National Research Council of the National Academy of Sciences, the National Institutes of Health and the U.S. Department of Agriculture as mandated under the Animal Welfare Act. All company facilities and programs involved with the care and use of animals are periodically subjected to rigorous inspection by company auditors to ensure compliance with applicable standards.
Testing with animals, where required, will continue to be an essential component of our company’s research and development efforts. We will also continue our firm commitment to pursue quality humane care, reduce use of animals and to develop, where feasible, alternatives to animal use.
Accordingly, the Board of Directors unanimously recommends a vote “AGAINST” this proposal.
ITEM 7—STOCKHOLDER PROPOSAL ON SEPARATION OF CHAIRMAN AND CEO POSITIONS
Resolved: The Shareholders of Bristol-Myers Squibb (“BMS”) urge the Board of directors (the “Board”) to amend the bylaws to require that an independent director who has not served as chief executive officer of the Company shall serve as chairman of the Board.
SUPPORTING STATEMENT
Since 2000 BMS’s performance has been disappointing.
We believe that the company’s disappointing record makes an overwhelming case for revitalizing the board and the way it works. All of BMS’s independent directors have served since 1998 or before. As three of them reached or neared the retirement age of 70, the board raised the retirement age to 72. While we appreciate directors’ service, we believe that is a step in the wrong direction. As the company must replenish itself with new products and new people, so the board needs to renew itself. Fresh views can help solve old problems.
In our view, it is unrealistic to expect a CEO, especially one facing serious performance problems, to lead the board in changing itself; it is equally unrealistic to expect the board to oversee the performance of its nominal chairman. Such an arrangement leaves no one responsible for the board.
It is realistic to separate the CEO and chairman jobs, so that the chairman leads the board, the board genuinely oversees the CEO, and the CEO leads the company. A non-executive chairman can lead the orderly succession of board members, bringing in needed strengths, and help improve board processes to come to grips with poor performance.
Separating the CEO and chairman jobs is a reform that works. Barron’s recently reported:
According to a recent report by Richard Bernstein, chief U.S. strategist at Merrill Lynch, of the 100 largest companies in the Standard & Poor’s 500, those splitting the top two positions “have, as a class, outperformed those that haven’t over the last decade.” Indeed, those with split roles had an average annual return of 22%, compared with 18% for those without a split.
The science underlying medicines is moving faster than ever, and the marketplace is evolving in ways that challenge drug companies to keep up. Drugs will thrive on clinical merit, not personal selling, advertising, and price increases. Drugs will be smarter and more targeted, with perhaps fewer blockbusters. BMS’s board will need new strengths to find opportunity in advancing science and evolving markets.
We believe that shareholders deserve a chairman not tied to management who will challenge management to deliver great performance and nothing less.
Please vote FOR this proposal.
Board of Directors’ Position
The Board of Directors recommends a vote “AGAINST”generally agrees with the proposal for the following reasons:
The Board of Directors, which includes ten independent, non-management directors among its eleven members, believesProponent that the positions of Chairman of the Board and Chief Executive Officer should be held by the same person, except in unusual circumstances such as a transition in leadership. The Board believes that currently it is in the best interest of our company to have a single person serve as Chairman and CEO to provide unified leadership and direction. The Board may separate these positions in the future should circumstances change.
The Board agrees that an independent Board structure is necessary for good corporate governance and accountability. The Board, however, does not believe its independence is compromised by having a single person serve as Chairman and CEO. The functions of the Board are carried out by the full Board, and when delegated, by the Board committees. Each directorif there is a full and equal participant in the major strategic and policy decisions of our company. The independent Board members meet on at least a quarterly basis in executive sessions that are led by the Chair of the Committee on Directors and Corporate Governance, who is an independent director. The insight and advice that each independent director provides to our company would not change if he or she served as non-executive Chairman of the Board.
The Board is committed to high standards of corporate governance and has adopted Corporate Governance Guidelines that are posted on our website. These guidelines were designed in part, to
ensure the independence of the Board and include a formal process for the evaluation of CEO performance by all independent Board members. The evaluation is used by the Compensation and Management Development Committee as a basis to recommend the compensation of the CEO, which is approved by all independent Board members.
