UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Zoetis Inc.
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NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
Parsippany, NJ |
NOTICE OF 20162019 ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 2016 AT 10:00 A.M.
HILTON SHORT HILLS
41 JOHN F. KENNEDY PARKWAY
SHORT HILLS, NEW JERSEY 07078
Dear Shareholders of Zoetis Inc.:
We are pleased to announce that Zoetis’ 2016 Annual Meeting of Shareholders (the “Annual Meeting”) will be held on Thursday, May 12, 2016, at 10:00 a.m. Eastern Time at the Hilton Short Hills, 41 John F. Kennedy Parkway, in Short Hills, New Jersey.
ITEMS OF BUSINESS
The items of business at the Annual Meeting are to consider and vote upon the following matters:
WHEN Wednesday, May 15, 2019 10:00 a.m. Eastern Daylight Time WHERE Hilton Short Hills 41 John F. Kennedy Parkway Short Hills, New Jersey 07078 RECORD DATE Close of Business on March 21, 2019 | ITEMS OF BUSINESS 1. Election of |
2. | An advisory vote to approve the company’s executive |
3. | Ratification of the |
4. |
RECORD DATE
Only shareholders of record as of the close of business on the record date, March 18, 2016, are entitled to receive notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.
HOW TO VOTE Shareholders of record on the Record Date are entitled to vote in the following ways: Call 1 (800)652-8683 (toll free) in the United States or Canada Visit www.investorvote.com/zts Return a properly completed, signed and dated proxy card Attend the Annual Meeting of Shareholders in person and vote your shares Sincerely yours, Heidi Executive Vice President, General Counsel and Corporate Secretary April IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2019 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY Zoetis Inc.’s Proxy Statement and Annual Report on Form10-K for the year ended December 31, MAILINGWe are mailing this proxy statement and the accompanying proxy card on or about April 1, 2016, in connection with the solicitation of proxies on behalf of our Board of Directors.PROXY VOTING● By mail ● By telephone ● By InternetWe cordially invite all shareholders to attend the Annual Meeting in person. Whether or not you expect to attend the Annual Meeting, we urge you to submit your proxy card in the envelope provided to you, or to use the Internet or telephone method of voting described in your proxy card, so that your shares can be voted at the Annual Meeting in accordance with your instructions. For specific instructions on voting, please refer to the instructions on the proxy card or voting instruction form.If you have any questions or require any assistance with voting your shares, please contact our proxy solicitor at the telephone numbers or address set forth below:Morrow & Co., LLC470 West AvenueStamford, CT 06902Call Collect: (203) 658-9400Call Toll-Free: (855) 289-3516It is important that your shares be represented and voted at the Annual Meeting.C.C Chen1, 20162, 201912, 201615, 2019:2015,2018 are available online at www.edocumentview.com/ZTS. We are furnishing proxy materials to our shareholders primarily via “Notice and Access” delivery. On or about April 2, 2019, we mailed to our shareholders a notice of Internet availability of proxy materials. This notice contains instructions on how to access our Proxy Statement and 2018 Annual Report and vote online.
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ITEM 2 — ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATION (SAY ON PAY) | 21 | |||
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As used in this proxy statement, the terms “we”, “us”, “our”, the “company” or “Zoetis” refer to Zoetis Inc. |
ZOETIS |
This summary highlights certain information in this proxy statement. As it is only a summary, please review the complete Zoetis Inc. Proxy Statement and 20152018 Annual Report before you vote.
2015 PERFORMANCE HIGHLIGHTS2019 ANNUAL MEETING
Over the course of 2015, the leadership of Zoetis drove strong operating performance by building on the commercial performance, innovative research and development and high quality supply chain that have been critical to our success. The company also initiated a full-scale review of our business (our ‘‘Business Review”) with the goals of (1) improving our operating margins, (2) reducing complexity that does not add value for our customers or our business, (3) optimizing resource allocation and efficiency, and (4) better positioning Zoetis competitively for long-term profitable growth.
Listed below are some highlights of our 2015 operating performance:
PROXY SUMMARY
EXECUTIVE COMPENSATION HIGHLIGHTS
In 2015, the Compensation Committee of the Board of Directors of Zoetis Inc. (the “Committee”) expanded from a group of four independent directors to five with the addition of Mr. Paul M. Bisaro. The compensation-related actions taken by the Committee in 2015 include:
PROXY SUMMARY
Time and Date |
Wednesday, May
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Place | Hilton Short Hills 41 John F. Kennedy Parkway Short Hills, New Jersey 07078
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Record Date | Close of business on March
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Voting | Shareholders on the record date are entitled to one vote per share on each matter to be voted upon at the Annual Meeting.
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Admission | We do not require tickets for admission to the meeting, but we do limit attendance to shareholders on the record date or their proxy holders. Please bring proof of your common share ownership, such as a current brokerage statement, and photo identification.
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In 2018, our leadership team once again drove strong operating performance based on the three interconnected capabilities that have been critical to our success since becoming a public company: direct customer relationships, innovative research and development, and high-quality manufacturing and supply. We continued to deliver on our value proposition, growing revenue faster than the market and growing our adjusted net income faster than revenue; targeting key investment opportunities for growth; and returning excess capital to our shareholders. |
1 | Operational revenue growth (anon-GAAP financial measure) is defined as revenue growth excluding the impact of foreign exchange. Page 44 of our 2018 Annual Report on Form10-K, filed with the SEC on February 14, 2019, contains a reconciliation of thisnon-GAAP financial measure to reported results under GAAP for 2018. |
2 | Adjusted net income and adjusted diluted EPS(non-GAAP financial measures) are defined as reported net income attributable to Zoetis and reported diluted EPS, excluding purchase accounting adjustments, acquisition-related costs and certain significant items. Pages 46 to 51 of our 2018 Annual Report on Form10-K, filed with the SEC on February 14, 2019, contain a reconciliation of thesenon-GAAP financial measures to reported results under GAAP for 2018. |
ZOETIS |
PROXY SUMMARY
ITEM 1 —
ITEM 1 | ELECTION OF DIRECTORS You are being asked to elect 4 directors – Juan Ramón Alaix, Paul M. Bisaro, Frank A. D’Amelio and Michael B. McCallister – to hold office until the 2022 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified, or until their earlier death, resignation or removal. |
SUMMARY INFORMATION ABOUT OUR DIRECTOR NOMINEES AND CONTINUING DIRECTORS
Additional information about our directors can be found under “Information About Directors” on pages 5 to 11.
Juan Ramón Alaix
| Paul M.
| Frank A.
| Sanjay Khosla
| Michael B. McCallister
| Gregory Norden
| Louise M. Parent
| Willie M. Reed
| Linda Rhodes
| Robert W.
| William C. Steere, Jr. | ||||||||||||
Experience, Skills, Expertise | ||||||||||||||||||||||
Academia |
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Animal Health |
✓ |
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✓ |
✓ |
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Consumer Products |
✓ |
✓ |
✓ |
✓ | ||||||||||||||||||
Global Businesses |
✓ |
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✓ |
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Life Sciences |
✓ |
✓ |
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✓ |
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✓ |
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Manufacturing & Supply |
✓ | |||||||||||||||||||||
Marketing & Sales |
✓ |
✓ |
✓ |
✓ |
✓ | |||||||||||||||||
Mergers & Acquisitions |
✓ |
✓ |
✓ |
✓ |
✓ |
✓ |
✓ |
✓ |
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Other Public Company Board Member |
✓ |
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✓ |
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Public Company CEO |
✓ |
✓ |
✓ |
✓ |
✓ | |||||||||||||||||
Public Company CFO; or Finance and Accounting
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✓ |
✓ |
✓ | |||||||||||||||||||
Public Company GC; Compliance, or Corporate Governance
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✓ |
✓ | ||||||||||||||||||||
Regulated Industries |
✓ |
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Research & Development |
✓ |
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Demographic Background | ||||||||||||||||||||||
Board Tenure | ||||||||||||||||||||||
Full Years |
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Age (as of April 2, 2019) | ||||||||||||||||||||||
Years Old |
67 |
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Did not wish to identify |
Director Nominee | Continuing Director | * Based on U.S. Census Bureau designations |
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ITEM 1 RECOMMENDATION: OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTEFOR THE ELECTION OF MR. ALAIX, MR. BISARO, MR. D’AMELIO AND MR. MCCALLISTER. |
2 | ZOETIS 2019 PROXY STATEMENT |
PROXY SUMMARY
ITEM 2 | ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATION (SAY ON PAY) You are being asked to approve, on an advisory basis, our executive officer compensation program as described in the Compensation Discussion and Analysis and the Executive Compensation Tables and accompanying narrative disclosure, as provided on pages 22 to 55 of this proxy statement. We believe that our program incentivizes and rewards our leadership for increasing shareholder value and aligns the interests of our leadership with those of our shareholders on an annual and long-term basis. | |
The Compensation Committee’s compensation-related actions in 2018 included the following: | ||
●Timing of Annual Base Salary Increases. The Committee approved a change to the effective date for 2018 base salary increases from April 1, 2018 to January 1, 2018, to simplify the compensation process and the related communications and disclosures, beginning with the disclosures included within this 2019 proxy statement. The CEO did not receive a base salary increase in 2018 and was not impacted by this change. | ||
●CEO Stock Ownership Requirement.The Committee annually reviews the stock ownership requirements of our NEOs, including the CEO, which are established as a multiple of each executive’s base salary, to encourage our NEOs to own and maintain a substantial stake in the company. In 2018, the Committee increased the stock ownership requirement for the CEO from 5 times to 6 times base salary to better align with practices reported by many of the companies in our compensation peer group. | ||
●Compensation Peer Group.As part of its annual review of our compensation peer group, the Committee made a few changes to the peer group for 2019 to provide a robust number of peer companies and a good balance of companies across the pharmaceutical, biotechnology, life sciences, and healthcare equipment industries that are more similar in size and scope to Zoetis. The revised peer group will be used by the Committee in making 2019 compensation decisions. |
ITEM 2 RECOMMENDATION: OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTEFOR THE APPROVAL OF OUR EXECUTIVE COMPENSATION. |
ITEM 3 | RATIFICATION OF APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019 You are being asked to ratify our Audit Committee’s appointment of KPMG LLP (“KPMG”) as our independent registered public accounting firm for 2019. KPMG has been our independent registered accounting firm since 2011. | |
The fees paid to KPMG are detailed on page 57. One or more representatives of KPMG will be present at the 2019 Annual Meeting. They will be given the opportunity to make a statement if they desire to do so, and they will be available to respond to appropriate questions. |
ITEM 3 RECOMMENDATION: OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTEFOR THE RATIFICATION OF THE APPOINTMENT OF KPMG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019. |
ZOETIS 2019 PROXY STATEMENT | 3 |
CORPORATE GOVERNANCE AT ZOETIS
ELECTION OF DIRECTORS |
Our Board of Directors currently consists of eleven directors divided into three classes. The directors hold office for staggered terms of three years and until their successors are elected and qualified, or until their earlier death, resignation or removal. One of the three classes is elected each year to succeed the directors whose terms are expiring. Our Board believes this structure is appropriate for the company as it allows for the continuity and stability of our Board and encourages a long-term strategic focus beneficial to the company and its stockholders.
The directors in Class III, whose terms expire at the 2019 Annual Meeting of Shareholders, are Juan Ramón Alaix, Paul M. Bisaro, Frank A. D’Amelio and Michael B. McCallister. Each of these directors has been nominated by the Board of Directors, upon the recommendation of its Corporate Governance Committee, to stand for election for a term expiring at the 2022 Annual Meeting of Shareholders.
The Corporate Governance Committee considers a number of factors and principles in determining the slate of director nominees for election to the company’s Board, as discussed in the section titled “Director Nominations” below. The Corporate Governance Committee and the Board have evaluated each of Mr. Alaix, Mr. Bisaro, Mr. D’Amelio and Mr. McCallister against the factors and principles Zoetis uses to select director nominees. Based on this evaluation, the Corporate Governance Committee and the Board have concluded that it is in the best interests of Zoetis and its shareholders for each of Mr. Alaix, Mr. Bisaro, Mr. D’Amelio and Mr. McCallister to continue to serve as a director of Zoetis.
Our Board has appointed Heidi C. Chen and Katherine H. Walden as proxies to vote your shares on your behalf. The proxies intend to vote for the election of Mr. Alaix, Mr. Bisaro, Mr. D’Amelio and Mr. McCallister unless you indicate otherwise on your proxy card, voting instruction form or when you vote by telephone or online. Each candidate has consented to being named in this proxy statement and serving as a director if elected. However, if any nominee is not able to serve, the Board can either designate a substitute nominee to serve in his or her place as a director or reduce the size of the Board. If the Board nominates another individual, the persons named as proxies may vote for such substitute nominee.
In order to be elected, a nominee must receive more votes cast “For” than “Against” his or her election. Abstentions and brokernon-votes will have no effect on the outcome of the vote. See “Corporate Governance Principles and Practices—Majority Voting Standard for Director Elections” for more information about our procedures if a nominee fails to receive a majority of the votes in an uncontested election.
Our Board of Directors recommends that you vote on your proxy card or voting instruction form “For” the election of each of the Board’s nominees for election – Juan Ramón Alaix, Paul M. Bisaro, Frank A. D’Amelio and Michael B. McCallister – to hold officeserve as directors of Zoetis until the 2019our 2022 Annual Meeting of Shareholders and until their respective successors are duly elected and qualified, or until their earlier death, resignation or removal.
All directors attended at least 75% The Board believes that each of these four nominees has a strong track record of being a responsible steward of shareholders’ interests and of bringing extraordinarily valuable insight, perspective and expertise to the meetings ofBoard. In each individual’s biography set forth on pages 6 to 11, we highlight specific experience, qualifications and skills that led the Board and Board committees on which they served in 2015.
SUMMARY INFORMATION ABOUT OUR DIRECTOR NOMINEES AND CONTINUING DIRECTORS
Directors whose terms expire at the 2016 Annual Meeting and who are nominees for terms expiring at the 2019 Annual Meeting:
Board Committees | |||||||||||||||||
Name | Age | Director Since | Occupation and Experience | Independent | Audit | Comp | Corp Gov | ||||||||||
Juan Ramón Alaix
| 64
| 2012
| CEO, Zoetis Inc.
| No
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Paul M. Bisaro | 55 | 2015 | Executive Chairman, Allergan plc
| Yes
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Frank A. D’Amelio | 58 | 2012 | EVP, Business Operations, and Chief Financial Officer, Pfizer Inc.
| No | |||||||||||||
Michael B. McCallister (Board Chair) | 63 | 2013 |
Former Chairman of the Board and CEO, Humana Inc.
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Yes |
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Directors whose terms expire at the 2017 Annual Meeting:
Board Committees | |||||||||||||||||
Name | Age | Director Since | Occupation and Experience | Independent | Audit | Comp | Corp Gov | ||||||||||
William F. Doyle* | 53 | 2015 | Member, Pershing Square Capital Management L.P.
| Yes | |||||||||||||
Gregory Norden | 58 | 2013 | Managing Director, G9 Capital Group LLC
| Yes | |||||||||||||
Louise M. Parent | 65 | 2013 | Former EVP and General Counsel, American Express Company
| Yes | |||||||||||||
Robert W. Scully | 66 | 2013 | Former member of Office of Chairman, Morgan Stanley
| Yes |
Directors whose terms expire at the 2018 Annual Meeting:
Board Committees | |||||||||||||||||
Name | Age | Director Since | Occupation and Experience | Independent | Audit | Comp | Corp Gov | ||||||||||
Sanjay Khosla |
64 |
2013 |
Former EVP, Mondelēz International
|
Yes |
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Willie M. Reed | 61 | 2014 | Dean of the College of Veterinary Medicine, Purdue University
| Yes | |||||||||||||
William C. Steere, Jr. |
79 |
2013 |
Former Chairman and CEO, Pfizer Inc.
|
Yes |
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Chair Memberto conclude that each individual should continue to serve as a director of Zoetis.
ITEM 1 RECOMMENDATION: OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
|
4 | ZOETIS |
PROXY SUMMARYCORPORATE GOVERNANCE AT ZOETIS
ITEM 2 — ADVISORY APPROVAL OF INFORMATION ABOUT DIRECTORS
OUR EXECUTIVE COMPENSATION (SAY ON PAY)DIRECTORS
You are being asked to approve, on an advisory basis, our executive officer compensation program as described in this proxy statement. We believe that our program incentivizesThe following table sets forth certain information regarding the director nominees and rewards our leadership for increasing shareholder value and aligns the interestsdirectors of our leadership with thosethe company whose terms will continue after the 2019 Annual Meeting of our shareholders on an annual and long-term basis.Shareholders.
Name | Age(1) | Position(s) with the Company | Term Expires | |||||||
Juan Ramón Alaix
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67
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Chief Executive Officer and Director
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2019(2)
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Paul M. Bisaro*
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58
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Director
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2019(2)
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Frank A. D’Amelio*
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61
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Director
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2019(2)
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Sanjay Khosla*
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67
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Director
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2021
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Michael B. McCallister*
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66
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Non-Executive Chairman of the Board and Director
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2019(2)
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Gregory Norden*
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61
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Director
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2020
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Louise M. Parent*
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68
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Director
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2020
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Willie M. Reed*
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64
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Director
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2021
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Linda Rhodes*
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69
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Director
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2021
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Robert W. Scully*
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69
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Director
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2020
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William C. Steere, Jr.*
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82
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Director
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2021
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* | Independent Director |
(1) | As of April 2, 2019. |
(2) | Nominee forre-election at the 2019 Annual Meeting for a term expiring in 2022. |
ZOETIS 2019 PROXY STATEMENT | 5 |
CORPORATE GOVERNANCE AT ZOETIS
OUR DIRECTOR NOMINEES
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Age 67 Director since July 2012 | Specific qualifications: ● Knowledge and leadership of our company as its current CEO and former President of Pfizer Animal Health ● Experience in animal health industry ● Global business experience ● Background in finance |
ITEM 3 — RATIFICATION OF APPOINTMENT OF KPMG LLP AS OUR AUDITORS FOR 2016Chief Executive Officer of our companysince July 2012. From 2006 to 2012, Mr. Alaix served as President of Pfizer Animal Health, our predecessor company, and was responsible for its overall strategic direction and financial performance. Under his leadership, the company grew to become a $4.3 billion enterprise in 2012. Mr. Alaix has more than 35 years’ experience in finance and management, including 20 years in the human pharmaceutical industry. He joined Pfizer in 2003 and held various positions, including Regional President of Central/Southern Europe for Pfizer’s pharmaceutical business. Prior to that, Mr. Alaix held various positions with Pharmacia, including as Country President of Spain, from 1998 until Pharmacia’s acquisition by Pfizer in 2003. Earlier in his career he served in general management withRhône-Poulenc Rorer in Spain and Belgium. In 2013, Mr. Alaix completed atwo-year term as President of the International Federation for Animal Health (“IFAH”), now known as HealthforAnimals, and he continues to serve as a member of its board and executive committee. HealthforAnimals represents manufacturers of veterinary medicines, vaccines and other animal health products in both developed and emerging markets. In 2018, he was awarded the Deming Cup for Operational Excellence from the Columbia Business School for his achievements as CEO of Zoetis. A native of Spain, Mr. Alaix received a graduate degree in economics from the Universidad de Madrid. Mr. Alaix’ knowledge and leadership of our company, his business and management experience, and his experience in the animal health industry make him a valuable member of our Board.
You are being asked to ratify our Audit Committee’s appointment of KPMG LLP (“KPMG”) as our independent registered public accounting firm for 2016. KPMG was our auditor in 2015, 2014 and 2013.
The fees paid to KPMG are detailed on page 61.
One or more representatives of KPMG will be present at the Annual Meeting. They will be given the opportunity to make a statement if they desire to do so, and they will be available to respond to appropriate questions.
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Age 58 Director since May 2015 | Specific qualifications: ● Senior management experience, including as former CEO of Actavis plc and Impax Laboratories, Inc. ● Experience in global healthcare and pharmaceutical industries ● Expertise in mergers and acquisitions ● Public company director experience |
Executive Chairman of Amneal Pharmaceuticals Inc., a specialty pharmaceutical company,since May 2018. Amneal Pharmaceuticals was formed by the merger of Amneal Pharmaceuticals LLC and Impax Laboratories, Inc., where Mr. Bisaro formerly served as President and Chief Executive Officer from March 2017 to May 2018. Mr. Bisaro was the Executive Chairman of the board of directors of Allergan plc (formerly Actavis plc) from July 2014 to October 2016. Until June 2014, Mr. Bisaro served as Board Chairman, President and Chief Executive Officer of Actavis, a global pharmaceutical company (formerly Watson Pharmaceuticals). He was appointed President, Chief Executive Officer and a member of the board of Watson Pharmaceuticals in September 2007; and was later appointed Chairman of the board of Watson Pharmaceuticals in October 2013. Prior to joining Watson, Mr. Bisaro was President, Chief Operating Officer and a member of the board of Barr Pharmaceuticals, Inc., a global specialty pharmaceutical company, from 1999 to 2007. Between 1992 and 1999, Mr. Bisaro served as General Counsel of Barr, and from 1997 to 1999 served in various additional capacities including Senior Vice President – Strategic Business Development. Prior to joining Barr, Mr. Bisaro was associated with the law firm Winston & Strawn and a predecessor firm, Bishop, Cook, Purcell and Reynolds from 1989 to 1992. Mr. Bisaro currently serves on the Board of Visitors of The Catholic University of America’s Columbus School of Law. Mr. Bisaro previously served on the boards of Allergan plc from 2007 to 2018 and Zimmer Biomet Holdings, Inc., a world leader in musculoskeletal health solutions, from 2013 to 2017. Mr. Bisaro holds an undergraduate degree in General Studies from the University of Michigan and a Juris Doctor from The Catholic University of America in Washington, D.C. Mr. Bisaro’s business, management and leadership experience, his understanding of the pharmaceutical industry, and his public company board experience make him a valuable member of our Board.
6 | ZOETIS 2019 PROXY STATEMENT |
CORPORATE GOVERNANCE AT ZOETIS
FRANK A. D’AMELIO Age 61 Director since July 2012 | Specific qualifications: ● Senior management experience ● Experience in finance and accounting ● Expertise in mergers and acquisitions ● Global business experience ● Public company director experience |
Chief Financial Officer and Executive Vice President, Global Supply and Business Operations of Pfizer, a global pharmaceutical company, since October 2018, where he serves as a member of Pfizer’s Senior Executive Leadership Team. Mr. D’Amelio previously served as Pfizer’s Executive Vice President, Business Operations and Chief Financial Officer from December 2010 to September 2018.He joined Pfizer in September 2007 and held various positions, including Senior Vice President and Chief Financial Officer. From November 2006 to August 2007, Mr. D’Amelio was the Senior Executive Vice President of Integration and Chief Administrative Officer at Alcatel-Lucent, S.A., a global telecommunications equipment company. Prior to the merger of Alcatel and Lucent Technologies in 2006, Mr. D’Amelio was the Chief Operating Officer of Lucent Technologies, with responsibility for leading business operations, including sales, the product groups, the services business, the supply chain, information technology operations, human resources and labor relations. In 2001, he was appointed Executive Vice President and Chief Financial Officer of Lucent and in 2004 was promoted to be Executive Vice President, Chief Administrative Officer and Chief Financial Officer and helped lead the company through one of the most challenging periods in the telecom industry’s history and returned the company to profitability. In this role, Mr. D’Amelio was responsible for management and oversight of all financial, accounting, real estate and labor relations operations and the operational aspects of the legal and human resources organizations. Mr. D’Amelio currently serves as a member of the board of Humana Inc., a health care company that offers a wide range of insurance products and health and welfare services. He also serves on the board of the Independent College Fund of New Jersey, and formerly served as a member of the National Advisory Board of JPMorgan Chase & Co. Mr. D’Amelio earned his MBA in Finance from St. John’s University and his bachelor’s degree in Accounting from St. Peter’s College. Mr. D’Amelio’s senior management experience and finance expertise, along with his public company board experience, make him a valuable member of our Board.
MICHAEL B. MCCALLISTER Age 66 Director since January 2013; Board Chair since June 2013 | Specific qualifications: ● Senior management experience, including as former CEO of Humana ● Accounting background ● Corporate governance experience ● Public company director experience |
Former Chairman of the Board and CEO of Humana Inc. Humana is a health care company that offers a wide range of insurance products and health and welfare services. Mr. McCallister joined Humana in 1974, and was its Chief Executive Officer from February 2000 until his retirement in December 2012. During his tenure as CEO, Humana gained a reputation as one of the industry’s leading people-focused innovative companies, leveraging products, processes and technology to help individuals take control of their own health. He also served as Chairman of the Board of Humana from 2010 to 2013. Mr. McCallister served for many years on the board of the Business Roundtable and was Chairman of its Health and Retirement Task Force. He currently serves on the boards of AT&T and Fifth Third Bank. Mr. McCallister holds a bachelor’s degree in accounting from Louisiana Tech University and an MBA from Pepperdine University. Mr. McCallister’s senior management experience in the health care industry, along with his public company board experience, make him a valuable member of our Board.
ZOETIS |
CORPORATE GOVERNANCE AT ZOETIS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTINGCONTINUING DIRECTORS
We are providing this proxy statement to you in connection with the solicitation of proxies by the Board of Directors of Zoetis Inc. (“we”, “us”, “our”, the “company” or “Zoetis”) for the 2016 Annual Meeting of Shareholders and for any adjournment or postponement thereof. We mailed our proxy materials on or about April 1, 2016, and filed our proxy materials with the SEC on April 1, 2016.
We are holding our 2016 Annual Meeting of Shareholders at 10:00 a.m. Eastern Time on Thursday, May 12, 2016, at the Hilton Short Hills in Short Hills, New Jersey, and we invite you to attend in person.
We do not require tickets for admission to the meeting, but we do limit attendance to shareholders of record on the record date, March 18, 2016, or their proxy holders. Please bring proof of your common stock ownership, such as a current brokerage statement, and photo identification. If you hold shares through a bank, broker, or other nominee (also known as shares held in “street name”), you must obtain a valid legal proxy, executed in your favor, from the holder of record if you wish to vote those shares at the meeting.
For safety and security purposes, no cameras, camcorders, videotaping equipment, or other recording devices, and no large packages, banners, placards, signs, or weapons will be permitted in the meeting. Since seating may be limited, admission to the Annual Meeting will be on a first-come, first-served basis.
Only shareholders or their valid proxy holders may address the meeting.
We have arranged for a live audio webcast and a replay of our Annual Meeting to be accessible to the general public on the following website: http://investor.zoetis.com/events-presentations. (Information from this website is not incorporated by reference into this proxy statement.)
HOW TO VIEW PROXY MATERIALS ONLINE
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 12, 2016
Our proxy statement and 2015 Annual Report are available online at www.edocumentview.com/ZTS.
We are furnishing proxy materials to our shareholders primarily via “Notice and Access” delivery. On or about April 1, 2016, we mailed to our shareholders a notice of Internet availability of proxy materials. This notice contains instructions on how to access our proxy statement and 2015 Annual Report and vote online.
You will not receive a printed, paper copy of our proxy materials unless you request one. If you are a registered shareholder, you may request a paper copy of our proxy materials by calling 1 (866) 641-4276 or by sending an email, with your 15-digit control number in the subject line, to investorvote@computershare.com. If you are a “beneficial owner” of our shares (as defined below), you may request a paper copy of your proxy materials at www.proxyvote.com, or by calling 1 (800) 579-1639, or by sending an email, with your control number in the subject line, to sendmaterial@proxyvote.com.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
We encourage you to vote as soon as possible, even if you plan to attend the meeting in person. Your vote is important. You may vote shares that you owned as of the close of business on March 18, 2016, which is the record date for the meeting.
If you own shares registered directly in your name as the shareholder of record, you are a “record owner” and have the right to give your proxy directly to our vote tabulating agent. You may vote by proxy in the following ways:
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Age 67 Director since June 2013 |
● International business and management experience ● Global operational experience, including in developing markets ● Experience in animal health industry ● Public company director experience |
Former Executive Vice President and President, Developing Markets of Mondelēz International from 2007 to 2013. Mr. Khosla brings more than 35 years of international business experience from his career with food, beverage and consumer product leaders such as Mondelēz, Kraft and Unilever, where he managed various business units, particularly in developing markets. As President, Kraft Foods, Developing Markets (now Mondelēz International) from 2007 to 2013, Mr. Khosla transformed the $5 billion business into a $16 billion business, while significantly improving profitability. He also has animal health experience from his three-year tenure from 2004 to 2007 as Managing Director of Fonterra Brands and Food Service, a multinational dairy cooperative based in New Zealand. Mr. Khosla formerly served on the board of Iconix Brand Group, Inc., a company that licenses and markets a portfolio of consumer brands, from 2016 to 2018. From 2008 until 2015, he served on the board of Best Buy, Inc., a specialty retailer of consumer electronics, personal computers, entertainment software and appliances, and from 2002 to 2017, he served on the board of NIIT, Ltd., a company involved in technology-related educational services. Mr. Khosla holds a bachelor’s degree in electrical engineering from the Indian Institute of Technology in New Delhi. Mr. Khosla also completed the Advance Management Program at Harvard Business School. Mr. Khosla is currently a senior fellow and adjunct professor at the Kellogg School of Management, Northwestern University and a Senior Advisor for the Boston Consulting Group. Mr. Khosla is also CEO of Bunnik LLC, a management consulting firm. Mr. Khosla’s international business and management experience, along with his public company board experience, make him a valuable member of our Board.
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GREGORY NORDEN Age 61 Director since January 2013 |
● Corporate finance experience, including as former Chief Financial Officer of Wyeth ● Experience in global healthcare and pharmaceutical industries ● Background in accounting as an audit manager at a major accounting firm ● Public company director experience |
Former Chief Financial Officer of Wyeth. Prior to his role as Chief Financial Officer of Wyeth, Mr. Norden held various senior positions with Wyeth Pharmaceuticals and American Home Products. Prior to his affiliation with Wyeth, Mr. Norden served as Audit Manager at Arthur Andersen & Co. Mr. Norden currently serves on the boards of Entasis Therapeutics, a leader in the discovery and development of breakthrough anti-infective products; NanoString Technologies, a provider of life science tools for translational research and development of molecular diagnostic products; Royalty Pharma, a leader in the acquisition of revenue-producing intellectual property; and Univision, the leading media company serving Hispanic America. Mr. Norden is a former director of Welch Allyn, where he served until 2015; Lumara Health, where he served until 2014; and Human Genome Sciences, Inc., where he served until 2012. In addition, Mr. Norden is the Managing Director of G9 Capital Group LLC, which invests in early stage ventures and provides corporate finance advisory services. Mr. Norden’s background in finance and experience as a senior executive in the global healthcare and pharmaceutical industries, along with his public company board experience, make him a valuable member of our Board.
8 | ZOETIS 2019 PROXY STATEMENT |
CORPORATE GOVERNANCE AT ZOETIS
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Age 68 Director since August 2013 |
● Experience in corporate governance and board matters ● Compliance and risk management experience ● Operations and senior management experience as former General Counsel and executive of American Express ● Global business experience ● Legal background |
For telephoneFormer Executive Vice President and Internet voting, you will needGeneral Counsel of American Express Company, a global services company that provides charge and credit card products and travel-related services, from 2003 to 2013. Since early 2014, Ms. Parent has served as Of Counsel at the 15-digit control number includedlaw firm of Cleary Gottlieb Steen & Hamilton LLP. Ms. Parent brings deep experience in corporate governance and board matters, and in compliance and risk management, gained during her tenure with American Express, where she worked extensively with the Audit, Compensation, and Nomination and Governance committees in her role as General Counsel. Ms. Parent also served on your notice orthe operating committee and global management team of American Express from 2003 through 2013, was a member of the board of American Express Centurion Bank through 2013 and served on your proxy card orthe Supervisory Board of Deutsche Bank AG from 2014 to 2018. Ms. Parent currently serves on the board of Fidelity National Information Services Inc., a global financial services technology company. Ms. Parent holds a bachelor’s degree from Smith College and a law degree from Georgetown University Law Center. Ms. Parent’s experience in the e-letter.corporate governance, compliance, risk management and global management makes her a valuable member of our Board.
If you own shares in street name or in a Zoetis benefit plan, the institution holding the shares is the record owner and you are a “beneficial owner” of those shares. You will receive voting instructions from your broker, bank, or plan trustee, and you may direct them how to vote on your behalf by complying with their voting instructions. Their instructions will include a control number for telephone and Internet voting, and applicable deadlines.
If you own shares registered directly in your name as the shareholder of record, you can revoke your proxy at any time before your shares are voted by:
WILLIE M. REED Age 64 Director since March 2014 | Specific qualifications: ● Thought leadership in the animal health community ● Doctorate in veterinary medicine and pathology ● Avian pathology, diagnostic medicine and infectious diseases expert ● Expertise in veterinary medicines and vaccines ● Senior management experience |
If you hold your sharesDean of the College of Veterinary Medicine at Purdue University since 2007. Dr. Reed has more than 30 years of experience in street name, you must contact your broker, bank, or other nomineeanimal health and veterinary medicine, gained during his tenure at Purdue University and Michigan State University, and as a Diplomate of the American College of Veterinary Pathologists and Charter Diplomate of the American College of Poultry Veterinarians. Dr. Reed has served as President of the Association of American Veterinary Medical Colleges, President of the American Association of Veterinary Laboratory Diagnosticians, President of the American Association of Avian Pathologists and Chair of the American Veterinary Medical Association Council on Research. He has served on a number of committees for specific instructions on how to change or revoke your vote.
Only the latest validly executed proxy that you submit will be counted.
If you areNational Institutes of Health and the United States Department of Agriculture. Dr. Reed has a shareholderDVM from Tuskegee University, and a Ph.D. in Veterinary Pathology from Purdue University. Dr. Reed’s expertise in veterinary medicines and vaccines and his thought leadership in the animal health community make him a valuable member of record and wish to vote your shares in person at the meeting, you should so notify our Corporate Secretary when you arrive at the meeting. If you hold shares in street name you must obtain a valid legal proxy, executed in your favor, from the holder of record if you wish to vote these shares at the meeting. You should contact your bank, broker, or other nominee to obtain a legal proxy.
ZOETIS |
INFORMATION ABOUT THE ANNUAL MEETING AND VOTINGCORPORATE GOVERNANCE AT ZOETIS
ITEMS TO BE VOTED ON AND BOARD RECOMMENDATION
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The Board of Directors does not intend to bring any matter before the Annual Meeting other than those set forth above, and the Board is not aware of any matters that anyone else proposes to present for action at the meeting. However, if any other matters properly come before the meeting, your proxy gives authority to the designated proxies to vote on such matters in accordance with their best judgment.
We will have a quorum and will be able to conduct the business of the Annual Meeting if a majority of the outstanding shares of our common stock entitled to vote at the meeting are represented, either in person or by proxy. At the close of business on the record date, 496,603,783 shares of our common stock were outstanding and entitled to vote. Each share is entitled to one vote on each matter to be voted upon at the Annual Meeting. Abstentions and broker non-votes will be counted as present for the purpose of determining whether a quorum is present for the meeting.