The Investor Responsibility Research Center reports that a large majority of the S&P 500 companies have a single person serve as both the Chairman and CEO. Specifically, none of our U.S. peer companies have a separate Chairman and CEO. The Board believes that our corporate governance structure, with its emphasis on independence, makes it unnecessary to have a policy of separating the roles of Chairman and CEO. The Board believes it is important that it has the discretion to act in the best interests of stockholders at any point in time. The proposal would deprive the Board of its flexibility to organize its functions and conduct its business in the manner it deems most efficient.
Accordingly, the Board of Directors unanimously recommends a vote “AGAINST” this proposal.
ITEM 8—STOCKHOLDER PROPOSAL ON RESTATEMENT SITUATIONS
RESOLVED: The shareholders of Bristol-Myers Squibb Company (“BMS” or the “Company”) request the board of directors to adopt a policy whereby, in the event of asignificant restatement of financial results, the board will review all bonuses and other awards that were made to senior executives on the basis of having met or exceeded performance targets during the period of the restatement and will recoup for the benefit of the Company all such bonuses or awardsshould be recouped to the extent that thesethe specified performance targets were not achieved.
SUPPORTING STATEMENT
Like many companies, BMS has a system of incentive compensation intended to encourage its executives and management to work enthusiastically in the Company’s interest. Incentive compensation can be a useful way to reward and motivate senior executives, but we believe that such compensation should be tied closely to the actual attainment of pre-set performance goals. We are concerned that this may not be happening at BMS.
In its 2002 10-K report, BMS restated results previously reported for 1997 through 2001 and the first half of 2002. The Company’s disclosure and related press reports were not altogether clear, but evidently sales had been overstated by some $2.5 billion and earnings by $900 million. It was clearly in the Company’s interest to have reported results correctly at the time, rather than misstating results for years, then having to restate them.
During the six years affected by the restatement, the Company reported the following incentive payments to the five or six named officers in each year’s proxy statement:
These payments and awards were presumably based on results reported at the time, not on the restated results. Given the magnitude of the restatements, these payments would presumably have been lower if calculated based on restated results. In our view, the difference between what the
payments and awards were and what they would have been if calculated on the basis of accurate numbers is a form of ill-gotten gains.
We view the Company’s current policy as inadequate. BMS noted in its 2004 Proxy Statement:
Additionally, the Committee established clawback provisions relating to stock option, restricted stock and long-term performance awards. Under these clawback provisions, executives that violate non-competition or non-solicitation agreements, or otherwise act in a manner detrimental to the company’s interests will forfeit any outstanding awards and will have to return any gains realized in the prior twelve months.
BMS’ policy does not explicitly require the repayment of unearned incentive pay in restatement situations, does not mention bonuses, and leaves much discretion to the Committee. Also, the policy is limited only to the prior twelve months and seemingly contemplates that executives may retain unearned incentive compensation for earlier years.
It is not enough for the Company’s compensation system to encourage good work. It needs also to discourage bad work and misstatement of results.
Please vote FOR this resolution.
Board of Directors’ Position
The Board of Directors recommends a vote “AGAINST” the proposal for the following reasons:
The Board of Directors believes that adoption of the proposal is unnecessary because the Board has already adopted a policy that addresses the concern raised by the proposal. Under the policy, which is posted on our website at www.bms.com, stating that we will require reimbursement of any bonus paid to executive officers and certain other officers where: a) the payment was predicated upon the achievement of certain financial results that were the subject of a restatement, b) in the Board’s view the executive engaged in misconduct that caused or partially caused the need for restatement, and c) a lower payment would have been made to the executive based upon the restated financial results. In each such instance, we will seek to recover the executive’s entire annual bonus for the relevant periodplus a reasonable rate of interest, which extends beyond the proposal as the proposal makes no mention of interest. The Board of Directors, therefore, believes that adoption of the proposal is unnecessary because the Board has already adopted a policy that addresses the concern raised by the proposal.
The recoupment policy encompasses cash bonuses awarded under the Executive Performance Incentive Plan. This is the only performance-based cash compensation plan that we currently maintain. In addition to the annual cash bonuses that may be recouped under the policy, non-cash performance-based awards granted under the 2002 Stock Incentive Plan may be recouped pursuant to the forfeiture provision in each executive’s plan agreement. The non-cash performance-based compensation granted under the Plan constitutes the only non-cash performance-based compensation granted to executives. Therefore, the proposal’s essential objective of recouping “all bonuses and any other awards” made on the basis of meeting specific performance targets is accomplished through the recoupment policy and the forfeiture provisions in the plan agreements.