The table below describes the vote requirements and the effect of abstentions and broker non-votes, as prescribed under our corporate governance documents and Delaware law, for the election of directors and the approval of the other Items on the agenda for the meeting.
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Age 69 Director since August 2017 | Specific qualifications: ● Broad animal health industry experience, including as CEO of animal healthstart-up company and founder of an animal health contract research organization ● Experience in private veterinary practice ● Doctorates in veterinary medicine and physiology ● Public company director experience |
Former Chief Scientific Officer and Chief Executive Officer of Aratana Therapeutics. Dr. Rhodes served as Chief Scientific Officer of Aratana Therapeutics from 2012 to 2016 and served as its Chief Executive Officer and Board member from 2011 to 2012. Dr. Rhodes has extensive experience as a research scientist, academic, veterinary practitioner and business leader, spanning nearly 30 years across the animal health industry. She is a founder of AlcheraBio, LLC, a veterinary contract research organization, and held various research positions with Merial, Merck and Company, and Sterling-Winthrop Drug Company. Dr. Rhodes also held several teaching positions and worked as a bovine veterinarian in private practice for many years. Dr. Rhodes served as a member of the Board of Directors of ImmuCell Corporation from 2005 until 2017. She is currently an adjunct faculty member of the Graduate Program in Endocrinology and Animal Biosciences at Rutgers University in New Brunswick, New Jersey. She serves on the Scientific Advisory Board of the Found Animals Foundation and on the Board of Directors of the Alliance for Contraception in Cats and Dogs. Dr. Rhodes earned her Ph.D. in Physiology from Cornell University and her VMD from the University of Pennsylvania. Dr. Rhodes’ experience as a research scientist, academic, veterinary practitioner, entrepreneur and business leader, her public company board experience and her knowledge of the animal health business make her a valuable member of our Board.
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| ROBERT W. SCULLY Age 69 Director since June 2013 |
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● Mergers and acquisitions expertise
● Global management experience ● Public company director experience ● Public company experience in risk management, audit and |
EFFECT OF NOT CASTING YOUR VOTE
If we have received a proxy specifying your voting choice, your shares will be voted in accordance with that choice.
If you are a registered shareholder and you do not cast your vote, no votes will be cast on your behalf on anyFormer member of the ItemsOffice of the Chairman of Morgan Stanley. Mr. Scully has nearly 35 years of experience in the financial services industry. He served as a member of the Office of the Chairman of Morgan Stanley from 2007 until his retirement in January 2009, where he had previously beenCo-President of the firm, Chairman of global capital markets and Vice Chairman of investment banking. Prior to joining Morgan Stanley in 1996, he served as a Managing Director at Lehman Brothers and at Salomon Brothers Inc. He currently serves on the Annual Meeting. If you signboards of KKR & Co. Inc., a private equity and returnasset management firm; Chubb Limited, a proxy card without specific voting instructions, or if you vote by telephone or viaglobal property and casualty company; and UBS Group AG, a global financial services company. Previously, he served as a director of Bank of America Corporation, GMAC Financial Services and MSCI Inc., and as a Public Governor of FINRA, Inc., the Internet without indicating how you want to vote, your shares will be voted in accordanceFinancial Industry Regulatory Authority. Mr. Scully holds a bachelor’s degree from Princeton University and an MBA from Harvard Business School, where he previously served on its Board of Dean’s Advisors. Mr. Scully’s global management experience, financial acumen, M&A expertise and investor insights, along with the Board’s voting recommendations stated above.
If you hold your shares in street name, you will receivehis public company board experience, make him a voting instruction form that lets you instruct your bank, broker, or other nominee how to vote your shares. Under New York Stock Exchange (“NYSE”) rules, if you do not provide voting instructions to your broker, the broker is permitted to exercise discretionary voting authority only on “routine” matters. The only “routine” item on this year’s Annual Meeting agenda is Item 3 – Ratificationvaluable member of KPMG as Auditor for 2016. If you hold your shares in street name, and you wish to have your shares voted on all items in this proxy statement, you must complete and return your voting instruction form.If you do not return your voting instruction form, your shares will not be voted on any Items, except that your broker may vote in its discretion on Item 3.
ZOETIS |
INFORMATION ABOUT THE ANNUAL MEETING AND VOTINGCORPORATE GOVERNANCE AT ZOETIS
We will pay the cost
WILLIAM C. STEERE, JR. Age 82 Director since January 2013 | Specific qualifications: ● Senior management experience, including as former CEO of Pfizer ● Knowledge of animal health business ● Global business experience ● Public company director experience |
Chairman Emeritus of preparing, assembling, printing, mailing,Pfizer, a global biopharmaceutical company, since July 2001. Mr. Steere joined Pfizer in 1959 and distributing these proxy materials. We will also bear the cost of soliciting votes on behalfheld various positions, including Chief Executive Officer from 1991 until 2000, Chairman of the Boardboard of Directors. Zoetis will provide copiesdirectors from 1992 until 2001, and member of these proxy materials to banks, brokerage houses, fiduciaries,the board of directors until 2011. Mr. Steere also served on the boards of Dow Jones & Company, Inc. until 2007; MetLife, Inc. until 2010; and custodians holding in their names sharesHealth Management Associates, Inc. until 2014. Mr. Steere’s business and senior management experience, his public company board experience and his knowledge of the animal health business obtained through his service with Pfizer make him a valuable member of our common stock beneficially owned by others so that they may forward these proxy materials to the beneficial owners. Our directors, officers, or employees may solicit proxies or votes for us in person, or by mail, telephone, or electronic communication. They will not receive any additional compensation for these solicitation activities. We will enlist the help of banks, brokers, and other nominee holders in soliciting proxies for the Annual Meeting from their customers who are beneficial owners of our stock and will reimburse those firms for related out-of-pocket expenses. We have retained Morrow & Co., LLC, a professional proxy solicitation firm, to help us solicit proxies. Zoetis expects that it will pay Morrow & Co. its customary fees, estimated to be approximately $10,000 in the aggregate, plus reasonable out-of-pocket expenses incurred in the process of soliciting proxies. Zoetis has also agreed to indemnify Morrow & Co. against certain liabilities relating to or arising out of their engagement.
AVAILABILITY OF VOTING RESULTS
We expect to announce preliminary voting results at the Annual Meeting. We will disclose the final voting results in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission (“SEC”) following the Annual Meeting.
ZOETIS |
CORPORATE GOVERNANCE AT ZOETIS
We were incorporated in July 2012 as a wholly-owned subsidiary of Pfizer. Through a series of transactions, in early 2013 Pfizer transferred to us substantially all of the assets and liabilities of its animal health business. On February 6, 2013, Pfizer completed an IPO of our Class A common stock. After the IPO, Pfizer owned all of our outstanding Class B common stock and no shares of our Class A common stock, giving Pfizer over 80% of the economic interest and the combined voting power in our outstanding common stock. As a result, we were a “controlled company” under the NYSE corporate governance rules, and as such we were exempt from some of the requirements of those rules.
In May 2013, Pfizer announced an exchange offer through which Pfizer shareholders could exchange a portion of their Pfizer common stock for Zoetis common stock owned by Pfizer. The exchange offer was completed on June 24, 2013, resulting in our full separation from Pfizer. In connection with the separation, all shares of our Class B common stock were converted to shares of our Class A common stock, and we currently have only a single class of common stock outstanding. Pfizer currently owns none of our stock. Under NYSE transition rules for companies that ceased to be “controlled companies,” our Board was not required to have a majority of independent directors and our Corporate Governance Committee was permitted to have a non-independent member until June 24, 2014, one year after our separation from Pfizer. Since June 24, 2014, the majority of our Board and all of our Committees have been comprised of independent directors.
KEY CORPORATE GOVERNANCE FEATURES
Topic |
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Board Independence and Expertise | ● All directors are independent other than our CEO ● Board consists of highly qualified, experienced and diverse directors with relevant expertise for overseeing our strategy, capital allocation, performance, succession planning and risk | |
Independent Board Chair |
● Board Chair
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Board Committees |
● Four Board committees: Audit, Compensation,
● All
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Executive Sessions |
● Directors hold regularly scheduled executive sessions
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Board Oversight of Risk |
● Risk oversight
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Proxy Access |
● Proactively adopted a proxy access right for shareholders in 2016 | |
Board Oversight of Management Succession | ● Board regularly reviews and discusses succession plans for CEO and other key executives | |
Board Self-Evaluation | ● Our Board conducts an annual self-evaluation of itself and each of its committees | |
Accountability | ● In uncontested director elections, our directors are elected by a majority of
● Each share of common stock is entitled to one vote
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● Processes in place to facilitate communication with shareholders and other stakeholders
CORPORATE GOVERNANCE AT ZOETIS
● Ongoing communication between our Board (including the Board Chair and Committee Chairs) and management
● Claw-back policy covering incentive compensation paid to
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Director Stock Ownership |
● Eachnon-employee director is required to hold Zoetis stock worth at least
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Open Lines of Communication |
● Board promotes open and frank discussions with senior management
● Our directors have access to all members of management and other employees and are authorized to hire outside
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Board Refreshment |
● Led by the Corporate Governance Committee, the Board regularly reviews the Board’s composition | |
Director Orientation and Continuing Education | ● Comprehensive orientation for new directors ● Continuing education consisting ofin-house presentations, presentations by industry and | |
Board Diversity | ● Diverse board with female and racial/ethnic representation ● Board considers diversity of
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12 | ZOETIS 2019 PROXY STATEMENT |
CORPORATE GOVERNANCE AT ZOETIS
CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES
DIRECTOR INDEPENDENCE
It is the policy of our company, and a requirement under NYSENew York Stock Exchange (“NYSE”) listing standards, that a majority of our Board consists of independent directors. To assist it in determining director independence, our Board has adopted categorical independence standards, referred to as our Director Qualification Standards, which meet and in some respects exceed, the independence requirements of the NYSE. Our Director Qualification Standards can be found on our website at www.zoetis.com underAbout Us — Us—Corporate Governance.Governance.
To be considered “independent” under our Director Qualification Standards, a director must be determined by our Board to have no material relationship with the company other than as a director. In addition, under our Director Qualification Standards, a director is not independent if the director is, or has been within the last three years, an employee of the company or an employee of a memberany subsidiary of the company’s consolidated group for financial reporting.
From January 1, 2015, through February 2, 2015,In 2018, our Board of Directors consisted of nineeleven directors, seventen of whom were determined by our Board to be independent under our Director Qualification Standards and twoone of whom werewas not independent under those standards. The independent directors during this period who continue to serve on our Board, were Paul M. Bisaro, Frank A. D’Amelio, Sanjay Khosla, Michael B. McCallister, Gregory Norden, Louise M. Parent, Willie M. Reed, Sanjay Khosla, Michael B. McCallister, Gregory Norden,Linda Rhodes, Robert W. Scully and William C. Steere, Jr. The onlynon-independent directors during this period, who continue to serve on our Board, were director in 2018 was Juan Ramón Alaix, and Frank A. D’Amelio. Mr. Alaixwho is not an independent director because he is employed as the company’s CEO, and Mr. D’Amelio is not an independent director because he is an executive officer of Pfizer, which was a member of Zoetis’ consolidated group for financial reporting within the last three years. Under our Director Qualification Standards, Mr. D’Amelio will not be eligible to be an independent director until the third anniversary of our complete separation from Pfizer, which will occur on June 24, 2016.
Messrs. William F. Doyle and Paul M. Bisaro were elected to our Board on February 3, 2015, and April 10, 2015, respectively. Prior to their respective elections, our Board determined that Messrs. Doyle and Bisaro are independent under our Director Qualification Standards.CEO.
On February 19, 2016,12, 2019, our Board completed its annual review of director independence and affirmatively determined that Ms. Parent, Dr. Reed, Dr. Rhodes, and Messrs. Bisaro, Doyle,D’Amelio, Khosla, McCallister, Norden, Scully and Steere are independent under NYSE listing standards and our Director Qualification Standards.
BOARD LEADERSHIP STRUCTURE
Our Corporate Governance Principles, which can be found on our website at www.zoetis.com underAbout Us — Us—Corporate Governance, provide the Board flexibility in determining its leadership structure. Currently, Juan Ramón Alaix serves as our CEO and Michael B. McCallister serves as ChairChairman of our Board. The Board believes that this leadership structure, which separates the CEO and the Board Chair roles, is optimal at this time because it allows
CORPORATE GOVERNANCE AT ZOETIS
Mr. Alaix to focus on operating and managing our company, while Mr. McCallister can focus on the leadership of the Board. The Board Chair presides over all meetings of our shareholders and of the Board as a whole, including its executive sessions, and performs such other duties as may be designated in ourBy-laws or by the Board. The Board will periodically evaluateevaluates our leadership structure and will determine whether continuing the separate roles of CEO and Board Chair is in the company’s best interest of the company and its shareholders based on circumstances existing at the time.
BOARD MEETINGS AND COMMITTEES
Director AttendanceDIRECTOR ATTENDANCE
During 2015,2018, our Board met 14eight times. Each of our directors attended at least 75% of the meetings of the Board and Board committees on which he or she served during 2015.2018.
All Board members are expected to attend our Annual Meeting unless an emergency prevents them from doing so. All of our directors attended our 2015 Annual Meeting.
ZOETIS 2019 PROXY STATEMENT | 13 |
Board Committee Membership
CORPORATE GOVERNANCE AT ZOETIS
BOARD COMMITTEE MEMBERSHIP
Our Board has a standing Audit Committee, Compensation Committee, and Corporate Governance Committee, and Quality and Innovation Committee. The written charter of each of our standing committees is available on our website at www.zoetis.com underAbout Us — Us—Corporate Governance.Governance. Each committee has the authority to hire outside advisors at the company’s expense.
The following table lists All of the Chair and current members of each committee.
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Juan Ramón Alaix
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Paul M. Bisaro
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Frank A. D’Amelio
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William F. Doyle
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Sanjay Khosla
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Michael B. McCallister
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Gregory Norden
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Louise M. Parent
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William M. Reed
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Robert W. Scully
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William C. Steere, Jr.
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Number of Meetings in 2015
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Chair Member
Independence of Committee Members
All current members of our Audit Committee, Compensation Committee and Corporate Governance Committeecommittees are independent under NYSE listing standards and our Director Qualification Standards, and the members of our Audit Committee and Compensation Committee satisfy the additional NYSE and Exchange Act (in the case of the Audit Committee) independence requirements for members of audit and compensation committees.
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Juan Ramón Alaix
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Paul M. Bisaro
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Frank A. D’Amelio
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Sanjay Khosla
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Michael B. McCallister
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Gregory Norden
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Louise M. Parent
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Willie M. Reed
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Linda Rhodes
| yes
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Robert W. Scully
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William C. Steere, Jr.
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Number of Meetings in 2018
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CORPORATE GOVERNANCE AT ZOETIS Chair Member
Compensation Committee Interlocks and Insider ParticipationCOMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Robert W. Scully (Chair), Paul M. Bisaro, Sanjay Khosla, Gregory Norden and Louise M. Parent. All of the current members are independent under NYSE listing standards.standards (including the additional standards applicable to members of compensation committees) and our Director Qualification Standards. None of the current members is a former or current officer or employee of Zoetis or any of its subsidiaries. None of the current members has any relationship that is required to be disclosed under this caption under the rules of the SEC. During 2015,2018, no executive officers of the company served on the compensation committee (or its equivalent) or board of directors of another entity whose executive officer served on the company’s Compensation Committee or Board.
Primary Responsibilities of Board Committees
14 | ZOETIS 2019 PROXY STATEMENT |
Audit Committee. As set forth in its written charter, the Audit Committee is responsible for the oversight of the integrity of our financial statements and system of internal controls. It has the sole authority and responsibility to select, determine the compensation of, evaluate and, when appropriate, replace our independent audit firm. It oversees the performance of our internal audit function. The Audit Committee reviews reports from management, legal counsel and third parties relating to the status of our compliance with laws, regulations and internal procedures, and oversees our Enterprise Risk Management process, internal controls and financial reporting. Our Board has determined that each member of the audit committee is financially literate, as required by the NYSE. In addition, our Board has determined that Mr. Norden, the Audit Committee Chair, and Mr. Scully each qualifies as an “audit committee financial expert” as defined in SEC regulations. The Report of the Audit Committee is included on page 63.
CORPORATE GOVERNANCE AT ZOETIS
Compensation Committee. As set forth in its written charter, the Compensation Committee is responsible for reviewing and approving our overall compensation philosophy and overseeing the administration of our compensation and benefit programs, policies and practices. It annually establishes the corporate goals and objectives relevant to the compensation of our CEO, and reviews the goals established by our CEO for our other executive officers, and evaluates their performance in light of these goals. The Compensation Committee recommends to the Board the compensation of our CEO and approves the compensation of our other executive officers. It also administers our incentive and equity-based compensation plans and oversees the management of risks relating to our compensation plans and arrangements. The Report of the Compensation Committee is included on page 38.
Corporate Governance Committee. As set forth in its written charter, the Corporate Governance Committee is responsible for matters of corporate governance and matters relating to the practices, policies and procedures of our Board of Directors. It identifies and recommends candidates for election to our Board and recommends the members and Chairs of Board committees. It advises on and recommends director compensation for approval by the Board, and recommends changes in our corporate governance documents. It also administers our policies and procedures regarding related persons transactions.PRIMARY RESPONSIBILITIES OF BOARD COMMITTEES
Board Committees | Responsibilities | |||||
AUDIT COMMITTEE All Members Independent All Members Financially Literate Each of Mr. D’Amelio, Mr. Norden and Mr. Scully qualifies as an “audit committee financial expert” | ● Oversees the integrity of our financial statements and system of internal controls ● Sole authority and responsibility to select, determine the compensation of, evaluate and, when appropriate, replace our independent public accounting firm ● Oversees the performance of our internal audit function ● Reviews reports from management, legal counsel and third parties (including our independent public accounting firm) relating to the status of our compliance with laws, regulations and internal procedures | |||||
COMPENSATION COMMITTEE All Members Independent | ● Responsible for approving our overall compensation philosophy ● Oversees our compensation and benefit programs, policies and practices and manages the related risks ● Annually establishes the corporate goals and objectives relevant to the compensation of our CEO, reviews the goals established by our CEO for our other executive officers and evaluates their performance in light of these goals ● Recommends to the Board the compensation of our CEO and approves the compensation of our other executive officers ● Administers our incentive and equity-based compensation plans | |||||
CORPORATE GOVERNANCE COMMITTEE All Members Independent | ● Responsible for the company’s corporate governance practices, policies and procedures ● Identifies and recommends candidates for election to our Board; recommends members and chairs of Board committees ● Advises on and recommends director compensation for approval by the Board ● Administers our policies and procedures regarding related person transactions | |||||
QUALITY AND INNOVATION COMMITTEE All Members Independent | ● Evaluates our strategy, activities, results and investment in research and development and innovation ● Oversees compliance with processes and internal controls relating to our manufacturing quality and environmental, health and safety (“EHS”) programs; reviews organizational structures and qualifications of key personnel in our supply chain, manufacturing quality and EHS functions |
BOARD’S ROLE IN RISK OVERSIGHT
TheAs one of its primary responsibilities, the Board of Directors as a whole and through its committees oversees the company’s risk management. Members of senior management, regularly reportincluding our Enterprise Risk Management program. Management provides regular reports to the Board on the areas of material risk to the company. Thecompany, and the Board discusses with management the company’s major and emerging risks, including operational, technology, privacy, data and physical security, disaster recovery, legal and regulatory risks. In addition, the Board regularly reviews information regarding the company’s strategy, finances, operations, legal and regulatory developments, research and development, manufacturing quality and competitive environment, as well as the risks related thereto. to these areas.
The Audit Committee oversees the management of risks related to financial reporting and monitors the annual internal audit risk assessment, which identifies and prioritizes risks related to the company’s internal controls in order to develop internal audit plans for future fiscal years. The Compensation Committee oversees the management of risks relating to our compensation plans and arrangements. The Corporate Governance Committee oversees risks associated with potential conflicts of interest and oversees the management of risks associated with the independence of the Board.Board, as well as the effectiveness of our Corporate Governance Principles and the Board’s compliance with our Code of Business Conduct and Ethics. The Quality and Innovation Committee oversees risks related to manufacturing quality and environmental, health and safety matters, as well as risks associated with our strategy and investments in research and development and external innovation. Each committee of the Board provides periodic reports to the full Board regarding their areas of responsibility and oversight. We believe that our Board’s leadership and committee structures, allocation of responsibilities and board practices supportactive role in risk oversight supports our efforts to oversee and manage areas of material risk to the company.
ZOETIS |
CORPORATE GOVERNANCE AT ZOETIS
BOARD’S ROLE IN CEO AND MANAGEMENT SUCCESSION
Our Board is responsible for planning for succession to the position of CEO as well as other senior management positions. Our Board works together with the CEO to review annual assessments of senior management and other persons considered potential successors to certain senior management positions.
MAJORITY VOTING STANDARD FOR DIRECTOR ELECTIONS
OurBy-laws contain a majority voting standard for all uncontested director elections. Under this standard, a director is elected only if the votes cast “for” his or her election exceed the votes cast “against” his or her election. Our Corporate Governance Principles provide that every nominee for director is required to agree to tender his or her resignation if he or she fails to receive the required majority vote in an uncontested director election. Our Corporate Governance Committee will recommend, and our Board of Directors will determine, whether or not to accept such resignation. The Board will then publicly disclose its decision-making process and the reasons for its decision.
In the event of a contested election, the director nominees will be elected by the affirmative vote of a plurality of the votes cast. Under this standard, in a contested election the directors receiving the highest number of votes in favor of their election will be elected as directors.
BOARD EVALUATION
Our Board conducts an annual self-evaluation of itself and its committees to assess its effectiveness and to identify opportunities for improvement. Our Board has successfully used this process to evaluate Board and committee effectiveness and identify opportunities to strengthen the Board, and believes that this process supports its continuous improvement.
DIRECTOR NOMINATIONS
The Corporate Governance Committee considers and recommends the annual slate of director nominees for approval by the full Board. When evaluating director candidates, the Corporate Governance Committee considers, among other factors: the candidate’s integrity; independence; diversity of experience; leadership ability; record of exercisingand ability to exercise sound judgment; animal health or veterinary expertise; prior government service;public company executive or board experience; significant operations, manufacturing or research and policy-making experience involving issues affecting business, government, education, and technology,development experience; as well as other areas relevant to the company’s global business. The Corporate Governance Committee is responsible for considering the appropriate size and needs of the Board, and may develop and recommend to the Board additional criteria for Board membership. The company does not have a formal policy with respect to diversity, but diversityDiversity of experience, background and thought among the various Board members is an important factor in the selection of directors.
The Corporate Governance Committee will consider director candidates recommended by shareholders. Recommendations should be sent to the Chair of the Corporate Governance Committee (in the manner described below) by November 18, 2016,2019, to be considered for the following2020 annual meeting. The Corporate Governance Committee evaluates candidates recommended by shareholders under the same criteria it uses for other director candidates. Shareholders may also submit nominees for election at an annual or special meeting of shareholders by following the procedures set forth in ourBy-laws, which are summarized on page 77.67.
Since
16 | ZOETIS 2019 PROXY STATEMENT |
CORPORATE GOVERNANCE AT ZOETIS
BOARD REFRESHMENT
Board development and director succession is an integral part of the initial public offering ofcompany’s long-term strategy. Our Board maintains a rigorous board refreshment process, spearheaded by the Corporate Governance Committee, focused on identifying and evaluating potential board candidates. Information about how we select our stockdirector nominees can be found in 2013, six directors have been elected to our Board: Sanjay Khosla, Robert W. Scully, Louise M. Parent, Willie M. Reed, William F. Doyle and Paul M. Bisaro. Mr. Khosla was identified as a potential candidate by a third-party search firm, Mr. Scully was identified as a potential candidate by a non-management director, Ms. Parent was identified as a potential candidate by a former director, Dr. Reed was identified as a potential candidate by an executive officer of our company, and Messrs. Doyle and Bisaro were identified as potential candidates by a shareholder.the section titled “Director Nominations.”
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Under our Corporate Governance Principles, our CEO is responsible for establishing effective communications with the company’s stakeholder groups, including shareholders, customers, employees, communities, suppliers, creditors, governments, corporate partners and other interested parties. While it is our policy that management speaks for the company,non-employee directors, including the Board Chair, may meet with stakeholders, but in most circumstances such meetings will be held with management present.
Stakeholders and other interested parties may communicate with the Chair of ourfollowing Board orand committee Chairs at the Chairs of our Audit, Compensation, or Corporate Governance Committees by sending anfollowing email to BoardChair@zoetis.com, AuditChair@zoetis.com, CompChair@zoetis.com, or CorpGovChair@zoetis.com, respectively. addresses:
Stakeholders and other interested parties may also write to any of our outside directors, including the Board and committee Chairs, by directing the communication to Katherine H. Walden, Vice President, Chief Governance Counsel and Assistant Secretary, Zoetis Inc., 100 Campus Drive, Florham Park,10 Sylvan Way, Parsippany, NJ 07932. 07054.
Communications are distributed to the Board, or to
CORPORATE GOVERNANCE AT ZOETIS
any individual director as appropriate, depending on the facts and circumstances outlined in the communication, but excludingexclude spam, junk mail and mass mailings, product complaints, product inquiries, new product suggestions, job inquiries, surveys and business solicitations or advertisements. Material that is unduly hostile, threatening, illegal or similarly unsuitable will also be excluded. However, any communication that is filtered outexcluded under our policy will be made available to any non-management director upon his or her request.
CORPORATE GOVERNANCEATTENDANCE OF DIRECTORS AT ZOETISANNUAL MEETING OF SHAREHOLDERS
We believe that it is important for directors to directly hear concerns expressed by stakeholders and other interested parties. It is our policy that all Board members are expected to attend the Annual Meeting.Meeting of Shareholders. All Board members attended our 20152018 Annual Meeting of Shareholders.
CODE OF ETHICS
All of our employees, including our CEO, Chief Financial Officer and Controller, are required to abide by our policies on business conduct to ensure that our business is conducted in a consistently legal and ethical manner. A copy of theour Code of Conduct can be found on our website www.zoetis.com underAbout Us — Us—Corporate Compliance.Compliance. We have also adopted a separate Code of Business Conduct and Ethics for members of our Board of Directors, a copy of which can be found on our website www.zoetis.com underAbout Us — Us—Corporate Governance.Governance. We will disclose any future amendments to, or waivers from, provisions of these Codes affecting our directors or executive officers on our website as required under applicable SEC and NYSE rules.
ZOETIS 2019 PROXY STATEMENT | 17 |
CORPORATE GOVERNANCE AT ZOETIS
COMPENSATION OF DIRECTORS FOR 2015
2018 COMPENSATION OF DIRECTORS
We provide competitive compensation to ournon-employee directors that enables us to attract and retain high quality directors, provides them with compensation at a level that is consistent with our compensation objectives, and encourages their ownership of our stock to further align their interests with those of our shareholders. Our directorsDirectors who are our full-time employees receive no additional compensation for service as a member of our Board of Directors. For 2015,
In 2018, ournon-employee directors’ compensation consisted of the following:of:
● | an annual cash retainer |
● | an |
● |
an equity retainer to eachnon-employee director upon his or her first election as such and annually thereafter with a value of |
During 2015The equity retainer is granted in the form of restricted stock units that vest on the third anniversary of the date of grant.
In 2018, we granted equity retainers in the form of restricted stock units, valued at $170,000$200,000 in the aggregate for each director on the date of grant, as follows:grant. Each of Ms. Parent, Drs. Reed and Rhodes and Messrs. Bisaro, D’Amelio, Khosla, Norden, McCallister, Scully and Steere received 2,730 restricted stock units valued at $73.24 per share.
Each restricted stock unit earns dividend equivalents which are credited as additional restricted stock units. Eachnon-employee director has a right to receive the shares of Zoetis common stock underlying the restricted stock units on the third anniversary of the date of grant of the restricted stock units (or in the case of dividend equivalents, on the third anniversary of the date of grant of the underlying restricted stock units), subject to the director’s continued service through such vesting date and subject to earlier vesting and settlement upon certain specific events.
CORPORATE GOVERNANCE AT ZOETIS
We have adopted share ownership guidelines applicable to non-employee directors, requiring the directors to hold Zoetis shares with a value of four times their annual cash retainer of $100,000. For purposes of satisfying these requirements, (a) a director’s holdings of the company’s stock shall include, in addition to shares held outright, units granted to the director as compensation for Board service and shares or units held under a deferral or similar plan, and (b) each such unit shall have the same value as a share of the company’s common stock. Each non-employee director has five years from (y) the date upon which the guidelines were established, or (z) if later, the date of his or her first election as a director, to achieve the share ownership requirement.
As described above under “Corporate Governance Principles and Practices—Director Independence,” William F. Doyle was appointed to serve as a director of our company on February 3, 2015. Mr. Doyle’s appointment was pursuant to a letter agreement with Pershing Square Capital Management, L.P. (“Pershing Square”), Sachem Head Capital Management LP, and certain of their respective affiliates, which is filed as an exhibit to our company’s Current Report on Form 8-K, filed with the SEC on February 4, 2015 (the “Letter Agreement”). Mr. Doyle is eligible to participate in our company’s non-employee director compensation program; however, he voluntarily waived any compensation from our company in respect of his services as a Board member. Mr. Doyle is a member of Pershing Square and is independently compensated by Pershing Square; however, the Letter Agreement provides that no compensation paid by Pershing Square to Mr. Doyle will depend directly or indirectly on the performance of our company or its stock price (although compensation arrangements based on the overall value of the funds Pershing Square manages will not be considered to be restricted arrangements unless the value of such funds depends primarily on the performance of our company or our stock price). In addition, in connection with a provision in the Letter Agreement contemplating our appointing another independent director to our Board, we previously announced that Mr. Paul M. Bisaro would become a director of our company immediately following our 2015 Annual Meeting.
ZOETIS |
CORPORATE GOVERNANCE AT ZOETIS
The following table summarizes the total compensation earned in 20152018 by each of our directors who served as anon-employee director during 2015.2018.
Name | Fees Earned or Paid in Cash($)(1) | Stock Awards ($)(2)(3) | Option Awards($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||
Paul M. Bisaro(4)
| $
| 66,667
|
| $
| 170,000
|
| –
| –
| –
| –
| $
| 236,667
|
| ||||||||||||||||||||||
Frank A. D’Amelio(5)
| $
| 100,000
|
| $
| 170,000
|
| –
| –
| –
| –
| $
| 270,000
|
| ||||||||||||||||||||||
Sanjay Khosla(6)
| $
| 100,000
|
| $
| 170,000
|
| –
| –
| –
| –
| $
| 270,000
|
| ||||||||||||||||||||||
Michael B. McCallister(7)
| $
| 275,000
|
| $
| 170,000
|
| –
| –
| –
| –
| $
| 445,000
|
| ||||||||||||||||||||||
Gregory Norden(8)
| $
| 125,000
|
| $
| 170,000
|
| –
| –
| –
| –
| $
| 295,000
|
| ||||||||||||||||||||||
Louise M. Parent(9)
| $
| 100,000
|
| $
| 170,000
|
| –
| –
| –
| –
| $
| 270,000
|
| ||||||||||||||||||||||
Willie M. Reed(10)
| $
| 100,000
|
| $
| 170,000
|
| –
| –
| –
| –
| $
| 270,000
|
| ||||||||||||||||||||||
Robert W. Scully(11)
| $
| 125,000
|
| $
| 170,000
|
| –
| –
| –
| –
| $
| 295,000
|
| ||||||||||||||||||||||
William C. Steere, Jr.(12)
| $
| 100,000
| ��
| $
| 170,000
|
| –
| –
| –
| –
| $
| 270,000
|
|
Name | Fees Earned or Paid in Cash($)(1) | Stock Awards ($)(2)(3) | Option Awards($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings($) | All Other Compensation ($) | Total ($) | |||||||||||||
Paul M. Bisaro(4)
|
| $125,000
|
| $
| 200,000
|
| –
| –
| –
| –
| $
| 325,000
|
| |||||||
Frank A. D’Amelio(5)
|
| $100,000
|
| $
| 200,000
|
| –
| –
| –
| –
| $
| 300,000
|
| |||||||
Sanjay Khosla(5)
|
| $100,000
|
| $
| 200,000
|
| –
| –
| –
| –
| $
| 300,000
|
| |||||||
Michael B. McCallister(6)
|
| $275,000
|
| $
| 200,000
|
| –
| –
| –
| –
| $
| 475,000
|
| |||||||
Gregory Norden(7)
|
| $125,000
|
| $
| 200,000
|
| –
| –
| –
| –
| $
| 325,000
|
| |||||||
Louise M. Parent(5)
|
| $100,000
|
| $
| 200,000
|
| –
| –
| –
| –
| $
| 300,000
|
| |||||||
Willie M. Reed(5)
|
| $100,000
|
| $
| 200,000
|
| –
| –
| –
| –
| $
| 300,000
|
| |||||||
Linda Rhodes(5)
|
| $100,000
|
| $
| 200,000
|
| $
| 300,000
|
| |||||||||||
Robert W. Scully(8)
|
| $125,000
|
| $
| 200,000
|
| –
| –
| –
| –
| $
| 325,000
|
| |||||||
William C. Steere, Jr.(5)
|
| $100,000
|
| $
| 200,000
|
| –
| –
| –
| –
| $
| 300,000
|
|
(1) | Non-employee directors may defer the receipt of up to 100% of their annual cash retainer |
(2) | The amounts in the Stock Awards column reflect the aggregate grant date value of restricted stock units granted to directors in |
(3) | Prior to 2015, eachnon-employee director was granted an equity retainer in the form of deferred stock units upon his or her election to the Board and annually thereafter. Deferred stock units vest fully on the date of grant, accrue dividend equivalents and are settled in Zoetis common stock only upon the director’s separation from service with the company. |
(4) |
Represents (a) a cash retainer of $100,000 for service to the Board as anon-employee director during |
Represents (a) a cash retainer of $100,000 for service to the Board as anon-employee director during |
Represents (a) a cash retainer of $100,000 for service to the Board as anon-employee director during |
Represents (a) a cash retainer of $100,000 for service to the Board as anon-employee director during |
Represents (a) a cash retainer of $100,000 for service to the Board as anon-employee director during |
ZOETIS |
CORPORATE GOVERNANCE AT ZOETIS
This page intentionally left blank.DIRECTOR COMPENSATION DECISIONS FOR 2019
In 2018, the Corporate Governance Committee performed its periodic review of the compensation paid to ournon-employee directors. Willis Towers Watson, an independent compensation consultant, assisted the Committee with its analysis of ournon-employee directors’ compensation relative to our peer group, market trends and best practices. Based on its review, the Corporate Governance Committee recommended, and our Board approved, an increase innon-employee directors’ compensation for 2019.