The recoupment policy provides that the Board will require reimbursement of annual bonuses from executive officers who, in the Board’s view, “engaged in misconduct that caused or partially caused the need for the restatement.” The Board also will determine whether the bonus payments would have been lower had they been calculated based on the restated results. This is consistent with the discretion granted to the Board in the proposal, which provides that the judgment of the Board may be used in crafting a recoupment policy “in accordance with applicable laws and existing contracts and pay plans.”
The Board also believes the proposal is unworkable because it is vague and overreaching. It would presumably apply to all restatement situations, even restatements that were not caused by misconduct. In addition,misconduct, and it would apply to all senior executives, including those who have no role in causing a restatement. As such, the adoption of the proposal could have the unintended effect of placing our company at a competitive disadvantage in recruiting critical talent. In addition, the proposal would apply to all significant extraordinary write-off situations, including those that were not caused by misconduct or associated with a restatement. In such case, we and our stockholders would also not be able to determine the period of time for which we are supposed to recoup compensation.
In contrast, the policy adopted by the Board addresses the concern raised by the proposal in a practicable and enforceable manner. The policy, together with our existing “clawback” provisions relating to stock options, restricted stock and long-term performance awards, makes clear the Board of Directors will take appropriate action in the event of misconduct.
Accordingly, the Board of Directors unanimously recommends a vote AGAINST“AGAINST” this proposal.
ITEM 9—6—STOCKHOLDER PROPOSAL ON RESTRICTED STOCKANIMAL TREATMENT
This Proposal is submitted by People for the Ethical Treatment of Animals.
WHEREAS, the Company conducts tests on animals as part of its product research and development; and
WHEREAS, the Company also retains independent laboratories to conduct tests on animals as part of product research and development; and
WHEREAS, abuses in independent laboratories have recently been revealed and disclosed by the media; and
WHEREAS, the Company has an Animal Testing policy (the “Policy”) posted on its website as part of its commitment to Corporate Responsibility; NOW THEREFORE,
BE IT RESOLVED, that the stockholdersshareholders request that the Board issue a report to shareholders on the feasibility of Bristol-Myers Squibbamending the Company’s Policy to ensure (a) that it extends to all contract laboratories and that it is reviewed with such outside laboratories on a regular basis, and (b) superior standards of care for animals who continue to be used for these purposes, both by the Company (“Bristol-Myers”) askitself and by all independently retained laboratories, including provisions to ensure that animals’ psychological, social and behavioral needs are met. Further, the Compensationshareholders request that the Board issue an annual report to shareholders on the extent to which in-house and Management Development Committeecontract laboratories are adhering to this policy, including the implementation of the Boardpsychological enrichment measures.
Supporting Statement:
A number of Directorspharmaceutical companies have adopted and prominently published animal welfare policies on their websites relating to adopt athe care of animals used in product research and development. The Company, as an industry leader, is commended for its efforts to “reduce our reliance on animal testing methods and ensure humane care when animal testing is unavoidable.”(1)
However, the recent disclosure of atrocities recorded at Convance, Inc. has made the need for formalized, publicly available animal welfare policy that extends to all outside contractors all the more relevant, indeed urgent. Filmed footage showed primates being subjected to such gross physical abuses and psychological torments that Convance sued to stop PETA Europe from publicizing it. The Honorable Judge Peter Langan, in the United Kingdom, who denied Convance’s petition, stated in his decision that the video was “highly disturbing” and that just two aspects of it, namely the “rough manner in which animals are handled and the bleakness of the surroundings in which they are kept . . . even to a significant portion of restricted stock granted to senior executives require the achievement of performance goals as a prerequisite to vesting. The policy should be implementedviewer with no particular interest in a way that does not violate any existing employment agreement or the terms of any equity compensation plan.animal welfare, at least cry out for explanation.”(2)
SUPPORTING STATEMENT
(1) | http://www.bms.com/static/ehs/perfor/data/produc.html#animaltest |
(2) | The case captionedCovance Laboratories Limited v. PETA Europe Limited was filed in the High Court of Justice, Chancery Division, Leeds District Registry, Claim No. 5C-00295. In addition to ruling in PETA’s favor, the Court ordered Covance to pay PETA £50,000 in costs and fees. |
Bristol-Myers uses a substantial amount of restricted stock to compensate its senior executives. From 2001 through 2003, CEO Peter Dolan received awards with a total value of $4,194,000, while chief scientific officer J.B.D. Palmer, M.D. received awards valued at $4,229,150 in 2002 and 2003. The vesting of these awards does not depend
Shareholders cannot monitor what goes on behind the achievement of any performance goals; rather, they simply vest over time.