Effective January 1, 2019, ournon-employee directors’ compensation will consist of:
● | an annual cash retainer of $100,000; |
● | an additional cash retainer of $150,000 for the Chairman of the Board of Directors and an additional cash retainer of $25,000 for any committee chairperson; and |
● | an equity retainer credited to eachnon-employee director upon his or her first election as such and annually thereafter with a value of $230,000 on the date of grant, based upon the closing price of shares of Zoetis common stock on that date. |
The cash retainers remained unchanged for 2019, but the equity retainer credited to eachnon-employee director upon his or her first election as such and annually thereafter was increased from $200,000 to $230,000. The equity retainer is in the form of restricted stock units which are subject to three-year cliff vesting, remaining unvested until the third anniversary of the date of grant. Beginning with restricted stock unit awards granted in 2019,non-employee directors may defer the settlement of 100% of their restricted stock unit awards under the Zoetis Amended and RestatedNon-Employee Director Deferred Compensation Plan. Deferred restricted stock unit awards are settled in stock upon the director’s separation from service.
DIRECTOR SHARE OWNERSHIP GUIDELINES
As part of the Corporate Governance Committee’s review of director compensation in 2018, the Committee also considered whether any changes should be made to our share ownership guidelines for directors. After review, the Committee recommended, and the Board approved, an increase to our share ownership guidelines applicable tonon-employee directors, requiring directors to hold Zoetis shares with a value of at least five times their annual cash retainer (currently $500,000), effective January 1, 2019, in place of the previous requirement of four times their annual cash retainer. For purposes of satisfying these requirements, (a) a director’s holdings of the company’s stock include, in addition to shares held outright, units granted to the director as compensation for Board service and shares or units held under a deferral or similar plan, and (b) each such unit has the same value as a share of the company’s common stock. Eachnon-employee director has five years from the date of (a) his or her first election as a director, or (b) if later, an increase in the amount of company stock required to be held to achieve the share ownership requirement.
ZOETIS |
ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATION (SAY ON PAY) |
We are seeking your vote, on an advisory basis, on the compensation of our named executive officers as described in the Compensation Discussion and Analysis and the Executive Compensation Tables and accompanying narrative disclosure, as provided on pages 22 to 55 of this proxy statement. While the vote is not binding on the Board, the Compensation Committee will consider the outcome of the vote when making future executive compensation decisions.
For background, Section 14A of the Exchange Act of 1934 (the “Exchange Act”) requires an advisory vote on the frequency of shareholder votes on executive compensation. We conducted this advisory vote on frequency at our 2014 Annual Meeting of Shareholders; our shareholders voted for, and our Board subsequently approved, an annual advisory vote on executive compensation.
Our Board of Directors believes that our executive compensation program incentivizes and rewards our leadership for increasing shareholder value and aligns the interests of our management with those of our shareholders on an annual and long-term basis.
ITEM 2 RECOMMENDATION: OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTEFOR THE APPROVAL OF OUR EXECUTIVE COMPENSATION. |
ZOETIS 2019 PROXY STATEMENT | 21 |
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
INTRODUCTIONEXECUTIVE SUMMARY
ThisIn this Compensation Discussion and Analysis (“CD&A”) describeswe describe our executive compensation philosophy and programs and the compensation decisions made by the Compensation Committee of the Board of Directors of Zoetis Inc. (the “Committee”) with respect toor the Board regarding the 2018 compensation of our named executive officers (“NEOs”) during 2015..
Zoetis’ executive compensation program is intendeddesigned to incent and reward our leadership for increasing shareholder value and align the interests of our leadership with those of our shareholders on an annual and long-term basis.
Our NEOs for 2015,2018, whose compensation is discussed in this CD&A and shown in the compensation tablesExecutive Compensation Tables below, are:
| Title | |
Juan Ramón Alaix
| Chief Executive Officer
| |
| Executive Vice President and Chief Financial Officer
| |
Kristin C. Peck | Executive Vice President and Group President,
| |
Clinton A. Lewis, Jr. | Executive Vice President and Group President,
| |
Catherine A. Knupp | Executive Vice President and President of Research and Development
|
EXECUTIVE SUMMARY
* | Effective January 2019, Mr. Lewis assumed the role of Executive Vice President and |
20152018 BUSINESS PERFORMANCEHIGHLIGHTS
Over the course of 2015,In 2018, our leadership team once again drove strong operating performance by buildingbased on the commercial performance, innovative research and development and high quality supply chainthree interconnected capabilities that have been critical to our success. The company also initiatedsuccess since becoming a public company: direct customer relationships, innovative research and development, and high-quality manufacturing and supply. We continued to deliver on our Business Review withvalue proposition, growing revenue faster than the goals of (1) improvingmarket and growing our operating margins, (2) reducing complexity that does not add valueadjusted net income faster than revenue; targeting key investment opportunities for growth; and returning excess capital to our customers or our business, (3) optimizing resource allocation and efficiency, and (4) better positioning Zoetis competitively for long-term profitable growth.shareholders.
Our 2018 financial performance as compared to 2017 is illustrated in the chart below:
22 | ZOETIS |
EXECUTIVE COMPENSATION
Listed below are some highlights of our 2015 operating performance:
● | Financial Highlights. We delivered our sixth consecutive year of operational revenue growth and increased profitability as highlighted below. |
(For more information please review the company’s Annual Report on Form10-K for fiscal year 2018 and this proxy statement.)
Revenue. For full year 2018, reported revenue was $5,825 million, with revenue growth of 10% both on a reported and an operational4 basis; this growth is greater than the expected global animal health industry growth for 2018. We generated strong operational revenue growth based on our |
¡ |
|
¡ | Earnings Per Share(“EPS”). Reported diluted EPS for 2018 was $2.93 per diluted share, compared to $1.75 per diluted share reported in 2017. Adjusted |
● | Value-Added Investment Opportunities. |
¡ |
|
|
|
Our acquisition of |
2015 COMPENSATION HIGHLIGHTS
In 2015, the Committee expanded from a group of four independent directors to five with the addition of Mr. Paul M. Bisaro. The compensation-related actions taken by the Committee in 2015 include:
Our acquisition of Smartbow, a developer of dairy cow monitoring systems and |
Adjusted net income and adjusted diluted |
Operational revenue growth (anon-GAAP financial measure) is defined as revenue growth excluding the impact of foreign exchange. Page 44 of our 2018 Annual Report on Form10-K, filed with the SEC on February 14, 2019, contains a reconciliation of thisnon-GAAP financial measure to reported results under GAAP for 2018. |
ZOETIS | 23 |
EXECUTIVE COMPENSATION
Our R&D partnership with Regeneron, which enables us to |
¡ | Expansion of our Manufacturing Network:In 2018, we made critical investments to expand our manufacturing capacity to ensure that we continue to bring our customers a reliable supply of high-quality products. We expanded our facilities in Charles City, Iowa, and Kalamazoo, Michigan, and made significant progress on the construction of our facility in Suzhou, China, which we expect to complete by the end of 2019. We also acquired a manufacturing facility in Tallaght, Ireland, to help us increase supply security for our market-leading bovine teat sealants and bring further value to our global dairy business. |
¡ | Bringing Value to Society: In addition to creating value for our shareholders and customers, we are committed to creating value for society as we strive to protect animal and human health; to ensure a safe, sustainable source of animal protein; and to safeguard the livelihoods of our customers. In 2018, we established the Center for Transboundary and Emerging Diseases, a globally coordinated initiative to help governments, veterinary and livestock farmer communities prepare for and respond to infectious disease threats, and we made significant progress in our African Livestock Productivity and Health Advancement (A.L.P.H.A.) initiative with the Bill and Melinda Gates Foundation, leading to the opening of a new veterinary diagnostic center in 2018 with one of the leading poultry producers in Nigeria. We initiated a similar partnership in Uganda to deliver sustainable animal health diagnostic services, education, and training to the country’s cattle veterinarians and farmers. |
● | Dividends and Capital Allocation.In 2018, we paid out approximately $243 million dollars in common stock dividends to shareholders totaling $0.504 per share. In December 2018, our Board of Directors declared a first quarter 2019 dividend of $0.164 per share, a 30% increase over the quarterly dividend rate paid in 2018, and authorized a $2.0 billion multi-year share repurchase program as part of our long-term capital allocation plans. The shares are expected to be repurchased over a number of years, and the program can be cancelled at any time. The company’s previous $1.5 billion share repurchase program is expected to be completed in the first half of 2019. We continue to prioritize our capital allocation in ways that will add value to Zoetis through internal investments, targeted business development activities and by returning excess capital to shareholders. |
2018 COMPENSATION HIGHLIGHTS
The Committee’s compensation-related actions included the following:
● | Timing of Annual Base Salary Increases. The Committee approved a change to the effective date for 2018 base salary increases from April 1, 2018 to January 1, 2018, to simplify the compensation process and the related communications and disclosures, beginning with the disclosures included within this 2019 proxy statement. The CEO did not receive a base salary increase in 2018 and was not impacted by this change. |
● | CEO Stock Ownership Requirement.The Committee annually reviews the stock ownership requirements of our NEOs, including the CEO, which are established as a multiple of each executive’s base salary, to encourage our NEOs to own and maintain a substantial stake in the company. In 2018, the Committee increased the stock ownership requirement for the CEO from 5 times to 6 times base salary to better align with practices reported by many of the companies in our compensation peer group. |
● | Compensation Peer Group.As part of its annual review of our compensation peer group, |
24 | ZOETIS 2019 PROXY STATEMENT |
EXECUTIVE COMPENSATION
CEO COMPENSATION: AT A GLANCE
Components of CEO Target Total Direct Compensation
Mr. Alaix’ target total direct compensation is comprised of base salary, target annual short-term incentive compensation opportunity and target long-term incentive compensation opportunity.
Base Salary and Annual Incentive Plan
Mr. Alaix’ 2018 base salary for the first three months of 2015 was $1,100,000$1,200,000 and his target annual target incentive opportunity for that three-month period was 115%125% of his base salary, providing for an annualizedannual target total cash compensation of $2,365,000.$2,700,000.
On February 27, 2015, to continue to align his compensation with the CEOs of our peer companies, the Committee recommended increasing Mr. Alaix’ base salary to $1,120,000, and maintaining his annual target incentive opportunity at 115% of his base salary, providing for annualized target total cash compensation of $2,408,000.
Upon the Committee’s recommendation, Zoetis’ Board of Directors approved this increase effective April 1, 2015, the effective date of annual salary increases generally applicable to other employees. Because this increase was not applied retroactively, Mr. Alaix’ full-year target total cash compensation for 2015 was $2,397,250, including a base salary of $1,115,000 and an annual incentive target of $1,282,250 (representing 115% of base salary earned in 2015).
In February 2016,12, 2019, the Committee recommended, and the Board of Directors approved, an annual incentive payment for 20152018 of $1,705,393 (133%$2,047,500 (136.5% of the full-year annual incentive target) for Mr. Alaix based on Zoetis’ 20152018 financial results and his individual performance.
Long-Term Incentive
InOn February 2015,13, 2018, Mr. Alaix received a long-term equity incentive grant with a total grant date fair value of $5,600,000,$8,100,000, consisting ofone-third each of stock options, time-vesting restricted stock units (“RSUs”), and performance-vesting RSUs (“performance award units.units”). Each of these awards (159,954(133,070 stock options, 40,50036,865 RSUs and 29,56326,908 performance award units) is subject to three-year cliff vesting and vests 100% on the third anniversary of the date of grant (i.e., they remain unvested until February 27, 2018)13, 2021), generally subject to Mr. Alaix’ continued employment through the vesting date and, in the case of performance award units, the company’s results against its three-year relative TSRtotal shareholder return (“TSR”) goals. As provided under the Zoetis Inc. 2013 Equity and Incentive Plan (the “Equity Plan”), vesting of awards may be accelerated in part or in full upon a termination of Mr. Alaix’ employment as a result ofdue to death, disability, retirement or upon a change in control.
EXECUTIVE COMPENSATION
Target Total Direct Compensation (“TTDC”)
The chart below shows the TTDC for Mr. Alaix for 2018:
CEO Pay Ratio
Item 402(u) of the first three monthsSEC’s RegulationS-K (the “SEC Regulation”), which was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2015,2010, requires disclosure of the last nine monthsratio of 2015 (which includes the April 1, 2015, increaseannual total compensation of our CEO to Mr. Alaix’our median employee’s annual total compensation. The ratio disclosed below is a reasonable estimate calculated in a manner consistent with the SEC Regulation.
Our median employee was identified in 2017 and we used this same employee to calculate our CEO pay ratio for 2018, as permitted by the SEC Regulation, because there has been no change in our employee population or employee compensation arrangements that we believe would significantly impact our pay ratio disclosure for 2018.
To identify our median employee, we chose “annual base salary described above), and his full year 2015 TTDC (whichpay” as our globally-consistent definition of pay. We calculated annual base pay using a methodology that reasonably reflects the pro-rata combinationannual compensation of Mr. Alaix’ pre-April 1, 2015 and post-April 1, 2015 TTDC).employees, which
ZOETIS 2019 PROXY STATEMENT | 25 |
EXECUTIVE COMPENSATION
included reasonable estimates of hours worked for hourly workers and annualized base pay for newly hired employees. We chose not to exclude any employees and used a valid statistical sampling approach to estimate the base pay for our median employee. Then we selected an individual whose base pay as of October 1, 2017, was at or near that value.
For 2018, our median employee’s annual total compensation (determined in a manner consistent with that of our CEO in the Summary Compensation Table) was $75,366. Our CEO’s total annual compensation for the year ended December 31, 2018, as disclosed in the Summary Compensation Table, was $11,669,400. Therefore, the ratio of CEO pay to median employee pay was 155 to 1.
OUR COMPENSATION PROGRAM
Compensation PhilosophyCOMPENSATION PHILOSOPHY
Our compensation philosophy, which is set by the Committee, is intended to achieve the following objectives:summarized below:
Compensation Philosophy | Objectives | |||
Pay for Performance | Foster apay-for-performance culture by tying a large portion of our executives’ pay to performance againstpre-established annual company |
Align Management Interests with Shareholders | Align the interests of management with results delivered to our shareholders |
Pay Mix | Provide competitive compensation opportunities over the short term (base salary and annual incentives) and long term (equity-based long-term incentive awards) which are intended to |
ZOETIS |
EXECUTIVE COMPENSATION
Basic PrinciplesBASIC PRINCIPLES OF OUR EXECUTIVE COMPENSATION PROGRAM
Key principles and elements of Our Executive Compensation Programour executive compensation program are summarized below. We believe these practices promote good governance and serve the interests of our shareholders.
| ||
✓ Emphasize pay for performance – our executive compensation program emphasizes variable pay over fixed pay, with
|
|
û Maintain employment agreements with our executives, including our
|
Elements of 2015 Compensation: At a GlanceELEMENTS OF 2018 COMPENSATION
Element | Description and Purpose | Comments | | |||||
Cash Compensation | ||||||||
Base Salary | ● Fixed cash compensation that reflects fulfillment ofday-to-day responsibilities, skills and experience.
● Addresses employee cash-flow needs and retention objectives. | ● Reviewed annually in light of changes in market practice, performance and individual | ||||||
Annual Incentive Plan | ● Annual cash incentive that rewards achievement of our financial and strategic/operational goals, as well as the individual performance of the NEO and, along with base salary, provides a market-competitive annual cash compensation opportunity.
● For | ● Amount of payout is based on the extent of achievement of company and individual goals set and approved by the Committee in the first quarter of each year.
● The Committee may exercise discretion in considering |
ZOETIS |
EXECUTIVE COMPENSATION
ELEMENTS OF 2018 COMPENSATION (CONTINUED)
| ||||||
Element | Description and Purpose | Comments | ||||
Long-Term Incentives | ||||||
Stock Options | ● Equity awards that provide value based on growth in our stock price.
● Intended to focus NEOs on increasing the company’s stock price.
● Reward NEOs for increases in the stock price over a period of up to ten years. | ● In
● Exercise price equals 100% of the stock price on the date of grant.
● Ten-year term.
● Three-year cliff vesting: vests 100% on the third anniversary of the date of grant, subject to the NEO’s continued employment through such date (with vesting on certain
| ||||
Restricted Stock Units | ● Equity awards that give the recipient the right to receive shares of Zoetis stock on a specified future date, subject to vesting.
● | ● In
● Three-year cliff vesting: vests 100% on the third anniversary of the date of grant, subject to the NEO’s continued employment through such date (with vesting on certain
● Paid out in shares of our company common stock upon vesting.
● Dividend equivalents are accrued over the vesting period and paid when and if the RSUs vest (subject to the same vesting conditions as the underlying RSUs).
| ||||
Performance Award Units | ● Equity awards that give the recipient the right to receive shares of Zoetis stock on a specified future date, subject to vesting and the company’s performance against its three-year relative TSR goals.
● | ● In
● Three-year cliff vesting: units earned based on the company’s TSR results over the three-year performance period relative to the TSR results of the S&P 500 Group (as described below under “Long-Term Incentives”) vest 100% on the third anniversary of the date of grant, subject to the NEO’s continued employment through such date (with vesting on certain
● Paid out in shares of our company common stock upon vesting, with the payout ranging from 0% to 200% of target (including dividend equivalents), depending on the extent to which thepre-determined performance goals have been achieved.
● Dividend equivalents are accrued over the vesting period and paid when and if the performance award units vest (subject to the same vesting conditions as the underlying performance award units).
|
ZOETIS |
EXECUTIVE COMPENSATION
ELEMENTS OF 2018 COMPENSATION (CONTINUED)
| ||||||
Element | Description and Purpose | Comments | ||||
Retirement | ||||||
U.S. Savings Plan
| ● Atax-qualified 401(k)/profit sharing plan that allows U.S. participants to defer a portion of their compensation, up to U.S. Internal Revenue Code (“IRC”) and other limitations, and receive a company matching contribution.
● A discretionary profit sharing contribution of up to 8% of an eligible employee’s total cash pay, within IRC limitations and based on company performance. | ● We provide a matching contribution of 100% on the first 5% of an employee’s total cash pay contributed to the Savings Plan, up to
● For | ||||
Supplemental Savings Plan | ● Anon-qualified deferred compensation plan that makes up for amounts that would otherwise have been contributed to the Savings Plan (by the employee or as matching or profit sharing contributions by the company) but could not be contributed due to IRC limitations.
● Also allows NEOs and certain other executives to defer up to an additional 60% of the amount of their | ● Matching and profit sharing contributions are notionally credited as company stock. | ||||
Equity Deferral Plan | ● The Zoetis Equity Deferral Plan allows the most senior leaders of the company
● Participation in this plan is voluntary. | ● Participants may elect to defer up to 100% of the company common stock to be received upon vesting, or a lesser amount in 25% increments.
● Participants may elect to receive their deferred shares upon termination of employment in a lump sum or in annual installments (special provisions provide for situations such as death or disability, or to comply with IRC regulations, as described more fully in the Zoetis Equity Deferral Plan).
● In general, election decisions must be made by the end of the year before the RSUs are granted, and by the end of the second year of a three-year performance period for performance award units. |
Severance | ||||||||
| ||||||||
Executive Severance | ● Severance benefits provided to NEOs and certain other executives | ● | Facilitates recruitment and retention of NEOs and certain other executives by providing income security in the event of involuntary job loss. | |||||
●Provides the CEO with:
| ||||||||
¡ | 1.5 times base salary and target annual incentive upon an involuntary termination of employment without cause (unrelated to a change in control).
| |||||||
¡ | 2.5 times base salary and target annual incentive upon an involuntary termination of employment without cause or a “good reason” termination following a change in control.
| |||||||
● | Provides other executives, including the NEOs other than the CEO with:
| |||||||
¡ | 1 times base salary and target annual incentive upon an involuntary termination of employment without cause (unrelated to a change in control).
| |||||||
¡ | 2 times base salary and target annual incentive upon an involuntary termination of employment without cause or a “good reason” termination following a change in control. |
ZOETIS |
EXECUTIVE COMPENSATION
Say on Pay ConsiderationSAY ON PAY CONSIDERATION AND SHAREHOLDER OUTREACH
At our 20152018 Annual Shareholder Meeting, we held a shareholder advisory vote on the compensation of our NEOs in 20142017 (“say on pay”). Our shareholders overwhelmingly approved the compensation of our NEOs, with 98.6%97.0% of the votes cast in favor of our say on pay resolution. We believe that the outcome of our say on pay vote signals our shareholders’ support of our compensation approach, specifically our efforts to retain and motivate our NEOs and to align pay with performance and the long-term interests of our shareholders.
We value feedback from our shareholders, and throughout 2018 we continued to actively engage our shareholders through participation in numerous investor meetings and conferences, with our CEO attending many of these meetings in person.
The Committee reviewed and considered these voting results and our shareholder engagement activities, among other factors described in this CD&A, in evaluating the company’s executive compensation program.
THE COMMITTEE’S PROCESS
AccordingPursuant to its Charter, the Committee is responsible for, among other duties:
● | Reviewing and approving the company’s overall compensation philosophy; |
● | Overseeing the administration of related compensation and benefit programs, policies and practices; |
● | Reviewing and approving the company’s peer companies and data sources for purposes of evaluating the company’s compensation competitiveness; |
● | Establishing the appropriate competitive positioning of the levels and mix of compensation elements; |
● | Evaluating the performance of the CEO against performance goals and objectives approved by the Board of |
● | Approving the performance goals, evaluating the performance of each executive against individual performance goals established in the first quarter of the year and approving the compensation of the company’s executive officers. |
To evaluate the performance of the CEO, the other NEOs and the other members of the ZET,Zoetis Executive Team (“ZET”), at the beginning of each year, the Committee meets and approves strategic, financial and operational objectives for the CEO, the other NEOs and the other ZET members for the upcoming year, and it also evaluates their performance for the previous year.
Our CEO, Mr. Alaix, does not play any role in the Committee’s determination of his own compensation. For the other NEOs and ZET members, Mr. Alaix presents the Committee with recommendations for each element of compensation. He bases these recommendations upon his assessment of each individual’s performance, the performance of the relevant functions overseen by the individual, benchmark information and retention risk. The Committee then reviews the CEO’s recommendations, makes appropriate adjustments and approves compensation changes at its discretion.
Role of the Compensation ConsultantsROLE OF THE COMPENSATION CONSULTANT
The Committee retained Willis Towers Watson to serve as its executive compensation consultant in 2015.2018. While Willis Towers Watson may make recommendations on the form and amount of compensation, the Committee continues to make all decisions regarding the compensation of our NEOs, subject to the review (and approval in the case of the CEO) of the other independent directors. In 2015,2018, Willis Towers Watson served the Committee in a variety of activities, including:
● | Reviewing and advising the Committee on evolving trends in executive compensation and as to materials presented by management to the Committee; |
30 | ZOETIS 2019 PROXY STATEMENT |
EXECUTIVE COMPENSATION
● | Attending all |
● | Providing the Committee with advice,pay-for-performance analytics and benchmarking norms related to the compensation of the CEO, the other NEOs and the other ZET members; |
● | Reviewing and making recommendations for changes to our compensation peer group; |
EXECUTIVE COMPENSATION
● | Reviewing our annual incentive and long-term incentive plan design; |
● | Reviewing recommendations for stock ownership guidelines for our executives; |
● | Reviewing and assessing our incentive and other compensation programs to ensure they do not create undue risk for the company; and |
● | Reviewing this CD&A and related |
Management engaged Compensation Advisory Partners, LLC, in 2015 as an advisor on executive compensation matters and to assess our incentive and other compensation programs to ensure they do not create undue risk for the company.
Peer Group and Compensation BenchmarkingPEER GROUP AND COMPENSATION BENCHMARKING
Each year, the Committee conducts a review of Zoetis’ compensation peer group of publicly-traded companies that is used for purposes of benchmarking pay levels and pay practices for our CEO, our other NEOs and the other ZET members. Because theremembers, to determine if any changes are currently no other independent publicly-traded animal health companies of comparable size and complexity, ournecessary or appropriate. Our peer group selection looks beyond our animal health competitors to a broader list of companies in the pharmaceutical, biotechnology, life sciences and healthcare equipment industries. Additionally, companies with similar sales and market capitalization, as well as similarities to Zoetis in the nature of their businesses, start-up histories, and industries and the availability of relevant comparative compensation data, are also considered.
As a result of this review and due to recent merger and acquisition activitychanges in the biopharmaceutical industry,market capitalization of companies that had previously been included in the peer group relative to Zoetis’ market capitalization, the Committee made certain revisions to the company’s compensation peer group for 20162019 in order to maintainprovide a robust number of peer companies and a good balance of companies across the various industries included in the company’s peer group.of similar size and scope. The revised compensation peer group is comprised of the 1714 peer companies listed in the table below.below:
Agilent Technologies, Inc.
|
| |
Alexion Pharmaceuticals, Inc.
|
| |
| Mettler-Toledo International Inc.
| |
| Mylan N.V. | |
Biogen Inc. | PerkinElmer, Inc.
| |
Bio-Rad Laboratories, Inc.
|
| |
Boston Scientific Corporation
|
| |
Celgene Corporation
|
| |
| Zimmer Biomet Holdings, Inc.
| |
|
Zoetis ranks in the 5739th percentile in revenue and the 6272nd percentile in total market capitalization among the companies in this revised peer group. This revised peer group will be used to guide the Committee in making 20162019 compensation decisions.
In determining the elements of 20152018 compensation for our NEOs, we used:used the following benchmarks:
● | Proxy statement data for the peer group as disclosed in |
● | Survey data fromsimilarly-sized companies in life sciences and other industries for benchmarking purposes to ensure robust data. In |
Target total direct compensation for our NEOs was aligned with the compensation of similar positions across our 2015 peer companies after 2015 compensation decisions were implemented. The Committee will continue to review our compensation peer group on an annual basis and will make any adjustments that are deemed to be appropriate to reflect our financial and operational performance and other matters the Committee deems relevant.
EXECUTIVEROLE OF MANAGEMENT IN COMPENSATION
Role of Management in Compensation Decisions DECISIONS
Our CEO and Chief Human Resources Officer provide the Committee with preliminary recommendations for compensation of the NEOs and other members of the ZET other than themselves. The Committee, with the advice of its own
ZOETIS 2019 PROXY STATEMENT | 31 |
EXECUTIVE COMPENSATION
independent compensation consultant, approves the compensation for the NEOs (other than the CEO) and the other members of the ZET, and recommends the compensation of the CEO to our full Board of Directors for approval.
20152018 COMPENSATION PROGRAM AND DECISIONS
Compensation StructureCOMPENSATION STRUCTURE
The compensation structure for our executives, including our NEOs, reflects our overall compensation philosophy of emphasizingpay-for-performance and aligning the interests of our executive officers and our shareholders, and is designed to emphasize variableincentive compensation over fixed compensation and equity compensation over cash compensation. For all of our NEOs, long-term incentive compensation is entirely equity-based and makes up the largest portion of their pay mix. In 2015, 86%2018, 89% of the TTDC of our CEO was variableincentive-based pay, either subject to achievement of performance goals or with value directly tied to the price of our common stock. For each of our NEOs other than our CEO, on average 74%76% of TTDC was variableincentive-based pay.
The table and chartcharts below show the mix of TTDC for our NEOs for 2015.2018. The TTDC for our NEOs reflects their annualized base salaries and target annual incentive opportunities as of the end of the year. The numbers in this table differ from those shown in the 20152018 Summary Compensation Table (provided later in this proxy statement) in that the Summary Compensation Table reflects actual base salary and annual incentives earned during 20152018 (rather than annualized target amounts), and this table does not include all compensation information required to be presented in the Summary Compensation Table under the rules of the SEC.
2018 NEO Compensation Structure as of December 31, 2015Structure*
Base Salary | Target Annual Incentive | Total Long-Term Incentive Value | Target Total Direct Compensation | Pay Mix | Base Salary |
Target Annual Incentive | Long-Term Incentive |
Target Total Direct Compensation | Pay Mix | ||||||||||||||||||||||||||||||||||||||||||||||||
Executive | Base Salary | Target Annual Incentive | Long- Term Incentive | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
NEO | Base Salary |
Target Annual Incentive | Long-Term Incentive |
Target Total Direct Compensation | Base Salary |
Target Annual Incentive |
Long- Term Incentive | ||||||||||||||||||||||||||||||||||||||||||||||||||
Juan Ramón Alaix
| $
| 1,120,000
|
| $
| 1,288,000
|
| $
| 5,600,000
|
|
| $8,008,000
|
|
| 14
| %
|
| 16
| %
|
| 70
| %
|
$
|
1,200,000
|
|
$
|
1,500,000
|
|
|
$8,100,000
|
|
|
$10,800,000
|
|
11%
|
14%
|
75%
| |||||||||||||||||||||
Paul S. Herendeen
| $
| 630,000
|
| $
| 441,000
|
| $
| 1,800,000
|
|
| $2,871,000
|
|
| 22
| %
|
| 15
| %
|
| 63
| %
| ||||||||||||||||||||||||||||||||||||
Glenn C. David
|
$
|
626,250
|
|
$
|
501,000
|
|
|
$1,600,000
|
|
|
$ 2,727,250
|
|
23%
|
18%
|
59%
| ||||||||||||||||||||||||||||||||||||||||||
Kristin C. Peck
| $
| 625,500
|
| $
| 437,850
|
| $
| 1,300,000
|
|
| $2,363,350
|
|
| 26
| %
|
| 19
| %
|
| 55
| %
|
$
|
675,000
|
|
$
|
540,000
|
|
|
$1,500,000
|
|
|
$ 2,715,000
|
|
25%
|
20%
|
55%
| |||||||||||||||||||||
Clinton A. Lewis, Jr.
| $
| 600,000
|
| $
| 420,000
|
| $
| 1,000,000
|
|
| $2,020,000
|
|
| 30
| %
|
| 21
| %
|
| 50
| %
|
$
|
675,000
|
| $
| 540,000
|
|
|
$1,500,000
|
|
|
$ 2,715,000
|
|
25%
|
20%
|
55%
| |||||||||||||||||||||
Catherine A. Knupp
| $
| 510,000
|
| $
| 357,000
|
| $
| 1,000,000
|
|
| $1,867,000
|
|
| 27
| %
|
| 19
| %
|
| 54
| %
|
$
|
626,250
|
|
$
|
501,000
|
|
|
$1,500,000
|
|
|
$ 2,627,250
|
|
24%
|
19%
|
57%
|
* | Amounts in this table are as of December 31, 2018 |
ZOETIS |
EXECUTIVE COMPENSATION
Base SalaryBASE SALARY
Base salary is the principal fixed component of the TTDC of our NEOs, and is determined by considering the relative importance of the position, the competitive marketplace and the individual’s performance and contributions. In setting base salaries and determining salary increases for our NEOs, the Committee takes into accountconsiders a variety of factors, including:
● | Level of responsibility; |
● | Individual and team performance; |
● | Internal review of the NEO’s total compensation, individually and relative to our other officers and executives with similar levels of responsibility within the company; and |
● | General levels of salaries and salary changes relative to officers and executives with similar responsibilities at peer group companies. |
With regard to individual and team performance, the Committee considers the CEO’s evaluation of the individual performance of each NEO. Salary levels are typically reviewed annually as part of the Committee’s performance review process and would otherwise be reviewed in the context of a promotion or other change in job responsibility.
After taking into consideration the factors listed above, the Committee approved increases to the base salaries (and corresponding increases to the target incentives) of Mr. David, Ms. Peck, Mr. Lewis, and Dr. Knupp, effective January 1, 2018, as reflected in order to better align the section above entitled “Compensation Structure”. Mr. Alaix did not receive an increase in his base salary in 2018 because his base salary was appropriately aligned with the base salaries of CEOs in our compensation peer group. Historically, annual base salary levelsincreases were effective as of our NEOs with median annualApril 1 of each year. In 2018, the Committee approved a change to the effective date for base salary levels for comparable positions inincreases from April 1 to January 1, simplifying the Zoetis peer group for 2015, the Committee made the following base salary determinations for our NEOs for 2015:compensation process and related communications and disclosures.
Annual Incentive PlanANNUAL INCENTIVE PLAN (“AIP”)
Our AIP is our annual cash incentive plan, which is intended to reward allAIP-eligible employees, including our NEOs, for achievement of company financial and strategic/operational goals, as well as achievement of their own individual performance goals.
Our AIP utilizes a funded pool approach. An overall target AIP pool for the year is determined by adding together the target AIP payouts for each eligible employee, including the NEOs. The actual amount of the AIP pool for 2015
Our AIP utilizes a funded pool approach. An overall target AIP pool for the year is determined by adding together the target AIP payouts for each eligible employee, including the NEOs. The actual amount of the AIP pool for 2018 was determined by the Committee based on the company’s attainment of the revenue, adjusted diluted EPS and free cash flow goals (weighted 40%, 40% and 20%, respectively) approved by the Committee in the first quarter of the year. |
The three measures (revenue, adjusted diluted EPS and free cash metric3 goals (weighted 40%, 40%,flow) were selected because they reflect the successful execution of our business strategy and 20%, respectively) approved bysupport the Committee in the first quarterachievement of the year.
These measures were selected because:company’s annual operating plan; more specifically:
● |
Revenue and adjusted diluted EPS are measures that shareholders closely track in their analysis of our performance |
● | Free cash |
ZOETIS |
EXECUTIVE COMPENSATION
The threshold, target and maximum performance levels for AIP pool funding for 2015 were established by the Committee in early 2015.
Company 2015 PerformanceCOMPANY 2018 PERFORMANCE
The revenue, adjusted diluted EPS and free cash metricflow target levels and results reflected here and used to determine the funding level of our AIP pool exclude the impactimpacts of foreign exchange and the acquisition of Abaxis during 20152018 and are therefore different from our reported revenue, and adjusted diluted EPS and free cash flow results of $4.765 billion$5,825 million, $3.13 per share and $1.77 per share,$1,452 million, respectively. The impact of foreign exchange is excluded asfor purposes of determining AIP performance achievement because it is not a direct measure of the company’s operating performance. Our financial results (excludingAdditionally, the impact of the Pharmaq acquisition),financial results of Abaxis were excluded for 2015purposes of determining the level of achievement of AIP company financial goals because Abaxis financial results were not included in our revenue, adjusted diluted EPS and free cash flow targets established for 2018. However, the Committee’s assessment of our NEOs’ performance, and the Board’s assessment of our CEO’s performance, for purposes of the individual performance component of the AIP payout determinations, included the executives’ contributions to the successful completion of the Abaxis acquisition and subsequent integration activities. These adjusted financial results for 2018 led to above-target payouts under our AIP:
● | Revenue, excluding the impacts of |
● | Adjusted diluted EPS, excluding the impacts of |
● | Free cash |
Given these results, the Committee approved an overallaggregate funding level of 130%135% of target for all employees eligiblepayment of awards under the AIP. The Committee believes this funding level reflects Zoetis’ 2015 financial performance and also recognizes Zoetis’ achievementdelivery of its 2015 objectives while implementing significant changes to the business resulting from our Business Review.strong 2018 financial performance.
The threshold, target and maximum performance levels for AIP pool funding, as well as the actual results for 2015,2018, are shown in the table below.below:
The target payout levels for our NEOs were set by the Committee (and, in the case of the CEO, the Board of Directors) in February 2015.2018. Payouts under the AIP program can range from 0% to 200% of the target level depending on actual performance.