We believe that compensation policies should align the interest of senior executives with those of stockholders, and we therefore applaud Bristol-Myers’ decision to deemphasize stock options and move to restricted stock, which facilitates direct ownership of stock. Restricted stock grants also have the virtue of more transparent accounting treatment than stock options, whose cost—unlike that of restricted stock—is not recognized on a company’s income statement. However, to provide appropriate incentives, we believe that restricted stock awards should have real downside risk.
There has been significant criticismclosed doors of the incentive valueanimal testing laboratories, so the Company must. Accordingly, we urge the Board to commit to ensuring that basic animal welfare measures are an integral part of restricted stock grants without performance hurdles. An August 11, 2003 editorial inForbes characterized restricted stock grants without performance targets as “weak incentives for improving performance.” WorldCom/MCIour Company’s corporate monitor and former SEC chairman Richard Breeden opined in his August 2003 governance recommendations that “there is not a strong reason for granting restricted stock rather than simply paying cash unless there are performance hurdles to vesting.” Matt Ward, CEO of San Francisco-based Westward Pay Strategies, says restricted stock grants without performance targets create “the lay-low effect: just lay low and don’t get fired.”
Leading companies have been requiring senior executives to satisfy performance requirements before restricted stock can vest. In its widely publicized 2003 shift from stock options to restricted stock, Microsoft has imposed performance vesting targets on its 600 most senior managers. The performance share units granted to GE CEO Jeffrey Immelt in 2003 similarly require the achievement of goals relating to cash flow from operations and total shareholder return. Bristol-Myers should follow the lead of these companies.
The need for performance targets for the vesting of restricted stock is especially acute in light of Bristol-Myers’ stock price performance. According to the most recent proxy statement, $100 invested in Bristol-Myers stock on December 31, 1998 would have been worth $51.74 on December 31, 2003, while $100 invested in an index of peer companies would have been worth $91.55 on that date.
stewardship.
We urge stockholdersshareholders to vote FORsupport this proposal.Resolution.
Board of Directors’ PositionsPosition
The Board of Directors recommends a vote “AGAINST” the proposal for the following reasons:
The Board of Directors believes adoption of thethat this proposal is unnecessary because our company already has a significant portionprogram in place to ensure that the highest level of Bristol-Myers Squibb’s long-term compensationcare be used when the use of laboratory animals is required. This program applies to both company laboratories as well as contract laboratories and is published on our website. The Board of Directors, therefore, believes that this proposal has been substantially implemented.
As referenced by the Proponents and as published on our website, we have maintained a long-standing, highly regarded program that is committed to reducing reliance on animal testing methods; that promotes the development, validation and use of non-animal tests; and provides the highest level of care when use of laboratory animals is required. We are also applying this program to our contract laboratories that are involved with the care and use of animals.
All of our laboratory animal facilities in the United States are accredited by the Association of Assessment and Accreditation of Laboratory Animal Care International, an unaffiliated review organization. Moreover, all non-U.S. sites and contractors must meet equivalent voluntary standards. We continue to meet or exceed the high standards of care and humaneness set by the National Research Council of the National Academy of Sciences, the National Institutes of Health and the U.S. Department of Agriculture as mandated under the Animal Welfare Act. All of our facilities and programs involved with the care and use of animals are periodically subjected to rigorous inspection by company auditors to ensure compliance with applicable standards.
We will continue our firm commitment to pursue quality humane care, reduce use of animals and to develop, where feasible, alternatives to animal use. The Board believes that our existing program is sufficient to ensure that the highest level of care for animals is used both by us and by our contract laboratories. In addition, the Board believes that publishing an additional report to stockholders beyond what is already performance-based.
The Compensation and Management Development Committee, which is composed entirely of independent directors, with the assistance of its outside compensation consultant Mercer Human Resource Consulting, is responsible for determining the proper levels and types of compensation appropriate to attract, retain and incent the senior management team.
Our long-term compensation program is composed of three parts: a) stock options; b) a long-term performance incentive plan, and c) restricted stock.