CEO 2015 Performance
34 | ZOETIS 2019 PROXY STATEMENT |
As discussed
EXECUTIVE COMPENSATION
PERFORMANCE AWARD UNITS
Our performance award units awarded in more detail2016 used relative total shareholder return (“Relative TSR”) as the metric for assessing our performance for the three-year performance period ended December 31, 2018. TSR is the appreciation of share price, including dividends, during the performance period. Relative TSR is Zoetis’ TSR as compared to the TSR over the performance period of the “S&P 500 Group”, which we define as the companies comprising the S&P 500 stock market index as of the beginning of the performance period, excluding companies that during the performance period are acquired or no longer publicly traded. Relative TSR was selected because we believe it best aligns the interests of our NEOs with those of our shareholders over the performance period.
In February 2019, the Committee certified that for the 2016-2018 performance cycle, our Relative TSR was at the 93rd percentile, ranking in the section above entitled “CEO Compensation: At A Glance,”top 10% of the annual incentive459 companies remaining in the S&P 500 Group at December 31, 2018. Based on this Relative TSR achievement, in accordance with the vesting matrix established at the beginning of the performance period, each 2016-2018 performance award unit vested at 200% of the established target for Mr. Alaix was initially set at $1,265,000 (115% of his January 1, 2015 salary) and was increased to $1,288,000 (115% of his April 1, 2015 salary) by our Board of Directors, upon a recommendation made by the Committee effective April 1, 2015. This increase was applied on a prospective basis in determining his target payout under the AIP for 2015.amount.
ZOETIS 2019 PROXY STATEMENT | 35 |
EXECUTIVE COMPENSATION
CEO 2018 PERFORMANCE
In determining Mr. Alaix’ 20152018 annual incentive payment, the Board of Directors and the Committee considered the strong financial results achieved by the company under Mr. Alaix’ leadership, including performance against the revenue, adjusted diluted EPS and free cash flow metrics included in the AIP, and the company’s strong 2015 stock price growth and Total Shareholder Return.AIP. The Board of Directors and the Committee also considered Mr. Alaix’ other 20152018 achievements, including leading a full-scale Business Review ofthose summarized in the company’s operations with the goals of (1) improving our operating margins, (2) reducing complexity that does not add value for our customers or our business, (3) optimizing resource allocation and efficiency, and (4) better positioning Zoetis competitively for long-term profitable growth.
CEO 2018 Achievements |
EXECUTIVE COMPENSATION
As a result of this Business Review:
Financial Achievements |
We continue to create shareholder value through our strong financial performance. We delivered our sixth consecutive year of operational revenue growth and increased profitability. | ||||
Product Innovations and Approvals | In 2018, we invested in our research and development programs with a focus on internal innovation, generating new product approvals and lifecycle innovations across our 300 product lines: ●We ● We introduced Stronghold® Plus/Revolution® Plus (selamectin and sarolaner), a topical combination parasiticide for cats that was approved in the ● We strengthened our vaccine portfolios with market approvals of |
Business Development and Strategic Alliances | We routinely pursue strategically aligned business development and strategic alliance opportunities to create shareholder value in the short and long term. In 2018, we completed several transactions, including the following areas: ● Diagnostics: Acquired Abaxis, apoint-of-care diagnostics company for approximately $2 billion. ● Data and Analytics: Acquired Smartbow, a developer of smartear-tags and monitoring systems for dairy cattle. ● R&D: Partnered with Regeneron to license technology to develop monoclonal antibody products. | |||||
Improvements and Investments in Manufacturing Quality, Cost and Reliable Supply | We focused on improvements in manufacturing quality, cost and reliable supply initiatives and we made critical investments to expand our manufacturing capacity: ● We met all our Supply Network Strategy milestones and we achieved our targets for reducing inventory on hand and reducing scrap. ● Construction is progressing at our facility in China for vaccines that help protect against the strains of animal diseases prevalent in China. ● We initiated operations at our plant in Rathdrum, Ireland, to produce active pharmaceutical ingredients that are used in many of our key products. ● We acquired a facility in Tallaght, Ireland, to ensure reliable supply of dairy cow teat sealant. ● We are expanding our plants in Kalamazoo, Michigan, and in Charles City, Iowa, to ensure adequate capacity for key medicines and vaccines. | |||||
Enhance Customer Experience | We made great strides during 2018 in delighting the customer and improving the customer experience: ● In the U.S., we improved our Net Promoter Score, an indicator of how likely customers are to recommend Zoetis, by 20% and in 2018 we also improved our Customer Satisfaction (CSAT) score from 68% to 71%. ●We completed the |
Employee Engagement | ● The results of our 2018 Colleague Survey, in which 92% of our global ● Zoetis was named to Working Mother magazine’s 2018 “100 Best Companies” list for the |
The Board of Directors and the Committee also considered the results of an anonymous 360 degree feedback survey, conducted among the members of the ZET, in evaluating Mr. Alaix’ 20152018 performance. ZET members provided their views on Mr. Alaix’ performance across various leadership dimensions, including strategystrategic acumen and vision,insightfulness, judgment and decision making, team and talent building, operational and leadership effectiveness, companyand reputation and external relationships, and corporate culture.relationships. The results of this survey were considered by the Board of Directors in its assessment of Mr. Alaix’ 20152018 performance and were used to provide constructive feedback to Mr. Alaix to enhance his leadership effectiveness going forward.
After considering and balancing each of these inputs to Mr. Alaix’ overall 20152018 performance, the Committee recommended and the Board of Directors approved an annual incentive payout to Mr. Alaix of 133%136.5% of target, ($1,705,393).for an amount of $2,047,500.
Other
36 | ZOETIS 2019 PROXY STATEMENT |
EXECUTIVE COMPENSATION
OTHER NEO 2015 Performance2018 PERFORMANCE
What follows are highlights of individual and regional/business unit/function performance considered in the CEO’s evaluation of the performance of the other NEOs and the CEO’s recommendations with respect to the other NEOs’for their AIP payouts for 2015.2018. In approvingreviewing the compensation recommendations for the other NEOs and approving their AIP payouts, the Committee considered the overall performance of the company, as well as the CEO’s assessment of each NEO’s individual performance and accomplishments relative to each NEO’s individual performance objectives that were approved by the Committee at the start of 2015 and upon the changes in NEO roles resulting from our organization restructuring.2018.
Paul S. Herendeen, Executive Vice President and Chief Financial Officer. As Chief Financial Officer, Mr. Herendeen played a key role in the initiation of the company’s Business Review and the implementation of the related organizational changes. Mr. Herendeen led our efforts to enhance our external financial reporting to better meet the needs of our investors and to simplify and streamline our financial reporting processes. Mr. Herendeen also played a critical role in reaching the agreement to acquire Pharmaq, an aquatic health business based in Norway. Additionally, Mr. Herendeen oversaw the successful implementation of the company’s Enterprise Resource Planning system in the United States and in many major international markets.
Kristin C. Peck, Executive Vice President and Group President (through May 4, 2015) and Executive Vice President and President of U.S. Operations (from May 5, 2015). As Group President and as a result of our Business Review, Ms. Peck led restructuring efforts, including an initiative to reduce cost and complexity across our operations through rationalizing approximately 5,000 low-revenue/low-margin products, simplifying our commercial model in approximately 30 markets, and identifying seven manufacturing sites to be divested or exited. As President
NEO | 2018 Achievements | |||||||
Glenn C. David Executive Vice President and Chief Financial Officer (CFO) | As Executive Vice President and CFO, Mr. David: ● Maximized the impact of U.S. tax reform, helping to lower the company’s effective tax rate for 2018 to below 19% and reduced the impact of certainone-time charges associated with the change in tax law. ● Successfully issued $1.5 billion in debt to support the Abaxis acquisition. ● Played a key role in all aspects of the Abaxis acquisition, including evaluation of the potential financial benefits to the company and post-close integration efforts. ● Continued to improve all metrics related to internal controls, Sarbanes-Oxley compliance, and timing of delivery of all financial reports. ● Provided effective financial leadership that enabled the company to achieve its strong 2018 financial results. | |||||||
Kristin C. Peck Executive Vice President and Group President, U.S. Operations, Business Development and Strategy | As Executive Vice President and Group President, U.S. Operations, Business Development and Strategy, Ms. Peck: ● Delivered above-market revenue growth, expanded operating margins and delivered strong income growth for U.S. Operations. ● Achieved strong growth of key and new products, including Apoquel®, Cytopoint®, Simparica®, and Cerenia® in the companion animal space and Draxxin®, Excede®, Deccox®, Zoamix®, and Fostera® PCV Combo in the livestock space. ● Identified new sources of revenue as new companion animal customers emerge in the evolving vet ecosystem, and maximized our growth through better net revenue management and important new commercial strategies in Pork and Poultry. ● Launched the first ever cross portfolio U.S. Pet Owner Loyalty Program to demonstrate cross-product loyalty with over 500,000 pet ownersign-ups in the first year. ● Established a new Zoetis strategic planning function, resulting in a new approach to digital project prioritization, creation of a Reference Lab for market assessment and strategy, and support to major Business Development initiatives. ● Enhanced the company’s product portfolio by successfully signing and closing strategically aligned business development transactions in key focus areas such as diagnostics, genetics, data analytics, and emerging markets, including the company’s approximately $2 billion acquisition of Abaxis, apoint-of-care diagnostics company whose products help customers detect disease in animals. | |||||||
Clinton A. Lewis, Jr. Executive Vice President and Group President, International Operations, Commercial Development, Global Genetics and Aquatic Health | As Executive Vice President and Group President, International Operations, Commercial Development, Global Genetics and Aquatic Health, Mr. Lewis: ● Achieved strong revenue and income growth for International Operations, growing faster than the overall animal health market globally and in each major region, and driving significant improvements in gross margin, operating margin, forecast accuracy, and inventory management. ● Achieved strong growth of key and new products, including Apoquel®, Cytopoint®, and Simparica®. ● Achieved strong revenue and income growth in our complementary businesses, including International Poultry BioDevices and Automation and Global Genetics. ● Played key roles in negotiating the acquisition of the teat-sealant facility in Tallaght, Ireland; defining the rationale and securing the acquisition of Abaxis; and in defining and developing the ‘On Farm’ ruminant strategy for Europe. ● Defined a new International Diagnostics organization structure and a new Global Diagnostics Product Management and Innovation organization as a result of the Abaxis acquisition. | |||||||
Dr. Catherine A. Knupp Executive Vice President and President of Research and Development | As Executive Vice President and President of Research and Development, Dr. Knupp: ● Led efforts that generated product approvals and lifecycle innovations across our 300 product lines worldwide. ● For companion animals: ¡ Broadened our canine dermatology and parasiticides portfolios with products like Cytopoint®, which now covers allergic as well as atopic dermatitis in the U.S., and is expanding to international markets; and our oral parasiticide, Simparica® (sarolaner) Chewables, which continued its successful rollout with additional approvals in countries outside the U.S. ¡ Introduced Stronghold® Plus/Revolution® Plus (selamectin and sarolaner), a topical combination parasiticide for cats that was approved in the U.S. in 2018, following its introduction in Europe and other international markets. ● For livestock, strengthened our vaccine portfolios with market approvals of Fostera® Gold PCV MH and Suvaxyn® Circo, providing livestock farmers innovative new solutions to help protect pigs from porcine circovirus (PCV2) and Mycoplasma hyopneumoniae (M. hyo); and Core EQ Innovator®, the first and only equine vaccine to help protect horses from all five core equine diseases in one injection. |
ZOETIS |
EXECUTIVE COMPENSATION
of U.S. Operations, Ms. Peck reorganized and recruited a new leadership team, delivering strong financial results and cost savings above target, generating above-market revenue growth and income results as compared to 2014.
Clinton A. Lewis, Jr., Executive Vice President and President of U.S. Operations (through May 4, 2015) and Executive Vice President and President of International Operations (from May 5, 2015). Under Mr. Lewis’ leadership through May 4, 2015, our U.S. business exceeded its revenue and income targets, continuing to grow faster than the market overall. While in the role of President of U.S. Operations, Mr. Lewis was instrumental to the successful integration of Abbott Animal Health. As President of International Operations, Mr. Lewis played a key role in implementing the new International Operations commercial organization and resource model, consolidating the former Canada/Latin America region, Europe, Africa, Middle East region and Asia Pacific region into one new region (International). Under Mr. Lewis’ leadership since May 5, 2015, International Operations delivered strong revenue and income growth and has delivered significant operational efficiencies.
Dr. Catherine A. Knupp, Executive Vice President and President of Research and Development. Dr. Knupp leads our global R&D function. In 2015, under her leadership, we received approximately 200 approvals, including a number of high priority approvals, in some instances ahead of schedule. These approvals included products such as Simparica® and Suvaxyn® Circo + MH RTU in the European Union, Apoquel® in Japan and Brazil, and the new canine vaccines, Vanguard® crLyme and Vanguard® B oral, in the United States. Additionally, in the United States, we received conditional licenses for a monoclonal antibody (anti-IL-31) therapy for atopic dermatitis and were first to market with a vaccine against a new strain of canine influenza. Dr. Knupp led the implementation of a new approach to external innovation and continues to effectively manage the company’s R&D spend, while accelerating key pipeline projects and expanding the company’s research presence and capabilities in growth markets, including the opening of a new research laboratory in Beijing, China.
NEO AIP DecisionsDECISIONS
In February 2016,2018, the Committee (and, in the case of the CEO, the Board of Directors) determined the amount of annual incentive earned by each of our NEOs and approved the final payouts to each executiveNEO for 2015.2018. The NEOs’ 20152018 annual incentive awards were based on:
● | The financial performance of Zoetis (measured against targets for revenue, adjusted diluted EPS and |
● | The financial performance of their respective region/business unit/function measured by annual budgets for revenue and income before adjustments (as applicable); |
● | The achievement of approved strategic and operational goals for their respective region/business unit/function; and |
● | An assessment of each |
EXECUTIVE COMPENSATION
The 2015 AIP target amounts are prorated to reflect base salary increases received during the year. The 20152018 AIP awards for our NEOs reflecting the Committee’s assessment of their performance in 20152018 (and, in the case of our CEO, the Board of Director’sDirectors’ assessment of his performance in 2015)2018) are shown in the table below.below:
Named Executive Officer
| 2015 Period
| Base Pay
| Pro-rata Base Pay
| AIP Target % of Base Pay
| AIP Target Amount
| AIP Award % of Target
| AIP Award Paid
| |||||||||||||||||||||||||||||||||||
NEO
| AIP Target
| AIP Award % of
| AIP Award
| |||||||||||||||||||||||||||||||||||||||
Juan Ramón Alaix | January 1 — March 31
| $
| 1,100,000
|
| $
| 275,000
|
|
| 115
| %
| $
| 316,250
|
| $
| 1,500,000
|
| 136.5%
| $
| 2,047,500
|
| ||||||||||||||||||||||
April 1 — December 31
| $
| 1,120,000
|
| $
| 840,000
|
|
| 115
| %
| $
| 966,000
|
| ||||||||||||||||||||||||||||||
Total
| $
| 1,115,000
|
|
| 115
| %
| $
| 1,282,250
|
| 133%
| $
| 1,705,393
|
| |||||||||||||||||||||||||||||
Paul S. Herendeen | January 1 — December 31
| $
| 630,000
|
| $
| 630,000
|
|
| 70
| %
| $
| 441,000
|
| 135%
| $
| 595,350
|
| |||||||||||||||||||||||||
Glenn C. David
| $
| 501,000
|
| 138.0%
| $
| 691,380
|
| |||||||||||||||||||||||||||||||||||
Kristin C. Peck | January 1 — December 31
| $
| 625,500
|
| $
| 625,500
|
|
| 70
| %
| $
| 437,850
|
| 133%
| $
| 582,341
|
| $
| 540,000
|
|
136.0%
| $
| 734,400
|
| ||||||||||||||||||
Clinton A. Lewis, Jr. | January 1 — March 31
| $
| 468,500
|
| $
| 117,125
|
|
| 65
| %
| $
| 76,131
|
| $
| 540,000
|
|
135.0%
| $
| 729,000
|
| ||||||||||||||||||||||
April 1 — May 4
| $
| 510,000
|
| $
| 46,363
|
|
| 70
| %
| $
| 32,454
|
| ||||||||||||||||||||||||||||||
May 5 — December 31
| $
| 600,000
|
| $
| 395,455
|
|
| 70
| %
| $
| 276,819
|
| ||||||||||||||||||||||||||||||
Total
| $
| 558,943
|
|
| 69
| %
| $
| 385,404
|
| 133%
| $
| 512,587
|
| |||||||||||||||||||||||||||||
Catherine A. Knupp | January 1 — March 31
| $
| 468,500
|
| $
| 117,125
|
|
| 65
| %
| $
| 76,131
|
| $
| 501,000
|
|
135.0%
| $
| 676,350
|
| ||||||||||||||||||||||
April 1 — December 31
| $
| 510,000
|
| $
| 382,500
|
|
| 70
| %
| $
| 267,750
|
| ||||||||||||||||||||||||||||||
Total
| $
| 499,625
|
|
| 69
| %
| $
| 343,881
|
| 132%
| $
| 453,923
|
|
Long-Term IncentivesLONG-TERM INCENTIVES (“LTI”)
Our Equity Plan is a comprehensive long-term incentive compensation plan that permits us to grant both equity-based and non-equity-based long-term compensation awards to employees and directors. The Committee believes that equity-based long-term equity-based incentive awards align the interests of management with our shareholders and focus management on our long-term growth. In addition, the Committee believes that equity-based awards are essential to attract and retain the talented professionals and managers needed for our continued success. In determining the size of equity-based grants, the Committee considers the number of shares available under the Equity Plan, the potential dilutive impact of such grants on our shareholders, the individual’s position with us, the appropriate allocation of such grants based on past and projected individual and corporate performance and the level of grants awarded by our peers to similarly situated executives.
In 2015, long-term incentive values were delivered to the NEOs, other ZET members and approximately 180 other senior leaders generally through a mix of one-third each of stock options, RSUs and performance award units. We believe that the mix of stock options (which have value only if there is an increase in the value of our stock), RSUs (which focus our executives on sustained growth), and performance award units (which reward the company’s executives in alignment with the relative return in our shareholders’ investment in the company over the three-year performance period) that was delivered in 2015
In 2018, long-term incentive awards were delivered through a mix of one-third each of stock options, RSUs and performance award units to approximately 200 of our senior leaders, including the NEOs. We believe that the mix of stock options (which have value only if there is an increase in the value of our stock), RSUs (which focus our executives on sustained growth) and performance award units (which reward the company’s executives in alignment with the relative return in our shareholders’ investment in the company over the three-year performance period) that was delivered in 2018 supports our pay-for-performance objective by tying executive awards to shareholder value accretion. Long-term incentive awards |
38 | ZOETIS 2019 PROXY STATEMENT |
EXECUTIVE COMPENSATION
LTI awards are subject to three-year cliff vesting, meaning that the awards vest in full on the third anniversary of the date of grant, subject toassuming continued employment through the vesting date and, in the case of performance award units, subject to the company’s total shareholder return over the three-year performance period relative to the total shareholder return of the companies comprising the S&P 500 Group (acceleratedGroup. For all LTI awards, earlier vesting provisions apply formay occur in connection with certain termination conditions, such as retirement, death, disability, restructuring, and change in control).control, etc., that are generally aligned with market practice.
Stock Options. We view stock options as a formThe three forms of long-term incentive that focuses and rewards executives for increasingLTI awards granted to our stock price. Ifsenior leaders, including the stock price does not increase from the level at the date of the grant, the stock options will have no value to the executives.
We believe that stock options:NEOs, are described below:
Stock Options | ||
We view stock options as a form of long-term incentive that focuses and rewards executives for increasing our stock price. If the stock price does not increase from the level at the date of the grant, the stock options will have no value to the executives. | ● Encourage our executives to focus on decisions that will lead to increases in the stock price for the long |
EXECUTIVE COMPENSATION
● | |||
Restricted Stock Units. RSUs provide executives with the right to receive shares of our stock at the end of the three-year cliff-vesting period. Dividend equivalents are applied during the vesting period to outstanding RSUs and any additional RSUs credited in connection with prior dividend equivalents, and are paid out in shares of our stock at the same time the associated RSUs are paid out.
We view RSUs as being effective in achieving several objectives:
Restricted Stock Units | ||
RSUs provide executives with the right to receive shares of our stock at the end of the three-year cliff-vesting period, generally subject to continued employment (with exceptions for certain terminations of employment). Dividend equivalents are applied to outstanding RSUs and are paid out in shares of our stock at the same time the associated RSUs are paid out. | ● Align the interests of executives with those of shareholders over the vesting |
● |
● | |||
Performance Award Units. We introduced and awarded performance award units in 2015 to enhance the alignment of executive pay with the value created for our shareholders. Performance award units provide executives with the right to receive shares of our stock at the end of the three-year performance vesting period. For the 2015 grant, the number of shares that executives receive depends upon the company’s total shareholder return over the 2015-2017 performance period relative to the S&P 500 Group. Dividend equivalents are applied during the performance vesting period to outstanding performance award units and any additional performance award units credited in connection with prior dividend equivalents, and are paid out in shares of our stock at the same time the associated performance award units are paid out.
The performance award unit vesting schedule is as follows:
Objectives | ||
We award performance award units to enhance the alignment of executive pay with the value created for our shareholders. Performance award units provide executives with the right to receive shares of our stock after the end of the three-year performance vesting period. The number of shares paid, if any, is generally subject to continued employment (with exceptions for certain terminations of employment) and the company’s total shareholder return | ||
Group. Dividend equivalents are applied to outstanding performance award units and are paid out in shares of our stock at the same time the associated performance award units are paid. | ||
| ||
| ||
|
The number of shares that vest and are paid is determined by linear interpolation when the company’s total shareholder return is between the 25th and 50th or between the 50th and 75th percentiles of the S&P 500 Group.
We view performance award units as being effective in achieving several objectives:
● |
● |
● | |||
The performance award unit vesting schedule is as follows: | |||
If the company’s TSR for the 2018-2020 performance period is: | The number of shares of stock that will vest is: | ||
Below the 25th percentile of the S&P 500 Group | Zero | ||
At the 25th percentile of the S&P 500 Group | 50% of the target number of units | ||
At the 50th percentile of the S&P 500 Group | 100% of the target number of units | ||
At or above the 75th percentile of the S&P 500 Group | 200% of the target number of units | ||
The number of shares that vest and are paid is determined by linear interpolation when the company’s total shareholder return is between the 25th and 50th or between the 50th and 75th percentiles of the S&P 500 Group. |
ZOETIS 2019 PROXY STATEMENT | 39 |
EXECUTIVE COMPENSATION
NEO LTI DecisionsDECISIONS
Our NEOs typically receive equity-based grants as part of our annual grant of long-term incentive awards which occurs during the first quarter of each year. The following table sets forth the long-term incentive awards delivered to our NEOs in 2015.2018. In determining the number of awards issued,shares underlying each applicable award, the value of RSUs is divided by the grant date closing price of Zoetis common shares, (rounded down to the nearest whole number), the option value is divided by the Zoetis Black-Scholes value as of the grant date (rounded down to the nearest whole number), and the performance award unit value is divided by the Zoetis Monte Carlo simulation value as of the grant date (rounded(in each case, the number of underlying shares is rounded down to the nearest whole number).
NEO | Total LTI Value | Value of Awards: | Number of Shares Underlying Awards: | |||||||||||||||||||||||||||
Stock Options | RSUs | Performance Award Units | Stock Options | RSUs | Performance Award Units | |||||||||||||||||||||||||
Juan Ramón Alaix |
$ |
8,100,000 |
|
$ |
2,700,000 |
|
$ |
2,700,000 |
|
$ |
2,700,000 |
|
|
133,070 |
|
|
36,865 |
|
26,908 | |||||||||||
Glenn C. David |
$ |
1,600,000 |
|
$ |
533,333 |
|
$ |
533,333 |
|
$ |
533,333 |
|
|
26,285 |
|
|
7,281 |
|
5,315 | |||||||||||
Kristin C. Peck |
$ |
1,500,000 |
|
$ |
500,000 |
|
$ |
500,000 |
|
$ |
500,000 |
|
|
24,642 |
|
|
6,826 |
|
4,983 | |||||||||||
Clinton A. Lewis, Jr. |
$ |
1,500,000 |
|
$ |
500,000 |
|
$ |
500,000 |
|
$ |
500,000 |
|
|
24,642 |
|
|
6,826 |
|
4,983 | |||||||||||
Catherine A. Knupp |
$ |
1,500,000 |
|
$ |
500,000 |
|
$ |
500,000 |
|
$ |
500,000 |
|
|
24,642 |
|
|
6,826 |
|
4,983 |
EXECUTIVE COMPENSATION
Named Executive Officer | Total Long-Term Incentive Value | Stock Option Value | RSU Value | Performance Award Unit Value | # of Stock Options Granted | # of RSUs Granted | # of Performance Award Units Granted | ||||||||||||||||||||||||||||
Juan Ramón Alaix
| $
| 5,600,000
|
| $
| 1,866,667
|
| $
| 1,866,667
|
| $
| 1,866,667
|
|
| 159,954
|
|
| 40,500
|
|
| 29,563
|
| ||||||||||||||
Paul S. Herendeen
| $
| 1,800,000
|
| $
| 600,000
|
| $
| 600,000
|
| $
| 600,000
|
|
| 51,413
|
|
| 13,018
|
|
| 9,502
|
| ||||||||||||||
Kristin C. Peck
| $
| 1,300,000
|
| $
| 433,333
|
| $
| 433,333
|
| $
| 433,333
|
|
| 37,132
|
|
| 9,401
|
|
| 6,863
|
| ||||||||||||||
Clinton A. Lewis, Jr.
| $
| 1,000,000
|
| $
| 333,333
|
| $
| 333,333
|
| $
| 333,333
|
|
| 28,563
|
|
| 7,232
|
|
| 5,279
|
| ||||||||||||||
Catherine A. Knupp
| $
| 1,000,000
|
| $
| 333,333
|
| $
| 333,333
|
| $
| 333,333
|
|
| 28,563
|
|
| 7,232
|
|
| 5,279
|
|
Retirement BenefitsRETIREMENT BENEFITS
Our NEOs receive retirement benefits through Zoetis’ U.S. Savings Plan. The Savings Plan is atax-qualified 401(k) savings plan available to all eligible U.S. employees. Participants may elect to contribute up to 60% of their salary and annual incentive payment to the Savings Plan, subject to Internal Revenue Code (“IRC”) limitations. We match 100% of the employee contribution, up to 5% of each eligible employee’s pay. We may also contribute a discretionary profit sharingprofit-sharing amount of up to 8% of each eligible employee’s pay (subject to Internal Revenue CodeIRC limitations). For 2015,2018, we contributed 5%5.0% of each eligible employee’s pay (including the NEOs) as a profit sharing contribution.
To the extent the Internal Revenue CodeIRC limitations are exceeded, our Zoetis Supplemental Savings Plan is anon-qualified deferred compensation plan that makes up for amounts that would otherwise have been contributed to the Savings Plan but could not be contributed due to Internal Revenue CodeIRC limitations on the amount of compensation that may be taken into account under atax-qualified plan ($265,000275,000 for 2015)2018). Eligible employees, including all of our NEOs, may elect to defer up to 30% of the amount by which their salary and annual incentive payment exceeds this compensation limit. We match these deferrals at the same rate as under the Savings Plan, i.e., 100% match up to 5% of pay. In addition, our NEOs and certain other executives may elect to defer up to an additional 60% of the amount of their annual incentive payment that is over the Internal Revenue CodeIRC 401(a)(17) limit. We do not match these additional deferrals. If an employee’s profit sharing contribution to the Savings Plan is limited by the compensation or contribution limit, the portion that the employee was not able to receive in the Savings Plan is credited to the employee’s account in the Zoetis Supplemental Savings Plan.
Severance
40 | ZOETIS 2019 PROXY STATEMENT |
EXECUTIVE COMPENSATION
SEVERANCE
The Zoetis Executive Severance Plan covers our NEOs ZET members, and certain other executives (approximately 14 employees)(currently 11 employees, including the NEOs). We do not generally maintain individual employment agreements with our executives.executives (other than agreements that are required or customary for executives outside of the U.S.). The plan provides for payment of severance benefits in the event of an involuntary termination of employment (other than for cause)Cause5) that is not in connection with a change in control,Change of Control5, and a higher level of benefits in the event of an involuntary termination of employment (other than for cause)Cause) or a termination for “good reason”“Good Reason” 5 that is in connection withoccurs upon or within 24 months following a change in control.Change of Control. The amounts payable under the plan are as follows:shown below:
Severance (Base Salary) | Continued Health and Life Insurance (at active employee cost) | Annual Incentive | ||||
Non-Change
| ||||||
CEO
| 18 months
| 12 months
| 1.5x target
| |||
Other Participants
| 12 months
| 12 months
| 1x target
| |||
Change
| ||||||
CEO
| 30 months
| 18 months
| 2.5x target
| |||
Other Participants
| 24 months
| 18 months
| 2x target
|
The salary payments are made as salary continuation in the case of a non-change in controlnon-Change of Control severance, and in a lump sum in the case of a change in controlChange of Control severance. The annual incentive payments are made in a lump sum under both circumstances. In addition to the benefits reflected in the table, we provide outplacement services to plan participants. All benefits under the plan are subject to the participant’s execution of a general release of all claims against the company.
EXECUTIVE COMPENSATION
PerquisitesPERQUISITES
We maintain a policy prohibiting traditional perquisites of employment (as determined by our Board of Directors) for our employees, including our NEOs. However, the company does provide certain benefits to all employees serving outside of their home country at the company’s request, including our NEOs, pursuant to itsour international assignment policy, which benefits fall into the category of perquisites or other personal benefits under applicable SEC rules. Certain benefits of this type were provided to Mr. Lewis in 2015 in connection with his relocation to Belgium andinternational assignment are included in the Summary Compensation Table under the heading “All Other Compensation.”Compensation”.
CORPORATE GOVERNANCE POLICIES
Stock Ownership and Holding RequirementsSTOCK OWNERSHIP REQUIREMENTS
Our sharestock ownership guidelines encourage our NEOs to own and maintain a substantial stake in the company. Our guidelines are established as a multiple of each executive’s base salary. In 2018, as part of its annual review, the Committee approved an increase to the stock ownership requirement for the CEO from 5 times to 6 times base salary, to better align with practices reported by many of the companies in our compensation peer group. Our CEO’s stock ownership was already above the 6 times base salary multiple at the time the requirement was increased.
In assessing compliance with the guidelines, we count sharesstock held outright, unvested restricted stock or RSUs, unvested performance award units and sharesstock held in benefit plans. Our sharestock ownership guidelines are as follows:
● | Mr. Alaix: |
● | All other ZET members, including our NEOs: 3 times base salary |
5 | “Cause”, “Change of Control” and “Good Reason” are as defined in the Zoetis Executive Severance Plan. |
ZOETIS 2019 PROXY STATEMENT | 41 |
EXECUTIVE COMPENSATION
A Zoetis executive must achieve the guidelineguidelines before he or she can sell any sharesstock acquired upon the exercise of options or the vesting of other awards, other than sharesstock sold to satisfy the exercise price of stock options or taxes due upon the exercise of options or the vesting or settlement of other awards. Our NEOs (and all other ZET members) have five years from the establishment of the guidelines in 2013 to achieve the sharestock ownership requirement.requirements. Newly hired employees and employees newly appointed to the ZET will have five years from the date of hire or appointment, as applicable, to achieve the sharestock ownership requirement.requirements. As of the last annual measurement date, all our NEOs have met the stock ownership requirements.
Anti-Hedging and Anti-Pledging PoliciesANTI-HEDGING AND ANTI-PLEDGING POLICIES
Zoetis maintains a policy prohibiting any of our directors or employees, including the NEOs, from “hedging” their ownership in shares of our common stock or other equity-based interests in our company, including by engaging in short sales or trading in derivative securities relating to our common stock. Zoetis also maintains a policy prohibiting any of our directors or employees, including the NEOs, from pledging Zoetis shares as collateral for loans or for any other purpose.
Claw-back PolicyCLAW-BACK POLICY
Zoetis maintains a claw-back policy under which the Committee shall, to the extent permitted by law, make retroactive adjustments to any cash-based or equity-based incentive compensation paid to employees, including our NEOs, where the payment was predicated upon the achievement of specified financial results that are the subject of a subsequent restatement, or where employees were found to have altered financial or operational results used to determine award values. Additionally, our claw-back policy includes recoupment due to willful misconduct or gross negligence which caused or might reasonably be expected to cause significant business or reputational harm to the company. The intent of the policy is to enable the company to recover any amount determined by the Committee to have been inappropriately received by the employee.
COMPENSATION RISK ASSESSMENT
In 2015,2018, the Committee considered whether the company’s compensation policies and practices for its employees, including the NEOs, create risks that are reasonably likely to have a material adverse effect on the company.
In evaluating a compensation risk assessment that was conducted by Compensation Advisory Partners, LLC, management’s compensation consultant, and reviewed byWillis Towers Watson, the Committee’s independent executive compensation consultant, the Committee considered the following: (i) the mix of cash and equity compensation, which is balanced with a strong emphasis on long-term awards; (ii) goals and objectives of the company’s compensation programs,
● | The mix of cash and equity compensation, which is balanced with a strong emphasis on long-term awards; |
● | Goals and objectives of the company’s compensation programs, reflecting both quantitative and qualitative performance measures and avoiding excessive weight on a single performance measure; |
● | The design of the company’s sales incentive plans, to ensure the mix of fixed and variable compensation promotes appropriate behaviors among participants; |
● | Equity compensation granted in the form of stock options, restricted stock units and performance award units to provide greater incentive to create and preserve long-term shareholder value; |
● | Regular review of comparative compensation data to maintain competitive compensation levels in light of the company’s industry, size and performance; |
● | The company’s minimum stock ownership guidelines, which ensure that executive officers have a meaningful direct ownership stake in the company and align executive officers with long-term shareholder interests; |
● | The company’s restrictions on engaging in hedging transactions in the company’s securities; and |
● | The company’s claw-back policy. |
ZOETIS |
EXECUTIVE COMPENSATION
reflecting both quantitative and qualitative performance measures and avoiding excessive weight on a single performance measure; (iii) equity compensation granted in the form of stock options, restricted stock units, and performance award units to provide greater incentive to create and preserve long-term shareholder value; (iv) regular review of comparative compensation data to maintain competitive compensation levels in light of the company’s industry, size and performance; (v) the company’s minimum stock ownership guidelines, which ensure that executive officers have a meaningful direct ownership stake in the company and align executive officers with long-term shareholder interests; (vi) the company’s restrictions on engaging in hedging transactions in the company’s securities; and (vii) the company’s claw-back policy.
Based on its evaluation in 2015,2018, the Committee has determined, in its reasonable business judgment, that the company’s compensation policies and practices as generally applicable to its executive officers and employees do not create risks that are reasonably likely to have a material adverse impact on the company and instead promote behaviors that support long-term sustainability and shareholder value creation.
TAX DEDUCTIBILITY OF NEO COMPENSATION
Section 162(m) of the Internal Revenue Code generallyIRC disallows a federal income tax deduction to public companies for compensation greater than $1 million paid in any tax year to specifiedcovered executive officers unlessofficers. Under prior law, there was an exception to the $1 million deduction limitation for compensation isthat meets the requirements of “qualified performance-based compensation” under. However, for tax years after 2017, this exception has been eliminated, subject to limited transition relief that section.
Certainapplies to certain arrangements in place as of our compensationNovember 2, 2017, and benefit plans are designed to permit us to grantthe group of executives covered by Section 162(m) has been expanded. Accordingly, no assurance can be given that awards paid in 2018 and later years that may qualify as “qualified performance-based compensation”; however, it is possible that awardswere originally intended to qualify for the tax deduction may not so qualify if all requirements of the “qualified performance-based compensation” exemption are not met. Furthermore, althoughexception, or that were otherwise expected to be deductible prior to the change in the tax law, will in fact be deductible.
As a general matter, while the Committee may take action intended to limit the impact of Section 162(m) of the Internal Revenue Code, it also believes that theconsiders tax deduction is onlydeductibility as one of several relevant considerationsfactors in setting compensation. The Committee believes thatdetermining compensation, it retains the tax deduction limitation should not be permitted to compromise the abilityflexibility to design and maintain executive compensation arrangements that it believes will attract and retain executive talent. Accordingly, achieving the desired flexibility in the design and delivery oftalent, even if such compensation may result in compensation that in certain cases is not deductible by the company for federal income tax purposes.
COMPENSATION DECISIONS FOR 2019
In February 2019, the Committee approved a change to the relative weighting of the types of long-term incentive awards that are granted to the company’s senior leaders (approximately 200 employees, including the NEOs). Beginning with long-term incentive awards granted in 2019, the weighting of our performance award units will increase from 33% to 50% of the total award, and the weighting of RSUs and stock options will each decrease from 33% to 25% of the total award. We believe that this increase in the percentage of each NEO’s annual long-term incentive awards that is granted in the form of performance award units will further align the interests of the NEOs with the interests of our shareholders and further enhance the link between pay and performance in our compensation program.
ZOETIS |
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
The Zoetis Compensation Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis contained in this proxy statement. Based on its review and discussions with management, the Zoetis Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the company’s proxy statement on Schedule 14A filed with the SEC.
THE COMPENSATION COMMITTEE
Robert W. Scully, Chair
Paul M. Bisaro (Committee member beginning May 1, 2015)
Sanjay Khosla
Gregory Norden
Louise M. Parent
ZOETIS |
EXECUTIVE COMPENSATION
The following tables summarize our NEO compensation:
1. | Summary Compensation Table.The Summary Compensation Table summarizes the compensation earned by our NEOs for the fiscal years ended December 31, |
2. |
|
3. | Outstanding Equity Awards at |
4. |
|
5. |
|
6. | Potential Payments upon Employment Termination Table.The Potential Payments upon Employment Termination Table summarizes payments and benefits that would be made to our NEOs in the event of certain employment terminations, assuming such terminations occurred on December 31, |
ZOETIS |
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Name
| Year(1)
| Salary ($)
| Stock
| Option
| Non-Equity
| All Other
| Total ($)
| Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Option Awards(2) ($) | Non-Equity Incentive Plan Compensation(3) ($) | All Other Compensation(4) ($) | Total ($) | |||||||||||||||||||||||||||||||||||||||||
Juan Ramón Alaix
|
| 2015
|
|
| 1,115,000
|
|
| 3,733,253
|
|
| 1,866,663
|
|
| 1,705,393
|
|
| 261,878
|
|
| 8,682,187
|
|
| 2018
|
|
| 1,200,000
|
| —
|
| 5,399,942
|
|
| 2,699,990
|
|
| 2,047,500
|
| 321,968
|
| 11,669,400
|
| |||||||||||||||
Chief Executive Officer
|
| 2014
|
|
| 1,050,000
|
|
| 2,499,989
|
|
| 2,499,993
|
|
| 1,375,700
|
|
| 211,044
|
|
| 7,636,726
|
|
| 2017
|
|
| 1,190,000
|
| —
|
| 4,866,579
|
|
| 2,433,331
|
|
| 1,750,000
|
| 288,859
|
| 10,528,769
|
| |||||||||||||||
| 2013
|
|
| 825,000
|
|
| 2,464,437
|
|
| 1,999,995
|
|
| 1,218,000
|
|
| 110,929
|
|
| 6,618,361
|
|
| 2016
|
|
| 1,150,000
|
| —
|
| 4,199,957
|
|
| 2,099,994
|
|
| 1,720,000
|
| 296,675
|
| 9,466,626
|
| ||||||||||||||||
Paul S. Herendeen
|
| 2015
|
|
| 630,000
|
|
| 1,199,956
|
|
| 599,990
|
|
| 595,350
|
|
| 82,638
|
|
| 3,107,934
|
| |||||||||||||||||||||||||||||||||||
Executive Vice President and
Chief Financial Officer
| 2014 | (6) | 207,614 | 437,468 | 437,495 | 167,130 | 18,686 | 1,268,393 | ||||||||||||||||||||||||||||||||||||||||||||||||
Glenn C. David
|
| 2018
|
|
| 626,250
|
| —
|
| 1,066,567
|
|
| 533,323
|
|
| 691,380
|
| 117,651
|
| 3,035,171
|
| ||||||||||||||||||||||||||||||||||||
Executive Vice President and
|
| 2017
|
|
| 596,250
|
| 150,000
|
| 933,252
|
|
| 466,666
|
|
| 550,041
|
| 101,388
|
| 2,797,597
|
| ||||||||||||||||||||||||||||||||||||
Chief Financial Officer
|
| 2016
|
|
| 483,030
|
| —
|
| 608,223
|
|
| 516,651
|
|
| 526,676
|
| 73,526
|
| 2,208,106
|
| ||||||||||||||||||||||||||||||||||||
Kristin C. Peck
|
| 2015
|
|
| 625,500
|
|
| 866,622
|
|
| 433,330
|
|
| 582,341
|
|
| 112,886
|
|
| 2,620,679
|
|
| 2018
|
|
| 675,000
|
| —
|
| 999,930
|
|
| 499,986
|
|
| 734,400
|
| 129,608
|
| 3,038,924
|
| |||||||||||||||
Executive Vice President and
|
| 2014
|
|
| 620,375
|
|
| 629,971
|
|
| 629,995
|
|
| 490,717
|
|
| 96,847
|
|
| 2,467,905
|
|
| 2017
|
|
| 655,000
|
| 300,000
|
| 933,252
|
|
| 466,666
|
|
| 599,440
|
| 112,245
|
| 3,066,603
|
| |||||||||||||||
President of U.S. Operations
|
| 2013
|
|
| 605,000
|
|
| 1,601,562
|
|
| 559,994
|
|
| 443,000
|
|
| 91,466
|
|
| 3,301,022
|
| |||||||||||||||||||||||||||||||||||
Group President, U.S.
|
| 2016
|
|
| 636,375
|
| —
|
| 899,958
|
|
| 449,995
|
|
| 568,856
|
| 119,499
|
| 2,674,683
|
| ||||||||||||||||||||||||||||||||||||
Operations, Business
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Development and Strategy
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Clinton A. Lewis, Jr.
|
| 2015
|
|
| 558,943
|
|
| 666,639
|
|
| 333,330
|
|
| 512,587
|
|
| 277,016
|
|
| 2,348,515
|
|
| 2018
|
|
| 675,000
|
| —
|
| 999,930
|
|
| 499,986
|
|
| 729,000
|
| 1,721,890
|
| 4,625,806
|
| |||||||||||||||
Executive Vice President and
|
| 2014
|
|
| 451,375
|
|
| 374,974
|
|
| 374,996
|
|
| 352,073
|
|
| 67,575
|
|
| 1,620,993
|
|
| 2017
|
|
| 655,000
|
| 300,000
|
| 933,252
|
|
| 466,666
|
|
| 607,060
|
| 1,485,268
|
| 4,447,246
|
| |||||||||||||||
President of International Operations
|
| 2013
|
|
| 400,000
|
|
| 919,000
|
|
| 300,000
|
|
| 300,000
|
|
| 51,904
|
|
| 1,970,904
|
| |||||||||||||||||||||||||||||||||||
Group President, International
|
| 2016
|
|
| 630,054
|
| —
|
| 799,972
|
|
| 399,998
|
|
| 571,303
|
| 966,604
|
| 3,367,931
|
| ||||||||||||||||||||||||||||||||||||
Operations, Commercial
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Development, Global Genetics and
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aquatic Health
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Catherine A. Knupp
|
| 2015
|
|
| 499,625
|
|
| 666,639
|
|
| 333,330
|
|
| 453,923
|
|
| 88,850
|
|
| 2,042,367
|
|
| 2018
|
|
| 626,250
|
| —
|
| 999,930
|
|
| 499,986
|
|
| 676,350
|
| 121,425
|
| 2,923,941
|
| |||||||||||||||
Executive Vice President and
|
| 2014
|
|
| 451,375
|
|
| 374,974
|
|
| 374,996
|
|
| 352,073
|
|
| 67,278
|
|
| 1,620,696
|
|
| 2017
|
|
| 582,500
|
| 300,000
|
| 933,252
|
|
| 466,666
|
|
| 534,245
|
| 99,895
|
| 2,916,558
|
| |||||||||||||||
President of R&D
|
| 2013
|
|
| 400,000
|
|
| 909,844
|
|
| 300,000
|
|
| 280,000
|
|
| 48,931
|
|
| 1,938,775
|
| |||||||||||||||||||||||||||||||||||
President of Research and
|
| 2016
|
|
| 525,027
|
| —
|
| 733,301
|
|
| 366,663
|
|
| 474,940
|
| 93,299
|
| 2,193,230
|
| ||||||||||||||||||||||||||||||||||||
Development
|
(1) |
The amounts shown in the “Stock Awards” column represent the aggregate grant date fair values for the Restricted Stock Units (“RSUs”) and the performance award units granted |
Number of Pfizer Units Forfeited
| Number of Replacement RSUs
| Grant Date Value of Replacement RSUs ($)
| Performance Award Unit Grants in 2018 | |||||||||||||||||||||||
Name
| RSUs
| PSAs
| TSRUs
| Grant Date Target Payout ($) | Maximum Value at Grant Date ($) | |||||||||||||||||||||
Juan Ramón Alaix
|
| 8,389
|
|
| 7,931
|
|
| —
|
|
| 15,471
|
|
| 464,439
|
|
| 2,699,949
|
| 5,399,898
| |||||||
Glenn C. David
|
| 533,307
|
| 1,066,614
| ||||||||||||||||||||||
Kristin C. Peck
|
| 7,705
|
|
| 7,295
|
|
| 66,918
|
|
| 34,696
|
|
| 1,041,574
|
|
| 499,994
|
| 999,988
| |||||||
Clinton A. Lewis, Jr.
|
| 12,647
|
|
| 2,294
|
|
| 20,971
|
|
| 20,620
|
|
| 619,012
|
|
| 499,994
|
| 999,988
| |||||||
Catherine A. Knupp
|
| 12,579
|
|
| 2,229
|
|
| 20,348
|
|
| 20,315
|
|
| 609,856
|
|
| 499,994
|
| 999,988
|
The amounts shown in the “Option Awards” column represent the aggregate grant date fair values of long-term incentive awards granted to the |
The amounts shown in |
ZOETIS |
EXECUTIVE COMPENSATION
The following table sets forth the component amounts presented in the “All Other Compensation” column above for the year ended December 31, |
Name | Company (i) ($) | Company (ii) ($) | International Assignment (iii) ($) | Other (iv) ($) | All Other Compensation ($) | Company Contributions Under the Zoetis Savings Plan (i) ($) | Company Contributions Under the Zoetis Supplemental Savings Plan (ii) ($) | International Assignment (iii) ($) | Other (iv) ($) | All Other Compensation ($) | |||||||||||||||||||||||||||||
Juan Ramón Alaix
|
| 10,600
|
|
| 235,820
|
|
| —
|
|
| 15,458
|
|
| 261,878
|
| 11,000
| 281,250
|
| —
|
|
| 29,718
|
| 321,968
| |||||||||||||||
Paul S. Herendeen
|
| 26,500
|
|
| 51,544
|
|
| —
|
|
| 4,594
|
|
| 82,638
|
| ||||||||||||||||||||||||
Glenn C. David
| 25,541
| 90,078
|
| —
|
|
| 2,032
|
| 117,651
| ||||||||||||||||||||||||||||||
Kristin C. Peck |
| 26,500
|
|
| 85,122
|
|
| —
|
|
| 1,264
|
|
| 112,886
|
| 27,500
| 99,916
|
| —
|
|
| 2,192
|
| 129,608
| |||||||||||||||
Clinton A. Lewis, Jr. |
| 26,500
|
|
| 64,602
|
|
| 184,565
|
|
| 1,349
|
|
| 277,016
|
| 27,500
| 100,678
|
| 1,590,314
|
|
| 3,398
|
| 1,721,890
| |||||||||||||||
Catherine A. Knupp |
| 26,500
|
|
| 58,670
|
|
| —
|
|
| 3,680
|
|
| 88,850
|
| 27,500
| 88,500
|
| —
|
|
| 5,425
|
| 121,425
|
(i) | The amounts shown in this column represent the sum of profit sharing and matching contributions under the Zoetis Savings Plan (“ZSP”), atax-qualified retirement savings plan. Under the terms of the ZSP, the company will match up to 5% of salary compensation contributed by each employee, subject to limitations under the U.S. Internal Revenue Code of 1986, as amended (“IRC”). The company |
(ii) | The amounts shown in this column represent the sum of profit sharing and matching contributions under the Zoetis Supplemental Savings Plan (“ZSSP”). The ZSSP is discussed in more detail in the |
(iii) | In connection with his |
(iv) | The amounts shown in this column |
ZOETIS |
EXECUTIVE COMPENSATION
20152018 GRANTS OF PLAN-BASED AWARDS TABLE
The following table provides additional information aboutnon-equity incentive awards and equity incentive awards granted to our NEOs during the fiscal year ended December 31, 2015.2018. All stock options, RSUs and performance award units granted to our NEOs in 20152018 were granted under the 2013 Equity and Incentive Plan and the applicable award agreements. See the discussion under the heading “Long-Term Incentives” in the CD&A for further information about these stock options, RSUs and performance award units.
Estimated Future Payouts | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All of or Units (#)
| All Other Underlying Options (#)
| Exercise Option Awards(3) ($/Sh)
| Grant Option Awards(4) ($)
|
Estimated Future Payouts | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All or Units | All Other Options | Exercise Awards(3) | Grant Awards(4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name
| Award
| Grant Date
| Threshold
| Target ($)
| Maximum
| Threshold
| Target
| Maximum
| Award
| Grant Date | Threshold
| Target ($)
| Maximum
| Threshold
| Target
| Maximum
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Juan Ramón Alaix | Annual Incentive | 0 | 1,282,250 | 2,564,500 | Annual Incentive | 0 | 1,500,000 | 3,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options(5) | 2/27/2015 | 159,954 | 46.09 | 1,866,663 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units(5) | 2/27/2015 | 40,500 | 1,866,645 | Stock Options (5) | 2/13/2018 | 133,070 | 73.24 | 2,699,990 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Award Units (6)
|
| 2/27/2015
|
|
| 0
|
|
| 29,563
|
|
| 59,126
|
|
| 1,866,608
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paul S. Herendeen | Annual Incentive | 0 | 441,000 | 882,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (5) | 2/13/2018 | 36,865 | 2,699,993 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Award Units (6)
|
| 2/13/2018
|
|
| 0
|
|
| 26,908
|
|
| 53,816
|
|
| 2,699,949
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Glenn C. David | Annual Incentive | 0 | 501,000 | 1,002,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options (5) | 2/13/2018 | 26,285 | 73.24 | 533,323 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (5) | 2/13/2018 | 7,281 | 533,260 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options(5) | 2/27/2015 | 51,413 | 46.09 | 599,990 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units(5) | 2/27/2015 | 13,018 | 600,000 | Performance Award Units (6)
|
| 2/13/2018
|
|
| 0
|
|
| 5,315
|
|
| 10,630
|
|
| 533,307
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Award Units (6)
|
| 2/27/2015
|
|
| 0
|
|
| 9,502
|
|
| 19,004
|
|
| 599,956
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kristin C. Peck | Annual Incentive | 0 | 437,850 | 875,700 | Annual Incentive | 0 | 540,000 | 1,080,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options(5) | 2/27/2015 | 37,132 | 46.09 | 433,330 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units(5) | 2/27/2015 | 9,401 | 433,292 | Stock Options (5) | 2/13/2018 | 24,642 | 73.24 | 499,986 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Award Units(6)
|
| 2/27/2015
|
|
| 0
|
|
| 6,863
|
|
| 13,726
|
|
| 433,330
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (5) | 2/13/2018 | 6,826 | 499,936 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Award Units (6)
|
| 2/13/2018
|
|
| 0
|
|
| 4,983
|
|
| 9,966
|
|
| 499,994
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Clinton A. Lewis, Jr. | Annual Incentive | 0 | 385,404 | 770,808 | Annual Incentive | 0 | 540,000 | 1,080,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options (5) | 2/13/2018 | 24,642 | 73.24 | 499,986 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (5) | 2/13/2018 | 6,826 | 499,936 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options(5) | 2/27/2015 | 28,563 | 46.09 | 333,330 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units(5) | 2/27/2015 | 7,232 | 333,323 | Performance Award Units (6)
|
| 2/13/2018
|
|
| 0
|
|
| 4,983
|
|
| 9,966
|
|
| 499,994
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Award Units(6)
|
| 2/27/2015
|
|
| 0
|
|
| 5,279
|
|
| 10,558
|
|
| 333,316
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Catherine A. Knupp | Annual Incentive | 0 | 343,881 | 687,762 | Annual Incentive | 0 | 501,000 | 1,002,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options(5) | 2/27/2015 | 28,563 | 46.09 | 333,330 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units(5) | 2/27/2015 | 7,232 | 333,323 | Stock Options (5) | 2/13/2018 | 24,642 | 73.24 | 499,986 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Award Units(6)
|
| 2/27/2015
|
|
| 0
|
|
| 5,279
|
|
| 10,558
|
|
| 333,316
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units (5) | 2/13/2018 | 6,826 | 499,936 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Award Units (6)
|
| 2/13/2018
|
|
| 0
|
|
| 4,983
|
|
| 9,966
|
|
| 499,994
|
|
(1) | These amounts represent the threshold, target and maximumnon-equity incentive plan awards under the Zoetis Annual Incentive Plan for |
(2) | These amounts represent the threshold, target and maximum share payouts under our performance award unit program for the performance period beginning January 1, |
(3) | The exercise price of the stock options is the closing price of the company’s stock on the grant date. |
48 | ZOETIS 2019 PROXY STATEMENT |
EXECUTIVE COMPENSATION
(4) | The amounts shown in this column represent the award values as of the grant date, computed in accordance with FASB ASC Topic 718 based on the assumptions and methodologies set forth in Note |
(5) | These Zoetis stock option and RSU awards are subject to three-year cliff vesting and vest 100% on the third anniversary of the grant date. |
(6) | These performance award units are subject to three-year cliff vesting and are earned based on |
ZOETIS | 49 |
EXECUTIVE COMPENSATION
OUTSTANDING EQUITY AWARDS AT 20152018 FISCALYEAR-END TABLE
The following table summarizes the Zoetis equity-based long-term incentive awards made to our NEOs that were outstanding as of December 31, 2015.2018.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested(1) (#) | Market Value of Shares or Units of Stock That Have Not Vested(2) ($) | Equity Shares, Not Vested(1) (#) | Equity Incentive Plan Market or Pay ($) | |||||||||||||||||||||||||||||||
Juan Ramón Alaix | 1/31/2013 | 285,306 | (3) | 26.00 | (4) | 1/31/2023 | 78,631 | (3) | 3,767,998 | |||||||||||||||||||||||||||||||
3/4/2014 | 312,109 | (3) | 30.89 | 3/3/2024 | 82,030 | (3) | 3,930,878 | |||||||||||||||||||||||||||||||||
2/27/2015 | 159,954 | (3) | 46.09 | 2/26/2025 | 40,717 | (3) | 1,951,159 | 29,721 | (5) | 1,424,230 | ||||||||||||||||||||||||||||||
Total | — | 757,369 | 201,378 | 9,650,035 | 29,721 | 1,424,230 | ||||||||||||||||||||||||||||||||||
Paul S. Herendeen | 9/2/2014 | 50,636 | (3) | 35.48 | 9/1/2024 | 12,442 | (3) | 596,221 | ||||||||||||||||||||||||||||||||
2/27/2015 | 51,413 | (3) | 46.09 | 2/26/2025 | 13,088 | (3) | 627,177 | 9,553 | (5) | 457,780 | ||||||||||||||||||||||||||||||
Total | — | 102,049 | 25,530 | 1,223,398 | 9,553 | 457,780 | ||||||||||||||||||||||||||||||||||
Kristin C. Peck | 1/31/2013 | 79,885 | (3) | 26.00 | (4) | 1/31/2023 | 22,016 | (3) | 1,055,007 | |||||||||||||||||||||||||||||||
8/15/2013 | — | — | — | 20,844 | (6) | 998,844 | ||||||||||||||||||||||||||||||||||
3/4/2014 | 78,651 | (3) | 30.89 | 3/3/2024 | 20,671 | (3) | 990,554 | |||||||||||||||||||||||||||||||||
2/27/2015 | 37,132 | (3) | 46.09 | 2/26/2025 | 9,451 | (3) | 452,892 | 6,900 | (5) | 330,648 | ||||||||||||||||||||||||||||||
Total | — | 195,668 | 72,982 | 3,497,297 | 6,900 | 330,648 | ||||||||||||||||||||||||||||||||||
Clinton A. Lewis, Jr. | 1/31/2013 | 42,796 | (3) | 26.00 | (4) | 1/31/2023 | 11,794 | (3) | 565,168 | |||||||||||||||||||||||||||||||
8/15/2013 | — | — | — | 6,572 | (6) | 314,930 | ||||||||||||||||||||||||||||||||||
3/4/2014 | 46,816 | (3) | 30.89 | 3/3/2024 | 12,304 | (3) | 589,608 | |||||||||||||||||||||||||||||||||
2/27/2015 | 28,563 | (3) | 46.09 | 2/26/2025 | 7,271 | (3) | 348,426 | 5,307 | (5) | 254,311 | ||||||||||||||||||||||||||||||
Total | — | 118,175 | 37,941 | 1,818,132 | 5,307 | 254,311 | ||||||||||||||||||||||||||||||||||
Catherine A. Knupp | 1/31/2013 | 42,796 | (3) | 26.00 | (4) | 1/31/2023 | 11,794 | (3) | 565,168 | |||||||||||||||||||||||||||||||
8/15/2013 | — | — | — | 6,391 | (6) | 306,257 | ||||||||||||||||||||||||||||||||||
3/4/2014 | 46,816 | (3) | 30.89 | 3/3/2024 | 12,304 | (3) | 589,608 | |||||||||||||||||||||||||||||||||
2/27/2015 | 28,563 | (3) | 46.09 | 2/26/2025 | 7,271 | (3) | 348,426 | 5,307 | (5) | 254,311 | ||||||||||||||||||||||||||||||
Total | — | 118,175 | 37,760 | 1,809,459 | 5,307 | 254,311 |
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#)(1) | Option Exercise Price ($) | Option Expiration Date | Number Stock (#)(1)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Units, or That Have | Equity Payout Value ($)(3) | |||||||||||||||||||||||||||||||||
Juan Ramón Alaix(7) | 3/4/2014 | 312,109 | 30.89 | 3/3/2024 | ||||||||||||||||||||||||||||||||||||||
2/27/2015 | 159,954 | 46.09 | 2/26/2025 | |||||||||||||||||||||||||||||||||||||||
2/19/2016 | 187,667 | 41.83 | 2/18/2026 | 136,449 | (6) | 11,671,847 | ||||||||||||||||||||||||||||||||||||
2/14/2017 | 170,163 | 55.02 | 2/13/2027 | 44,724 | 3,825,691 | 33,127 | 2,833,684 | |||||||||||||||||||||||||||||||||||
2/13/2018
|
| 133,070
|
|
| 73.24
|
| 2/12/2028
|
| 37,027
|
|
| 3,167,290
|
|
| 27,026
|
|
| 2,311,804
|
| |||||||||||||||||||||||
Glenn C. David | 2/27/2015 | 7,712 | 46.09 | 2/26/2025 | ||||||||||||||||||||||||||||||||||||||
2/19/2016 | 8,191 | 41.83 | 2/18/2026 | 5,955 | (6) | 509,391 | ||||||||||||||||||||||||||||||||||||
8/22/2016 | 21,301 | 51.23 | 8/21/2026 | 5,449 | 466,107 | |||||||||||||||||||||||||||||||||||||
12/6/2016 | 11,144 | 50.22 | 12/5/2026 | 3,026 | 258,844 | |||||||||||||||||||||||||||||||||||||
2/14/2017 | 32,634 | 55.02 | 2/13/2027 | 8,577 | 733,677 | 6,353 | 543,436 | |||||||||||||||||||||||||||||||||||
2/13/2018
|
| 26,285
|
|
| 73.24
|
| 2/12/2028
|
| 7,313
|
|
| 625,554
|
|
| 5,338
|
|
| 456,613
|
| |||||||||||||||||||||||
Kristin C. Peck(7) | 1/31/2013 | 40,385 | 26.00 | (5) | 1/31/2023 | |||||||||||||||||||||||||||||||||||||
3/4/2014 | 78,651 | 30.89 | 3/3/2024 | |||||||||||||||||||||||||||||||||||||||
2/27/2015 | 37,132 | 46.09 | 2/26/2025 | |||||||||||||||||||||||||||||||||||||||
2/19/2016 | 40,214 | 41.83 | 2/18/2026 | 29,238 | (6) | 2,501,019 | ||||||||||||||||||||||||||||||||||||
2/14/2017 | 32,634 | 55.02 | 2/13/2027 | 8,577 | 733,677 | 6,353 | 543,436 | |||||||||||||||||||||||||||||||||||
2/13/2018
|
| 24,642
|
|
| 73.24
|
| 2/12/2018
|
| 6,856
|
|
| 586,462
|
|
| 5,005
|
| 428,128 | |||||||||||||||||||||||||
Clinton A. Lewis, Jr.(7) | 1/31/2013 | 42,796 | 26.00 | (5) | 1/31/2023 | |||||||||||||||||||||||||||||||||||||
3/4/2014 | 46,816 | 30.89 | 3/3/2024 | |||||||||||||||||||||||||||||||||||||||
2/27/2015 | 28,563 | 46.09 | 2/26/2025 | |||||||||||||||||||||||||||||||||||||||
2/19/2016 | 35,746 | 41.83 | 2/18/2026 | 25,990 | (6) | 2,223,185 | ||||||||||||||||||||||||||||||||||||
2/14/2017 | 32,634 | 55.02 | 2/13/2027 | 8,577 | 733,677 | 6,353 | 543,436 | |||||||||||||||||||||||||||||||||||
2/13/2018
|
| 24,642
|
|
| 73.24
|
| 2/12/2018
|
| 6,856
|
|
| 586,462
|
|
| 5,005
|
|
| 428,128
|
| |||||||||||||||||||||||
Catherine A. Knupp(7) | 2/27/2015 | 28,563 | 46.09 | 2/26/2025 | ||||||||||||||||||||||||||||||||||||||
2/19/2016 | 32,767 | 41.83 | 2/18/2026 | 23,824 | (6) | 2,037,905 | ||||||||||||||||||||||||||||||||||||
2/14/2017 | 32,634 | 55.02 | 2/13/2027 | 8,577 | 733,677 | 6,353 | 543,436 | |||||||||||||||||||||||||||||||||||
2/13/2018
|
| 24,642
|
|
| 73.24
|
| 2/12/2018
|
| 6,856
|
|
| 586,462
|
|
| 5,005
|
|
| 428,128
|
|
(1) |
These Zoetis stock |
(2) | These amounts are rounded to the nearest whole unit and include accrued dividend equivalent units applied after the grant date. |
(3) | Based on Zoetis’ closing stock price on December 31, 2018 of $85.54. |
(4) |
These performance award units are subject to three-year cliff vesting and are earned, in the case of awards granted in 2017, based on |
50 | ZOETIS |
EXECUTIVE COMPENSATION
(5) | Zoetis’ Initial Public Offering (“IPO”) stock price on February 1, 2013. |
(6) | These amounts consist of Zoetis RSUs that remained unvested as of December 31, 2018, and performance award units for which the performance period ended on December 31, 2018 and the level of performance has been determined. The table below shows these amounts for each NEO as of December 31, 2018. |
Name | RSU Awards | Earned Performance Award Units | Total Number of Units that Have Not Vested | |||
Juan Ramón Alaix
| 51,171
| 85,278
| 136,449
| |||
Glenn C. David *
| 2,233
| 3,722
| 5,955
| |||
Kristin C. Peck
| 10,964
| 18,274
| 29,238
| |||
Clinton A. Lewis, Jr.
| 9,746
| 16,244
| 25,990
| |||
Catherine A. Knupp
| 8,934
| 14,890
| 23,824
|
* | Mr. David’s number of RSUs and earned performance award units are lower than those of other NEOs because he had not yet been appointed CFO at the time these awards were granted. |
(7) | Certain NEOs were Pfizer employees at the time of Zoetis’ |
Number of Securities Underlying Outstanding TSRUs Vested and Held by Each NEO as of December 31, 2015(a) | ||||||||||||||||
Grant Date | Juan Ramón Alaix | Kristin C. Peck | Clinton A. Lewis, Jr. | Catherine A. Knupp | ||||||||||||
2/24/2011 (b) | 42,348 | 26,534 | 9,071 | 9,071 | ||||||||||||
2/24/2011 (c) | 35,058 | 21,966 | 7,510 | 7,510 | ||||||||||||
2/23/2012 (d) | 53,635 | 22,916 | 7,010 | 6,740 | ||||||||||||
2/23/2012 (e) | 45,468 | 19,427 | 5,942 | 5,714 | ||||||||||||
176,509 | 90,843 | 29,533 | 29,035 |
EXECUTIVE COMPENSATION
2015 OPTION EXERCISES AND STOCK VESTED TABLE
The following table provides additional information about the number and value of RSUs that vested during the year ended December 31, 2015. None of the NEOs exercised any Zoetis stock options during 2015.
| ||||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
|
2015 Pfizer Option Exercises and Stock Vested Information
Certain NEOs were Pfizer employees at the time of Zoetis’ IPO in February 2013 and continue to hold Pfizer equity-based long-term incentive awards. The table below shows Pfizer RSUs and PSAs that vested in 2015 and TSRUs that settled in 2015.
TSRU Awards (b) | Stock Awards | |||||||||||||||
Name(a) | Number of (#) | Value Realized on Exercise ($) | Number of (#) | Value Realized on Vesting ($) | ||||||||||||
Juan Ramón Alaix | 22,176 | 768,620 | 7,642 | 263,486 | (c) | |||||||||||
Kristin C. Peck | 17,485 | 606,030 | 2,413 | 83,635 | (d) | |||||||||||
Clinton A. Lewis, Jr. | 7,062 | 244,769 | 738 | 25,579 | (d) | |||||||||||
Catherine A. Knupp | 6,311 | 218,739 | 710 | 24,609 | (d) |
ZOETIS |
EXECUTIVE COMPENSATION
2018 OPTION EXERCISES AND STOCK VESTED TABLE
The following table provides information about the number and value of shares acquired upon vesting of RSUs held by, and exercises of stock options by, our NEOs during 2018.
Option Awards | RSU Awards | Performance Award Units(1) | ||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(2) | Number of Shares Acquired on Vesting | Value Realized on Vesting ($)(3) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(3) | ||||||||||||||
Juan Ramón Alaix(5)
|
| 285,306
|
|
| 19,213,699
|
| 41,412(4)
|
| 3,382,118
|
| 60,458(4)
|
| 4,937,605
|
| ||||||
Glenn C. David
|
| 16,385
|
|
| 1,004,639
|
| 1,995
|
| 162,932
|
| 2,914
|
| 237,986
|
| ||||||
Kristin C. Peck(5)
|
| 39,500
|
|
| 2,283,528
|
| 9,612
|
| 785,012
|
| 14,035
|
| 1,146,238
|
| ||||||
Clinton A. Lewis, Jr. (5)
|
| —
|
|
| —
|
| 7,394
|
| 603,868
|
| 10,795
|
| 881,628
|
| ||||||
Catherine A. Knupp(5)
|
| 89,612
|
|
| 5,208,661
|
| 7,394
|
| 603,868
|
| 10,795
|
| 881,628
|
|
(1) | These performance award units earned were determined based on relative TSR performance over the 2015-2017 performance period and were paid on February 27, 2018. |
(2) | The value realized when the stock options were exercised represents the excess of the fair market value of the shares at the time of exercise over the exercise price of the stock options. |
(3) | These RSUs and performance award units were granted on February 27, 2015 and vested on February 27, 2018. The value realized on vesting is based on the closing price of our common stock on February 27, 2018, of $81.67. |
(4) | Mr. Alaix elected to defer receipt of 100% of the shares pursuant to his vested RSUs and performance award units under the Zoetis Equity Deferral Plan. |
(5) | Certain NEOs were Pfizer employees at the time of Zoetis’ IPO in February 2013 and continue to hold Pfizer equity-based long-term incentive awards. The table below shows Pfizer TSRUs that settled in 2018. |
TSRU Awards(b) | ||||||
Name(a) | Number of (#) | Value Realized on Exercise ($) | ||||
Juan Ramón Alaix
|
| 23,872
|
| 865,599
| ||
Kristin C. Peck
|
| 14,957
|
| 542,341
| ||
Clinton A. Lewis, Jr.
|
| 5,113
|
| 185,397
| ||
Catherine A. Knupp
|
| 5,113
|
| 185,397
|
(a) | Mr. David does not hold Pfizer equity-based long-term incentive awards and is not included in this table. |
(b) | These7-Year Pfizer TSRUs were granted on February 24, 2011 and settled in Pfizer stock on February 28, 2018 at the Pfizer closing stock price of $36.26. |
52 | ZOETIS 2019 PROXY STATEMENT |
EXECUTIVE COMPENSATION
2018NON-QUALIFIED DEFERRED COMPENSATION TABLE
The following table summarizes activity during 20152018 and account balances as of December 31, 2018, in the Zoetis Supplemental Savings Plan (“ZSSP”) and the Zoetis Equity Deferral Plan for our NEOs asNEOs.
The key features of December 31, 2015.the ZSSP are described in the Compensation Discussion and Analysis section, “Retirement Benefits”. Amounts for our NEOs who were Pfizer employees at the time of the IPO include priornon-qualified Supplemental Savings Plan balances held by NEOs when they served as executives of Pfizer and transferred to the ZSSP.
Under the Zoetis Equity Deferral Plan, NEOs may elect to defer the full amount of common stock to be received upon vesting of RSUs and performance award units, or less than the full amount in 25% increments. NEOs may elect to receive their deferred shares in the January following termination of employment in a lump sum or in annual installments (special provisions provide for situations such as death or disability, or to comply with IRC regulations, as described more fully in the Zoetis Equity Deferral Plan). Election decisions must be made by the end of the year before the RSUs are granted, and by the end of the second year of a three-year performance period for performance award units.