The long-term performance share plan, which represents 25-40% of the long-term incentive mix, is 100% performance contingent. If, as was the case with the 2001-2003 plan and 2002-2004 plan, the threshold targets are not met, no payments are made under the plan.
For 2005, the Committee has approved the implementation of exercise thresholds for all annual stock option grants to the proxy named officers and other senior executives. To satisfy the exercise threshold, Bristol-Myers Squibb stock would need to close at a price of at least 15% above the option grant price for seven (7) consecutive trading days. Although the options would vest according to the normal vesting schedule, the executive may not exercise the options unless and until the threshold is satisfied. For 2005 option grants, to preserve favorable accounting under current rules, the thresholds will lapse in years 9 and 10. Pursuant to the expensing of options, thispublished on our website would not be required in future years.
For 2004 and 2005, the long-term compensation mix is approximately 35-45% options, 25-40% Long-Term Performance share plan and 30% restricted stock. The implementationa good use of the exercise thresholds for options beginning in 2005, combined with the increased emphasis the Committee has placed on the Long-Term Performance Share plan in recent years, ties approximately 70% of long-term incentives to specific performance criteria. The Committee believes this satisfies the spirit of the stockholder’s proposal, while still providing the flexibility it needs to make compensation decisions appropriate for our company.
The Committee does not believe it is in the best interests of our company to require the placement of performance criteria on restricted stock, as the proponent suggests. After careful review of the long- term compensation mix and business needs, the Committee has determined that it should and will continue to maintain a portion (30%) of the long-term incentive program in time-based restricted stock as it allows the Committee to attract and retain the necessary talent to execute our company’s turn around.
resources.
Accordingly, the Board of Directors unanimously recommends a vote “AGAINST” thethis proposal.
ITEM 10—7—STOCKHOLDER PROPOSAL ON DIRECTOR VOTE THRESHOLDTERM LIMITS
Resolved: That theRESOLVED: The shareholders of Bristol-Myers Squibb Company (“Company”BMS”) hereby request thaturge the Board of Directors initiate the appropriate processof (the “Board”) to amend the Company’s governance documents (certificatesbylaws so that, beginning with the nomination of incorporationcandidates for election as directors at the 2007 annual meeting, the Board shall not nominate any candidate (other than the Chief Executive Officer) who at the time of the upcoming annual meeting has served or bylaws) to provide thatwill have served as a director nominees shall befor at least twelve years.
SUPPORTING STATEMENT
The Board of Directors is the only body elected by the affirmative voteshareholders of a publicly traded company such as BMS, and thus it is important that Board candidates be selected using the majoritybest governance practices.
The Corporate Library (“TCL”), an independent research firm on corporate governance, has identified an issue of votes castconcern pertaining to director tenure. TCL states:
Experienced directors can be important assets to almost any board. However, in certain situations, long-tenured directors can become serious liabilities…
(TCL)… recognizes that the best boards exhibit a good balance between long and short-tenured directors. The worst possible combination: a board comprised of one-third to one-half similarly long-tenured directors (over 15 years, and the higher the range the greater the likelihood of eventual failure) combined with no recently (zero to three years tenure) elected new directors.
We are concerned that BMS’s Board has aspects of what TCL regards as the “worst possible combination.” The company’s 2005 Proxy Statement included the following facts regarding directors’ service:
We appreciate directors’ service. For many years in the 1980s and 1990s BMS performed very well, with steady, solid growth in sales, earnings, and dividends, and the company’s stock reflected the company’s fine performance. Since 2000, however, BMS’s performance has been disappointing.
We do not suggest that adoption of this proposal at an annual meeting of shareholders.
Supporting Statement: Our Company is incorporated in Delaware. Among other issues, Delaware corporate law addressesearlier point would by itself have avoided these disappointments. We believe, however, that the issue of the level of voting support necessary for a specific action, such as the election of corporate directors. Delaware law provides that a company’s certificate of incorporation or bylaws may specify the number of votes that shall be necessary for the transaction of any business, including the election of directors. (DGCL, Title 8, Chapter 1, Subchapter VII, Section 216). Further, the law provides that if the level of voting support necessary for a specific action is not specifiedproposed policy could in the certificate of incorporation or bylaws of the corporation, directors “shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.”
Our Company presently uses the plurality vote standard for the election of directors. We feel that it is appropriate and timely forfuture help the Board to initiate arefresh itself and thus help BMS deal with change in the Company’s director election vote standard. Specifically, this shareholder proposal urges that the Board of Directors initiate a change to the director election vote standard to provide that in director elections a majority vote standard will be used in lieu of the Company’s current plurality vote standard. Specifically, the new standard should provide that nominees for the board of directors must receive a majority of the vote cast in order to be elected or re-elected to the Board.
Under the Company’s current plurality vote standard, a director nominee in a director election can be elected or re-elected with as little as a single affirmative vote, even while a substantial majority of the votes cast are “withheld” from that director nominee. So even if 99.99% of the shares “withhold” authority to vote for a candidate or all the candidates, a 0.01% “for” vote resultscompany’s evolving markets, exploit advances in the candidate’s election or re-election to the board. The proposed majorityscience underlying new medicines, anticipate performance issues, and avoid legal problems.
Please vote standard would require that a director receive a majority of the vote cast in order to be elected to the Board.
It is our contention that the proposed majority vote standard for corporate board elections is a fair standard that will strengthen the Company’s governance and the Board. Our proposal is not intended to limit the judgment of the Board in crafting the requested governance change. For instance, the Board should address the status of incumbent directors who fail to receive a majority vote when standing for re-election under a majority vote standard or whether a plurality director election standard is appropriate in contested elections.
We urge your support ofFOR this important director election form.
proposal.
Board of Directors’ PositionsPosition
The Board of Directors recommends a vote “AGAINST” the proposal for the following reasons:
The Board of Directors believes that active stockholder participationmandating arbitrary twelve-year terms for members of the company’s Board of Directors is not in our best interests or the best interests of our stockholders. Employing such a policy could result in the electionpremature departure of directors is important towho have acquired extensive knowledge, insight and perspective about our business operations. Rather than deprive the company and to effective corporate governance. In 2003, upon the Board’s recommendation, the stockholders declassified the Board such thatof the service of highly valued directors by 2006 eachimposing fixed term limits, the Board of Directors adheres to the following practices, as stated in our Certificate of Incorporation and every director will be subject to stockholder considerationCorporate Governance Guidelines:
In addition, pursuant to the New York Stock Exchange listing standards, our Board of Directors has adopted categorical standards to assist it in determining director independence. These standards must be met by the independent directors not only at the time of initial election to the Board, but continuously throughout the term of each independent director’s service.
We believe that the principles and practices currently in place provide the means to ensure the continuity of independent oversight by our Board, and that requiring term limits could deny the mechanisms through which stockholders participate are those that best serve the interests of our company and its stockholders.
Thestockholders of valuable contributions by long-standing directors and undermine our system of plurality voting, which the proponent seeks to replace, not only has long been the accepted system among companies comparable to our company, but is also the default system under the laws of the State of Delaware. The rules governing plurality voting are well understood. In addition, it is important to note that at last year’s annual meeting of stockholders, each director was elected by more than 93% of the total votes cast. The proposal suggests that directors for the Bristol-Myers Squibb Board are being elected by minimal affirmative votes. That clearly is not the case.
The Board believes that a majority voting system proposed by the proponent presents complex legal and practical issues that the proposal does not address. Although the Board could appoint directors to fill vacancies, it may not be able to find candidates willing to serve with a majority voting system. In addition, the Board believes that the appointment of directors is less democratic than the election of directors by plurality vote.
The Board also believes that implementation of the proposal at this time would be premature. The proposal is premature because the SEC has already proposed new rules that would provide stockholders with greater participation in the annual election of directors. The SEC did not propose to require a majority voting system for electing directors, but instead proposed different mechanisms to permit direct stockholder nominations in specified circumstances. If the SEC’s proposals are adopted, they would more directly and uniformly provide new avenues for stockholder participation in the process for election of directors.
If the majority voting system is adopted, we may need to implement costly vote-getting strategies to ensure director nominees obtain the required vote. The end result may be increased spending by our company in routine elections and unnecessarily increasing the cost of soliciting stockholder votes. The Board believes this would be a poor use of stockholder funds.
corporate governance.
Accordingly, the Board of Directors unanimously recommends a vote “AGAINST” this proposal.