Name | Plan(1) | Aggregate ($) | Executive ($) | Company ($) | Aggregate ($) | Aggregate ($) | Aggregate ($) | |||||||||||||||||||
Juan Ramón Alaix | Zoetis Supplemental Savings Plan | 3,023,542 | 1,079,640 | 235,820 | 82,910 | — | 4,421,912 | |||||||||||||||||||
Paul S. Herendeen | Zoetis Supplemental Savings Plan | — | 74,813 | 51,544 | 66 | — | 126,423 | |||||||||||||||||||
Kristin C. Peck | Zoetis Supplemental Savings Plan | 759,442 | 46,121 | 85,122 | 27,306 | — | 917,991 | |||||||||||||||||||
Clinton A. Lewis, Jr. | Zoetis Supplemental Savings Plan | 139,209 | 38,761 | 64,602 | 9,055 | — | 251,627 | |||||||||||||||||||
Catherine A. Knupp | Zoetis Supplemental Savings Plan | 836,291 | (5) | 103,759 | 58,670 | (12,791) | — | 985,929 |
Name | Plan | Aggregate ($) | Executive ($) | Company ($) | Aggregate ($) | Aggregate ($) | |||||||||||||||||||||
Juan Ramón Alaix | Zoetis Supplemental Savings Plan
|
| 9,250,240
|
|
| 1,178,539
|
|
| 281,250
|
|
| 72,653
|
|
| 10,782,682
|
| |||||||||||
Zoetis Equity Deferral Plan
|
| —
|
|
| 8,319,723
|
|
| —
|
|
| 432,442
|
|
| 8,752,165
|
| ||||||||||||
Glenn C. David | Zoetis Supplemental Savings Plan
|
| 731,583
|
|
| 170,041
|
|
| 90,078
|
|
| 1,549
|
|
| 993,251
|
| |||||||||||
Kristin C. Peck | Zoetis Supplemental Savings Plan
|
| 1,580,937
|
|
| 49,958
|
|
| 99,916
|
|
| 133,137
|
|
| 1,863,948
|
| |||||||||||
Clinton A. Lewis, Jr. | Zoetis Supplemental Savings Plan
|
| 699,840
|
|
| 60,406
|
|
| 100,678
|
|
| 61,432
|
|
| 922,356
|
| |||||||||||
Catherine A. Knupp | Zoetis Supplemental Savings Plan
|
| 1,763,513
|
|
| 265,497
|
|
| 88,500
|
|
| (108,236
| )
|
| 2,009,274
|
|
(1) |
Amounts in this column that were |
(2) | Executive contributions to the ZSSP shown in this column are included in the Summary Compensation Table for the year 2018. Mr. Alaix’ contribution to the Zoetis Equity Deferral Plan represents the shares payable pursuant to RSU awards and performance award units that vested on February 27, 2018; the value shown in the table above is based on the closing price of our common stock on February 27, 2018 of $81.67. These awards were reported in the Summary Compensation Table in 2015 (the year of grant) at the grant date fair value amount. Mr. Alaix has elected to receive these deferred shares in a lump sum in the January following his termination of employment. |
(3) |
Company contribution amounts shown in this column include profit sharing and company matching contributions and are reflected in the “All Other Compensation” column of the Summary Compensation Table. Company contribution amounts under thetax-qualified ZSP are also reflected in the “All Other Compensation” column of the Summary Compensation Table but not in the table above. |
(4) | Aggregate earnings are not reflected in the Summary Compensation |
ZOETIS | 53 |
EXECUTIVE COMPENSATION
POTENTIAL PAYMENTS UPON EMPLOYMENT TERMINATION TABLE
The NEOs are eligible to receive benefits under the Zoetis Executive Severance Plan which provides for payment of severance benefits in the event of an involuntary termination of employment (other than for cause)“Cause”) that is not in connection with a change in control of the company (“CIC”) and a higher level of benefits in the event of an involuntary termination of employment (other than for cause)“Cause”) or a termination for “good reason”“Good Reason” that is in connection with,occurs upon, or within 24 months after, a change in control of the company.CIC. The amounts payable under the Zoetis Executive Severance Plan are summarized in the CD&A under “Severance.”“Severance”.
Treatment of long-term incentive awards upon termination of employment is in accordance with the terms of the Equity Plan and the long-term incentive award agreements, as described in the footnotes to the table below.agreements.
The following table shows the estimated benefits payable upon a hypothetical termination of employment under the Zoetis Executive Severance Plan and the Equity Plan under various termination scenarios, assuming the applicable termination occurred on December 31, 2015.2018. Payment of severance benefits is contingent upon the execution of a release agreement.
Name | Description | Without Cause: Individual Position Elimination ($) | Without Cause: Restructuring ($) | Without Cause or for Good Reason Upon or Within 24 Months Following a Change in Control ($) | Death or Disability ($) | Retirement ($) | Description | Without Apart from a | Without Cause: Restructuring Event ($) | Without Cause or for Good Reason Upon or Within 24 Months Following a CIC ($) | Death or Disability ($) | Retirement ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Juan Ramón Alaix | Severance Amount | 3,612,000 | (1) | 3,612,000 | (1) | 6,020,000 | (6) | — | — | Severance
|
| 4,050,000
| (1)
|
| 4,050,000
| (1)
|
| 6,750,000
| (6)
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Juan Ramón Alaix
| Benefits Continuation
|
| 16,522
| (2)
|
| 16,522
| (2)
|
| 24,783
| (7)
|
| —
|
|
| —
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outplacement Services
|
| 9,000
| (3)
|
| 9,000
| (3)
|
| 9,000
| (3)
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value of Benefits Continuation | 14,721 | (2) | 14,721 | (2) | 22,082 | (7) | — | — | Equity Acceleration
|
| 30,133,988
| (4)
|
| 33,375,472
| (5)
|
| 38,843,291
| (8)
|
| 38,843,291
| (9)
|
| 30,133,988
| (10)
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value of Outplacement Services | 16,560 | (3) | 16,560 | (3) | 16,560 | (3) | — | — |
Total |
|
34,209,510 |
|
|
37,450,994 |
|
|
45,627,074 |
|
|
38,843,291 |
|
|
30,133,988 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Acceleration | 17,622,661 | (4) | 19,886,167 | (5) | 22,936,098 | (8) | 22,936,098 | (9) | 17,622,661 | (10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 21,265,942 | 23,529,448 | 28,994,740 | 22,936,098 | 17,622,661 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Paul S. Herendeen | Severance Amount | 1,071,000 | (1) | 1,071,000 | (1) | 2,142,000 | (6) | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value of Benefits Continuation | 19,811 | (2) | 19,811 | (2) | 29,716 | (7) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value of Outplacement Services | 16,560 | (3) | 16,560 | (3) | 16,560 | (3) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Glenn C. David
|
Severance
|
|
1,127,250
|
(1)
|
|
1,127,250
|
(1)
|
|
2,254,500
|
(6)
|
|
—
|
|
|
—
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefits Continuation
|
| 12,304
| (2)
|
| 12,304
| (2)
|
| 18,457
| (7)
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outplacement Services
|
| 9,000
| (3)
|
| 9,000
| (3)
|
| 9,000
| (3)
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Acceleration | — | 1,621,287 | (5) | 2,405,160 | (8) | 2,405,160 | (9) | — | Equity Acceleration
|
| —
| (4)
|
| 4,948,732
| (5)
|
| 6,395,329
| (8)
|
| 6,395,329
| (9)
|
| —
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 1,107,371 | 2,728,658 | 4,593,436 | 2,405,160 | — |
Total |
|
1,148,554 |
|
|
6,097,286 |
|
|
8,677,286 |
|
|
6,395,329 |
|
|
— |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kristin C. Peck | Severance Amount | 1,063,350 | (1) | 1,063,350 | (1) | 2,126,700 | (6) | — | — |
Severance
|
|
1,215,000
|
(1)
|
|
1,215,000
|
(1)
|
|
2,430,000
|
(6)
|
|
—
|
|
|
—
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value of Benefits Continuation | 20,127 | (2) | 20,127 | (2) | 30,190 | (7) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value of Outplacement Services | 16,560 | (3) | 16,560 | (3) | 16,560 | (3) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kristin C. Peck
| Benefits Continuation
|
| 12,935
| (2)
|
| 12,935
| (2)
|
| 19,402
| (7)
|
| —
|
|
| —
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outplacement Services
|
| 9,000
| (3)
|
| 9,000
| (3)
|
| 9,000
| (3)
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Acceleration | 3,567,275 | (4) | 6,034,973 | (5) | 6,986,394 | (8) | 6,986,394 | (9) | — | Equity Acceleration
|
| —
| (4)
|
| 6,539,806
| (5)
|
| 7,849,490
| (8)
|
| 7,849,490
| (9)
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 4,667,312 | 7,135,010 | 9,159,844 | 6,986,394 | — |
Total |
|
1,236,935 |
|
|
7,776,741 |
|
|
10,307,892 |
|
|
7,849,490 |
|
|
— |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Clinton A. Lewis, Jr. | Severance Amount | 1,020,000 | (1) | 1,020,000 | (1) | 2,040,000 | (6) | — | — |
Severance
|
|
1,215,000
|
(1)
|
|
1,215,000
|
(1)
|
|
2,430,000
|
(6)
|
|
—
|
|
|
—
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value of Benefits Continuation | 19,911 | (2) | 19,911 | (2) | 29,866 | (7) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value of Outplacement Services | 16,560 | (3) | 16,560 | (3) | 16,560 | (3) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Clinton A. Lewis, Jr.
| Benefits Continuation
|
| 22,220
| (2)
|
| 22,220
| (2)
|
| 33,330
| (7)
|
| —
|
|
| —
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outplacement Services
|
| 9,000
| (3)
|
| 9,000
| (3)
|
| 9,000
| (3)
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Acceleration | 1,736,690 | (4) | 3,296,968 | (5) | 3,860,087 | (8) | 3,860,087 | (9) | — | Equity Acceleration
|
| —
| (4)
|
| 6,079,314
| (5)
|
| 7,376,322
| (8)
|
| 7,376,322
| (9)
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 2,793,161 | 4,353,439 | 5,946,513 | 3,860,087 | — |
Total |
|
1,246,220 |
|
|
7,325,534 |
|
|
9,848,652 |
|
|
7,376,322 |
|
|
— |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Catherine A. Knupp | Severance Amount | 867,000 | (1) | 867,000 | (1) | 1,734,000 | (6) | — | — |
Severance
|
|
1,127,250
|
(1)
|
|
1,127,250
|
(1)
|
|
2,254,500
|
(6)
|
|
—
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Catherine A. Knupp
| Benefits Continuation
|
| 21,870
| (2)
|
| 21,870
| (2)
|
| 32,805
| (7)
|
| —
|
|
| —
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outplacement Services
|
| 9,000
| (3)
|
| 9,000
| (3)
|
| 9,000
| (3)
|
| —
|
|
| —
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Acceleration
|
| 5,172,030
| (4)
|
| 5,772,277
| (5)
|
| 7,060,832
| (8)
|
| 7,060,832
| (9)
|
| 5,172,030
| (10)
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value of Benefits Continuation | 19,710 | (2) | 19,710 | (2) | 29,564 | (7) | — | — |
Total |
|
6,330,150 |
|
|
6,930,397 |
|
|
9,357,137 |
|
|
7,060,832 |
|
|
5,172,030 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value of Outplacement Services | 16,560 | (3) | 16,560 | (3) | 16,560 | (3) | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Acceleration | 2,885,901 | (4) | 3,290,091 | (5) | 3,851,404 | (8) | 3,851,404 | (9) | 2,885,901 | (10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 3,789,171 | 4,193,361 | 5,631,528 | 3,851,404 | 2,885,901 |
54 | ZOETIS 2019 PROXY STATEMENT |
EXECUTIVE COMPENSATION
(1) | These amounts represent severance payable under the Zoetis Executive Severance Plan, equal to 18 months |
EXECUTIVE COMPENSATION
(2) | These amounts represent the cost of 12 months of active health and life insurance coverage at the levels provided to the applicable NEO as of the date of termination of employment and assuming no increase in the cost of coverage. |
(3) | These amounts represent the program fee for outplacement services for 12 months. |
(4) | These amounts represent the value of Zoetis long-term incentive awards that vest on the executive’s involuntary termination of employment without |
(5) | These amounts represent the value of Zoetis long-term incentive awards that vest on the executive’s involuntary termination of employment without |
(6) | These amounts represent severance payable under the Zoetis Executive Severance Plan, equal to 30 months |
(7) | These amounts represent the cost of 18 months of active health and life insurance coverage at the levels provided to the applicable NEO as of the date of termination of employment and assuming no increase in the cost of coverage. |
(8) | These amounts represent the value of Zoetis long-term incentive awards that vest upon a qualifying termination following a |
(9) | These amounts represent the value of Zoetis long-term incentive awards that vest on termination of employment due to death or disability using Zoetis’ closing stock price of |
(10) | These amounts represent the value of Zoetis long-term incentive awards that vest on termination of employment due to retirement (Mr. Alaix and Dr. Knupp |
ZOETIS | 55 |
EXECUTIVE COMPENSATION
The following table shows shares reserved for issuance for outstanding awards granted under the company’s 2013 Equity and Incentive Plan as of December 31, 2015.2018.
Plan Category | Number of (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) | Number of Outstanding Options, (a) | Weighted-Average Warrants and Rights | Number of Securities Reflected in Column (a)) | |||||||||||||||||||||
Equity compensation plans approved by security holders | 8,133,033(1) | $31.03 | 15,824,420 | 6,217,910 | (1) | $43.41 | (2) | 12,212,046 | |||||||||||||||||||
Equity compensation plans not approved by security holders | — | — | — | 460,654 | (3) | — | — | ||||||||||||||||||||
Total | 8,133,033 | $31.03 | 15,824,420 | 6,678,564 | $43.41 | 12,212,046 |
(1) | Includes |
(2) | The weighted-average exercise price is only applicable to stock options. |
ITEM 1 — ELECTION OF DIRECTORS
Our Board of Directors currently consists of eleven directors divided into three classes. The directors hold office for staggered terms of three years (and until their successors are elected and qualified, or until their earlier death, resignation or removal). One of the three classes is elected each year to succeed the directors whose terms are expiring.
The directors in Class III, whose terms expire at the 2016 Annual Meeting, are Juan Ramón Alaix, Paul M. Bisaro, Frank A. D’Amelio and Michael B. McCallister. Each of these directors has been nominated by the Board of Directors, upon the recommendation of its Corporate Governance Committee, to stand for election for a term expiring at the 2019 Annual Meeting of Shareholders. Each of these nominees has consented to being named in this proxy statement as a Board nominee and to serve if elected.
Our Board of Directors recommends that you vote on your proxy card or voting instruction form “FOR” the election of each of the Board’s nominees for election — Juan Ramón Alaix, Paul M. Bisaro, Frank A. D’Amelio and Michael B. McCallister — to serve as directors of Zoetis until our 2019 Annual Meeting and until their successors are elected and qualified, or until their earlier death, resignation or removal. Unless instructed otherwise, proxy holders intend to vote the proxies received by them in response to this solicitation FOR the election of the nominees named above as directors. If any such nominee should refuse or be unable to serve, the proxies will be voted for such person as shall be designated by the Board of Directors to replace such nominee. The Board of Directors has no reason to believe that any of its nominees will refuse or be unable to serve as a director if elected. If any substitute nominees are designated, we will file an amended Proxy Statement and proxy card that, as applicable, identifies the substitute nominees, discloses that such nominees have consented to being named in the revised Proxy Statement and to serve if elected, and includes biographical and other information about such nominees required by the rules of the SEC.
In order to be elected, a nominee must receive more votes cast “For” than “Against” his or her election. Abstentions and broker non-votes will have no effect on the outcome of the vote. See “Corporate Governance Principles and Practices — Majority Voting Standard for Director Elections” for more information about our procedures if a nominee fails to receive a majority of the votes in an uncontested election.
|
ITEM 1 — ELECTION OF DIRECTORS
The following table sets forth certain information regarding the director nominees and the directors of the company whose terms will continue after the Annual Meeting.
Name | Age(1) | Position(s) with the Company | Term Expires | |||||||
Juan Ramón Alaix
|
| 64
|
| Chief Executive Officer and Director
|
| 2016
| (2)
| |||
Paul M. Bisaro
|
| 55
|
| Director
|
| 2016
| (2)
| |||
Frank A. D’Amelio
|
| 58
|
| Director
|
| 2016
| (2)
| |||
William F. Doyle
|
| 53
|
| Director
|
| 2017
| (3)
| |||
Sanjay Khosla
|
| 64
|
| Director
|
| 2018
|
| |||
Michael B. McCallister
|
| 63
|
| Non-Executive Chair of the Board and Director
|
| 2016
| (2)
| |||
Gregory Norden
|
| 58
|
| Director
|
| 2017
|
| |||
Louise M. Parent
|
| 65
|
| Director
|
| 2017
|
| |||
Willie M. Reed
|
| 61
|
| Director
|
| 2018
|
| |||
Robert W. Scully
|
| 66
|
| Director
|
| 2017
|
| |||
William C. Steere, Jr.
|
| 79
|
| Director
|
| 2018
|
|
(3) | These RSUs were granted under the Abaxis 2014 Equity Incentive Plan, as amended, and assumed by Zoetis |
Set forth below is certain information with respect to the director nominees and continuing directors. Unless otherwise indicated, the principal occupation listed below for each person has been his or her principal occupation for the past five years. In addition, described below are each director’s particular experiences, qualifications, attributes or skills that contributed to the Board’s conclusion that the person should continue to serve as a director of the company.
BACKGROUND TO THE BOARD’S RECOMMENDATION IN FAVOR OF THE ZOETIS NOMINEES
The Corporate Governance Committee considers a number of factors and principles in determining the slate of director nominees for election to the company’s Board, as discussed in the sections titled “Corporate Governance Committee” and “Director Nominations” above. In particular, the Corporate Governance Committee and the Board consider the following when evaluating and selecting nominees: the candidate’s integrity; independence; diversity of experience; leadership ability; record of exercising sound judgment; animal health or veterinary expertise; prior government service; and prior policy-making experience involving issues affecting business, government, education, and technology, as well as other areas relevant to the company’s global business.
The Corporate Governance Committee and the Board have evaluated each of Mr. Alaix, Mr. Bisaro, Mr. D’Amelio and Mr. McCallister against the factors and principles Zoetis uses to select nominees for director. Based on this evaluation, the Corporate Governance Committee and the Board have concluded that it is in the best interests of Zoetis and its shareholders for each of the proposed nominees listed below to continue to serve as a director of Zoetis.
The Zoetis Board recommends that you vote on your proxy card or voting instruction form “FOR” the election of Mr. Alaix, Mr. Bisaro, Mr. D’Amelio and Mr. McCallister to serve as directors of Zoetis until our 2019 Annual Meeting and until their successors are elected and qualified, or until their earlier death, resignation or removal. The Board believes that these four nominees have a strong track record of being responsible stewards of shareholders’ interests and bringing extraordinarily valuable insight, perspective and expertise to the Board.
In each individual’s biography set forth below, we have highlighted specific experience, qualifications, and skills that led the Board to conclude that each individual should continue to serve as a director of Zoetis.
ITEM 1 — ELECTION OF DIRECTORS
DIRECTOR NOMINEES
|
Chief Executive Officer of our companysince July 2012. From 2006 to 2012 he served as President of Pfizer Animal Health, and was responsible for its overall strategic direction and financial performance. Under his leadership, the company grew to become a $4.3 billion enterprise in 2012. Mr. Alaix has 35 years’ experience in finance and management, including 20 years in the pharmaceutical industry. He joined Pfizer in 2003 and held various positions, including Regional President of Central/Southern Europe for Pfizer’s pharmaceutical business. Prior to that, Mr. Alaix held various positions with Pharmacia, including as Country President of Spain, from 1998 until Pharmacia’s acquisition by Pfizer in 2003. Earlier in his career he served in general management with Rhône-Poulenc Rorer in Spain and Belgium. In 2013, Mr. Alaix completed a two-year term as President of the International Federation for Animal Health (IFAH), and he continues to serve as a member of its board and executive committee. IFAH represents manufacturers of veterinary medicines, vaccines and other animal health products in both developed and emerging markets. A native of Spain, Mr. Alaix received a graduate degree in economics from the Universidad de Madrid. Mr. Alaix’s experience, including his knowledge and leadership of our company, his business and management experience, and his experience in the animal health industry make him a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
|
Executive Chairman of the Board of Directors of Allergan plc (formerly Actavis plc) since July 2014. Mr. Bisaro served as Chairman, President and Chief Executive Officer of Actavis until June 2014. He was appointed President, Chief Executive Officer and a member of the board of Actavis in September 2007 and he was appointed Chairman of the Board in October 2013. Prior to joining Actavis (formerly Watson Pharmaceuticals), Mr. Bisaro was President, Chief Operating Officer and a member of the board of Barr Pharmaceuticals, Inc., a global specialty pharmaceutical company, from 1999 to 2007. Between 1992 and 1999, Mr. Bisaro served as General Counsel of Barr, and from 1997 to 1999 served in various additional capacities including Senior Vice President — Strategic Business Development. Prior to joining Barr, he was associated with the law firm Winston & Strawn and a predecessor firm, Bishop, Cook, Purcell and Reynolds from 1989 to 1992. Mr. Bisaro currently serves on the board of directors of Zimmer Biomet Holdings, Inc., a designer and manufacturer of orthopaedic devices and surgical products, and on the Board of Visitors of The Catholic University of America’s Columbus School of Law. Mr. Bisaro holds an undergraduate degree in General Studies from the University of Michigan and a Juris Doctor from The Catholic University of America in Washington, D.C. Mr. Bisaro’s business, management and leadership experience, his understanding of the pharmaceutical industry, and his public company board service make him a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
ITEM 1 — ELECTION OF DIRECTORS
|
Executive Vice President, Business Operations, and Chief Financial Officer of Pfizer since December 2010, where he serves as a member of Pfizer’s Senior Executive Leadership Team. Mr. D’Amelio joined Pfizer in September 2007 and held various positions, including Senior Vice President and Chief Financial Officer. From November 2006 to August 2007, Mr. D’Amelio held the position of Senior Executive Vice President of Integration and Chief Administrative Officer at Alcatel-Lucent, S.A., a global telecommunications equipment company. Prior to the merger of Alcatel and Lucent Technologies in 2006, Mr. D’Amelio was the Chief Operating Officer of Lucent Technologies, responsible for leading business operations, including sales, the product groups, the services business, the supply chain, information technology operations, human resources and labor relations. In 2001, he was appointed Executive Vice President and Chief Financial Officer of Lucent, where he helped lead the company through one of the most challenging periods in the telecom industry’s history and returned the company to profitability. In this role, Mr. D’Amelio was responsible for management and oversight of all financial, accounting, real estate and labor relations operations, and the operational aspects of the legal and human resources organizations. Mr. D’Amelio currently serves as a member of the board of Humana Inc., a health care company that offers a wide range of insurance products and health and welfare services, and as chair of its audit committee. He also serves on the board of the Independent College Fund of New Jersey, and formerly served as a member of the National Advisory Board of JPMorgan Chase & Co. Mr. D’Amelio earned his MBA in Finance from St. John’s University and his bachelor’s degree in Accounting from St. Peter’s College. Mr. D’Amelio’s business, management and leadership experience and his experience serving on the board of another public company make him a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
|
Former Chairman of the Board of Humana Inc.(2010-2013), a health care company that offers a wide range of insurance products and health and welfare services, where he led the board’s corporate governance efforts. Mr. McCallister joined Humana in 1974, and was its Chief Executive Officer from February 2000 until his retirement on December 31, 2012. During his tenure as CEO, Humana gained a reputation as one of the industry’s leading people-focused innovative companies, leveraging products, processes and technology to help individuals take control of their own health. Mr. McCallister served for many years on the board of the Business Roundtable and is past Chairman of its Health and Retirement Task Force. He is currently on the boards of AT&T, where he serves on the audit committee, Fifth Third Bank, and Bellarmine University. Mr. McCallister holds a bachelor’s degree in accounting from Louisiana Tech University and an MBA from Pepperdine University. Mr. McCallister’s extensive business and management experience in the health care industry and public company board service make him a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
ITEM 1 — ELECTION OF DIRECTORS
CONTINUING DIRECTORS
|
Member of Pershing Square Capital Management L.P., a registered investment advisor, since 2013, where he serves as a senior advisor focused on the healthcare industry. Since 2003, Mr. Doyle has been the Managing Partner of WFD Ventures LLC, an investor in early-stage human healthcare device, drug and service companies. Previously, as an executive at Johnson & Johnson, Mr. Doyle was a member of Johnson & Johnson’s Consumer Pharmaceuticals and Medical Devices Group Operating Committee with responsibility for licensing, acquisitions and strategy. He was also Chairman of Johnson & Johnson’s Medical Devices Research and Development Council, Worldwide President of Biosense-Webster, and a member of the internal boards of directors of Cordis Corporation and Johnson & Johnson Development Corporation (J&J’s venture capital subsidiary). Earlier, Mr. Doyle was a management consultant with McKinsey & Co. working in McKinsey’s Global Healthcare practice group. Mr. Doyle serves as chairman of the board of Novocure Ltd., a public company since October 2, 2015, that is commercializing a new therapeutic modality for glioblastoma and other solid tumors; and is a member of the boards of several private companies, including Optinose, Inc., a developer of new therapies for migraine, nasal inflammatory disease and autism. In addition, Mr. Doyle is a member of the Dean’s Board of Advisors of Harvard Business School; Harvard Business School’s Healthcare Advisory Board; and the MIT Corporation’s visiting committee for undergraduate education. Mr. Doyle holds a bachelor’s degree in materials science and engineering from the Massachusetts Institute of Technology and an MBA from Harvard Business School. Mr. Doyle’s extensive business and management experience in the health care industry and board service make him a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
|
Former Executive Vice President of Mondelēz International. Mr. Khosla brings more than 35 years of international business experience from his career with food, beverage and consumer product leaders such as Mondelēz, Kraft and Unilever, where he managed various business units, particularly in developing markets. As President, Kraft Foods, Developing Markets (now Mondelēz International) from 2007 to 2013, Mr. Khosla transformed the $5 billion business to a $16 billion business, while significantly improving profitability. He also has animal health experience from his three-year tenure (2004 – 2007) as Managing Director of Fonterra Brands and Food Service, a multinational dairy cooperative based in New Zealand. Mr. Khosla serves on the board of NIIT, Ltd., a company involved in technology-related educational services. From October 2008 until June 2015, he served on the board of Best Buy, Inc., a specialty retailer of consumer electronics, personal computers, entertainment software and appliances. Mr. Khosla holds a bachelor’s degree in electrical engineering from the Indian Institute of Technology in New Delhi. Mr. Khosla also completed the Advance Management Program at Harvard Business School. Mr. Khosla is currently a senior fellow and adjunct professor at the Kellogg School of Management, Northwestern University. Mr. Khosla’s international business and management experience and his experience serving on the board of another public company make him a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
ITEM 1 — ELECTION OF DIRECTORS
|
Managing Director of G9 Capital Group, LLC, which invests in early stage ventures and provides corporate financial advisory services. From 1989 to 2010, Mr. Norden held various senior positions with Wyeth/American Home Products, most recently as Wyeth’s Senior Vice President and Chief Financial Officer. Prior to this role, Mr. Norden was Executive Vice President and Chief Financial Officer of Wyeth Pharmaceuticals. Prior to his affiliation with Wyeth, Mr. Norden served as Audit Manager at Arthur Andersen & Co. Mr. Norden also serves on the boards of NanoString Technologies, a provider of life science tools for translational research and development of molecular diagnostic products; Royalty Pharma, a leader in the acquisition of revenue-producing intellectual property; and Univision, the leading media company serving Hispanic America. Mr. Norden is a former director of Welch Allyn, where he served until 2015; Lumara Health, where he served until 2014; and Human Genome Sciences, Inc., where he served until 2012. Mr. Norden’s background in finance and experience as a senior executive in the global healthcare and pharmaceutical industries make him a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
|
Former Executive Vice President and General Counsel of American Express Company (2003-2013). Since early 2014, Ms. Parent has served as Of Counsel at the law firm of Cleary Gottlieb Steen & Hamilton LLP. Ms. Parent brings deep experience in corporate governance and board matters, and compliance and risk management, gained during her tenure with American Express, where she worked extensively with the Audit, Compensation, and Nomination and Governance committees in her role as General Counsel. Ms. Parent also served on the operating committee and global management team of American Express from 2003 through 2013 and was a member of the board of American Express Centurion Bank through 2013. Ms. Parent currently serves on the Supervisory Board of Deutsche Bank AG. Ms. Parent holds a bachelor’s degree from Smith College and a law degree from Georgetown University Law Center. Ms. Parent’s experience in corporate governance, compliance and risk management, and global management makes her a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
ITEM 1 — ELECTION OF DIRECTORS
|
Dean of the College of Veterinary Medicine at Purdue University since 2006. Dr. Reed has more than 30 years of experience in animal health and veterinary medicine, gained during his tenure at Purdue University and Michigan State University, and as a Diplomate of the American College of Veterinary Pathologists and Charter Diplomate of the American College of Poultry Veterinarians. Dr. Reed has served as President of the Association of American Veterinary Medical Colleges, President of the American Association of Veterinary Laboratory Diagnosticians, President of the American Association of Avian Pathologists and Chair of the American Veterinary Medical Association Council on Research. He currently serves on the American Veterinary Medical Association’s Member Services Committee. Dr. Reed has a Doctor of Veterinary Medicine degree from Tuskegee University, and a Ph.D. in Veterinary Pathology from Purdue University. Dr. Reed’s medical expertise, his deep understanding of veterinary medicines and vaccines and his leadership experience in the animal health community make him a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
|
Former member of the Office of the Chairman of Morgan Stanley. Mr. Scully has nearly 35 years of experience in the financial services industry. He served as a member of the Office of the Chairman of Morgan Stanley from 2007 until his retirement in January 2009, where he had previously been Co-President of the firm, Chairman of global capital markets and Vice Chairman of investment banking. Prior to joining Morgan Stanley in 1996, he served as a Managing Director at Lehman Brothers and at Salomon Brothers Inc. He currently serves on the boards of KKR & Co. LP, a private equity and asset management firm, and Chubb Limited (formerly ACE Limited), a global property and casualty company, and is a Public Governor of FINRA, the Financial Industry Regulatory Authority. Previously, he served as a director of Bank of America Corporation, GMAC Financial Services and MSCI Inc. Mr. Scully holds a bachelor’s degree from Princeton University and an MBA from Harvard Business School. Mr. Scully’s global management experience, business development knowledge, and investor insights make him a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
56 | ZOETIS |
ITEM 1 — ELECTION OF DIRECTORS
|
Chairman Emeritus of Pfizer since July 2001. Mr. Steere joined Pfizer in 1959 and held various positions, including Chief Executive Officer from 1991 until 2000, Chairman of the board of directors from 1992 until 2001, and member of the board of directors until 2011. Mr. Steere also served on the boards of Dow Jones & Company, Inc. until 2007, MetLife, Inc. until 2010 and Health Management Associates, Inc. until 2014. Mr. Steere’s extensive business and management experience, his public company board service and his knowledge of the animal health business obtained through his service with Pfizer make him a valuable member of our Board.
Specific qualifications, experience, skills, and expertise:
ITEM 1 — ELECTION OF DIRECTORS
The following persons currently serve as our executive officers.
JUAN RAMÓN ALAIX
Age 64
Chief Executive Officer and Director
Information about Mr. Alaix is provided on page 52.
PAUL S. HERENDEEN
Age 60
Executive Vice President and Chief Financial Officer
Mr. Herendeen has served as our Executive Vice President and Chief Financial Officer since September 2014. He served as Executive Vice President and Chief Financial Officer of Warner Chilcott PLC, a specialty pharmaceutical company, from 2005 to 2013 and from 1998 to 2000, and was a director of Warner Chilcott in 2013 and from 1996 to 2000. From 2001 to 2004, Mr. Herendeen was Executive Vice President and Chief Financial Officer of MedPointe, Inc., a specialty pharmaceutical company acquired by Meda AB.
ALEJANDRO BERNAL
Age 43
Executive Vice President and Group President, Strategy, Commercial and Business Development
Mr. Bernal has served as our Executive Vice President and Group President, Strategy, Commercial and Business Development since May 2015. From October 2012 through April 2015 he served as our Executive Vice President and Area President of the Europe, Africa and Middle East region. He was Area President of the Europe, Africa and Middle East region for Pfizer’s animal health business unit from 2010 to 2012. Mr. Bernal joined Pfizer in 2000 and held various positions, including Area President of the Canada and Latin America region; Regional Director of Southwest and Central Latin America; Division Director for Central America and Colombia; Swine and Poultry Team Leader for Mexico; and Swine Product Manager for Northern Latin America for Pfizer Animal Health.
HEIDI C. CHEN
Age 49
Executive Vice President, General Counsel and Corporate Secretary
Ms. Chen has served as our Executive Vice President and General Counsel since October 2012, as our Corporate Secretary since July 2012 and was Vice President and Chief Counsel of Pfizer Animal Health from 2009 to 2012. Ms. Chen joined Pfizer in 1998 and held various legal and compliance positions, including lead counsel for Pfizer’s established products business unit.
CATHERINE A. KNUPP
Age 55
Executive Vice President and President of Research and Development
Dr. Knupp has served as our Executive Vice President and President of Research and Development since October 2012 and was Vice President of Pfizer’s Veterinary Medicine Research and Development business unit from 2005 to 2012. Dr. Knupp joined Pfizer in July 2001 and held various positions, including Vice President of Pfizer’s Michigan laboratories for Pharmacokinetics, Dynamics and Metabolism.
ROXANNE LAGANO
Age 51
Executive Vice President and Chief Human Resources Officer
Ms. Lagano has served as our Executive Vice President and Chief Human Resources Officer since October 2012. Ms. Lagano joined Pfizer in 1997 and held various positions, including Senior Vice President, Pfizer Global Compensation, Benefits and Wellness; and Senior Director, Business Transactions, Pfizer Worldwide Human Resources.
ITEM 1 — ELECTION OF DIRECTORS
CLINTON A. LEWIS, JR.
Age 49
Executive Vice PresidentThe Audit Committee is directly responsible for the appointment, compensation, retention and President of International Operations
Mr. Lewis has served as our Executive Vice President and President, International Operations since May 2015. From October 2012 through April 2015 he served as our Executive Vice President and President of U.S. Operations, and from 2007 to 2012 he was President of U.S. Operations for Pfizer Animal Health. Mr. Lewis joined Pfizer in 1988 and held various positions across sales, marketing and general management, including Senior Vice President of Sales, U.S.; General Manager, Pfizer Caribbean; and General Manager, U.S. Anti-Infectives.