Under our Bylaws, no business may be brought before an annual meeting except as set forth in the notice of the meeting or as otherwise brought before the meeting by or at the direction of the Board or by a stockholder entitled to vote who has delivered notice to our company containing certain information set forth in our Bylaws, not fewer than 120 days before the date our company’s proxy statement is released to stockholders in connection with the prior year’s annual meeting. For our company’s meeting in 2006,2007, we must receive this notice no later than November 23, 2005.22, 2006. These requirements are separate and distinct from and in addition to the SEC requirements that a stockholder must meet to have a stockholder proposal included in our proxy statement.
A copy of the Bylaw provisions discussed above may be obtained by writing to us at our principal executive offices, 345 Park Avenue, New York, New York 10154, attention: Secretary.
20062007 STOCKHOLDER PROPOSALS
Stockholder proposals relating to our 20062007 Annual Meeting of Stockholders must be received by us at our principal executive offices, 345 Park Avenue, New York, New York 10154, attention: Secretary, no later than November 23, 2005.22, 2006. Stockholders are encouraged to contact the Office of the Corporate Secretary prior to submitting a stockholder proposal or any time they have concerns about our company. At the direction of the Board of Directors, that office acts as corporate governance liaison to stockholders.
CORPORATE GOVERNANCE GUIDELINES
The business of the company is managed under the direction of the Board of Directors pursuant to the Delaware General Corporation Law and the company’s Bylaws. It has responsibility for establishing broad corporate policies and for the overall performance of the Company. The Board selects the senior management team that is responsible for the day-to-day operations of the company and for keeping the Board advised of the company’s business. The Board acts as an advisor and counselor to senior management and ultimately monitors its performance.
Composition and Structure of the Board
1. | Size of the Board. The Board in recent years has had between 10 and 12 members. This range permits diversity of perspectives and experience without hindering effective discussion. However, the Board is prepared to increase its membership if the Board deems it advisable, for example to bring new or specialized skills and talent to the Board. |
2. | Board Membership Criteria. The Committee on Directors and Corporate Governance is responsible for reviewing with the Board, on an annual basis, the appropriate criteria for membership to the Board. Generally, non-employee directors should be persons of diverse backgrounds with broad experience in areas important to the operation of the Company such as business, science, finance/accounting, law, education or government and should possess qualities reflecting integrity, independence, wisdom, an inquiring mind, vision, a proven record of accomplishment and ability to work with others. |
3. | Selection of New Directors.The Committee on Directors and Corporate Governance evaluates candidates and recommends them to the Board. The full Board is responsible for selecting its members and recommending them for election by the stockholders or by a majority vote of the Board to fill vacancies. The invitation to join the Board should be extended by the Chairman, on behalf of the entire Board. |
4. | Voting for Directors.In the event any nominee for director in an uncontested election receives a greater number of votes “withheld” from his or her election than votes “for” such election (“Withheld Vote Director”), the following actions will take place: |
a) | The Withheld Vote Director shall submit within ten (10) business days after the certification of the stockholder vote an offer of resignation to the Board of Directors for consideration by the Committee on Directors and Corporate Governance. |
b) | The Committee on Directors and Corporate Governance, which is composed entirely of independent directors, shall consider the Withheld Vote Director’s offer of resignation and recommend to the Board whether to accept it based on their judgment of the best interests of the Company and its stockholders. The Committee on Directors and Corporate Governance will consider all factors deemed relevant including, the underlying reasons for the majority withheld vote (if ascertainable), the qualifications of Withheld Vote Director as well as his or her contributions to the Company. In making its recommendation, the Committee on Directors and Corporate Governance may consider a range of options including accepting the offer of resignation or rejecting the offer of resignation and addressing the underlying causes of the withheld vote. |
c) | The independent members of the Board of Directors shall act on the recommendation of the Committee on Directors and Corporate Governance at its next regularly scheduled Board meeting which will be held within sixty (60) days after the certification of the stockholder vote. |
d) | The Board of Directors shall promptly disclose its decision whether to accept or reject the Withheld Vote Director’s resignation offer within four (4) business days after the decision is made and the reasons for the decision in a broadly disseminated press release that will also be furnished to the U.S. Securities and Exchange Commission on Form 8-K. |
The Withheld Vote Director shall not participate in the deliberations of the Committee on Directors and Corporate Governance or Board of Directors regarding his or her offer of resignation.
5. | Independent Directors. The Board’s policy is that a substantial majority of its members be independent directors. Only independent directors may serve on the Audit Committee, Compensation Committee and Committee on Directors and Corporate Governance. |