KRISTIN C. PECK
Age 44
Executive Vice President and President of U.S. Operations
Ms. Peck has served as our Executive Vice President and President, U.S. Operations since May 2015. From October 2012 through April 2015, she served as our Executive Vice President and Group President. Ms. Peck joined Pfizer in 2004 and held various positions, including Executive Vice President, Worldwide Business Development and Innovation; Senior Vice President, Worldwide Business Development, Strategy and Innovation; Vice President, Strategic Planning; Chief of Staff to the Vice Chairman; and Senior Director, Strategic Planning. Ms. Peck also served as a member of Pfizer’s Executive Leadership Team.
ROMAN TRAWICKI
Age 52
Executive Vice President and President of Global Manufacturing and Supply
Mr. Trawicki has served as our Executive Vice President, Global Manufacturing and Supply since May 2015. He joined Zoetis in January 2015 as President, Global Manufacturing and Supply. From 2009 to 2014, he was GE Healthcare’s General Manager of Global Supply Chain for Medical Diagnostics, where he focused on diagnostics, injectable contrast media and nuclear medicines.
ITEM 2 — ADVISORY VOTE TO APPROVE EXECUTIVE
COMPENSATION (SAY ON PAY)
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are seeking your vote, on an advisory basis, on the compensation of our named executive officers as described in the Compensation Discussion and Analysis and the compensation tables and accompanying narrative disclosure, as provided on pages 19 to 49 of this proxy statement.
Pursuant to Section 14Aoversight of the Exchange Act of 1934 (the “Exchange Act”), an advisory vote oncompany’s independent registered public accounting firm. At least annually, the frequency of shareholder votes on executive compensation was conducted in connection with the 2014 Annual Meeting of Shareholders. At that meeting, our shareholders agreed, and our Board subsequently approved, that the advisory vote on executive compensation be held on an annual basis. Accordingly, and pursuant to Section 14A of the Exchange Act, we are giving you an opportunity to express your view of our 2015 executive compensation programs and policies. While the vote does not address any specific item of compensation and is not binding on the Board, the Compensation Committee will consider the outcome of the vote when making future executive compensation decisions.
Our Board of Directors believes that our executive compensation program incentivizes and rewards our leadership for increasing shareholder value and aligns the interests of our leadership with those of our shareholders on an annual and long-term basis.
|
ITEM 3 — RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee reviews our accounting firm’s qualifications, performance and independence in accordance with regulatory requirements and guidelines in order to determine whether to reappoint such firm as our independent registered public accounting firm.
Based on its review, the Audit Committee has appointed KPMG as our independent registered public accounting firm for the year ending December 31, 2016.2019. The Audit Committee and Board of Directors believe that the continued retention of KPMG as the company’s independent registered public accounting firm is in the best interests of the company and its shareholders. KPMG has served as our independent accounting firm forcontinuously since 2013, 2014 and 2015, and also audited our financial statements for 2011 and 2012, when we were wholly owned by Pfizer. We are asking shareholders to ratify the appointment of KPMG for 2016.2019. If shareholders fail to ratify the appointment, the Audit Committee will reconsider the selection of such firm. One or more representatives of KPMG will be present at the Annual Meeting andof Shareholders, will be given the opportunity to make a statement if he or she desires to do so, and will be available to respond to appropriate questions.
ITEM 3 RECOMMENDATION: OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTEFOR THE RATIFICATION OF THE APPOINTMENT OF KPMG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR
|
The following table sets forth the aggregate fees for professional services billed or to be billed by KPMG for the years ended December 31, 20152018 and 20142017 for the audits of our financial statements, and fees for other services rendered by KPMG during those periods.
2015
| 2014
| |||||||
Audit services
| $
| 13,298,150
|
| $
| 12,064,650
|
| ||
Audit-related services
|
| 125,000
|
|
| 82,000
|
| ||
Tax services
|
| 656,171
|
|
| 483,947
|
| ||
Total fees
| $
| 14,079,321
|
| $
| 12,630,597
|
|
2018
| 2017
| |||||||
Audit fees
|
|
$10,507,920
|
|
|
$9,965,280
|
| ||
Audit-related fees
|
|
63,100
|
|
|
93,100
|
| ||
Tax fees
|
|
1,493,433
|
|
|
1,263,304
|
| ||
All other fees
|
|
—
|
|
|
—
|
| ||
Total fees
|
|
$12,064,453
|
|
$
|
11,321,684
|
|
Audit servicesfees consist of fees for professional services for the audit or review of the company’s consolidated financial statements and for the audit of internal control over financial reporting, or for audit services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements, and comfort letters. Audit servicesfees includes reimbursement for directout-of-pocket travel and other sundry expenses, which were approximately $400,000$300,000 and $300,000 for the yearyears ended December 31, 2015.2018 and 2017, respectively.
ZOETIS 2019 PROXY STATEMENT | 57 |
AUDIT COMMITTEE MATTERS
Audit-related servicesfees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of the company’s consolidated financial statements and are not reported under Audit Services,fees, including audits of employee benefit plans, special procedures to meet certain statutory requirements and agreed-upon procedures related to contract compliance.
Tax servicesfees consist primarily of fees for tax advice and planning, and tax compliance including the review and preparation of statutory tax returns and other tax compliance related services.
ITEM 3 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
POLICY ONPRE-APPROVAL OF AUDIT FIRM SERVICES
In 2013, subsequent to our IPO and consistentConsistent with the requirements of the SEC and the Public Company Accounting Oversight Board (“PCAOB”) regarding auditor independence, theour Audit Committee had responsibilityis responsible for appointing, setting the compensation of and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee established a policy topre-approve all audit and permissiblenon-audit services provided by the independent registered public accounting firm.
Prior to engagement of the independent registered public accounting firm for the next year’s audit, management submits for Audit Committee approval a list of services and related fees expected to be rendered during that year within each of four categories of services:
● | Audit services include audit work performed on the financial statements, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits and discussions surrounding the proper application of financial accounting and/or reporting standards. |
● | Audit-related services are |
● | Tax services include all services, except those services specifically related to the audit of the financial statements, performed by the independent registered public accounting firm’s tax personnel, including tax analysis; |
● | All other services are those services not captured in the audit, audit-related or tax categories. The company generally does not request such services from the independent registered public accounting firm. |
Prior to engagement, the Audit Committeepre-approves independent registered public accounting firm services within each category, and the fees for each category are budgeted. The Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the originalpre-approval categories. In those instances, the Audit Committee requires specificpre-approval before engaging the independent registered public accounting firm. The Audit Committee may delegatepre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, anypre-approval decisions to the Audit Committee at its next scheduled meeting.
All of the services relating to the fees set forth in the above table for 20142017 and 20152018 werepre-approved by our Audit Committee in accordance with the above policy.
ZOETIS |
ITEM 3 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMAUDIT COMMITTEE MATTERS
A key role of the Audit Committee is to assist the Board in its oversight of the company’s financial reporting, internal controls and audit functions. As set forth in the written charter of the Audit Committee, management of the company is responsible for the preparation, presentation and integrity of the company’s financial statements, the company’s accounting and financial reporting principles, and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The company has a full-time Internal Audit department that reports to the Audit Committee and management. This department is responsible for objectively reviewing and evaluating the adequacy, effectiveness and quality of the company’s system of internal control.
The company’s independent registered public accounting firm, KPMG LLP (“KPMG”), is responsible for auditing the company’s financial statements in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”), expressing an opinion on the conformity of the consolidated financial statements to U.S. generally accepted accounting principles (“U.S. GAAP”), and expressing an opinion on the effectiveness of the company’s internal controls over financial reporting.
In the performance of its oversight function, the Audit Committee met with KPMG, management and the company’s Chief Audit Executive to assure that all were carrying out their respective responsibilities. Both KPMG and the Chief Audit Executive had full access to the Audit Committee, including regular meetings without management present. In addition, the Audit Committee has reviewed and discussed the company’s audited financial statements with management and KPMG. The Audit Committee also has discussed with KPMG the matters required to be discussed under the auditing standards of the PCAOB, including the matters required by PCAOB Auditing Standard No. 16. Furthermore, the Audit Committee (i) has received from KPMG the written disclosures and letter required by applicable requirements of the PCAOB regarding KPMG’s communications with the Audit Committee concerning independence; (ii) has discussed with KPMG their independence from the company and its management; and (iii) has considered whether KPMG’s provision ofnon-audit services to the company is compatible with maintaining the auditors’ independence. All audit andnon-audit services performed by KPMG must be specifically approved by the Audit Committee or a member thereof.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the company’s audited financial statements for the fiscal year ended December 31, 2015,2018, be included in the company’s 20152018 Annual Report on Form10-K that was filed with the SEC on February 24, 2016.14, 2019. The Audit Committee has also recommended, and the Board has approved the appointment of KPMG as our independent auditors for the fiscal year ending December 31, 2016.2019.
THE AUDIT COMMITTEE
Gregory Norden, Chair
Frank A. D’Amelio
Louise M. Parent
Robert W. Scully
William C. Steere, Jr.
ZOETIS |
The tabletables below showsshow how many shares of Zoetis common stock certain individuals and entities beneficially owned on February 29, 2016.March 15, 2019. These individuals and entities are (1) owners of more than 5% of the outstanding shares of our common stock, (2) our current directors, (3) the executive officers named in the Summary Compensation Table on page 40,46 and (4) all our current directors and executive officers as a group. A person has beneficial ownership of shares if the person has voting or investment power over the shares or the right to acquire such power within 60 days. Investment power means the power to direct the sale or other disposition of the shares. Each person has sole voting and investment power over the shares except asunless otherwise described below.
Name of Beneficial Owner
| Number of Shares Owned (1)(2)
| Percent of Class (%) (3)
| ||||||
5% Beneficial Owners:
| ||||||||
BlackRock, Inc.(4) | 33,730,813 | 6.79 | % | |||||
55 East 52nd Street | ||||||||
New York, NY 10022 | ||||||||
Pershing Square Capital Management, L.P.(5) | 41,823,145 | 8.41 | % | |||||
888 Seventh Avenue, 42nd Floor | ||||||||
New York, NY 10019
| ||||||||
The Vanguard Group(6) | 27,468,403 | 5.53 | % | |||||
100 Vanguard Blvd. | ||||||||
Malvern, PA 19355
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Directors and Named Executive Officers:
| ||||||||
Paul M. Bisaro
|
| —
|
|
| *
|
| ||
Frank A. D’Amelio
|
| 14,361
|
|
| *
|
| ||
William F. Doyle
|
| —
|
|
| *
|
| ||
Sanjay Khosla
|
| 9,361
|
|
| *
|
| ||
Michael B. McCallister
|
| 17,119
|
|
| *
|
| ||
Gregory Norden
|
| 13,188
|
|
| *
|
| ||
Louise M. Parent
|
| 9,361
|
|
| *
|
| ||
Willie M. Reed
|
| 4,603
|
|
| *
|
| ||
Robert W. Scully
|
| 9,361
|
|
| *
|
| ||
William C. Steere, Jr.
|
| 14,619
|
|
| *
|
| ||
Juan Ramón Alaix
|
| 55,916
|
|
| *
|
| ||
Paul S. Herendeen
|
| 71
|
|
| *
|
| ||
Kristin C. Peck
|
| 23,566
|
|
| *
|
| ||
Clinton A. Lewis, Jr.
|
| 20,440
|
|
| *
|
| ||
Catherine A. Knupp
|
| 18,580
|
|
| *
|
| ||
Directors and executive officers as a group (19 persons)
|
| 244,870
|
|
| *
|
|
OWNERSHIP OF OUR COMMON STOCK
Name of Beneficial Owner | Number of Shares Owned | Percent of Class (%) (1) | ||||||
5% Beneficial Owners: | ||||||||
BlackRock, Inc.(2) | 36,690,850 | 7.7% | ||||||
55 East 52nd Street | ||||||||
New York, NY 10055 | ||||||||
The Vanguard Group(3) | 36,371,124 | 7.6% | ||||||
100 Vanguard Blvd. | ||||||||
Malvern, PA 19355 |
(1) | Percentages based on 479,222,830 shares |
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| |||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| outstanding on March 15, 2019. |
(2) |
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| ||||
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|
Based on a Schedule 13G/A that BlackRock Inc. filed with the SEC on |
Based on a Schedule 13G/A that Vanguard Group Inc. filed with the SEC on February 11, |
60 | ZOETIS 2019 PROXY STATEMENT |
OWNERSHIP OF OUR COMMON STOCK
Name of Beneficial Owner | Common Stock(1) | Deferred Stock Units(2) | Vested Options(3) | RSUs Vesting Within 60 days(4) | Total | |||||||||||||||
Directors and Named Executive Officers: | ||||||||||||||||||||
Paul M. Bisaro |
|
8,044 |
|
|
— |
|
|
— |
|
|
— |
|
|
8,044 |
| |||||
Frank A. D’Amelio |
|
10,394 |
|
|
9,560 |
|
|
— |
|
|
— |
|
|
19,954 |
| |||||
Sanjay Khosla |
|
5,394 |
|
|
9,560 |
|
|
— |
|
|
— |
|
|
14,954 |
| |||||
Michael B. McCallister |
|
15,796 |
|
|
10,334 |
|
|
— |
|
|
— |
|
|
26,130 |
| |||||
Gregory Norden |
|
9,009 |
|
|
10,334 |
|
|
— |
|
|
— |
|
|
19,343 |
| |||||
Louise M. Parent |
|
5,079 |
|
|
9,560 |
|
|
— |
|
|
— |
|
|
14,639 |
| |||||
Willie M. Reed |
|
4,716 |
|
|
4,701 |
|
|
— |
|
|
— |
|
|
9,417 |
| |||||
Linda Rhodes |
|
5 |
|
|
— |
|
|
— |
|
|
— |
|
|
5 |
| |||||
Robert W. Scully |
|
6,432 |
|
|
9,560 |
|
|
— |
|
|
— |
|
|
15,992 |
| |||||
William C. Steere, Jr. |
|
12,421 |
|
|
10,334 |
|
|
— |
|
|
— |
|
|
22,755 |
| |||||
Juan Ramón Alaix |
|
96,712 |
|
|
— |
|
|
347,621 |
|
|
— |
|
|
444,333 |
| |||||
Glenn C. David |
|
12,882 |
|
|
— |
|
|
15,903 |
|
|
— |
|
|
28,785 |
| |||||
Kristin C. Peck |
|
46,165 |
|
|
— |
|
|
188,882 |
|
|
— |
|
|
235,047 |
| |||||
Clinton A. Lewis, Jr. |
|
55,477 |
|
|
— |
|
|
143,220 |
|
|
— |
|
|
198,697 |
| |||||
Catherine A. Knupp |
|
50,913 |
|
|
— |
|
|
28,563 |
|
|
— |
|
|
79,476 |
| |||||
Directors and executive officers as a group (19 persons)(5) |
|
423,589 |
|
|
73,945 |
|
|
871,007 |
|
|
�� — |
|
|
1,368,541 |
|
(1) | Represents shares of our common stock and includes shares held by executive officers in our 401(k) plan. |
(2) | Represents shares underlying vested deferred stock units and related dividend equivalent units held bynon-employee directors, which directors have a right to acquire within 60 days after leaving our Board. |
(3) | Represents shares underlying vested stock options granted to our executive officers pursuant to the Zoetis Inc. 2013 Equity and Incentive Plan. |
(4) | Represents shares underlying restricted stock units granted to our directors or executive officers pursuant to the Zoetis Inc. 2013 Equity and Incentive Plan that will vest within 60 days. |
(5) | The directors and executive officers as a group do not own more than 1% of the total outstanding shares based on 479,222,830 shares outstanding on March 15, 2019. |
SECTION 16(A)16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of 10% or more of a registered class of our common stockequity securities to file reports with the SEC about their ownership of and transactions in our common stock. Based solely on our records and other information furnished to us, we believe that all reports that were required to be filed by our directors and executive officers under Section 16(a) during 20152018 were timely filed.
ZOETIS |
TRANSACTIONS WITH RELATED PERSONS
POLICY CONCERNING RELATED PERSON TRANSACTIONS
Our Board of Directors has adopted a written policy regarding the review, approval and ratification of transactions with related persons. This policy provides that the Board’s Corporate Governance Committee will review each transaction, arrangement or relationship in which we are a participant if the amount involved exceeds $120,000 and a “related person” has a direct or indirect material interest. In general, “related persons” are our directors and executive officers, shareholders beneficially owning more than 5% of our outstanding stock, and their immediate family members. We refer to such a transaction as a “related person transaction.”
The policy calls for every proposed related person transaction to be reviewed by the Corporate Governance Committee and, if deemed appropriate, approved by the Committee. The Committee is required to consider all of the relevant facts and circumstances, and to approve only those transactions that, in light of known circumstances, it determines to be in ourZoetis’ best interests. If we become aware of an existing related person transaction which has not been reviewed and approved under the policy, the matter will be referred to the Committee, which will evaluate all available options, available, including ratification, revision or termination of the transaction.
Any member of the Corporate Governance Committee who has an interest in the transaction being reviewed may not participate in the review but may be counted towards a quorum of the Committee. The Chair of the Committee may review and approve a related person transaction if it is not practical or desirable to delay a review of a transaction until the next meeting of the committee,Committee, and then the Chair will report such approvalon the review to the Committee at its next regularly scheduled meeting.
A description and a copy of our related person transaction approval policy is available on our website at www.zoetis.com underAbout Us — Us—Corporate Governance.
The related person transaction approval policy was not in effect when we entered into the transactions and agreements with Pfizer described below. Any transactions contemplated by such agreements have been deemed to be approved and are not subject to the terms of this policy.Governance.
Since the beginning of 2013,During fiscal year 2018, we havedid not enteredenter into any related person transactions in which any of our directors or executive officers has a direct interest. However, our directors and former directors who are executive officers of Pfizer, including Frank A. D’Amelio, who currently serves on our Board, and Charles H. Hill, who served on our Board until June 24, 2013, may be deemed to have an indirect interest in our transactions with Pfizer, which are summarized below.
TRANSACTIONS BETWEEN ZOETIS AND PFIZER
Prior to 2013 we were a wholly-owned subsidiary of Pfizer. During 2013 Pfizer disposed of its entire ownership of our stock in two transactions, which are collectively referred to as the “separation.” On February 6, 2013, Pfizer effected an IPO of our Class A common stock, which represented approximately 19.8% of our common stock. As a result of the IPO and certain related transactions, Pfizer owned 100% of the outstanding shares of our Class B common stock and no shares of our Class A common stock, giving Pfizer approximately 80.2% of the economic interest and combined voting power of the outstanding shares of our common stock other than with respect to the election of directors and approximately 97.6% of the combined voting power of the outstanding shares of our common stock with respect to the election of directors. In May 2013, Pfizer announced an exchange offer whereby Pfizer shareholders could exchange a portion of their Pfizer common stock for Zoetis common stock. The exchange offer was completed on June 24, 2013, resulting in our full separation from Pfizer and the disposal of Pfizer’s entire ownership and voting interest in Zoetis.
ZOETIS |
TRANSACTIONS WITH RELATED PERSONS
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
In
We are providing this proxy statement to you in connection with the separation, immediately prior tosolicitation of proxies by the completionZoetis Board of Directors for the IPO we2019 Annual Meeting of Shareholders and Pfizer entered into certain agreements that provide a framework for any adjournment or postponement thereof. We mailed our ongoing relationship with Pfizer. Certain of the agreements summarized below areproxy materials on or about April 2, 2019 and filed as exhibits to our Annual Report on Form 10-K for 2012, which was filedproxy materials with the SEC on April 2, 2019.
We are holding our 2019 Annual Meeting of Shareholders at 10:00 a.m. Eastern Daylight Time on Wednesday, May 15, 2019, at the Hilton Short Hills in Short Hills, New Jersey. We invite you to attend in person.
We do not require tickets for admission to the meeting, but we do limit attendance to shareholders of record on the record date, March 28, 2013. The21, 2019, or their proxy holders. Please bring proof of your common stock ownership, such as a current brokerage statement, and photo identification. If you hold shares through a bank, broker, or other nominee (also known as shares held in “street name”), you must obtain a valid legal proxy, executed in your favor, from the holder of record if you wish to vote those shares at the meeting.
For security reasons, we will not permit cameras, camcorders, videotaping equipment, or other recording devices or audio equipment, or large packages, banners, placards, signs, props, costumes, live animals (other than service animals) or weapons in the meeting. Admission to the 2019 Annual Meeting of Shareholders will be on a first-come, first-served basis.
Only shareholders of record or their valid proxy holders may address the meeting.
We have arranged for a live audio webcast and a replay of our Annual Meeting of Shareholders to be accessible to the general public on the following summaries of these agreements are qualified in their entiretywebsite: http://investor.zoetis.com/events-presentations. Information from this website is not incorporated by reference to the full text of such agreements.into this proxy statement.
GLOBAL SEPARATION AGREEMENTHOW TO VIEW PROXY MATERIALS ONLINE
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 15, 2019
Our Proxy Statement and 2018 Annual Report are available online at www.edocumentview.com/ZTS.
We entered intoare furnishing proxy materials to our shareholders primarily via “Notice and Access” delivery. On or about April 2, 2019, we mailed to our shareholders a global separation agreement with Pfizer immediately priornotice of Internet availability of proxy materials. This notice contains instructions on how to the completion of the IPO that governs the relationship between Pfizeraccess our proxy statement and us following the IPO.2018 Annual Report and vote online.
Allocation of Assets and Liabilities
Notwithstanding the transfer of assets and assumption of liabilities that occurred prior to the completionYou will not receive a printed, paper copy of our separation from Pfizer,proxy materials unless you request one. If you are a registered shareholder, you may request a paper copy of our proxy materials by calling 1(866) 641-4276 or by sending an email, with your15-digit control number in the global separation agreement generally allocates assets and liabilitiessubject line, to Zoetis and Pfizer accordinginvestorvote@computershare.com. If you are a “beneficial owner” of our shares (as defined below), you may request a paper copy of your proxy materials at www.proxyvote.com, or by calling 1(800) 579-1639, or by sending an email, with your control number in the subject line, to the business to which such assets or liabilities relate. In general, Pfizer conveyed, leased or licensed to us ownership of all assets that are used exclusively or held for use exclusively in Pfizer’s animal health business and we have assumed all of Pfizer’s historical and future liabilities to the extent relating to, arising out of, or resulting from, the operation of the animal health business (whether before, on, or after the consummation of the IPO), including:
We and Pfizer agreed that our cash balance on the date of the completion of the IPO would be at least $300 million.
Indemnification
Generally, each party will indemnify, defend and hold harmless the other party and its subsidiaries (and each of their affiliates) and their respective officers, employees and agents from and against any and all losses relating to, arising out of or resulting from: (i) liabilities assumed by the indemnifying party and (ii) any breach by the indemnifying party or its subsidiaries of the global separation agreement and the other agreements described in this section (unless such agreement provides for separate indemnification). The global separation agreement also specifies procedures with respect to claims subject to indemnification.
Delayed Transfers and Further Assurances
To the extent transfers of assets and assumptions of liabilities related to our business were not completed prior to the date of the agreement because of a necessary consent or governmental approval or because a condition precedent to any such transfer was not satisfied or any related relevant fact was not realized, the parties will cooperate to effect such transfers or assumptions for agreed-upon consideration as promptly as practicable.
Each of the parties agreed to cooperate with the other party and use commercially reasonable best efforts to take or to cause to be taken all actions, and to do, or to cause to be done, all things reasonably necessary, proper or advisable under applicable law, regulations and agreements to consummate and make effective the transactions contemplated by the global separation agreement and the other agreements described in this section.
ZOETIS |
TRANSACTIONS WITH RELATED PERSONSINFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Mutual ReleasesHOW TO VOTE BY PROXY
Generally, each of PfizerYour vote is important and Zoetis releasedwe encourage you to vote as soon as possible, even if you plan to attend the other party from any and all liabilities. The liabilities released include liabilities arising under any contract or agreement, existing or arising from any acts or events occurring or failing to occur or any conditions existing before the completionmeeting in person. You may vote shares that you owned as of the IPO.close of business on March 21, 2019, the record date for the 2019 Annual Meeting of Shareholders.
Term
The global separation agreement will continue unless terminated by us and Pfizer, although certain rights and obligations may terminate upon the completion of the Exchange Offer.
TRANSITIONAL SERVICES AGREEMENTS
We entered into a transitional services agreement with Pfizer immediately prior to the completion of the IPO that granted us the right to continue to use certain of Pfizer’s services and resources related to our corporate functions, such as business technology, facilities, finance, human resources, public affairs and procurement. We refer to these services and resources, collectively,If you own shares registered directly in your name as the “Pfizer services.”
We pay Pfizer mutually agreed-upon fees for the Pfizer services, whichshareholder of record, you are based on Pfizer’s costs of providing the Pfizer services. During the two years following the completion of the IPO, the markup for these services was 0%a “record owner” and for the remainder of the term of the agreement, Pfizer may introduce a markup of 7%. A markup of 7% applied for 2015 and will apply for the remainder of 2016 for the Pfizer services which continue to be provided under this agreement. We are able to request good faith negotiations of the applicable fees if we believe that the fees materially over-compensate Pfizer for any of the Pfizer services and Pfizer has reciprocal rights if it believes the fees materially under-compensate Pfizer. Third-party costs are passed through to us at Pfizer’s or its affiliates’ cost.
Under the agreement, we are able to use the Pfizer services for a fixed term established on a service-by-service basis. However, we generally have the right to terminate a service earlier if we give noticeyour proxy directly to Pfizer. Partial reductionour vote tabulating agent. You may vote by proxy in the provision of any service requires Pfizer’s consent. In addition, either party is able to terminate the agreement due to a material breach by the other party, subject to limited cure periods.
In addition, we may, from time to time, agree to provide to Pfizer certain limited reverse transitional services with respect to the continued use of certain assets or resources that Pfizer conveyed to us prior to the completion of the IPO. To the extent such services are provided, Pfizer will pay us a mutually agreed-upon fee for these services, which fee will be based on our costs of providing the service to Pfizer.
TAX MATTERS AGREEMENT
Allocation of Taxes
In connection with the IPO, we entered into a tax matters agreement with Pfizer that governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. In general, under the agreement:following ways:
By telephone | By calling 1 (800)652-8683 (toll free) in the United States or Canada | 24 hours a day until 4:00 a.m., Eastern Daylight Time, on May 15, 2019 | ||||
By Internet | Online at www.investorvote.com/ZTS | 24 hours a day until 4:00 a.m., Eastern Daylight Time, on May 15, 2019 | ||||
By mail | By returning a properly completed, signed and dated proxy card | Allow sufficient time for us to receive your proxy card before the date of the meeting |
For telephone and Internet voting, you will need the15-digit control number included on your notice or on your proxy card or in thee-letter.
If you own shares in street name or in a Zoetis benefit plan, the institution holding the shares is the record owner and you are a “beneficial owner” of those shares. You will receive voting instructions from your broker, bank, or plan administrator, and you may direct them how to vote on your behalf by complying with their voting instructions. Their instructions will include a control number for telephone and Internet voting, and applicable deadlines.
If your shares are held through the Zoetis Savings Plan, the Zoetis Registered Retirement Savings Plan or the ZoetisNon-Registered Plan, you will receive a proxy card that will also serve as a voting instruction card for all the Zoetis shares you hold in such plan. If you do not vote your shares or specify your voting instructions on your voting instruction card, the administrator of the applicable savings plan will vote your shares in accordance with the terms of your plan. To allow sufficient time for voting by the administrator of the applicable savings plan, your voting instructions must be received by 10:00 a.m., Eastern Daylight Time, on May 13, 2019.
If you own shares registered directly in your name as the shareholder of record, you can revoke your proxy at any time before your shares are voted by:
● | Submitting a written revocation to our |
● | Submitting a later-dated proxy; |
● |
|
● | Voting in person at the meeting. |
If you hold your shares in street name, you must contact your broker, bank, or other nominee for specific instructions on how to change or revoke your vote.
Only the latest validly executed proxy that you submit will be counted.
If you are a shareholder of record and wish to vote your shares in person at the meeting, you should so notify our Corporate Secretary when you arrive at the meeting. If you hold shares in street name and wish to vote your shares in person at the meeting, you must obtain a valid legal proxy, executed in your favor, from the holder of record. To obtain a valid legal proxy, you should contact your bank, broker, or other nominee.
ZOETIS |
TRANSACTIONS WITH RELATED PERSONSINFORMATION ABOUT THE ANNUAL MEETING AND VOTING
If a majority of the outstanding shares of our common stock entitled to vote at the meeting are represented, either in person or by proxy, then we will have a quorum and be able to conduct the business of the 2019 Annual Meeting of Shareholders. At the close of business on March 21, 2019, the record date for the 2019 Annual Meeting of Shareholders, 479,147,357 shares of our common stock were outstanding and entitled to vote. Each share is entitled to one vote on each matter to be voted upon at the Annual Meeting of Shareholders. Abstentions and brokernon-votes will be counted as present for the purpose of determining whether a quorum is present for the meeting.
The table below describes the vote requirements and the effect of abstentions and brokernon-votes, as prescribed under our corporate governance documents and Delaware law, for the election of directors and the approval of the other Items on the agenda for the meeting.
Item | Vote Required | Effect of | ||
Election of Directors | Majority of the votes cast (i.e., more votes “For” than “Against”) | Not considered as votes cast and have no effect on the outcome | ||
Advisory Vote to Approve Our Executive Compensation (Say on Pay) | Majority of the votes cast | Not considered as votes cast and have no effect on the outcome | ||
Ratification of Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for | Majority of the | May be considered as votes cast |
* | A brokernon-vote occurs when a broker submits a proxy but does not vote on an Item because it is |
WeEFFECT OF NOT CASTING YOUR VOTE
If we have received a proxy specifying your voting choice, your shares will be voted in accordance with that choice.
If you are a registered shareholder and you do not generally entitled to receive payment from Pfizer in respect ofcast your vote, no votes will be cast on your behalf on any of our tax attributesthe Items at the Annual Meeting.
If you are a registered shareholder and sign and return a proxy card without specific voting instructions, or tax benefitsif you vote by telephone or via the Internet without indicating how you want to vote, your shares will be voted in accordance with the Board’s voting recommendations stated above.
If you hold your shares in street name, you will receive a voting instruction form that lets you instruct your bank, broker, or other nominee how to vote your shares. Under NYSE rules, if you do not provide voting instructions to your broker, the broker is permitted to exercise discretionary voting authority only on “routine” matters. The only “routine” item on this year’s Annual Meeting agenda is Item 3 — Ratification of Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm for 2019. If you hold your shares in street name, and you wish to have your shares voted on all items in this proxy statement, you must complete and return your voting instruction form.If you do not return your voting instruction form, your shares will not be voted on any reduction of taxes of Pfizer. Neither party’s obligations under the agreement are limited in amount or subject to any cap. The agreement also assigns responsibilities for administrative matters, such as the filing of returns, payment of taxes due, retention of records and conduct of audits, examinations or similar proceedings. In addition, the agreement provides for cooperation and information sharing with respect to tax matters.
Pfizer is primarily responsible for preparing and filing any tax return with respect to the Pfizer affiliated group for U.S. federal income tax purposes and with respect to any consolidated, combined, unitary or similar group for U.S. state or local or foreign income tax purposes or U.S. state or local non-income tax purposesItems, except that includes Pfizer or any of its subsidiaries, including those that also include us and/or any of our subsidiaries. We are generally responsible for preparing and filing any tax returns that include only us and/or any of our subsidiaries.
The party responsible for preparing and filing a given tax return generally has exclusive authority to control tax contests related to any such tax return. We generally have exclusive authority to control tax contests with respect to tax returns that include only Zoetis and/or any of our subsidiaries.
Preservation of the Tax-Free Status of Certain Aspects of the Separation
We and Pfizer intend for certain transactions related to our separation from Pfizer to qualify for tax-free treatment under U.S. federal, state and local tax law and/or foreign tax law.
We have agreed to certain covenants that contain restrictions intended to preserve the tax-free status of these transactions. Weyour broker may take certain actions prohibited by these covenants only if Pfizer receives a private letter ruling from the IRS or we obtain and provide to Pfizer an opinion from a U.S. tax counsel or accountant of recognized national standing, in either case acceptable to Pfizervote in its sole and absolute discretion to the effect that such action would not jeopardize the tax-free status of these transactions. We will be barred from taking any action, or failing to take any action, where such action or failure to act adversely affects or could reasonably be expected to adversely affect the tax-free status of these transactions, for all time periods. In addition, during the time period ending two years after the date of the exchange offer these covenants include specific restrictions on our:
We generally agreed to indemnify Pfizer and its affiliates against any and all tax-related liabilities incurred by them relating to the separation, the exchange offer and/or certain related transactions to the extent caused by an acquisition of our stock or assets or by any other action undertaken by us. This indemnification provision applies even if Pfizer has permitted us to take an action that would otherwise have been prohibited under the tax-related covenants described above.
RESEARCH AND DEVELOPMENT COLLABORATION AND LICENSE AGREEMENT
We entered into an R&D collaboration and license agreement with Pfizer immediately prior to the completion of the IPO. Under the agreement, nominated employees could request permission (known as “intent to access”) to conduct certain limited research activities. The most recent amendment allows nominated employees to openly discuss potential opportunities with Pfizer. If Zoetis requests intent to access for one of these opportunities and Pfizer grants it, then Zoetis can conduct permitted research activities to further assess the opportunity. To conduct further research and development on the class of compounds identified during intent to access, we must request permission (known as
ZOETIS |
TRANSACTIONS WITH RELATED PERSONSINFORMATION ABOUT THE ANNUAL MEETING AND VOTING
“approvalCOST OF PROXY SOLICITATION
We will pay the cost of preparing, assembling, printing, mailing and distributing these proxy materials. We will also bear the cost of soliciting votes on behalf of the Board of Directors. Zoetis will provide copies of these proxy materials to banks, brokerage houses, fiduciaries and custodians holding in principle”) from a joint steering committee described below and any approval will be subject to any restrictions specifiedtheir names shares of our common stock beneficially owned by the joint steering committee. Certain compoundsothers so that we began researching priorthey may forward these proxy materials to the completionbeneficial owners. Our directors, officers, or employees may solicit proxies or votes for us in person, or by mail, telephone, or electronic communication. They will not receive any additional compensation for these solicitation activities. We will enlist the help of banks, brokers and other nominee holders in soliciting proxies for the IPO were granted approval in principle asAnnual Meeting of the completionShareholders from their customers who are beneficial owners of the IPO.
Upon granting approval in principle, Pfizerour stock and will grantreimburse those firms for relatedout-of-pocket expenses. We have retained Saratoga Proxy Consulting, LLC, a professional proxy solicitation firm, to help us an optionsolicit proxies. Zoetis expects that it will pay Saratoga Proxy Consulting, LLC its customary fees, estimated to enter into a license agreement, which will be exercisable no later than five years after the approval in principle is granted. Prior to exercising the option, our license from Pfizer under the agreement will be non- exclusive, except with respect to patents and know-how that we develop, for which our license will be exclusive (except as to Pfizer and its affiliates). Accordingly,approximately $15,000 in the caseaggregate, plus reasonableout-of-pocket expenses incurred in the process of non-exclusive licenses, Pfizer could itself,soliciting proxies. Zoetis also has agreed to indemnify Saratoga Proxy Consulting, LLC against certain liabilities relating to or could enable a third party to, conduct research on compounds that arearising out of its engagement.
AVAILABILITY OF VOTING RESULTS
We will disclose the same or similar to those that we are researching. If we exercise the option and enter into the license agreement for a particular compound, our license to research, develop and commercialize products with such compounds for the animal health field will be exclusive, subject to any restrictions imposed by Pfizer and the joint steering committee. Except for certain compounds we began researching prior to the completion of the IPO, pursuant to any such license agreement, we will pay Pfizer an upfront payment, a milestone payment upon obtaining regulatory approvalvoting results in a major market country and royaltiesCurrent Report on net sales. Our obligationForm8-K to pay royalties will expire on a product-by-product and country-by-country basis upon the later of: (i) the expiration of the related patents and data exclusivity or (ii) ten years after the first commercial sale of such product.
During the term of the agreement, we are required to reimburse Pfizer’s and its affiliates’ costs in connectionbe filed with the agreement. CertainSEC within 4 business days following the 2019 Annual Meeting of such costs are paid inShareholders.
If you have any questions or require any assistance with voting your shares, please contact our proxy solicitor at the form of an annual access fee and others are invoiced on a quarterly basis. The joint steering committee is comprised of an equal number of representatives from each party and acts by consensus. If consensus cannot be reached, the matter will be referred to each party’s alliance manager to propose potential solutions. If the alliance managers fail to propose such a solution, the matter will be referred to senior executives of each party. If the senior executives do not resolve the matter, Pfizer will have the final decision-making authority.telephone numbers or address set forth below:
Pfizer will own all intellectual property invented or generated under the agreement (subject to any third-party rights) and has sole discretion regarding filing, prosecuting and maintaining such intellectual property, subject to our rights, in certain instances, to request that Pfizer file or continue to maintain patents at our cost. Pfizer will have sole discretion regarding the enforcement of any intellectual property licensed to us under the agreement.Saratoga Proxy Consulting, LLC
We have confidentiality and other obligations related to the security of intellectual property and other confidential information and materials. If Pfizer reasonably believes that we violated these provisions, Pfizer is able to deny our access to such intellectual property and other confidential information and materials.520 Eighth Avenue, 14th Floor
The term of the agreement is seven years, subject to extension by mutual agreement. The agreement will terminate with respect to particular compounds if intent to access or approval in principle is denied or we fail to exercise our license option. Pfizer is also able to terminate our rights under the agreement or any related license agreement (as applicable) with respect to any compound for which approval in principle has been granted (including compounds for which we have exercised the option and entered into a license agreement) if Pfizer pays us an agreed-upon amount which is intended to reflect the fair market value of the compound under our license. This right will expire on a compound-by-compound basis when we submit a regulatory approval application for each compound in a major market country and will not apply to compounds for which approval in principle was granted prior to the completion of the IPO.New York, NY 10018
In the event of either party’s uncured material breach, the other party has the right to terminate the agreement. If the material breach concerns any security measures or confidentiality or use restrictions and such breach is the result of bad faith, gross negligence or willful misconduct, such breach will be deemed to not be curable and, in addition to the agreement terminating, Pfizer will be able to terminate any license agreements that we have entered into after exercising our option (except to the extent any license agreement relates to a commercial product).Call Collect:212-257-1311
The agreement will terminate automatically if we enter into an agreement resulting in our change of control, we assign or another party assumes this agreement without Pfizer’s consent or we are otherwise acquired by a third party, or if either party becomes insolvent or certain other events related to our bankruptcy or indebtedness occur. If we acquire a certain interest in, or assets of, a human health company, Pfizer will be able to terminate the agreement, and if Pfizer
ZOETIS |
TRANSACTIONS WITH RELATED PERSONS
acquires or is acquired by an animal health business of a certain size, either party will be able to terminate the agreement. Following expiration and termination for specific reasons, we will be granted a non-exclusive license to any intellectual property that we developed under the agreement to conduct research in the animal health field, subject to certain exclusions (which exclusions will include the compounds that we researched and developed under the agreement and other compounds designated by Pfizer on a case-by-case basis). Except as set forth above, license agreements entered into pursuant to the R&D Collaboration and License Agreement will not terminate if the R&D Collaboration and License Agreement terminates.
EMPLOYEE MATTERS AGREEMENT
We entered into an employee matters agreement with Pfizer immediately prior to the completion of the IPO. The employee matters agreement governs Pfizer’s, our and the parties’ respective subsidiaries’ and affiliates’ rights, responsibilities and obligations post-IPO with respect to the following matters in connection with the animal health business:
Employment
We offered employment to employees who were providing services to our business and who did not otherwise transfer to our entities by operation of law. To the extent that severance obligations were triggered by such transfers, Pfizer administered the severance pay obligations in accordance with the terms and conditions of the applicable Pfizer severance pay plan or policy. Our employees who were providing services to our business and were on long-term disability on the applicable employee transfer date will remain employees of Pfizer to the extent permissible under applicable law, collective bargaining agreements, trade union agreements or work council agreements.
Benefit Plans Generally
Prior to the completion of the IPO, except to the extent provided in respect of certain jurisdictions, we became a participating employer in the Pfizer benefit plans (including certain legacy benefit plans). Generally, we ceased to be a participating employer in the Pfizer plans and adopted our own benefit plans on a date or dates following the completion of the IPO, which was determined by the parties, which we refer to as the “Plan Transition Date,” and which varied by benefit plan and by country. An appropriate allocation of our costs incurred under Pfizer benefit plans prior to the Plan Transition Date was charged back to us.
Credited Service
In general, our employee benefit plans recognize service at Pfizer for those colleagues who were employed by Zoetis as of June 24, 2013, except as otherwise specified in the employee matters agreement.
Defined Benefit and Retiree Medical Plans
Our employees ceased to participate in the Pfizer U.S. qualified defined benefit pension plans and the U.S. retiree medical plan effective December 31, 2012, and liabilities allocable to our employees under such plans were retained by Pfizer. Our employees under the U.S. qualified defined benefit pension plans became 100% vested in their accrued benefits as of December 31, 2012. Pfizer will continue crediting certain employees’ service with us generally through December 31, 2017 (or termination of employment from us, if earlier) for certain early retirement benefits with respect to the defined benefit pension plans, and for plan eligibility with respect to the retiree medical plan. Outside of the United States, Pfizer transferred to us its defined benefit plan pension assets and liabilities associated with the
TRANSACTIONS WITH RELATED PERSONS
employees transferring to us in the certain countries as described in the applicable local separation agreements or the addendum to the Employee Matters Agreement. In certain countries, liabilities with respect to past service with Pfizer were retained by Pfizer.
Non-Qualified Defined Benefit Pension Plans
We ceased to be a participating employer in the Pfizer U.S. non-qualified defined benefit pension plans on December 31, 2012, and Pfizer will continue crediting certain employees’ service with us through December 31, 2017 (or termination of employment from Zoetis if earlier), for certain early retirement benefits. Our employees under the U.S. non-qualified defined benefit pension plan became 100% vested in their accrued benefits as of December 31, 2012. Pfizer has retained the liabilities allocable to our employees under the U.S. non-qualified pension plans.
Defined Contribution Plans
The employee matters agreement provided for the transfer of assets and liabilities with respect to Zoetis employees from the U.S. Pfizer qualified defined contribution plans to a U.S. qualified defined contribution plan established by us as soon as practicable following the date that we establish such qualified defined contribution plan, except to the extent that a Zoetis employee terminates employment prior to the Plan Transition Date. Zoetis employees under the Pfizer qualified defined contribution benefit plans were 100% vested in their account balances as of the Plan Transition Date. Outside of the United States, Pfizer transferred to our defined contribution plans assets and liabilities allocable to the employees transferring to Zoetis in the certain countries as described in any applicable local separation agreement or the addendum to the Employee Matters Agreement.
Non-Qualified Defined Contribution Plans
With respect to the supplemental savings plan in the United States, Pfizer transferred liabilities allocable to the employees who transferred to Zoetis as described in the employee matters agreement. Such transfer took place following the date that we established a non-qualified supplemental savings plan. Liabilities allocable to Zoetis employees under other Pfizer nonqualified plans have been retained by Pfizer.
Health and Welfare Plans
Generally, we have established or continued (or assumed the obligation of contributing to) health and welfare plans or arrangements in every country where we have employees. Health and welfare liabilities allocable to our U.S. employees, to the extent such liabilities are incurred prior to the date that we established our own health and welfare plans in the United States, were retained by Pfizer and the allocated cost for these plans were charged to us.
MASTER MANUFACTURING AND SUPPLY AGREEMENTS
We have entered into two master manufacturing and supply agreements with Pfizer. Under the first of these agreements, Pfizer manufactures and supplies us with animal health products, which are referred to as the “Pfizer-supplied products.” Under the second agreement, we manufacture and supply Pfizer with human health products, which are referred to as the “Zoetis-supplied products.” Only Zoetis’ Kalamazoo manufacturing site manufactures Zoetis-supplied products. Following the termination of the lease agreements related to our Guarulhos manufacturing site and subject to the receipt of various regulatory approvals in Brazil, the Guarulhos site may also manufacture Zoetis-supplied products pursuant to this agreement.
Under the agreement related to the Pfizer-supplied products, our supply price is Pfizer’s costs plus a percentage markup. Subject to limited exceptions, during the two years following the completion of the IPO, the markup was 0% and, for the remainder of the term of the agreement, the markup will be 15%. The cost of each Pfizer-supplied product is subject to annual review, and there is a year-end true-up mechanism with respect to differences between budgeted and actual amounts. The agreement related to the Zoetis-supplied products contains reciprocal payment provisions pursuant to which Pfizer will make payments related to the Zoetis-supplied products.
TRANSACTIONS WITH RELATED PERSONS
These agreements will expire five years following the completion of the IPO, with limited exceptions. In addition, these agreements require Pfizer or us, as the case may be, to use commercially reasonable efforts to develop the capabilities and facilities to manufacture the applicable products on its own behalf or to establish alternative sources of supply reasonably prior to expiration of the applicable agreement. The party purchasing products under the agreement may terminate the agreement with respect to any manufacturing site upon at least six months’ prior notice. Also, either party may terminate the agreement for customary reasons, including for a material breach by the other party (subject to a 90-day cure period) or with respect to the affected site for a force majeure event affecting the other party that continues for at least 30 days.
ENVIRONMENTAL MATTERS AGREEMENT
We entered into an environmental matters agreement with Pfizer immediately prior to the completion of the IPO. The agreement sets forth standards for each party’s performance of remedial actions for liabilities allocated to each party under the global separation agreement, addresses our substitution for Pfizer with respect to animal health assets and remedial actions allocated to us (including substitution related to, for example, permits, financial assurances and consent orders), allows our conditional use of Pfizer’s consultants and contractors to assist in the conduct of remedial actions, and addresses the exchange of related information between the parties.
The agreement also sets forth standards of conduct for remedial activities at the co-located facilities: Guarulhos, Brazil; Catania, Italy; Hsinchu, Taiwan; and Kalamazoo, Michigan in the United States. In addition, the agreement sets forth site-specific terms to govern conduct at several of these co-located facilities. The agreement lasts perpetually; however, the agreement will terminate automatically if the global separation agreement terminates.
SCREENING SERVICES AGREEMENT
We entered into an agreement with Pfizer immediately prior to the completion of the IPO, pursuant to which we provide certain high throughput screening services to Pfizer’s R&D organization. Pfizer will pay us agreed-upon fees for these services.
INTELLECTUAL PROPERTY LICENSE AGREEMENTS
Immediately prior to the completion of the IPO, we entered into patent and know-how license agreements with Pfizer, pursuant to which: (i) Pfizer and certain of its affiliates have licensed to us and certain of our affiliates the right to use certain intellectual property rights in the animal health field; and (ii) we have licensed to Pfizer and certain of its affiliates certain rights to intellectual property in all fields outside of the animal health field.
Patent and Know-How License Agreement (Pfizer as Licensor)
Immediately prior to the completion of the IPO, we entered into a patent and know-how license agreement with Pfizer. Pursuant to the agreement, Pfizer granted us a royalty-free, fully paid-up, sublicensable (subject to certain restrictions), exclusive, worldwide license to certain patents and know-how to research, develop and commercialize certain commercial, development-stage, and early stage products in the field of animal health. We do not have rights to use most of these patents and know-how with any compounds other than those for which we are expressly licensed.
Pfizer also granted us a royalty-free, fully paid-up, sublicensable (subject to certain restrictions) non-exclusive, worldwide license to certain other Pfizer patents and know-how to research, develop and commercialize certain other products in the animal health field. Under the agreement, we also have been granted a royalty-free, fully paid-up, sublicensable (subject to certain restrictions) non-exclusive, worldwide license for the animal health field to certain know-how that is not compound-related or product-related.
Pfizer also granted us a sublicense to certain third-party intellectual property for such uses as agreed upon by the parties, the terms of which are royalty-free and fully paid-up as between us and Pfizer, but otherwise vary based on
TRANSACTIONS WITH RELATED PERSONS
each third-party agreement. With respect to certain of such third-party intellectual property, Pfizer will have a right of first negotiation with us for an exclusive license to improvements to such third-party intellectual property and related patents that we own.
Pfizer controls filing, prosecuting and maintaining patents licensed to us, except that at our cost we have the right to file patent applications covering certain know-how licensed to us and certain know-how invented by us. We will grant Pfizer a royalty-free, fully paid-up, sublicensable, exclusive license for the human health field to any such patent applications and patents that issue from these patent applications that we own. We are required to pay certain costs associated with filing and maintaining the patents exclusively licensed to us, or our license will convert to a non-exclusive license.
Pfizer will have the right to forgo, and cease paying for, prosecution and maintenance of the licensed patents and it may delegate responsibility to prosecute and maintain exclusively licensed patents to us or assign such patents to us. If Pfizer assigns such patents to us, we will grant Pfizer a royalty-free exclusive license to the assigned patents in all fields of use, but this license will exclude (and we will retain) all rights that Pfizer exclusively licensed to us under the agreement before assigning the patents to us.
Pfizer will have the right to enforce against third-party infringements all patents licensed to us and patents that it may later assign to us if the infringement is within the scope of Pfizer’s license to such assigned patents, unless Pfizer does not pay for certain prosecution and maintenance costs and the patents are exclusively licensed or assigned to us, in which case, we will have rights to enforce such patents against third-party infringements within the scope of our exclusive rights. We also will have the right to enforce new patents that we file and own.
The agreement expires, with respect to licensed patents, upon expiration of the last to expire patent right that Pfizer owns, with respect to third-party intellectual property, upon expiration or termination of the agreement pursuant to which such third-party intellectual property is licensed to Pfizer and with respect to know-how that Pfizer owns, upon the thirtieth anniversary of the agreement. Upon expiration of the agreement in its entirety, our licenses to know-how owned by Pfizer convert to fully paid-up, perpetual licenses. We have the right to terminate the agreement in whole or in part upon prior written notice to Pfizer. In the event of either party’s uncured material breach, the other party has the right to terminate the agreement. The agreement also provides that the insolvency of either party and the occurrence of certain other events related to each party’s bankruptcy or indebtedness also results in automatic termination. In addition, in circumstances where Pfizer has an interest in the licensed intellectual property in connection with its human health development programs, our rights to use the licensed intellectual property are restricted and/or in limited instances, subject to Pfizer’s right to terminate such license at will. Pfizer also has the right to terminate any third-party agreements under which it is sublicensing rights to us.
Patent and Know-How License Agreement (Zoetis as Licensor)
Immediately prior to the completion of the IPO, we entered into a patent and know-how license agreement with Pfizer. Pursuant to the agreement, we granted Pfizer a royalty-free, fully paid-up, sublicensable (subject to certain restrictions), exclusive license to all patents and know-how that we own or have been licensed from third parties as of the IPO (excluding any patents and know-how licensed from third parties to which our rights are limited to animal health) for Pfizer to research, develop, and commercialize any products throughout the world in all fields except the animal health field. Under the agreement, we also granted Pfizer a royalty-free, fully paid-up, perpetual, sublicensable (subject to certain restrictions), non-exclusive license to certain patents filed within a certain period of time following the IPO that cover know-how that we own. Pfizer is permitted to use such patents in connection with its research, development, and commercialization of products outside the animal health field.
Upon notice from Pfizer, we are required to file patent applications covering know-how licensed to Pfizer or continue to prosecute and maintain patents that have already been filed. In each case, Pfizer reimburses us for related costs, which vary depending on whether patents are filed at the time of Pfizer’s notice. We have the sole right to enforce patents that are licensed to Pfizer under this agreement in the animal health field. Pfizer has the right to enforce the licensed patents in all other fields (including the human health field) only if it reimburses us for certain costs related to prosecution and maintenance of such patents. If Pfizer decides that it will not reimburse us for such costs, we will have the right to enforce in such fields.
TRANSACTIONS WITH RELATED PERSONS
The agreement expires, with respect to licensed patents that we own, upon the expiration of the last to expire patent right, with respect to third-party intellectual property, upon the expiration or termination of the agreement pursuant to which such third-party intellectual property is licensed to us and with respect to know-how that we own, upon the thirtieth anniversary of the agreement. Upon expiration of the agreement in its entirety, Pfizer’s licenses to any know-how owned by us will convert to fully paid-up, perpetual licenses. Pfizer has the right to terminate the agreement in whole or in part upon prior notice to us. In the event of either party’s uncured material breach, the other party has the right to terminate the agreement. The agreement also provides that the insolvency of either party and the occurrence of certain other events related to bankruptcy or indebtedness also results in automatic termination. Upon termination of the agreement, all licenses terminate.
Trademark and Copyright License Agreements
Immediately prior to the completion of the IPO, we entered into a trademark and copyright license agreement with Pfizer, pursuant to which Pfizer granted us rights with respect to certain trademarks and copyrighted works. Specifically, Pfizer granted us an exclusive, worldwide, royalty-free, perpetual and fully paid-up license to use certain scheduled trademarks in the same manner that we used such trademarks as a business unit of Pfizer and in connection with any modifications or line extensions of products with which such trademarks were used as a business unit of Pfizer. We have the right to sublicense such trademarks to third parties with Pfizer’s prior written consent, which Pfizer cannot unreasonably withhold, but such consent is not required for sublicenses granted to our customers and distributors in the ordinary course of business. We do not have the right to register domain names that incorporate the trademarks or use the trademarks in the address of any social media or use the trademarks in any trade name, corporate name or “doing business as” name.
Pfizer also granted us a non-exclusive, worldwide, royalty-free, perpetual and fully paid-up license to use, copy and distribute to ourselves and our affiliates copyrights in certain policies and guidelines, and any related derivative works, that are necessary for us to continue to conduct certain aspects of our business in the same manner as they were conducted when we were a business unit of Pfizer.
The agreement will terminate on a trademark-by-trademark or copyrighted work-by-copyrighted work basis upon our written notice to Pfizer that we have ceased bona fide commercial use of such trademark or copyrighted work and it will terminate as to one of our affiliates if such affiliate ceases being an affiliate of ours. We granted a similar license to Pfizer to use the Aureomycin trademark and variants thereof in connection with Pfizer’s human health business.
BRAZIL LEASE AGREEMENTS
In September 2012, Pfizer’s subsidiary, Laboratórios Pfizer Ltda. (“Laboratórios”), as lessee, and our subsidiary, PAH Brasil Participações Ltda. (“PAH Brasil”), as lessor, entered into: (i) the Private Instrument of Non Residential Lease Agreement and Others, which establishes and regulates the use of the real property at our Guarulhos, Brazil facility (the “Real Property Lease”) and (ii) the Private Instrument of Lease Agreement Movable Assets and Others, which establishes the terms of the use of the fixed assets at the same site (the “Fixed Asset Lease” and, together with the Real Property Lease, the “Brazil Leases”). As a result of a merger of PAH Brasil into Fort Dodge Saúde Animal Ltda. (“Fort Dodge Brazil”) with Fort Dodge Brazil surviving, the Brazil Leases were assigned to Fort Dodge Brazil, later renamed Zoetis Indústria de Produtos Veterinários Ltda. (“Zoetis Brazil”).
Rent, Rent Adjustment and Penalty
The monthly rent under the Brazil Leases corresponds to the amount of depreciation of the fixed assets and real property covered by the leases. During the first month that the leases were in effect, the rent under the Fixed Asset Lease was R$752,459 (approximately $0.4 million) and the rent under the Real Property Lease was R$479,977 (approximately $0.2 million). In subsequent periods, the parties will adjust these amounts to reflect the anticipated monthly depreciation amount, and previously paid amounts may be adjusted if the amounts paid differ from actual depreciation. Late payments under Brazil Leases are subject to an adjustment plus a penalty equal to 2% and interest on arrears of 1% per month. A breach of either of the Brazil Leases that is not cured within 30 days from receipt of
TRANSACTIONS WITH RELATED PERSONS
notice thereof is subject to a penalty equal to three monthly rent payments under the applicable lease. In addition to the rent, Laboratórios will pay expenses related to water consumption, sewerage and electricity as well as all taxes levied on the property.
Covenants and Obligations
Laboratórios is required to maintain the fixed assets and real property in the same condition as they were received, except for normal wear and tear and any improvements thereon, and is responsible for the repair of any damage. Improvements on the existing fixed assets and investments in new fixed assets are permitted under the Fixed Asset Lease, provided Fort Dodge Brazil is given notice thereof and consents to Laboratórios’ proposal. Costs for such improvements are paid or reimbursed by Fort Dodge Brazil unless the fixed asset is used solely to manufacture human health products, in which case the cost shall be the responsibility of Laboratórios and, in the event a new asset is purchased, exclusive ownership shall be retained by Laboratórios. The Real Property Lease also permits improvements on the property to be implemented by Laboratórios at its sole and entire discretion. Laboratórios is entitled to reimbursement for any related costs as long as Fort Dodge Brazil consented to the implementation of the improvements.
Term and Termination
The Brazil Leases will last for a period of five years commencing on September 28, 2012. The Real Property Lease provides for automatic renewals for successive periods of one year at Laboratórios’s discretion, unless notice of non-renewal is provided by Laboratórios. In the event that the Real Property Lease is extended, the Fixed Asset Lease shall be extended for the same period by executing an amendment to such lease.
The Brazil Leases terminate at any time if agreed upon by the parties. The Brazil Leases also terminate upon satisfaction of certain regulatory conditions that will permit the animal health manufacturing operations of Laboratórios to be transferred to Zoetis Brazil and the human pharmaceutical manufacturing operations Laboratórios to be transferred to another facility of Laboratórios or party contracted by the latter. The Fixed Asset Lease automatically terminates upon the termination of the Real Property Lease or, subject to certain conditions, the master manufacturing and supply agreement that provides for Zoetis-supplied products. The Real Property Lease automatically terminates upon the termination of the Fixed Asset Lease or the expropriation of the property and cannot be terminated by Zoetis Brazil prior to termination of the master manufacturing and supply agreement that provides for Zoetis-supplied products. In the event the property is partially or completely destroyed, Laboratórios has the option to terminate the Real Property Lease.
MUMBAI, INDIA INTERIM LEASE AGREEMENT
We entered into an interim lease agreement with respect to our R&D facility in Mumbai, India. We will pay Pfizer a mutually agreed-upon rent for the facility and we anticipate the lease would expire upon the completion of the transfer of the Mumbai, India facility from Pfizer.
INFORMATION ABOUT SUBMITTING SHAREHOLDER PROPOSALS AND OUR 2020 ANNUAL MEETING
AND OUR 2017 ANNUAL MEETING
Under ourBy-laws, shareholders must follow certain procedures to nominate a person for election as a director at an annual or special meeting, or to propose an item of business at an annual meeting. Under these advance notice procedures, shareholders must submit the proposed nominee or item of business by delivering a notice to our Corporate Secretary at our principal executive offices. We must receive the notice within the following deadlines:
● | We must receive notice of a shareholder’s intention to introduce a nomination or proposed item of business for an annual meeting not less than 90 days |
● | However, if we hold the |
● | If we hold a special meeting to elect directors, we must receive a shareholder’s notice of intention to introduce a nomination no later than the close of business on the tenth day after the earlier of the date we first provide notice of the meeting to shareholders or announce it publicly. |
OurBy-laws provide that notice of a proposed nomination must include certain information about the shareholder and the nominee, as well as a written consent of the proposed nominee to serve if elected. A notice of a proposed item of business must include a description of the proposed business and the reason for bringing it to the meeting, any material interest of the proposing shareholder in the business and certain other information about the shareholder. In addition, the shareholder making the proposal must be a shareholder of record on both the date he or shesuch shareholder provides the notice and the record date for the meeting, and either the shareholder or his or hersuch shareholder’s qualified representative must appear in person at the meeting to present the nomination or proposed item of business.
Any notice that is received outside of the window specified above for proposed items of business, or that does not include all of the information required by ourBy-laws or comply with the other requirements of ourBy-laws, will not be brought before the meeting.
Additionally, we recently adoptedourBy-laws contain proxy access provisions to permit eligible shareholders — including qualifying groups of up to 20 shareholders that have continuously owned at least 3% of the company’s outstanding common stock for at least three years — to nominate director nominees constituting up to the greater of two directors or 20% of the number of directors serving on the Board, and have such nominees included in the company’s annual meeting proxy materials, provided that the shareholder(s) and the nominee(s) satisfy the requirements specified in ourBy-laws. Notice of proxy access director nominees must be received by our Corporate Secretary at our principal executive offices not less than 90 days norbut no more than 120 days before the first anniversary of the prior year’s annual meeting. Under this provision, we must receive proxy access nominations notices pertaining to the 20172020 Annual Meeting no earlier than January 12, 2017,16, 2020, and no later than February 11, 2017.15, 2020.
Under SEC rule Rule14a-8, if a shareholder wants us to include a shareholder proposal in our proxy statement for the 20172020 Annual Meeting, our Corporate Secretary must receive the proposal at our principal executive offices no later than December 2, 2016,4, 2019, which is 120 calendar days before theone-year anniversary of the release date of our proxy statement for the 20162019 Annual Meeting. If we change the date of our 20172020 meeting by more than 30 days from theone-year anniversary of the 20162019 meeting, then the deadline is a reasonable time before we print and send our proxy materials for the 20172020 meeting. Any such proposal must comply with all of the requirements of SEC Rule14a-8.
ZOETIS 2019 PROXY STATEMENT | 67 |
INFORMATION ABOUT SUBMITTING SHAREHOLDER PROPOSALS AND OUR 2020 ANNUAL MEETING
Shareholders should mail all nominations and proposals for our 20172020 Annual Meeting to our Corporate Secretary at Zoetis Inc., 100 Campus Drive, Florham Park,10 Sylvan Way, Parsippany, NJ 07932.07054. You may obtain a copy of ourBy-laws from our Corporate Secretary at the same address. OurBy-laws are also available online, as Exhibit 3.2 to our 2015 Annual Report on Form10-K, which was filed with the SEC on February 24, 2016.
INFORMATION ABOUT SUBMITTING SHAREHOLDER PROPOSALS AND OUR 2017 ANNUAL MEETING
To reduce costs and reduce the environmental impact of our Annual Meeting,be environmentally responsible, we have adopted anSEC-approved procedure called “householding.” Under this procedure, we may deliver a single copy of the notice of Internet availability of proxy materials and, if applicable, this Proxy Statementproxy statement and the Annual Report, to multiple shareholders who share the same address unless we have received contrary instructions from an affectedimpacted shareholder at that address. Shareholders who participate in householding will continue to receive separate proxy cards. Upon written or oral request, we will promptly deliver a separate copy of the notice of Internet availability of proxy materials and, if applicable, this Proxy Statementproxy statement and the Annual Report, to any shareholder at a shared address to which the company delivered a single copy of any of these documents. If you are a registered shareholder and would like to enroll in this service or receive individual copies of this year’s and/or future proxy materials, please contact our Corporate Secretary by mail at Zoetis Inc., 100 Campus Drive, Florham Park,10 Sylvan Way, Parsippany, NJ 07932,07054, or by phone at(973) 822-7000. If you hold shares in street name or in a Zoetis benefit plan, you may contact your brokerage firm, bank, broker-dealer, benefit plan provider, or other similar organization to request information about householding.
www.zoetis.com
ZOETIS |
FOR ANIMALS. FOR HEALTH. FOR YOU.
ZOETIS DISCOVERS, DEVELOPS, MANUFACTURES AND COMMERCIALIZES A
DIVERSE PORTFOLIO OF ANIMAL HEALTH MEDICINES AND VACCINES DESIGNED
TO MEET THE REAL-WORLD NEEDS OF VETERINARIANS AND THE LIVESTOCK
FARMERS AND COMPANION ANIMAL OWNERS THEY SUPPORT.
Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. | ||||||||||||||
Votes submitted electronically must be received by 4:00 a.m., (Eastern Time), on May 15, 2019 | ||||||||||||||
Online Go towww.investorvote.com/ZTS or scan the QR code – login details are located in the shaded bar below. | ||||||||||||||
Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada | ||||||||||||||
Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. | Save paper, time and money! Sign up for electronic delivery at www.investorvote.com/ZTS |
q IFVOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q |
A | Proposals – The Board recommends a voteFOR all the nominees listed andFOR Proposals 2 and 3. |
1. | Election of Directors: |
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For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||||||||||||||||||
01 - Juan Ramón Alaix | ☐ | ☐ | ☐ | 02 - Paul M. Bisaro | ☐ | ☐ | ☐ | 03 - Frank A. D’Amelio | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||||
04 - Michael B. McCallister | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||||||||||||
For | Against | Abstain | For | Against | Abstain | |||||||||||||||||||||||||||||||||||||||||
2. | Advisory vote to approve our executive compensation (Say on Pay). | ☐ | ☐ | ☐ | 3. Ratification of appointment of KPMG LLP as our independent registered public accounting firm for 2019. | ☐ | ☐ | ☐ |
1. |
Election of Directors: | +
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For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||||||||||||||||||
01 - Juan Ramón Alaix |
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02 - Paul M. Bisaro |
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03 - Frank A. D’Amelio |
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04 - Michael B. McCallister |
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For | Against | Abstain | For | Against | Abstain | |||||||||||||||||||||||||||||||||||||||||
2. | Say on Pay - An advisory vote on the approval of executive compensation. | ¨ | ¨ | ¨ | 3. | Proposal to ratify KPMG LLP as our independent public accounting firm for 2016. |
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B | Authorized Signatures |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
Date (mm/dd/yyyy) – Please print date below. | Signature 1 – Please keep signature within the box. | Signature 2 – Please keep signature within the box. | ||||||||||
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02AFEB030Y0B
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders.
The material is available at: www.envisionreports.com/ZTS
Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.investorvote.com/ZTS |
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q PLEASE FOLD ALONG THE PERFORATION,IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
Proxy — Zoetis Inc.
Notice of 20162019 Annual Meeting of Shareholders
Proxy Solicited by Board of Directors for Annual Meeting —– May 12, 201615, 2019
Michael B. McCallister, Heidi C. Chen and Katherine H. Walden, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Zoetis Inc. to be held on May 12, 2016,15, 2019, or at any postponement or adjournment thereof.
If shares of Zoetis Inc. common stock are issued to or held for the account of the undersigned under employee stock or retirement benefit plans and voting rights are attached to such shares (an “Employee Voting Plan”), the undersigned hereby directs the respective fiduciary of each applicable Employee Voting Plan to vote all shares of Zoetis Inc. common stock held in the undersigned’s name and/or account under such Employee Voting Plan in accordance with the instructions given herein, at Zoetis Inc.’s Annual Meeting of Shareholders and any adjournment or postponement thereof, on all matters properly coming before the meeting, including but not limited to the matters set forth on the reverse side. If the undersigned has shares in an Employee Voting Plan and does not vote those shares, the Employee Voting Plan fiduciary may or may not vote the shares, in accordance with the terms of the Employee Voting Plan. Employee Voting Plan shares may not be voted at the meeting.All votes of Employee Voting Plan shares must be received by 10:00 A.M., EDT, Monday, May 13, 2019, in order to be counted.
Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR all nominees and FOR Proposals 2 and 3.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
(Items to be voted appear on reverse side.)side)
C | Non-Voting Items |
Change of Address – Please print new address below. | Comments – Please print your comments below. | |||||||||
∎ | + |
Using a black inkpen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. |
q IFVOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - |
A | Proposals – The Board recommends a voteFOR all the nominees listed andFOR Proposals 2 and 3. |
1. | Election of Directors: | |||||||||||||||||||||||||||||||||||||||||||||
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For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||||||||||||||||||
| ☐ | ☐ | ☐ | 02 - Paul M. Bisaro | ☐ | ☐ | ☐ | 03 - Frank A. D’Amelio | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||||||||||
04 - Michael B. McCallister | ☐ | ☐ | ☐ |
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Election of Directors: | +
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For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||||||||||||||||||
01 - Juan Ramón Alaix |
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02 - Paul M. Bisaro |
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03 - Frank A. D’Amelio |
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04 - Michael B. McCallister |
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For | Against | Abstain | For | Against | Abstain | |||||||||||||||||||||||||||||||||||||||||
2. | Say on Pay - An advisory vote on the approval of executive compensation. | ¨ | ¨ | ¨ | 3. | Proposal to ratify KPMG LLP as our independent public accounting firm for 2016. | ¨ | ¨ | ¨ |
| Advisory vote to approve our executive compensation (Say on Pay). |
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☐ | ☐ | ☐ | 3. Ratification of appointment of KPMG LLP as our independent registered public accounting firm for 2019. | ☐ | ☐ | ☐ |
Authorized Signatures |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
Date (mm/dd/yyyy) – Please print date below. | Signature 1 – Please keep signature within the box. | Signature 2 – Please keep signature within the box. | ||||||||||
/ / |
1 U P X 4 1 4 7 1 0 | + |
02AFDC030Y1B
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders.
The material is available at: www.edocumentview.com/ZTS
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION,VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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Proxy — Zoetis Inc.
Notice of 20162019 Annual Meeting of Shareholders
Proxy Solicited by Board of Directors for Annual Meeting —– May 12, 201615, 2019
Michael B. McCallister, Heidi C. Chen and Katherine H. Walden, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of Zoetis Inc. to be held on May 12, 2016,15, 2019, or at any postponement or adjournment thereof.
If shares of Zoetis Inc. common stock are issued to or held for the account of the undersigned under employee stock or retirement benefit plans and voting rights are attached to such shares (an “Employee Voting Plan”), the undersigned hereby directs the respective fiduciary of each applicable Employee Voting Plan to vote all shares of Zoetis Inc. common stock held in the undersigned’s name and/or account under such Employee Voting Plan in accordance with the instructions given herein, at Zoetis Inc.’s Annual Meeting of Shareholders and any adjournment or postponement thereof, on all matters properly coming before the meeting, including but not limited to the matters set forth on the reverse side. If the undersigned has shares in an Employee Voting Plan and does not vote those shares, the Employee Voting Plan fiduciary may or may not vote the shares, in accordance with the terms of the Employee Voting Plan. Employee Voting Plan shares may not be voted at the meeting.All votes of Employee Voting Plan shares must be received by 10:00 A.M., EDT, Monday, May 13, 2019, in order to be counted.
Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR all nominees and FOR Proposals 2 and 3.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
(Items to be voted appear on reverse side.)side)